The story so far:
For the past two decades, India’s electricity demand growth rates remained relatively flat at around 5%. While energy and electricity demands have been traditionally managed through forward planning, the rollout of data centres, Electric Vehicles (EVs), green hydrogen and 5G/Internet-of-Things (IoT) programmes are key drivers which will steadily increase electricity consumption.
Why does India need data centres?
The demand for data centres in India is being driven by the need for data storage given the government’s Digital India and data localisation policies, increased data consumption, and 5G roll-out which is expected to enable adoption of data intensive technologies such as IoTs and Artificial Intelligence (AI). Although India boasts of 2x internet users than Europe, it lags on the data centre capacity front (1.4 GW versus 10GW). However, as data privacy rules come into effect and AI adoption grows, India’s data centre capacity might grow by two to three times in the near term (2027) and over five-fold in the long term (2030), based on a low buildout and an aggressive buildout scenario, respectively (including large AI infrastructure).
How much power is required?
The energy consumption of AI data centres is monumental and presents a critical challenge. These facilities are not just large storage units; they are computational powerhouses utilising Graphic Processing Units (GPUs) with individual racks consuming 80-150 KW compared to 15-20 KW for traditional enterprise servers. This computational intensity drives an insatiable demand for electricity, making AI the most significant driver of increased energy consumption within the data centre sector. Projections indicate that global electricity generation for data centres could surge from 460 terawatt-hours (TWh) in 2024 to over 1,000 TWh by 2030, reaching 1,300 TWh in 2035. A good example would be China, which is witnessing a 25% year-on-year growth with respect to base load electricity due to Generative AI and Large Language Model (LLM) usage. China’s data centres’ power consumption could reach 400+ billion kWh in 2025 (~4% of total power consumption), with a compound annual growth rate (CAGR) of 18% in 2023-2030, much earlier than the original forecast of reaching 400 billion kWh only in 2030.
Another example is from the Dominion service territory in Virginia, U.S. which has total electricity demand and peak demand growth rates projected to exceed 25% within the next five years, due to the GW-scale data centres it hosts.
Where are data centres being built?
The U.S. leads with 51% of the global data centre capacity in Texas, Wisconsin, Northern Virginia, Phoenix, Ohio and Pennsylvania. Other countries planning such AI infrastructure include China, Norway, the U.K., Germany, Japan and Malaysia. In India, Visakhapatnam and Jamnagar have recently been chosen by Google and Reliance Industries respectively for their GW-scale AI data centre ambitions.
Companies such as Yotta, AdaniConneX, Sify and CtrlS are also planning AI data centres in Mumbai, Chennai, Bangalore, and Hyderabad. The Indian government’s “IndiaAI mission” and substantial private investments are further accelerating this expansion, highlighting a national commitment to fostering a thriving AI ecosystem.
What are the power sources?
The push by AI data centres towards low-carbon energy sources is driven by corporate decarbonisation targets, soaring energy demands, and increasing pressure from regulators and investors. As AI workloads rapidly increase, major tech companies are investing in diverse renewable energy strategies and new technologies to meet climate goals.
Current power mixes rely on multiple sources — intermittent renewables with developing storage solutions, onsite green hydrogen and natural gas for grid reliability, and emerging alternatives like geothermal energy and nuclear fusion. Small Modular Reactors (SMRs) represent another source of low carbon that has caught the attention of Big Tech companies. SMRs provide crucial benefits such as flexible sizing in the range of 1 MW to 300+ MW; factory manufacturing capability for cost savings; passive safety enhancements; and 24/7 stable baseload power production. Around $15.4 billion has been invested in SMR development worldwide — $10 billion (public funding) and $5.4 billion from private investment.
While legacy challenges like safety, waste disposal and regulatory hurdles persist, the evolving public perception of SMRs is becoming more favourable, especially with technological advancements enhancing safety. Moreover, SMRs do not need expensive transmission infrastructure as it is positioned close to consumption hubs. AI data centres across the world are urgently looking to secure reliable baseload power for its own centres as utilities might not have the budget to create the necessary infrastructure by the 2030 timeframe.
How can India capitalise on SMRs?
