Datacentres critical to Singapore but sustainability concerns remain

Datacentres are critical to Singapore’s competitiveness and relevance as a global business hub, contributing more than S$2bn to its economy each year and generating some 1.6 million jobs through the cloud services they deliver.

Those were the key findings of a new study conducted by economics consultancy AlphaBeta on the economic and environmental contributions of Singapore’s datacentres, as well as how the industry could evolve under different scenarios from now until 2030.

Speaking at a media briefing, Fraser Thompson, co-founder and principal at AlphaBeta, said the overall economic benefits of datacentres stem not only from direct contributions from their construction, but also indirect and induced impacts, such as spending on utilities by datacentre operators and consumer spending by datacentre workers.

Just as crucial is the “enabled impact” of datacentres around low latency and data security enabled by local datacentres, said Thompson.

“This is really important to emphasise because often when we measure the first three categories of benefits, we forget about the last benefit, which is the most beneficial from a Singapore perspective,” he said, noting that financial services firms and key government services, for example, all require low-latency performance.

There are also broader benefits that come with datacentres being located in Singapore, said Thompson. Some of these revolve around supporting innovation and reducing business costs, where about 13-16% of costs can be saved through a shift to cloud, he added.

Although the economic impact of datacentres is undeniable, there have been growing concerns about their carbon footprint. In 2019, the Singapore government imposed a two-year moratorium on new datacentre construction in the city-state, which was lifted in January 2022.

The government had also announced plans to pilot a new framework designed to ensure that new datacentres are resource-efficient and contribute to Singapore’s economic and strategic objectives.

Datacentre operators and hyperscale cloud providers such as Amazon Web Services are already doubling down on their sustainability efforts, employing renewable energy and other cooling-related innovations to improve the energy efficiency of their datacentres.

Indeed, the study found that the power usage effectiveness (PUE) of datacentres in Singapore improved from 2.0 in 2017 to 1.9 in 2020. However, a considerable 34% of datacentres in Singapore continue to register a PUE of over 2.0.

“We do see those divergences between different players in the market and one of the key things in Singapore will be how to minimise the divergences and make sure that all players are hitting the best practices,” said Thompson.

Meanwhile, carbon emissions have grown more slowly than internet demand, with a 36% reduction in carbon emissions per unit of internet capacity from 2017 to 2020. “There is some encouraging sign that energy efficiency and carbon productivity are improving, but they are not improving at the pace we need them to be,” said Thompson.

Amid growing digitisation efforts in Singapore, where the use of data services is expected to quadruple by 2030, a possible pathway to meet the demand for datacentres in a sustainable way is through what Thompson called “green growth”.

In this scenario, the number of datacentres grow, most with high server utilisation rates and high degrees of energy efficiency at both the server and facility level, similar to hyperscale cloud datacentres.

Datacentre operators can also be encouraged to put a stronger focus on sustainability performance through better compute power, targeting lower PUEs and adopting more energy-efficient approaches, such as liquid cooling and sourcing of 100% renewable energy.

“Green growth is a real business scenario,” said Thompson. “We can grow the industry and economic output that comes with that. We can also capture other benefits from low latency and secure data services, and we don’t have the trade-off in terms of energy demand and significant carbon emissions.”