Representation on power related issues faced by the data centre industry

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Representation on power related issues faced by the data centre industry

Sudipto

@Sudipto

July 22, 2024

Public Policy

Nasscom made a representation to the Ministry of Electronics and Information Technology (Meity) on the power related issues faced by the data centre (DC) industry. This representation is in furtherance of the stakeholder consultation, organised by Meity on June 14, 2024, to discuss power related issues with representatives of the DC industry.

This representation builds on our previous recommendations (dated March 21, 2020 and November 30, 2020), including those on the draft National Data Centre Policy (Draft DC Policy). We have classified our recommendations in two categories: General and Specific recommendations. For our general recommendations, we submit that:

Given that the Draft DC Policy has been in the public domain for more than three years, MEITY should consider updating and releasing an operational national policy factoring in our recommendations in this representation and subsequent developments, including the government’s focus on renewable energy (RE). This is essential with the growing power demand from DCs along with the rising computational requirements in the field of AI and climate change concerns. Having a national DC policy can supplement the state DC policies and guide them towards a cohesive approach across states.

Since electricity is a concurrent subject, a working group with both central and state level government/regulators should be constituted to identify and address power-related issues faced by the DC industry. This working group can include relevant central level ministries (such as, Meity, Ministry of New and Renewable Energy and Ministry of Power), representatives of some of the key state regulators/Distribution Companies (with significant DC presence, such as Maharashtra, Uttar Pradesh, Telangana, Karnataka, Tamil Nadu, Gujarat, Rajasthan, West Bengal, Odisha) and the industry.

In our section on specific recommendations, we have highlighted the following recommendations:

Establish dual power grid networks to ensure uninterrupted supply of electricity: Given that disruption in power supply can have significant consequences for DC operations, states should establish dual power grid networks to supply power from two different substations to DCs. While doing so, determination of fixed cost should be determined based on maximum demand of the consumer without considering the second power connection provided, as only one source will be used at a time.

Create a common framework for RE banking regulation: Banking is an essential complement to the open access (OA) purchase of RE. Banking allows generators to deposit surplus RE into the grid and withdraw it later, as needed. However, recently, more states have either withdrawn their banking facility completely or imposed various conditions that limit the duration and quantum of banking. As such, we recommend that Meity should initiate discussions with some key state regulators (where DCs have significant presence) to address the concerns related to banking regulation.

Allow DCs to avail power at industrial tariff rates: While different states can determine the tariff rates for their own jurisdictions, there is merit in ensuring consistency across states on tariff determination. This would also be in line with the objective of promoting transparency, consistency and predictability in regulatory approaches across jurisdictions, as highlighted in the National Tariff Policy.

However, as per industry inputs, at present the classification of DCs in tariff orders of different states is not consistent. For example, in Tamil Nadu, Telangana, and Maharashtra, DCs can purchase power at industrial tariff rates, whereas in Uttar Pradesh, DCs are charged as per non-industrial tariff rates, which substantially increases the cost of operations for DCs. As such, it is essential to have consistent categorisation of DCs in tariff orders across states to ensure that DCs are supplied power at industrial tariff rates.

Draft DC policy should promote the use of natural gas for powering DCs: Given that DCs need huge amounts of power, the Draft DC Policy rightly focuses on promoting environmentally friendly and sustainable methods of energy generation and usage.

However, it is important to consider that generation of solar or wind energy for powering DCs is often coupled with other issues such as the requirement of considerable amount of land, transmission losses, and wheeling charges, which increase the cost of operation for DCs. Given this context, promotion and use of natural gas as a viable option for powering DCs can be considered.

Establish pre-provisioned DC parks with necessary infrastructure to host multiple DCs: DCs have unique infrastructural requirements, particularly on account of power (both quantity and quality), land and data connectivity. These requirements make it challenging to build a DC in a mixed-use zone or even in an industrial area. For instance, the power distribution network in these existing zones/areas is generally not designed to meet the huge power demands of DCs. Similarly, as per industry inputs, DCs require at least three different fiber paths with high network capacity to hedge the risk arising out of a fiber cut.

Considering that these factors require government intervention, it can be efficiently channelised by setting up dedicated DC parks at par with global standards. Such DC parks can be demarcated enclaves, which are pre-provisioned with the necessary infrastructure to host multiple hyper scale DCs. Note that this is also in line with TRAI’s 2022 Recommendations and the Draft DC Policy.

If the above subject-matter is of interest to you, kindly reach out to Sudipto Banerjee (sudipto@nasscom.in) with a copy to policy@nasscom.in.

Data centre power Renewable Energy

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Sudipto

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