India's Solar Power Surge: A 22% CAGR in the Next Decade

India's solar energy demand is set to rise at a 22% CAGR through FY26-35, spurred by data centers' power needs, AI growth, and increased electrification. Projected to reach 3,228BU by FY35, solar's share in total power consumption may jump to 33% base and 37% bull scenario.

India is slated for a significant surge in solar energy demand, projected to grow at a compound annual growth rate (CAGR) of 22% from FY26 to FY35, according to a report by Nuvama. This growth is largely driven by the burgeoning need for power among data centers, which are seeing expansion parallel to India’s economic growth and urbanization.

The report forecasts total power consumption in the country to rise from approximately 1,848 billion units currently to nearly 3,228BU by FY35. Solar power's contribution to the national grid is expected to climb from 9% in FY26 to 33% by FY35 under base-case conditions, potentially increasing to 37% in a more optimistic scenario.

Furthermore, electricity costs make up 30-40% of data centers' operating expenses, compelling operators to adopt renewable energy sources like solar to cut costs and emissions. As data centers expand in tandem with advancements in AI models and computing regulations, the demand for solar capacity is expected to grow, with green hydrogen and data center industries driving an incremental capacity of 416GW in the base case by FY35.