India’s Sustainable Energy and AI Era Could Bring SMR Sector Into View

The burgeoning artificial intelligence (AI) industry is set to revolutionise the way data is processed and used, fuelling unprecedented demand for energy. SMR's have become a trending topic in recent months, particularly accelerating with recent investment from major tech firms, but the topic of SMRs was also raised in the Indian budget.

In enterprise data centres, energy constitutes a staggering 46% of operating costs, and even more in service provider data centres, where it can climb up to 60%.

This trend is only set to surge, with the International Data Corporation (IDC) report anticipating a compound annual growth rate (CAGR) of 44.7% in AI data centre energy consumption, predicted to reach 146.2 Terawatt hours by 2027.

India's digital infrastructure is not immune to this wave of change. Data centers in the country, which presently consume less than 1% of national power, are expected to gulp down 6% of India's total electricity by 2030, reflecting the rapid digital transformation underway. This uptick in demand is parallel to another significant development in the energy sector.

Nuclear energy companies, such as Oklo Inc (NYSE: OKLO) and NuScale Power (NYSE: SMR), have observed a marked appreciation in their share values following power supply agreements with tech behemoths like Amazon and Google to feed their AI-driven data centres.

To support this paradigm shift while aligning with its ambitious net-zero emissions target by 2070, India is keen on the deployment of 40-50 Small Modular Reactors (SMRs), an initiative that promises to overhaul the existing captive thermal power plants. Unlike the traditional behemoths of nuclear power, SMRs epitomise innovation with their factory-based manufacturing model, which slashes construction times by an impressive 25-30%, expediting the timeline from blueprint to operation.

Additionally, SMRs boast advanced passive safety features that utilize natural forces to maintain core cooling during accidents, setting a new bar for safety in nuclear power generation. Their operational efficiency is further underscored by extended fuel cycles, with some designs promising up to a decade before needing refueling. Such features make SMRs particularly attractive for remote areas where energy infrastructure may be scant.

From a financial perspective, the smaller size and modular nature of SMRs offer a lower barrier to entry with reduced upfront capital expenditures and minimized economic risks compared to traditional large reactors.

The crucial role of SMRs extends beyond just energy supply. As India confronts the repercussions of AI's energy demands, SMRs could be the cornerstone of a clean, sustainable, and autonomous energy future. Their strategic deployment aligns with the dual goals of empowering the digital frontier and maintaining environmental duty.