As internet traffic surges, data centres are turning to finance for sustainability solution
When economies locked down in early 2020, data came to the rescue. Global internet traffic surged by more than 40%, supporting a wave of video conferencing, social networking and online shopping1. Data centres are vital nodes in this Internet Protocol (IP) traffic flow: once anonymous utilities that are moving into the sustainability spotlight.
As 5G and Internet of Things (IoT) connections roll out, this explosive growth is forecast to continue, supporting economies in emerging markets. In developing Asia, engagement with digital commerce is rising at 8% a year, while in Sub-Saharan Africa, smartphone connections are projected to almost double between 2019-20252.
This will propel demand for data centres. Until 2024, Southeast Asia is expected to be the fastest-growing region for data centre colocation − where server space is rented to third parties − with the market expanding by 13% annually. Asia Pacific is forecast to expand at 12% per year3. But data growth presents a sustainability challenge.
Currently, data centres account for around 1% of global electricity use. Energy efficient new servers and infrastructure have, to a certain extent, kept scale and sustainability in balance. But pressures are growing4.
“Data centres’ total global greenhouse gas emissions are less than their total energy usage, primarily because of the concentration of assets in more developed markets,” explains James Cameron. “As geographies and technologies develop, we forecast they will drive a material increase in energy demand.”
Data centre servers, which prefer 20-25°C environments, need to be protected from 30°C+ tropical heat. Cooling systems need more power as a result. Without rapid innovation, by 2030 it is estimated that Singapore’s data centres will consume up to 12% of the country’s total energy demand5.
As a result, companies like STT GDC are increasingly seeking out innovative green energy solutions. A group company, China-based data centre developer, GDS Holdings, recently announced a Memorandum of Understanding (MOU) with Singapore’s Sembcorp Industries, a leading renewable energy provider.
The two organisations agreed to work together to explore synergies between GDS’s green data centres and Sembcorp’s renewable power generation6. Both parties are clients of Standard Chartered, which connected them.
Another STT GDC group company, VIRTUS Data Centres, now uses 100% renewable power in some of its data centres, thanks to partnerships with wind, solar and tidal energy providers7.
“We’ve been working with data centre developers around how they source their energy,” says James Cameron. “Standard Chartered can leverage relationships with energy providers to help create captive renewable energy power purchase agreements (PPAs) for data centres.”
By linking data centre providers and power utilities, banks can also create a virtuous circle of green finance and development, explains Cameron: “Based on the PPAs that renewable energy developers have with data centres, we can then work with the energy companies to finance their new projects.”
Infrastructure design is another pillar of efforts to make sure efficiency outpaces data demand.
In developed economies, vast hyperscale facilities have become cornerstones of this race. Environments that can provide natural cooling, as far north as the Arctic Circle8, are also expected to be a growth area. Microsoft has gone to the extent of testing an underwater data centre near Scotland which takes advantage of consistently cool temperatures on the seabed9.
However, in warmer climates with limited space for new facilities, some emerging economies are developing their own solutions.
Singapore’s package of green data centre standards, which categorises buildings according to measures including waste and water recycling, is one such initiative. Finance is also incentivising positive change. As loans link favourable interest rates to the installation of rooftop solar and low-energy, water-based cooling systems, data centre operators are supported to upgrade existing facilities.
Such innovative solutions may even provide developing economies with an opportunity to leapfrog established sustainability solutions.
Data is already proving to be the new gold and has an opportunity to lift fortunes globally. Africa’s Data Centres Association (ADCA) believes data centres could be a catalyst for economic transformation on the continent10.
At the same time, more than half of infrastructure providers believe sustainability is an increasingly important competitive differentiator, an aim voiced in the CSR reports of many global clients11.
“This is a highly dynamic market with significant valuations and M&A activity,” says James Cameron. “But this opportunity also brings real responsibilities for developers, banks and investors.”
As economies become ever more dependent on the cloud, nations will increasingly need to partner with those who manage data to make sure it is green.
