Carbon Tax Pressures Singapore Data Centers

By April 2018Uncategorized

Carbon Tax Pressures Singapore Data Centers

Carbon Tax Pressures Singapore Data Centers

Businesses across Singapore will have to contend with a new threat to their profitability in the future: the carbon tax which will be imposed in 2019. Announced by the Finance Minister Heng Swee Keat in February 2018, the carbon tax will be levied on all factories and establishments that release more than 25,000 tons of greenhouse gases.

Data centers have been springing up at an accelerated rate since the rise of Internet and Cloud based companies and with companies storing billions of gigabytes of information. In Singapore, the rise in demand has been matched with a rise in supply, and what we see today is a competitive market with both international and homegrown data center providers.

Essentially, data centers consume an immense amount of energy, especially with technologies today enabling higher density in IT equipment. It is predicted that data centers will consume three times the energy that they do today in the next few years.

With the carbon tax levy set at $5 for every ton of greenhouse gas released by companies from 2019 to 2023, we take a look at how this will generously impact the competitive data center business.

The Impact on Businesses

It is easy to assume that data center providers will probably pass on the costs to the end-users. However, this would not be sustainable in the long-term, given the competitive nature of the market that extend beyond the country and into the region. Outside of Singapore, countries such as Japan and Hong Kong have also been deemed as a preferred data center hub for global end-users to set up in Asia.

Companies generally prefer data centers located nearby to allow for quick movement of data, and greater control with better accessibility. Along with significantly lower costs and improved digital infrastructure since the past few years, Malaysia could also be a convenient alternative location to look at.

With that in mind, data centers in Singapore need to look into improving their energy efficiency to reduce their operating expenditure, avoid costly tax payments, and ultimately remain competitive in the Asian region. A significant amount of energy is consumed in running a data center, with almost 37% being used to keep the equipment cool. While it is a big challenge, there is definitely room to achieve optimal energy efficiency.

A Green Data Center – Distant Dream or a Real Possibility?

Currently, the best-in-class data center in Singapore has a power usage effectiveness rating of 1.44 whereas a similar data center in Nevada can achieve an annual PUE rating of 1.185. Singapore’s Infocomm Media Development Authority (IMDA), Keppel Data Centers, and Huawei have joined hands to see if they can create a high-rise “green data center” to solve both space and power concerns. This includes exploring at elements such as server rack positioning, intelligent control systems, data hall structures, and the use of natural ventilation or physics-based cooling methods for more efficient energy consumption. The IMDA has also designed the Green Data Center Standard to establish processes and systems required to improve energy efficiency in typical data centers.

Renewable energy is limited in Singapore. In an energy-intensive facility such as a data center, relying solely on renewable technology is not a suitable option. Tropical and humid climates are not conducive to many of the energy-saving techniques as well, which means data center businesses have to be inventive. The industry must innovate in different ways to reduce energy consumption and boost efficiency, possibly by combining different green technologies and techniques to find a sustainable option.

As the IMDA and its industry partners continue to explore the possibility of a true “green” data center in a tropical country with limited renewable energy, data center providers will more likely to adjust its business plans and projections in expectation of the carbon tax to be brought into effect in 2019.

Hear more about Carbon Tax at the upcoming APAC Datacenter Design & Operations Convention 2018 on 4th July.


Stephanie Chiang

Co-founder, W.Media

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