This article is the first in a multi-part series, by Factum, exploring the shifting landscape of global digital infrastructure and climate change.
By Dulanjaya Mahagamage
The global data center industry has experienced such a rapid and profound transformation that it has surpassed both regulatory frameworks and public understanding. Historically, digital infrastructure was viewed primarily as a technological issue focused on bandwidth, latency, and server capacity. However, this perspective is no longer sufficient. Data centers are now positioned at the crossroads of three major challenges defining the 21st century: the accelerating climate crisis, shifting global geopolitics, and the growing struggle for digital sovereignty among nations of all sizes and development levels.
For a country like Sri Lanka, strategically located in the Indian Ocean and still recovering from a significant economic crisis, the issue of building digital infrastructure is not just a technical matter. It carries constitutional implications for national autonomy, has existential ties to climate risks, and holds strategic importance for the country’s role in an increasingly fragmented global digital landscape.
This article explores these interconnected dynamics and offers policy-oriented suggestions for how Sri Lanka can develop its digital infrastructure responsibly, avoiding the environmental and strategic mistakes made by earlier adopters.
Exponential Demand, Exponential Consequences
The demand for digital infrastructure is increasing faster than most grid systems can handle. Significant drivers of this surge include cloud computing, video streaming, financial networks, and artificial intelligence, with AI emerging as the dominant factor. The International Energy Agency estimated that global data center electricity consumption reached around 460 terawatt-hours in 2022 and is projected to more than double by 2026, primarily due to AI.
The environmental impact extends beyond just electricity use. Cooling systems in large facilities can consume millions of liters of water daily. For example, Google’s global data centers used approximately 23 billion liters of water in 2023 alone. Additionally, electronic waste from server hardware, which is typically replaced every three to five years, poses another challenge. Much of this waste ends up in developing nations where disposal practices are poorly managed, a situation that is particularly relevant for South Asia.
Digital Infrastructure as Strategic Geography
There is an important analogy to consider. In 1890, Alfred Thayer Mahan argued that sea power was the foundation of national strength. Today, submarine cables, which carry over 95 percent of international data traffic, along with the cloud platforms that governments use to run their services, hold a similarly crucial position. The ownership of this infrastructure is just as significant as its construction.
This reality has influenced policy thinking across Asia. India has adopted aggressive data localization policies that require financial data to remain within its borders. Cities like Mumbai, Noida, Hyderabad, and Chennai have emerged as regional data center hubs, supported by domestic policy initiatives. The government’s Digital India program creates strong incentives for the development of domestic capacity, although India’s heavy reliance on coal raises serious carbon concerns regarding the speed of this expansion.
Smaller South Asian nations, such as Sri Lanka, Bangladesh, and Nepal, remain largely dependent on foreign cloud providers, primarily U.S. hyperscale’s, for their banking systems, government services, and telecommunications. This reliance is not merely an operational hassle; it also poses legal risks. The legal frameworks in the United States and China allow their governments to compel the disclosure of data held within their jurisdictions, regardless of the data subject’s location. For instance, bank records of Sri Lankan citizens stored on a U.S. cloud server could, in principle, be accessed through U.S. legal orders.
Sri Lanka’s Position
Sri Lanka’s geography offers significant advantages. Several submarine cable systems connect the island to East Asia, Europe, the Gulf, and East Africa. Its time zone is convenient for both Asian and European business hours. Additionally, the development of the Port City in Colombo, along with the growing ICT export sector, provides a solid foundation for economic growth.
However, there are notable vulnerabilities. The 2022 energy crisis, which led to rolling blackouts lasting up to ten hours daily, highlighted the fragility of Sri Lanka’s energy infrastructure. This crisis was not solely due to climate change, but such a severe level of grid failure less than three years ago makes it difficult for data center operators, who require high uptime, to invest in the country without clear evidence of structural improvements. Colombo also faces climate risks due to its low elevation and has experienced significant infrastructure damage from severe flooding in recent years.
Moreover, water stress is escalating, particularly in the dry zone, and coastal aquifers are at risk of salinity intrusion. While these issues are not arguments against building digital infrastructure, they emphasize the need for careful planning that accounts for climate risks in site selection, cooling system design, and energy sourcing.
