Navigating the Challenges of Data Center Development
In the heart of Southeast Asia, where the heat meets the relentless pace of technological advancement, a new frontier is emerging. It's where my two passions—energy and intelligence—converge in the form of data centres. Having spent years developing large-scale renewable energy projects before diving into AI applications, I find myself at home in this rapidly evolving landscape. Yet, as I explore the underlying infrastructure powering our digital lives, I'm struck by both the familiar and the uncharted.
Data Centers Evolving from Cloud Backbone to AI Powerhouse
Gone are the days when data centres were mere real estate plays with a dash of energy management and IT assets. Today, these digital fortresses are undergoing a transformation as profound as the shift from steam engines to electric motors. The catalyst? The insatiable appetite of Generative AI, for both their training, and inference. During training, they use enormous amounts of parallel computational power, and at inference they deliver the intelligent service they were endowed with. While AI training is currently a major focus, the sheer volume of AI adoption is quickly making inference workloads a significant demand driver for GPUs.
Imagine a world where every company's entire online presence is powered by AI. Where each of your next decisions is suggested by an algorithm that anticipates your wants better than you. Where each of your interactions with companies are with their AI agents. Essentially, where “customer service” brains are moving from grey-matter onto silicon. This isn't science fiction; it's the trend driving the evolution of data centres. We're witnessing a seismic shift from general-purpose CPU-based facilities that are great for storage and retrieval of information like accessing websites, to tightly coupled GPU clusters capable of high-performance computing (HPC) needed to generate the exact content users need on the fly by running massive AI models, and this, at scale. HPC is rapidly moving from serving applications that were considered niche to becoming the new normal.
This transition is rewriting the rules of the game. A decade ago, data centre racks drew 6-10kW of power. Today? We're looking at upwards of 100 kW per rack. The overall power demand has skyrocketed from 10-30 MW to a staggering 300 MW in a single facility. It's as if we've gone from powering a neighbourhood to energizing an entire city—all within the confines of a single facility.
The Challenge Scaling to a $50 Billion Opportunity
Let's put this into perspective. Southeast Asia alone is expected to add 5GW of installed IT assets in the next three to five years. With each megawatt costing around $10 million to install, this represents a $50 billion investment. But that's just the tip of the iceberg.
To power this digital behemoth, we'll need an additional 6GW of energy supply. So, in a region already vulnerable to climate change, the choice between emitting and renewable energy for data centres isn't just an economic decision—it's an environmental one. Innovations in energy storage and grid management are crucial for integrating renewables and minimizing carbon emissions. So let’s look at a few scenarios, solar, gas and nuclear.
If we were to rely on solar power, given the current technical limitations, we'd need to install a mind-boggling 30GWp of capacity. That's roughly $25 billion worth of solar panels covering an area 80% the size of Singapore. To put it another way, we'd need to double the entire region's current solar and wind capacity—just for data centres. And let's not miss the innovations needed in storage to manage the stress power intermittency introduces to the grids, which is yet another opportunity for the region to shape this industry.
Countries like Malaysia and Indonesia, which have excess gas production, could opt to position their energy sources as the solution. However, the question remains about the appetite off-takers and investors have for more emissions. It will be interesting to see how, when push comes to shove, short term competitiveness impacts governmental long term environmental considerations. My guess is that more gas powered IPPs will be permitted to serve the exploding demand.
Nuclear for its part has been a promising solution, but has remained elusive. Smaller, seemingly safe fusion reactors have been slated to enter commercial application in the next two years. Singapore’s somewhat conservative stance on the technology has seen a new light recently with the signing of a bilateral agreement “the 123 Agreement” with the USTDA to deepen development cooperation. But given the speculative state of these developments, it’s difficult to predict how nuclear will play a role.
The Challenges Forming a Multifaceted Puzzle
The Power Conundrum
Zooming in on a single project, securing power for a 250 MW data centre is more than just a technical challenge; it's a diplomatic one. It requires navigating a complex web of regulations, grid stability issues, and relationships with power providers. Imagine trying to plug a supercomputer that pulls megawatts of power that are fluctuating within milliseconds from a power grid designed for household appliances—that's one part of the scale of adaptation required.
