A data centre needs a lot of reliable power, fast network connections, land, a way to remove heat, and permission to build. For years, closeness to customers and fibre decided location. Now, with AI, access to power and the time it takes to connect often decide first. The best site is where enough of these line up at once, at an acceptable cost and on an acceptable timeline.
What the evidence lists
Lawrence Berkeley National Laboratory's 2024 report on US data centres notes that factors such as proximity to population centers, electricity cost, network infrastructures, and local utility prices influence where data centres locate, and that Virginia hosts the highest electricity demand associated with data centres in the United States. The International Energy Agency observes that the rising demand of data centres, combined with their regional concentration, is leading to long grid connection queues in many regions, and that training AI can be done far from users while answering users may benefit from being close to them.
| Factor | Why it matters |
|---|---|
| Power and connection time | No power, no data centre; connection queues set the timetable |
| Network | Fibre routes and subsea cables carry the data in and out |
| Closeness to users | Matters for answering users quickly; less for training models |
| Climate | Cooler climates make cooling cheaper |
| Water | Some cooling designs need it; scarcity limits options |
| Land and permits | Space for halls and substations, and how long approvals take |
| Policy and incentives | Tax, land and power rules change the cost |
Policy in India
India's Ministry of Electronics and Information Technology published a draft data centre policy for discussion in November 2020. It lists challenges including high cost of power, complex clearance processes and time consuming approvals, and proposes that states be encouraged to demarcate zones for data centre parks and that open access allow data centre providers to buy power directly. Several states have their own policies; Tamil Nadu's Data Centre Policy 2021, for example, notes that the state has the second highest number of submarine cable landing stations in India and applied to data centre units and parks incorporated until 31 March 2026. Anyone considering a site should check which policies are in force at the time.
What is not certain
- The weight of each factor differs by type of data centre; AI training sites and sites serving users choose differently.
- Policies and incentives change; the examples here are as published on their dates and may have been revised or have expired.
Sources and method
- Shehabi and others, Lawrence Berkeley National Laboratory, 2024 United States Data Center Energy Usage Report, 19 December 2024. Landing page https://eta-publications.lbl.gov/publications/2024-lbnl-data-center-energy-usage-report ; full text https://climate.mit.edu/sites/default/files/2025-02/lbnl-2024-united-states-data-center-energy-usage-report.pdf
- International Energy Agency with the Korea Energy Economics Institute, Energy and AI in East Asia, revised April 2026. https://iea.blob.core.windows.net/assets/431d7d22-039e-46d3-9832-090a8b4075fc/EnergyandAIinEastAsia.pdf
- Ministry of Electronics and Information Technology, Government of India, Draft Data Centre Policy, draft for discussion, November 2020. https://www.meity.gov.in/writereaddata/files/Draft%20Data%20Centre%20Policy%20-%2003112020_v5.5.pdf
- Government of Tamil Nadu, Information Technology Department, Data Centre Policy 2021, G.O. (Ms.) No. 33, 23 November 2021. https://tngim2024.com/public/Front/Doc/Data_Centre_Policy_compressed.pdf
Method: each link was opened on 29 October 2026 and every figure was taken from the page or filing cited beside it, in the currency stated there. No figure was estimated. Company examples describe what those companies report about themselves; they are not recommendations.
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This article provides general information, not investment advice or an offer of securities.