As India races to attract data centre investments, developed economies are confronting a difficult question: can the AI boom continue without putting pressure on electricity grids, water supplies and local communities?
India is positioning itself as a major destination for data centres, backed by rising digital consumption, demand for artificial intelligence (AI) computing and government incentives. But in some of the world’s most established data centre markets, the industry is facing a very different challenge: growing resistance from regulators, local communities and electricity network operators.
The opposition is not necessarily against data centres or AI. It reflects concerns about the infrastructure costs of accommodating facilities that can consume as much electricity as tens of thousands of households, while generating relatively few direct jobs compared with traditional industrial projects.
The International Energy Agency’s (IEA) report, Energy and AI, published in April 2025, estimated that data centres consumed around 415 terawatt-hours (TWh) of electricity in 2024, equivalent to approximately 1.5% of global electricity consumption. The IEA projected that this could rise to around 945 TWh by 2030.
The agency also highlighted the uneven distribution of the impact. Data centres account for a relatively small share of global electricity use, but their concentration in particular locations can put considerable pressure on local power networks.
When data centres compete with households for power
Electricity availability has emerged as one of the biggest constraints on expansion, particularly in developed economies where existing grids are already under pressure. The IEA’s 2025 report notes: “A typical AI-focused data centre consumes as much electricity as 100,000 households, but the largest ones under construction today will consume 20 times as much.”
This is becoming a planning challenge for governments. Data centre developers can move quickly to build facilities, but new power generation, transmission lines and grid connections often require years of investment and regulatory approvals.
The problem is especially visible in Ireland. According to the country’s Commission for Regulation of Utilities, data centres accounted for 22% of national electricity demand in 2024, compared with 5% in 2015.
Ireland introduced a new electricity connection policy requiring proposed data centres to demonstrate how they can operate within the constraints of the electricity system. The country is not simply rejecting the industry; it is attempting to manage its impact on energy security.
Britain is facing a similar issue. In July 2026, energy regulator Ofgem said electricity connection applications had surged from 41 gigawatts (GW) to 125 GW in less than a year, with data centre projects accounting for at least 80 GW of the applications.
Ofgem proposed measures to prevent speculative projects from occupying grid capacity that could otherwise be used by viable developments. The concern is not merely how many facilities are proposed, but whether the electricity system can accommodate them.
Water, land and the local backlash
Electricity is only one part of the problem. Data centres also require cooling infrastructure, land, roads and other utilities. Depending on the cooling technology and location, some facilities can place significant demands on local water resources. For communities, the question is straightforward: what do they gain from hosting a large, resource-intensive facility, and what costs do they bear?
The Electric Power Research Institute’s community-centred data centre research identifies environmental risks, infrastructure strain and a lack of transparency as recurring concerns. Its research found that at least 25 US data centre projects were cancelled in 2025 because of local opposition, compared with six in 2024 and two in 2023.
These concerns can turn a project into a political and planning issue. Residents may worry about higher electricity bills, pressure on water supplies, noise from cooling equipment and backup generators, and the conversion of land for facilities that employ comparatively few people once operational.
However, the environmental impact is not identical across projects. Water consumption depends on the cooling system and local climate, while emissions depend on the electricity mix and the use of backup power. Efficient cooling, renewable energy and responsible site selection can reduce these pressures.
Why developed countries cannot afford to ignore the problem
There is an economic dimension to the debate. Data centres bring investment, digital infrastructure and demand for construction, engineering and technology services. They can also support AI research, cloud computing and advanced manufacturing.
But governments must weigh these benefits against the cost of expanding the power grid and ensuring that households and other industries retain access to reliable, affordable electricity.
The IEA’s 2026 report, Key Questions on Energy and AI, says the rapid expansion of data centres is straining planning and regulatory systems. It also identifies concerns about electricity affordability and environmental impacts as factors behind growing community resistance.
This creates a difficult balancing act. Countries want to retain their competitive position in AI, but they also need to ensure that the benefits of investment are not accompanied by disproportionate costs for consumers and local communities.
What this means for India
India’s opportunity is significant. The country offers a large digital economy, growing demand for cloud services and AI, and potential access to renewable power. Its data centre ambitions could attract investment and strengthen its position in the global digital infrastructure chain.
But the international experience carries an important lesson: incentives and land availability alone will not guarantee sustainable growth.
India will need to align data centre expansion with transmission capacity, reliable electricity supply, water availability and clear environmental standards. Developers should also be encouraged to invest in renewable power, energy storage, efficient cooling and systems that can reduce or shift electricity consumption when the grid is under pressure.
There is also a question of economic value. A country hosting data centres should seek more than construction investment and server capacity. It should aim to develop domestic expertise in AI infrastructure, chip design, cloud engineering, cybersecurity and advanced computing services.
The global pushback is therefore not a reason for India to abandon its ambitions. It is a warning against measuring success only by the number of facilities announced or the amount of capital committed.
The next phase of the data centre race may be decided not simply by which country can build the most capacity, but by which can supply reliable power, manage environmental costs and translate infrastructure investment into wider economic gains.
