In the Covid pandemic, investments in new data centers have boomed worldwide. The growing amounts of data for streaming, e-commerce and computer games had to be processed and stored somewhere.
So far, the US is by far the most important region for these data centers, but that is likely to change now. Asia comes into focus. In the next two years, China and India will be the two most important target countries for the construction of new, gigantic server farms. At least that’s what a survey by the law firm DLA Piper among major investors around the world suggests. Among other things, the demand for data services in Asia is increasing rapidly.
It’s about billions in investments. Last year alone, companies spent nearly $54 billion building data centers. And the investment sums, which include the international cloud providers Amazon Web Services, Microsoft Azure and Google as well as Alibaba and Tencent, continue to rise.
But are the centers, which require an immense amount of energy, really that attractive for the region? Yes, investment locations benefit from land sales and job creation, even though data centers are less labor intensive than other investments. At the same time, according to the International Energy Agency, around one percent of global energy consumption goes into data processing – the high-performance servers have to be operated and, above all, cooled.
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In Singapore, previously the most important location in Asia for such centers, more than five percent of energy consumption already flows into the data centers. The city-state had therefore banned the construction of new locations in 2019.
Singapore withdraws moratorium
Singapore has already tried a number of things to provide the energy for the server parks: tests are being carried out to see whether unused cooling water from a liquid gas terminal can also supply a data center located there. Data centers at sea and floating solar farms are also being tried.
The data centers in the city are to become more efficient.
(Photo: imago images/NurPhoto)
Earlier this year, the government lifted the ban on new centers. With the condition that the centers are energy efficient enough. Tokyo, Sydney and Seoul had previously overtaken the city-state as data center investment destinations.
For investors in data centers, energy security and reasonable energy costs will be decisive for their location in the future. The power outages in China and India last year showed them that stable energy availability is important and not always a matter of course. And with the upheavals on the energy market after the Russian war in Ukraine, it is hardly surprising that Europe is losing its attractiveness as a global location.
Within Asia, too, the centers are likely to be located where energy is cheap. In China, for example, the renewable energies in the west of the country are to be used to process the amount of data in data centers there that the internet industry based in the eastern coastal cities needs. This is what the three-year plan of the Ministry of Industry envisages.
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China, like Singapore, has formulated a minimum level of energy efficiency for future data centers. Because the goal that China wants to steadily reduce its carbon dioxide emissions from 2030 onwards should not be thwarted by the settlements.
India and Indonesia are currently promoting themselves as future locations for data processing and are advertising that they can provide enough green energy at low cost to operate the data centers. In Indonesia, among others, the Chinese data management company GDS has acquired 10,000 square meters of land to build two data centers near the Singapore border. The company is following its Chinese customers who are expanding into Southeast Asia.
In India, the government has officially classified the data centers as “critical infrastructure”, which has advantages for long-term borrowing in such an investment. Special economic zones should also make it easier for the centers to settle there. Energy subsidies are offered to investors. Now only the energy infrastructure has to keep up.
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