India’s 2025 budget initiated the Nuclear Energy Mission with a ₹20,000 crore ($2.4 billion) outlay with the aim to reach 100 GW of nuclear capacity by 2047, and putting at least five indigenously manufactured SMRs into operation by 2033. The current development includes Bhabha Atomic Research Centre’s BSMR-200 pressurised heavy water reactor with slightly enriched uranium fuel and a variant of 55 MW for remote areas in isolated mode.
India’s approach rests on complete reforms. The government is planning to introduce amendments to the Atomic Energy Act, 1962 and the Civil Liability for Nuclear Damage Act, 2010 to draw in around $26 billion worth of private investment and bring India in line with international legal provisions. India must leverage SMR technology transfer agreements with Holtec International USA and other international partners to position its technology for domestic as well as international opportunities. State governments can assist with identifying and pre-approving existing coal sites and green hydrogen hubs for nuclear projects; investing in demonstration projects; facilitating land acquisition; offering training for regulators; and helping to re-skill the coal workforce. Additionally, collaborations between nuclear SMR vendors, AI data centre players, and renewable energy companies could unlock large-scale opportunities.
How do SMRs enhance safety?
SMR designs incorporate advanced safety features aiming for performance comparable to or better than existing reactor designs. Modern SMRs rely heavily on inherent and passive safety systems requiring fewer external electricity sources and reduced human intervention. These passive systems ensure SMRs provide secure, reliable, and sustainable energy. The inherent design characteristics lead to reduced likelihood of core-damaging accidents, and reduced consequences, if accidents do occur, due to less radioactivity and thermal energy. The smaller size simplifies safety measures during emergencies.
SMR designs leverage several advantages: smaller reactor cores with smaller quantities of nuclear material; passive safety features like natural convection enabling automated shutdown; accident-tolerant fuels maintaining structural integrity at higher temperatures; longer event sequences (hours or days) providing extra time for mitigation; and the combination of lower nuclear material quantities and passive features leading to smaller offsite emergency planning zones.
What about SMR regulation?
The business case depends heavily on responsive regulatory environments, but regulators face challenges with licensing processes originally developed for larger light-water reactors. Existing regulations often don’t apply to advanced technologies proposed for new SMRs, necessitating new regulations. However, such regulatory processes are typically time-consuming, expensive, and opaque. A specific concern is how regulatory bodies will handle design iteration after initial certification.
Global SMR regulatory reforms focus on six key areas — (1) technology-neutral frameworks replacing large reactor-specific rules; (2) streamlined licensing including fleet approvals and combined construction-operating licences; (3) modular manufacturing accommodation with factory fabrication certification; (4) international harmonisation through International Atomic Energy Agency (IAEA) standards and mutual design recognition; (5) risk-informed requirements adjusting emergency planning zones and staffing proportional to smaller facility risks; and (6) accelerated deployment pathways for follow-on units. The U.S. ADVANCE Act (2024), Canada’s Vendor Design Review, and the U.K.’s regulatory sandbox exemplify these reforms, with most jurisdictions targeting framework completion by 2026 and first commercial deployment by 2030.
Moreover, international cooperation is essential for timely deployment of safe and secure SMRs. The IAEA offers comprehensive support through its platform on Small Modular Reactors and their Applications. The Nuclear Harmonization and Standardization Initiative (NHSI) facilitates safe and secure development by promoting regulatory harmonisation. The IAEA hosts the SMR Regulators’ Forum for sharing experiences and best practices among regulatory authorities worldwide. The Safeguards by Design Programme helps stakeholders make informed design choices incorporating international safeguards while optimising economic, operational, safety, and security factors.
What are the concerns related to transportation and waste of SMRs?
New regulatory approaches are needed for SMR transportation and waste streams. Since SMRs are factory-fabricated and transported, this creates security vulnerabilities and radiation leakage risks, especially for fuel-loaded systems. Regulations are needed to address liability in transportation accidents.
Advanced SMR designs using new fuel concepts (like HALEU) or coolants other than water may generate new forms of radioactive waste requiring new disposal and storage plans. SMR companies are developing plans to store spent nuclear fuel indefinitely in interim on-site storage facilities, as a clear national pathway for long-term disposal remains a concern.
The author is an Energy and Emerging Technologies expert.
