Delivering data centres in an AI-driven world
Power availability is the top priority for data centre investors and developers working to meet high levels of demand in the Asia-Pacific region. As the deployment of artificial intelligence (AI) further increases that demand, there is a growing focus on incorporating renewable energy systems and greening facilities to power a more sustainable future for the sector.
Asia-Pacific (APAC) is capitalising on the data centre development boom as demand for cloud computing services from businesses and governments drives growth in hyperscale data centre development.
Several core markets currently have 50MW facilities under construction and, as construction activity has intensified, so have costs. Emerging markets, such as Jakarta and Kuala Lumpur, experienced some of their largest price increases in 2023, by 13 and 10 percent, respectively.
APAC as a whole has felt the pinch, though – as was documented in our 2023 data centre cost index as we examined conditions in 46 key markets and surveyed industry experts.
Power drives focus on emerging markets
With 92 percent of respondents surveyed considering access to power more important than location, we too have noticed data centre investors and developers turning to less established locations across APAC.
This has benefitted Malaysia, which has seen a spike in activity following the Singapore government’s pause on data centre development between 2019 and 2022. Singapore, however, has also seen a surge in development now this moratorium and strict COVID-19 lockdowns have both been removed from the picture. It retains its place as the fifth most expensive market to build in as a result, following Tokyo, Zurich and Silicon Valley.
Demand for cloud-based platforms and the rise of AI continue to drive activity in Australia and New Zealand too, with costs recording a modest increase. Cloud computing operators like Microsoft and Amazon Web Services are investing heavily in such established regions, as are European and American developers and providers, such as EdgeConnex and Stack. Market growth is also being driven by regional players, like Keppel, AirTrunk and NextDC.
Power supply constraints and skills shortages persist
Energy-intensive data centres are putting some national grids under severe pressure, prompting governments to limit their development. Construction skills are also in short supply globally, with 94 percent of survey respondents reporting a lack of experienced teams.
This competition for talent, plus ongoing supply chain disruption in the wake of COVID-19 and continued conflict are upping labour costs, plus overall construction costs and uncertainties. Skill shortages are acute in New Zealand, however, with well-established Auckland still the most expensive location for data centre construction across Australia and New Zealand.
AI is adding to any existing pressures, with 88 percent of respondents reporting that demand for data centre capacity for AI is increasing. The rise of AI is creating a need for data centres with high rack densities and more megawatts that can train large language models. This, in turn, requires access to stable renewable power and the development of advanced cooling systems.
In this fast-evolving environment, early advice and guidance on project and programme delivery is essential. The sector must draw on global knowledge to bring in well-defined project management and controls, efficient digital workflow processes, supply chain management and effective cost management, to mitigate the risks and target success from earliest project stages through to operations.
Targeting decarbonisation for future growth
APAC government moves to implement increasingly stringent environmental regulations present opportunities for data centre operators, paving the way for the adoption of renewable energy sources, energy-efficient technologies and innovative cooling solutions.
Singapore, while now having lifted its three-year moratorium on data centre construction, has imposed conditions that require data centres to be ‘best-in-class’ in terms of resource efficiency, using sustainable energy and efficient cooling technology with the long-term objective of reducing carbon emissions.
Although it is necessary to transition to more sustainable construction practices and energy supply, it is not without its challenges. Below, we share four ways the industry can enhance its commitment to a greener future, securing energy costs and delivering projects cost-effectively and efficiently, while addressing challenges and limitations.
1. Opt for renewable energy
Sustainable energy sources are central to meeting demand for power as AI’s potential is realised, while reducing the reliance on fossil fuels and stabilising energy costs and supply. Solar, wind and hydropower projects are becoming increasingly common, supported by favourable government policies and falling renewable energy costs.
Identifying renewable energy options, evaluating the risks and opportunities, technological advances, cost-effective solutions and energy security is necessary.
Renewable energy supply can be intermittent as it relies on fluctuating natural resources, so energy storage may need to be incorporated into energy infrastructure. The construction and implementation of renewable energy infrastructure enables systems to be fully integrated into data centre operations.
2. Tap into green finance
Green and sustainability-linked project finance is becoming a powerful tool for operators to raise capital and is growing in popularity, especially in hubs such as China, Japan and Singapore. The issuance of sustainable finance instruments more than doubled between 2020 and 2021, crossing US$6tn as of April 2023 and confirming the region's commitment to decarbonisation. However, there is a need to continue scaling its deployment, giving private capital the confidence to invest.
However, there is a need to continue scaling up its deployment, giving private capital the confidence to invest.
Integrating sustainability metrics into financial reporting and disclosing environmental, social and governance performance are crucial for maintaining investor confidence and securing funding. To support this transition, there is a need to identify funding opportunities, develop sustainability criteria for financing and navigate the process of securing and reporting on green financing.
3. Target embodied carbon
Data centres have traditionally focused on operational efficiency and reducing their carbon footprint. As operational efficiencies improve, the relative impact of embodied carbon becomes more significant, while increasing regulatory pressure and stakeholder demand for transparency are encouraging the reporting and reduction of total carbon emissions.
These factors are leading data centre operators to reduce their embodied carbon emissions. This brings practical difficulties, including assuring supply chains, products and data, so it is essential to be rigorous in conducting lifecycle assessments, specifying materials and implementing sustainable construction practices. Setting and targeting embodied carbon reduction goals is also paramount.
4. Leverage AI
Data centres are increasingly incorporating AI into their own operations. This is enabling operators to optimise energy efficiency and predict and prevent equipment failures, and automate routine tasks, generating cost savings and increased efficiency.
Cleaner, greener data centres
Transitioning to greener energy sources and campuses presents many challenges for the sector – challenges that need to be met by robust project strategies, targets and controls capable of driving efficient, timely, cost effective and sustainable delivery in APAC’s emerging and established markets.
Renewable energy sources and AI must be effectively deployed to realise carbon reduction and other benefits. The sustainability of construction practices, supply chains and materials also need to be charted to ensure projects deliver on their embodied energy targets.
Beyond this, investors, developers and operators should equip themselves with the data and tools they need to make informed decisions and map out a route to project delivery that is more efficient, more cost effective and more sustainable.
Tapping into global expertise and knowledge to guide projects from inception to operations can help the sector realise its future potential.