Cautionary Lessons from the Globe
Ireland’s experience serves as a valuable lesson. The country attracted significant U.S. technology investments through low taxes and its proximity to European markets. By the early 2020s, data centers were consuming over 20 percent of Ireland’s national electricity, prompting grid operator EirGrid to warn of potential system instability. In some areas, new data center connections were denied because the newly available renewable energy capacity was being absorbed by these server farms instead of replacing fossil fuel generation, which was the opposite of the intended goal.
Singapore recognized the unsustainable nature of its situation and imposed a moratorium on new data center construction from 2019 to 2022. This decision was driven by concerns over land constraints, water stress, and reliance on natural gas. When the moratorium was lifted, strict energy efficiency standards were made mandatory. The key takeaway is not that data centers should be entirely blocked but rather that unchecked growth without proper governance can lead to crises.
In the Gulf states, particularly the UAE and Saudi Arabia, there is a significant investment in digital infrastructure as part of their strategies to diversify sovereign wealth. These nations are working to support enormous server loads in one of the hottest regions in the world by employing advanced liquid cooling techniques, utilizing desalinated water, and expanding solar energy capacity. While the situation contains significant irony, the ambition is genuine.
Bhutan presents a relevant model for resource-constrained developing countries. The nation is constitutionally carbon-negative and relies almost entirely on hydropower for its electricity grid. Bhutan has explored sustainable digital infrastructure built on an abundance of clean energy. The rationale is sound: renewable energy should be prioritized, with data infrastructure constructed on this foundation. However, there is a notable limitation, glacier retreat poses a threat to the long-term water flows that sustain Bhutan’s hydropower.
A Practical Pathway
The single most consequential decision Sri Lanka can make is to designate renewable-powered digital infrastructure zones, areas where solar, wind, and potentially offshore renewable energy capacity are developed as a precondition for data centre permitting rather than as an afterthought. Such zones must be identified through rigorous ecological mapping to avoid environmentally sensitive regions, wildlife corridors, forest ecosystems, wetlands, and water-stressed areas. Site selection cannot be driven solely by land availability or proximity to urban centres; it must integrate climate resilience, biodiversity protection, disaster vulnerability, and long-term sustainability considerations from the outset. In practice, this means avoiding ecologically fragile coastal belts, elephant migration routes, protected forest reserves, and agricultural zones critical to local livelihoods. This approach mirrors what Nordic countries achieved through hydropower-linked digital infrastructure: leveraging a natural energy advantage to create a differentiated and credible green infrastructure model while maintaining strong environmental safeguards.
Sri Lanka should avoid replicating the hyperscale infrastructure model that has created environmental and grid pressures elsewhere. Large hyperscale facilities concentrate enormous electricity and water demand in single locations, offer relatively limited local employment relative to their physical and energy footprint, and can give global technology operators disproportionate leverage in domestic policy negotiations. A more resilient alternative would be a distributed infrastructure strategy consisting of several medium-scale facilities across multiple regions, powered by locally integrated renewable energy systems and designed with modular expandability. Such a model would distribute grid stress more evenly, improve redundancy during climate-related disruptions, and create greater opportunities for domestically operated facilities serving government services, financial systems, healthcare, and critical national infrastructure. Distributed edge computing infrastructure may become particularly important as artificial intelligence applications increasingly require low-latency processing closer to users and urban centers.
Digital sovereignty cannot be achieved without adequate domestic infrastructure capacity. Data localization policies are ineffective if sensitive government, financial, and citizen data continues to rely entirely on infrastructure located abroad and governed by foreign laws. Establishing a sovereign government cloud platform that operates under Sri Lankan law, supported by long-term public-sector procurement commitments, could mitigate exposure to external legal systems, enhance national cybersecurity, and create the stable demand necessary for making early-stage domestic data center investments economically viable. This infrastructure would also lay the groundwork for local cloud ecosystems, AI services, disaster recovery systems, and digital public services.
However, the expansion of digital infrastructure cannot succeed without simultaneous investments in modernizing energy infrastructure. Upgraded transmission systems, battery storage integration, smart-grid technologies, automated fault isolation, and demand-response mechanisms are essential for attracting high-quality data center investments. Properly integrated facilities can improve grid stability by providing controllable loads and battery storage systems, transforming data centers from passive energy consumers into active contributors to national energy resilience. This can foster a mutually beneficial relationship between digital infrastructure expansion and the transition to renewable energy, rather than placing a one-sided burden on the national grid.