Location, Location, Location
Data centers have a peculiar trait: they become more valuable the closer they are to each other, benefiting from network effects for redundancy and reduced latency. While AI training might be less location-sensitive ("AI doesn't care where it goes to school"), the need for quick data access when it comes to inference could keep proximity to population centres a crucial factor. The question therefore remains, is it realistic to install HPC facilities where there is excess power?
While Singapore, Malaysia and Indonesia created the SIJORI as a regional hub, the recent development efforts of fiber interconnection between Singapore and Sarawak could offer an interesting expanded geographical playground.
The Contractual Dance of Regulatory Hurdles
Developing any infrastructure project is a delicate dance of contracts and permits, and data centers are no exception. From loose Letters of Intent with financiers, contractors and off-takers to binding agreements, each step requires careful choreography. Land acquisition alone involves setting up local entities, securing government approvals, and navigating environmental impact assessments. It's a process that tests patience, proactivity and diplomatic skills in equal measure. Therefore, selecting a site within an enabling regulatory environment is a critical consideration.
Singapore has stringent data privacy laws and robust infrastructure standards, making it attractive for data centre investment. Given how critical AI is becoming for the future of the other SEA countries, it would make sense that data sovereignty questions further push for streamlining the ease of doing business across Southeast Asia. Will the market mold regulations in the right way in the remaining countries of the region?
Technology Selection
Between the time a data centre is designed and its initial phase is commissioned, many developers have seen requirements evolve dramatically. Therefore, optimizing for flexibility, extensibility of power supply while deeply understanding the applications that the infrastructure can serve become increasingly central questions. Decisions that were historically left to the client of colocation facilities now have strategic implications that cannot be ignored by the developers. A trend seems to be a gradual expansion of the scope developers have to take on. Therefore, would organizations with the widest skill sets be better positioned to compete?
Thermal Management
Here's a startling fact: just a fraction of the energy consumed by these computational powerhouses goes into actual computing. An average of 15% of the energy is used to keep the systems at the required temperature, and the rest? It's dissipated as "heat". This is more than 80 MW of heat from a 100 MW facility—enough to power a small town.
Current solutions focus on liquid cooling and direct-to-chip technologies, efficiently moving heat to cooling towers for evaporation. But is this the best we can do? In colder climates, this waste heat is often repurposed for district heating. In the tropics, however, we're left with a challenge that's also an opportunity.
A Radical Proposal for Embracing the Heat
What if, instead of fighting the heat, we embraced it? There aren’t many promising energy recovery methods with 27℃ to 34℃ water coming out of a facility when the outdoor temperature is at 30℃. But when it’s gigawatts of waste heat, the problem becomes something more serious to innovate on. Imagine redesigned chips that operate at temperatures above 100℃. Yes, this is still dreamy land, requiring significant innovation in material science, and would increase energy consumption for computing. But if it unlocks the ability to recover 80% of a facility's energy input, it represents a multi-billion dollar opportunity, since energy is fungible - that is, if it’s recovered from there, it does not need to come from another source. Integrating these projects with off-takers recovering that heat for productive uses would be a chance for every player in the value chain, and mainly the chip manufacturer, to capture value that's currently evaporating into thin air.
The Future Could Offer a Digital Oasis in the Jungle
Developing data centers in Southeast Asia isn't just about following the needs of an increasingly connected population; it's about crafting the foundation of a future that’s accelerating with more intelligence. As the region continues to grow as a hub for digital infrastructure, innovators have the opportunity to set new global standards at every level—from chip design to energy management, from regulatory frameworks to cooling technologies. It will demand collaboration between technologists, policymakers, and energy providers on an unprecedented scale. Because that’s what it takes to architect the nervous system of Southeast Asia.
The talent in the region has already created a large portion of the innovation in the industry, therefore the question is not if, but how quickly are the needed solutions going to become mainstream industry standards around the world. Southeast Asia cannot wait for other parts of the world to answer their challenges, so whether its policymakers, technologists, or investors, they all have to innovate. This will ensure that the beautiful jungle and the high technological digital world keep their balance, in the image of Singapore.
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