Drivers for Growth
The Western Australian Government wants Perth to become a data centre hub servicing the SE Asian market. After launching an independent Data Centre Prospectus in November 2022 it has since followed up with a raft of digital and energy initiatives to make this policy deliver.
In March this year, the government said it was spending AU$ 140 million – part of its Digital Capability Fund – to improve WA’s digital capabilities to accelerate land development approvals and streamline delivery of key infrastructure projects. It believes building data centres can be cheaper in Australia than many markets in Asia, so Perth’s unique international connectivity – Australia has at least 17 subsea cables to Asia and the world, of which several land in Perth – should make it an attractive hub.
Relatively cheap power traditionally was also a factor. In 2022, the average price for the largest industry users in Western Australia was AU$ 132.36/MWh compared to Singapore’s AU$ 456.28/MWh (Source: Presync, Perth vs Major Global Data Centre Markets – Electricity Price Comparisons, April 2023). And this – plus state and federal government incentives – has already been attractive for the likes of new operator GreenSquareDC which announced plans in 2022 to build an AU$ 1bn 96MW hyperscale facility called WAi1 purpose-built for resource-intensive AI computing.
However, Perth operator DC Alliance warns that energy price rises in the WA have negated some of the innovation gains in PUE. According to DCA sales lead Natalie Parker, energy prices have increased significantly – partly due to recent grid instability and to AEMO restructure – with a 20-30% increase from 2022/23. “We are unlikely to see ‘lower’ power bills from DC efficiency nor energy savings as any technological improvement cannot negate the pricing increase,” she said.
Perth is developing differently
Despite the impetus, Perth is still a small market in Australia and it is quite different when compared to Sydney and Melbourne – not just in terms of the size but also the market dynamics.
“At the end of 2023 Perth sat on 178MW of total capacity – 29MW of which is currently live and the rest is in the pipeline at various stages of development,” said DC Byte research analyst Sarvaesh Mohan. “A large portion of the pipeline is due to a single project…This would mean that Perth accounts for roughly 4% of the entire Australian market. For comparison Sydney is around 60% and Melbourne is around 25%.”
Mohan said that unlike Sydney and Melbourne which have significant cloud activity, translating into sizeable hyperscale deployments (self-builds and colocation) over the past few years, Perth has not seen the same level of cloud activity – although AWS did announce a Local Zone in Perth in January 2023. “This means that we won’t be seeing large AirTrunk, NextDC, and CDC campuses to service the needs of the CSPs just yet. The operators in the market include the likes of NextDC, Telstra, Vocus, Equinix, and newer players such as Stack. You could say the facilities mostly service domestic needs,” he said.
A large driver of the Perth market has been the mining, resources, and the financial industries.
“With mining for instance, reliable IT infrastructure would be required to store, process, and analyse data related to production, exploration and other needs,” he said. “While this is still the most significant in my opinion, the improvements to Perth’s connectivity might change that in the future especially with AI’s potential.”
Connectivity helps
Subco’s Oman-Australia Cable (OAC) launch in 2022 kicked off a lot of interest in Perth. “Together with the Australia-Singapore Cable (ASC) in 2018 and the upcoming Sydney-Melbourne-Adelaide-Perth (SMAP) slated for deployment in 2026, Perth does have a slight edge when it comes to regional connectivity (Australia to the rest of APAC and beyond),” said Mohan.
“Sydney and Melbourne seem to have an edge when connecting Australia to the US. This regional connectivity could potentially make Perth an AI hub – we could see training campuses here that will leverage on the connectivity to Singapore and the rest of APAC – but I would caveat that actual AI deployments have not occurred just yet,” he added.
Gauging just how big the market will grow is more difficult. “Perth has the potential to multiply by 6 in total market capacity if all of the pipeline capacity becomes operational and possibly even more if AI really takes off in the market,” he said. “This would be a significant growth but a little misleading as one of the projects in the market is GreenSquare DC’s WAi1 facility which would add 96MW to the market but is currently in the early stages.”
This facility is hoping to leverage on the connectivity to the rest of APAC and AI’s potential to be a first mover in the market. “However, to our knowledge construction on the [WAi1] project will only likely begin in 2024 with a first phase expected to be operational sometime in 2025,” Mohan told W.Media. “I’d argue that this project is somewhat of a litmus test for the potential of the market. Conservatively, the market could multiply by 3 in total capacity but there is certainly room for more growth if Perth can become a future AI hotspot.”
Cost vs Latency when choosing Perth
While the lower costs of energy and land in Perth does make it more appealing in some aspects compared to the East Coast, latency could still be an issue for critical workloads in Sydney and Melbourne. This operational equation always weighs on operators looking at the Perth market but technology changes are altering the equation. However, AI adds a layer of complexity to the argument due to the dense deployments required, and subsequent opportunity for edge-like data centres to emerge.
“For some AI workloads I would hypothesise that inference facilities and ‘edge’ facilities would be necessary to minimise latency and Sydney and Melbourne will still play larger roles,” said Mohan. “For other workloads such as training campuses for AI models a metro like Perth would be suitable as these campuses would need to be in the hundreds of MWs but latency would not be as important. Training campuses could appear in Perth to service AI models that are being utilised in Australia and perhaps regional demand as well.”
Author: Simon Dux