Sri Lanka’s strategic location in the Indian Ocean strengthens the case for carefully managed development of digital infrastructure. As new submarine cable systems increasingly connect East Africa, the Gulf, South Asia, and Southeast Asia, Sri Lanka has a significant opportunity to position itself as a regional hub for connectivity and redundancy. Hosting multiple cable landing stations from independent consortia would not only generate revenue and attract investment but also reduce reliance on any single provider or geopolitical bloc. Active engagement through regional frameworks, such as the Indian Ocean Rim Association, could enable Sri Lanka to contribute to shaping emerging norms regarding digital infrastructure governance, cybersecurity cooperation, and regional data flows, rather than merely adapting to decisions made elsewhere.
However, the expansion of data centers and related infrastructure must occur within a strong environmental and social governance framework. The selection of land and development of infrastructure should be accompanied by comprehensive Environmental Impact Assessments (EIAs), Social Impact Assessments (SIAs), climate-risk analyses, feasibility studies, and transparent public consultation processes before any approvals are granted. These assessments must evaluate not only the immediate environmental effects but also the cumulative impacts on biodiversity, water resources, energy systems, local communities, land use patterns, and climate adaptation goals. Public participation is particularly crucial in preventing conflicts over land acquisition, ecological degradation, and unequal distribution of economic benefits. Without such safeguards, digital infrastructure projects risk replicating the extractive development patterns that have historically accompanied large-scale energy and infrastructure expansion across the Global South.
A Sustainable Way Forward
Sri Lanka is at a critical juncture where decisions regarding digital infrastructure will significantly impact its economic resilience, environmental sustainability, and geopolitical autonomy. In an age where dependence on technology is closely linked to geopolitical influence, the country cannot afford to rely entirely on foreign-owned digital infrastructure for essential sectors such as banking, government services, healthcare, and communications. Additionally, uncontrolled expansion of hyperscale data centers could lead to environmental and energy issues like those experienced in countries like Ireland, especially for an island already vulnerable to climate change, rising temperatures, energy insecurity, and ecological stress.
A sustainable approach requires strategic planning rather than isolated infrastructure growth. Renewable energy generation should precede large-scale expansion of digital infrastructure. This effort should be supported by climate-adaptive site selection, biodiversity-sensitive land use, resilient transmission systems, and water-efficient cooling technologies. Rather than adopting highly centralized hyperscale models, Sri Lanka could develop a distributed network of medium-scale facilities powered by renewable energy. This strategy would enhance resilience while alleviating pressure on the national grid.
Sri Lanka’s location in the Indian Ocean also provides an opportunity to establish itself as a regional hub for connectivity and resilience, linking South Asia, Southeast Asia, East Africa, and the Gulf. By emphasizing climate-conscious infrastructure governance and fostering regional digital cooperation, the country could distinguish itself through sustainability rather than mere scale.
In this context, Bhutan offers an example of how smaller developing nations can align their digital ambitions with environmental sustainability by leveraging their unique advantages. While Sri Lanka may face different geographic challenges, the broader lesson remains relevant: sustainable digital infrastructure can serve as a strategic asset rather than a developmental hindrance.
However, all future digital infrastructure projects must adhere to strict governance standards. These standards should include Environmental Impact Assessments (EIAs), Social Impact Assessments (SIAs), climate-risk assessments, feasibility studies, and transparent public consultations. Sri Lanka should also implement proven mitigation strategies, such as renewable-powered facilities, smart-grid integration, battery storage systems, modular infrastructure design, and energy-efficient cooling technologies.
Ultimately, the key question is not whether Sri Lanka should expand its digital infrastructure, but whether it can do so in a manner that enhances digital sovereignty while maintaining environmental resilience. The countries that thrive in the coming decade will be those that successfully integrate technological development with sustainability, energy security, and long-term strategic planning.
Dulanjaya Mahagamage is a digital rights researcher and communications professional with over five years of experience in social media analytics, trust and safety, digital governance, and policy analysis. He is currently Lead Researcher at Factum.
Factum is an Asia-Pacific-focused think tank on International Relations, Tech Cooperation, and Strategic Communications accessible via www.factum.lk.
The views expressed here are the author’s own and do not necessarily reflect the organization’s.
