In today’s Finshots, we talk about district cooling systems and why they might not be the silver bullet for India’s heat problem.

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The Story

Every summer, India runs into the same crisis. Temperatures shoot up, people crank up their ACs, peak electricity demand spikes and the power grid groans under the load. Plus, things seem to be getting worse with long summers and denser cities.

The IEA (International Energy Agency) even tried putting a number to this and found that by 2030, cooling alone could account for nearly half of India’s peak electricity demand.

Sidenote: Peak demand electricity is the single highest draw on the grid at a given moment, and it’s the level utilities must build their generation and transmission to handle.

So clearly something needs to change. That’s the reason policymakers and private players have been mulling over alternatives, and one idea that’s been floated around for a while now is the District Cooling System (DCS).

Think of it this way. Instead of every building buying its own AC plant, you build one massive, industrial-scale chiller plant for a neighbourhood. This central plant cools water to about 4–6°C and pumps it through insulated underground pipes. When the chilled water reaches a building, it passes through a heat exchanger, where it absorbs heat from the building’s air-handling units. The slightly warmer water is then piped back to the central plant, cooled again, and the cycle continues.

That’s simply impressive since it makes cooling far more efficient than hundreds of standalone AC units. The efficiency gains come from scale since large central plant consumes less energy per unit of cooling than smaller units running independently.

And that’s exactly why private giants are pitching DCS as a disruption to the AC market. The government is keen too as India’s Cooling Action Plan (ICAP) wants to cut cooling demand and emissions sharply by 2037.

And the numbers on paper are impressive. If India used DCS for just a part of its new commercial demand by 2037, it could avoid 22 gigawatts of peak load and cut 27 million tonnes of CO₂ emissions each year. That’s like shutting down dozens of coal plants.

Sounds like a no-brainer and also something that India should expand to as many cities and districts as possible, right?

But well, here’s where the reality bites. Let’s take a look at this on how this pans out for a DCS system.

First, the cost. The major one here is the underground piping distribution network, which alone makes up anywhere between 40–60% of the capex cost. And in most Indian places where every inch of road already hides cables, sewage lines, and water pipes, adding one more utility could be expensive and messy (and honestly, no one wants another round of road-digging!). Plus, you spend big years before late-cycle buildings hook up. So unless you plan it into the city design right at the start, you’ll be stuck digging up roads or see years before benefits flow.

Second, density. A DCS would make financial sense in very dense, planned districts with big anchor customers like skyscrapers, malls, and hotels stacked together. Spread-out, chaotic sprawl ruins efficiency and finances.

And third, you’ll have to think about the energy source. Since India’s power supply is 70% coal-based, shifting from individual ACs to a DCS doesn’t magically make cooling green. Unless the grid itself cleans up and uses say renewable powered grid, or unless you use smarter options like thermal storage. So the main advantage lies in peak shaving i.e. storing chilled water at night and supplying it during afternoon spikes, which reduces blackouts and strain on transformers.

Plus, there’s also the equity gap. DCS is meant for high-rise districts, airports, industrial and office spaces — not low-income housing or informal settlements. In a country where millions still rely on fans or evaporative coolers, this may be far from becoming a climate solution for everyone.

Put all of this together and you can see why we can’t generalise DCS as a viable solution despite being an energy efficient option. Which brings us to what’s happening in India with DCS.

GIFT City in Gujarat was the first to adopt DCS. It integrated cooling pipes into underground utility tunnels from day one, avoiding the road-digging chaos. But even there, the early challenges were seen as heavy upfront capex and demand-assessment risks.

Which is why larger players are circling this space. Adani Energy Solutions (AESL), through its subsidiary Adani Cooling Solutions (ACSL), has announced plans to build DCS projects in various states, even signing a deal in Maharashtra. Tata Power is also eyeing cooling-as-a-service opportunities. And they know this isn’t a consumer durables play, it’s an infrastructure finance business.

Because unlike buying an AC, DCS is a service. Building owners don’t pay upfront. They pay a monthly bill for cooling capacity plus consumption. For infra giants, that means steady contracts, long-term returns, and utility-style economics.

Globally, this model works. Take Marina Bay in Singapore as an example. It has run without interruption since 2006. Toronto’s Deep Lake Water Cooling saves 55 MW of peak demand annually by piping freezing lake water into skyscrapers. Hong Kong even made DCS connections mandatory in its Kai Tak redevelopment zone.

And that’s the interesting bit. Where governments reserved corridors, mandated connections, and treated chilled water as a utility, DCS worked. But without that, it can be hard to scale.

So where does that leave India, you ask?

Look, the thing is ACs aren’t going away anytime soon. In fact, India remains one of the most underpenetrated air-conditioning markets globally. So district cooling might chip away at the commercial segment in a few dense pockets, but it won’t replace millions of split ACs hanging out of residential windows. At best, DCS can take pressure off the grid, cut refrigerant leakage, and make planned business districts more efficient. At worst, it becomes an expensive pilot project that never scales beyond a few smart cities.

Still, district cooling isn’t the only path forward. Many urbanists argue India’s real cooling crisis is architectural. Glass-and-concrete towers copied from the West trap heat like greenhouses. Traditional Indian designs (shaded courtyards, verandas) had passive cooling built in long before ACs. And we know how shaded parks are on average cooler than nearby concrete, and that even a 1% rise in tree canopy can cut city air temperatures by 0.1–0.2°C. Again, these aren’t silver bullets. But they prove cooling isn’t always about megawatts and machines and that sometimes, the smartest future looks a lot like the past.

So yeah, DCS can be efficient. But efficiency alone won’t make it India’s cooling saviour. It needs planned corridors, clear tariffs, resilient infrastructure, and government backing. And it needs a well thought out approach where city design, contract design, and grid design talk to each other.

If India gets that right, maybe DCS could move from demo projects to default in many places. If not, it’ll remain niche. Because in the end, the technology isn’t the bottleneck, an absence of well-rounded policy and enabling systems like pubic-private partnership (PPPs) projects that can make it scale is.

Until then…

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