Solar Demand in India May Triple as Data Centers Expand

India’s solar demand could witness unprecedented growth over the next decade, driven by the rapid expansion of data centers, artificial intelligence (AI), and green hydrogen projects.

According to a report by SBICAPS, solar demand in India is projected to grow at a compound annual growth rate (CAGR) of 22 percent between FY25 and FY35, positioning solar energy as a major pillar of the country’s future power mix.

The report highlights that solar demand in India is expected to rise much faster than overall electricity consumption. While India’s total power demand is estimated to grow at around 6 percent annually through FY35, solar energy demand could expand at nearly four times that pace. This sharp increase is being fueled by energy-intensive sectors such as AI-powered data centers and emerging green hydrogen facilities.

Data Centers to Become a Key Driver of Solar Demand

The growing data center industry is expected to play a crucial role in boosting renewable energy consumption across the country. As businesses increasingly adopt AI technologies, cloud computing, and digital services, the need for large-scale data storage and processing infrastructure is rising rapidly.

Data centers require massive amounts of electricity to power servers, cooling systems, and network operations. Since energy costs account for a significant share of operating expenses, many operators are turning to renewable energy sources such as solar power to meet sustainability goals and reduce long-term costs.

Key highlights from the report include:

• India’s electricity demand is projected to rise from 1,848 billion units (BU) in FY25 to 3,228 BU by FY35.
• Solar demand is expected to grow at a 22 percent CAGR during the same period.
• In a bullish scenario, solar demand could register a CAGR of 25 percent.
• Solar energy’s share in India’s electricity mix could increase from 9 percent currently to 33 percent by FY35.
• Under an optimistic scenario, solar’s contribution could reach 37 percent.

Also Read: Hydrogen Storage Innovations Are Driving India's Clean Energy Push

India May Need 416 GW Additional Solar Capacity

To support the expected increase in power consumption, India will require significant investments in renewable energy infrastructure. The SBICAPS report estimates that the country may need to add around 416 gigawatts (GW) of solar capacity between FY26 and FY35.

A substantial portion of this capacity requirement is expected to come from data centers and green hydrogen projects. Together, these sectors could drive demand for nearly 251 GW of additional solar capacity under the base-case scenario.

The report also points out that solar power is becoming increasingly competitive due to falling costs and supportive government policies aimed at accelerating renewable energy adoption.

Challenges Remain Despite Strong Growth Outlook

While the long-term outlook for the solar sector remains positive, industry experts caution that infrastructure challenges need to be addressed.

Solar energy generation is intermittent, making energy storage solutions critical for ensuring round-the-clock power supply. Data centers, in particular, require uninterrupted electricity, increasing the importance of battery storage systems and hybrid renewable energy projects.

In addition, transmission networks and grid infrastructure will need substantial upgrades to handle the expected surge in renewable energy generation. Timely investments in storage and grid modernization will be essential to fully capitalize on the growing demand for clean energy.

The report suggests that if these challenges are effectively managed, solar power could emerge as one of the biggest beneficiaries of India’s digital transformation and AI-driven growth over the next decade.