As India competes fiercely to attract billions of dollars of investment to develop artificial intelligence (AI), cloud computing and digital infrastructure, a global report has revealed key findings. According to climate risk consultancy XDI (Cross Dependency Initiative), extreme temperatures and inclement weather can pose serious challenges to India’s younger generation of data centers. A global survey has ranked India’s proposed data centers 11th in the world in terms of physical risks posed by climate change.
The report, titled “2026 Global Analysis of Planned Data Centers for Physical Climate Risk and Resilience,” released Wednesday assessed 2,595 proposed data center constructions worldwide and their direct climate risks. According to the report, while energy and water consumption are critical in setting up data centers, operational disruptions caused by infrastructure damage and extreme temperatures are currently a major challenge. The study found that the world’s top 30 sub-national regions that will face operational disruption due to extreme temperatures include Tamil Nadu, Telangana and Karnataka, known as India’s major technology and investment hubs.
Dr. Carl Mellon, head of science and technology and founder of XDI, said the data center debate has largely been limited to energy and water use, but physical climate risks are becoming an increasingly important issue. He added that the only question now is not where the next-generation digital infrastructure will be built, but whether these infrastructures can be viable, insurable and economically viable up to the appointed date. According to the report, proposed data centers in South Asia, Southeast Asia and East Asia are most exposed to climate risk. Twelve percent of proposed projects in South Asia are already classified as high risk, which is expected to triple by the end of the century.
India, as well as countries like Brazil, Mexico, Indonesia and Spain, have been warned that extreme temperatures could cause major disruptions to data center operations. According to the report, more than 75 percent of the proposed projects in these countries are in the high risk category. Extreme temperatures not only reduce equipment performance, but also increase cooling costs, stress power supplies, and increase the risk of service disruptions. Additionally, external infrastructure failures such as power grids, telecommunications, transportation, and water supply can reduce productivity tenfold compared to direct physical damage. Global insurance premiums related to data centers could rise from $10.6 billion to $24.2 billion by 2030, amid the ongoing expansion of AI infrastructure around the world, according to an estimate by Swiss Re.
The report makes clear that this future risk is not irreversible. As noted by Dr. Malone, the proposed data centers, unlike existing infrastructure, offer the opportunity to prevent this loss through proper planning. Decisions made now regarding site selection, engineering standards and resiliency investments will have a significant impact on future efficiency and insurability. At a time when states in India are competing fiercely to attract data center and AI industry investment, building the digital economy to not only meet demand, but also build infrastructure to deal with future hot and hostile climates is a key challenge for the government and the technology sector.
