Singapore: Rising Data Centre Costs Amid Power Constraints

As demand for data centres continues to grow rapidly, the world is facing a situation where supply chains are unable to satisfy demand. As a result, prices for the construction of data centres are increasing, especially in markets with limited labour and contractor pools. According to the Data Centre Cost Trends: A cross-market review report published by Turner and Townsend, Singapore has risen from 5th place in 2023 to 2nd this year, which can be attributed to continued supply-demand imbalance. It also states that Singapore remains the most power-constrained market for data centres, with low capacity and vacancy rates.

With all these in mind, Singapore is ranked the second highest in the Data Centre Cost Index 2024, with a price of US$13.80 per watt. This is just slightly lower than Japan, which has a building cost of US$14.30. This piece looks into how Singapore manages its data centre demand with increasing cost and power constraints.

With no natural resources, Singapore imports all its energy from neighbouring countries. As of 2023, about 95 percent of Singapore’s electricity is generated from natural gas supplied by neighbouring countries like Malaysia and Indonesia. The heavy reliance on imports signifies that Singapore is in a very vulnerable position in terms of energy supply. Even as the world begins to seek more renewable energy alternatives, the lack of renewable energy sources has made it difficult for Singapore to produce its own renewable energy. Since June 2022, the Energy Market Agency in Singapore has started importing renewable energy via Thailand and Malaysia. Due to geographical location constraints, Singapore has no choice but to rely heavily on neighbouring countries for its energy supply. But by diversifying the sources of energy, it effectively helps to reduce the reliance on a singular country for its energy supply.

In May this year, the Singapore government also officially launched the Green Data Centre Roadmap to guide digital sustainability and chart green pathways for data centres. This roadmap signifies the emphasis the authorities are placing on sustainability for all current and upcoming data centres in Singapore. Support will be provided to industry players through grants provided by the Economic Development Board (EDB), such as the enhanced Resource Efficiency Grant for Emissions. The Infocomm Media Development Authority (IMDA) will also work with industry players to accelerate the use of green energy for data centres.

By setting clear industry standards, Singapore will be able to ensure that all data centres that are approved for construction run more efficiently and sustainably. The green mark for data centres has also been updated in October with tighter criteris. Jointly created by the Building and Construction Authority and IMDA, this green mark was created to recognise data centre players that implement best practices and demonstrate superior environmental practices. While it is not mandatory for all data centres in Singapore to achieve the green mark, it sets a good benchmark for all industry players to strive towards. With a key focus on energy efficiency, this new update continues to tighten requirements on Power Usage Effectiveness (PUE) measurements. Power consumption must now be captured after the Power Distribution Unit (PDU) instead of after the UPS previously. The new prerequisite for data centre operators is to measure PUE at 25% IT load and also display energy metering and show real-time PUE.

These new green data centre measurements came in place after the three-year halt for construction of data centres between 2019 and 2022. The decision to limit the construction of data centres within those years was to provide the Singapore government with more time to evaluate how data centres in Singapore can grow in a more sustainable way. Singapore is now more selective in terms of the type of data centres that are being built in the country. Instead of merely increasing the number of data centres being built, it places more emphasis on the sustainability of data centres so that the industry can grow more sustainably and effectively. This would ensure that the supply of energy in Singapore is able to meet the demand, despite it being a power-constrained market.

As a small nation with limited resources, it is inevitable that labour costs and power constraints will continue to be an issue for Singapore. However, through the various policies and implementations the authorities have started to put in place, it is clear that the problem is being noticed and active steps are being taken to tackle it.

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Author Info:
Aurora Tang
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