Amid data-centre boom, can South-east Asia keep the lights on and taps running?

AS SOUTH-EAST Asia becomes the life of the data-centre party, the big test lies in managing the “hangover” – the strain on power grids and water supplies.

Malaysia, Indonesia, Singapore, Vietnam and Thailand are spearheading the data-centre boom, but each faces infrastructure and environmental hurdles amid the skyrocketing demand.

Data centres are big resource guzzlers, consuming vast amounts of water globally, mainly for cooling. A typical 100 megawatt (MW) facility, for instance, can use around 4.2 million litres of water daily – equivalent to the needs of a city of 10,000 residents.

Their energy appetite is just as massive. With the artificial intelligence (AI) revolution gaining momentum, Goldman Sachs Research projected in May that data-centre power demand will surge by 160 per cent by 2030.

Meanwhile, South-east Asia’s data-centre market is set to grow 73 per cent from US$10.24 billion in 2023 to US$17.73 billion by 2029, driven by surging demand for data processing and storage. 

Tech giants such as Microsoft, Amazon Web Services, Google and Tencent Cloud are pouring investments into the region’s data-centre space.

The Business Times lays out how Asean countries are navigating the digital boom resource-wise, as governments and operators are pushed to find solutions – some more innovative than others – to keep data centres electrified.

Singapore: Greening resource limits

Singapore’s land and energy constraints have prompted a cautious approach to data-centre development. In 2019, the government imposed a moratorium on approvals for new data centres to develop sustainable growth policies.

In 2022, a pilot call for applications led to Equinix, GDS, Microsoft and an AirTrunk-ByteDance consortium being awarded 80 MW of data-centre capacity a year later. These firms were chosen for their ability to adopt efficient cooling technologies and support AI and machine-learning capacity, linking with offshore data centres.

Singapore now has 1.4 gigawatts (GW) of data-centre power across 70 facilities, with plans to add at least another 300 MW under its Green Data Centre Roadmap unveiled in May 2024.

The road map focuses on addressing the higher energy density of AI hardware, which requires advanced cooling techniques such as direct-to-chip and immersion cooling. Specialists in the field say this positions Singapore to lead the region in AI-enabled data centres.

Although the Republic’s share of South-east Asia’s data-centre capacity may decline, Bain & Company partner Kiran Karunakaran expects revenue from local data centres to remain steady over the next three years.

Asher Ling, managing director of Princeton Digital Group (PDG) Singapore, believes operators such as PDG can diversify in Johor and Batam to create a larger region serving global needs, and calls it “an interesting case study for the world” over the next five years. – YONG JUN YUAN

Malaysia: Double-edged sword

Malaysia’s data-centre industry is expanding rapidly, with 159 MW of capacity under construction as at July 2024, with plans to add 1.2 GW over the next five years. Johor has become a key hub, attracting more than 50 new data centres in the past two years; Cyberjaya in Selangor hosts 16 operational centres.

This swift expansion presents environmental challenges, particularly in energy consumption, water usage and carbon emissions. By 2035, data centres are expected to require more than 5,000 MW of electricity, surpassing 40 per cent of Peninsular Malaysia’s current power-generation capacity.

Despite a strong reserve margin, this demand could strain the national grid.

To boost sustainability, the government provides 100 per cent tax exemptions for eligible data centres, cloud investments and green-tech projects, while Tenaga Nasional Berhad’s “green lane” streamlines approvals for eco-friendly data-centre operations.

Water consumption is another concern, especially in states such as Selangor and Penang, which already face supply issues. These states are investing billions to improve water infrastructure and meet rising demand. Johor plans to introduce guidelines for sustainable practices.

The Malaysian Communications and Multimedia Commission is developing a technical code for green data centres to set environmental and energy management standards for future projects. – TAN AI LENG

Indonesia: Crunch time

Indonesia’s fast-growing data-centre industry is driving a surge in energy demand, which is expected to hit 210 MW in 2024. This is a 45 per cent increase from the previous year, and it could hit 2.3 GW by 2030.

By late 2023, 35 data centres were operating in Greater Jakarta, mainly serving financial services. A shift towards hyperscale facilities in cities such as Batam is emerging, on the back of greater power capacity and cheaper land.

The industry’s heavy reliance on coal raises environmental concerns, as the transition to green energy faces hurdles due to limited access to renewables and the high cost of switching. The state utility PLN’s steep tariffs and lack of incentives also impede progress towards the sector’s sustainable-energy solutions.

Despite these challenges, the Indonesian government has committed to supplying cleaner energy to reduce data centres’ carbon footprints by up to half.

Batam, poised to become a regional data-centre hub, is preparing for rising energy demands, with electricity needs projected to hit 530 MW, and water usage reaching 315 litres per second by 2030.

To support this, Batam plans to increase power generation by 1,944 MW by 2032, and establish a 500 MW interconnection with Sumatra.

The island aims to meet half its energy needs through solar power, including the Batam Bintan Karimun Solar PV Park, which is expected to generate 1,000 MW by 2026. – ELISA VALENTA

Vietnam: Digital surge

Vietnam’s data-centre market is still in its early stages, but is set to see significant investment growth in the second half of 2024 and 2025, following the enforcement of a new law on telecommunications. This law has liberalised the sector by lifting the 49 per cent foreign ownership cap, allowing full foreign investment.

FiinGroup reports that Vietnam’s data-centre IT load capacity was 106 MW in 2023, and is projected to double by 2027 with a 22 per cent compound annual growth rate, though it still lags behind regional peers such as Singapore, Malaysia and Indonesia.

Despite its potential, the country struggles to meet the growing electricity demands of its expanding data-centre sector to meet its goal to become a digital hub. A severe drought in the summer of 2023 depleted hydropower reservoirs, triggering rolling blackouts that disrupted production in northern industrial provinces last May and June.

Experts stress that upgrading power infrastructure, including the energy grid, submarine cables and fibre networks, is crucial for the country to meet the growing demands of new data-centre development.

To address energy security, Vietnam has clarified its power development plan through 2030. A new decree issued in 2024 also allows large electricity consumers, including data centres, to buy power directly from renewable energy producers, either through private transmission lines or the national grid.

This move is expected to reduce pressure on the national grid during peak periods, and enhance power availability for the energy-intensive data-centre industry. – JAMILLE TRAN

Thailand: Fuelling up

Relative to its regional rivals, Thailand may be a small fish in the vast data-centre ocean, but it is making waves by embracing renewable energy to meet the growing power demands of its AI-driven data centres.

As at the first quarter of 2024, the kingdom had 59 data centres with total capacity amounting to 66 MW, Cushman & Wakefield data shows. This could jump to 642 MW by 2028, said global data-centre market intelligence provider, DC Byte.

In June 2023, Thailand launched a pilot scheme allowing data-centre operators to buy renewable power directly from energy producers, bypassing the national grid. This enables the operators to better manage costs and reduce risks from fluctuating market prices.

The Thai government has attracted billions in foreign investments for data centres and renewable energy. State-owned energy providers are also exploring sustainable solutions, such as ST Telemedia Global Data Centres (STT GDC) Thailand collaborating with PTT to use cold energy from liquefied natural gas regasification for cooling data centres.

STT GDC Thailand, a joint venture of the Temasek-backed data-centre provider, now operates three data centres in the country.  – GOH RUOXUE