if you're listening to this podcast online or forwarding the link to your friends, all that data will be going through a building with lots of computer systems in it or in other words, data centers, they make our digital economy and digital lifestyles possible. But there are also huge guzzlers of energy. There's now a big push for green data centers and you might be wondering how this will affect you. I'm Jonathan pierce from the money mine team with five
things you need to know about green data centers. My guest today, Managing director South Asia at Equinix and Daylight research analyst at DBS Bank. He may. Let's start with you, give us the context to this. Why is sustainability such a key challenge for data centers, sustainability is not just an issue for data center but equally it is a challenge for all of us that
consume power. Unfortunately, data centers have become the spotlight and the central focus on sustainability because of the amount of power that we consume in data centers during the pandemic. We remain connected to each other to the rest of the world. And this was sustained by
digital connectivity. Statistics are showing that in the last five months we have continued to accelerate our digital consumption more than we have in the last five years because of this is becoming a challenge and a focus for data centers. We need to ensure that as we grow our digital consumption, we continue to green. Our data centers. Data centers are also the cornerstone of everything that we do that's digital. So sustainability is something that the industry is thinking about carefully.
But what about us consumers, should we be worrying about whether a data center is sustainable or not? The men on the street needs to be very concerned about the sustainability of data centers because each and every one of us doing anything that's online, enjoying lifestyle apps, purchasing our groceries, shopping, googling, doing any of social media etcetera is all generating massive data that needs to be stored and
Process and computed in our digital infrastructure. Every single photo that we snap of the food that we eat is storage that is consumed digitally. If this digital infrastructure is not sustainable, we are really contributing to the carbon emissions that our planet currently is suffering from cop 27 has hosted quite clearly that we are heading towards 2.4 and this process of reversing it downwards is going to
be a huge challenge. So every man on the street needs to play a role in ensuring that they care about the sustainability of data centers and they need to understand which are the data centers that are playing a more pivotal role in ensuring that their data centers are green. Let's bring in day live from DBS Bank. Now this region is projected to be the fastest growing in the world for data centers. So this will be something of
interest to investors. How can they bring sustainability into the picture for
Singapore reads with a significant exposure to data centers in terms of how they can be more sustainable in terms of data center. Something that is a very common measure for data centers will be what we call the P. U. E. Power usage effectiveness. To have a better P. You score, Data centers would have to be more power efficient. So for example the hardware, the likes of your servers, the likes of your cooling system has to be more power efficient in terms of P. U. E. That is
something that that is important for data center operators. That is something that I believe the data center operators would be looking at improving. And another aspect for sustainability for data centers would be in terms of the carbon footprint. Data center operators are gradually switching to the use of more renewable energy to power their data centers. They are also exploring ways on how they can induce
more renewable energy, how they can improve the efficiency. Many of the data center reads or if not all of them have actually committed to align themselves to some form of sustainability reporting frameworks and they have also set in place targets to reduce carbon emissions.
It's estimated that data centers make up about 1% of global electricity demand. So part of the sustainability challenge will
be in finding alternative sources of energy. Now one of these alternatives is hydrogen, but how viable a solution is that in the Singapore context, hydrogen offers the potential to end our dependence on fossil fuels as we work to meet climate goals, fortunately the use of alternative sources such as solar, wind, geothermal and hydro energy is gaining increased support will buy and we continue to also explore all those possibilities. Ethnics is already
currently piloting hydrogen ready fuel cells in Italy. If successful, it will be implemented more broadly across a global network based on site of specific regional needs and clearly local regulation requirements. Hydrogen generation on an industrial scale remains several years away from being commercially viable, making it imperative to assess and
adopt alternatives. Even as global R and D efforts continue piloting hydrogen and our data centers in Singapore currently remains to challenge storage and transportation issues in a populated, dense area need to be resolved. And if you're able to resolve these challenges of transportation and storage, what kind of savings are we looking at the greenhouse gas emission savings that we're looking at? Clearly, you know, 100% would be the dream state. However, based
on the unknowns around hydrogen to begin with. If we can hit 80% that would be a key objective. So it sounds like sustainability. Makes good business sense. Would you agree dale
when we talk about sustainable data centers best example, would be more power efficient assets, for example, in Singapore with rising energy costs that we saw in in recent times Data center that uses less energy significantly reduces their operating cost. This is a form in which data center reits would benefit from a more sustainable data center. If you look at it from the angle of leasing out this data center assets to tenants.
A lot of these data center tenants are major MNCs and they themselves have actually committed to reduce their own carbon footprint and emissions when it comes to their operations. For a data center that has a more sustainable data center data center that has a smaller footprint, they would definitely be in a better position to attract and retain some of these tenants and potentially even command higher rents
from the investor point of view. Does it make more sense to invest in a sustainable data center compared to a not so sustainable one.
In terms of pay off, there are two more direct payoffs for investors firstly in terms of operations definitely, you know, with a more sustainable, newer, more efficient data center, we are looking at long term cost savings and operations, especially on the utility cost front. That would be the main pay off. The second payoff would be increasingly a lot of your M. N. C. A lot of end users, they have set their own targets to reduce their carbon footprint and emissions.
With a sustainable, a more green data center facility, the landlord would be better able to actually attract more tenants to retain their tenants and also at the same time, hopefully they can command higher rents for some of these better spec data centers as well. The short answer is a definite yes, it is definitely better to invest in a sustainable dc. But a question to actually ask ourselves is what is a sustainable data
center or one that is less sustainable. I would think that a so called less sustainable data center is probably one that is slightly older where the hardware where the infrastructure is less efficient in terms of the energy consumption, they would be less efficient but less efficient or slightly older data center may not
necessarily be a bad investment. It really depends on the management of the data center track record and the capabilities if they show that or if they have the capability to upgrade some of these older properties, it may not necessarily be a bad investment in Singapore and construction costs have actually gone through the roof in recent times, investing in a brand new swanky data center with the top specs may be something that is very costly as
compared to, you know, investing in a slightly older data center where you know, management can value add to the property. They can actually upgrade the existing equipment and drive more value for investors. Definitely a sustainable data center is better. But you know, if the manager has the track record and capability to value add to some of these less sustainable data centers, it could actually be a good value proposition as well.
So green data centers pay off in many ways for businesses. They come with a lower cost of operations. There also attractive for property investors because they could command a green premium for rentals with rising awareness of the carbon footprint of data centers. The industry is looking into renewable options, but it will take time to develop commercially viable alternatives. Plus solutions for Singapore will need to take into account the local climate and other conditions.
Now, Singapore has recently lifted a moratorium on the building of new data centers. How does that change the outlook for the sector in Singapore? Especially given that data centers account for around 7% of the island's overall power usage.
This topic on sustainable data centers is looking very exciting here in Singapore. In part this was also driven by the moratorium over the last three years. The moratorium over the last three years has actually so called false data center operators to relook how they operate and how they develop data centers.
There is a urgency to actually convert or to build more efficient, more sustainable data centers for example, Capital Data center Right now, they are exploring the idea of a floating data center park where the data center is built in modules on the sea uses seawater to cool the
data center if successful. You know, I think this is something that could change the data center landscape here in Singapore, especially given that, you know, we have land constraints, this need or the urgency to actually look for more sustainable options. The need to actually innovate this would change the landscape for Singapore data centers and it would be something very interesting to look out for in the coming years.
Final question, what's at stake if we don't try to make data centers more sustainable? So currently digital traffic is growing massively. The pandemic has shown to us that being digital ready is extremely important. There is no guarantee that there is not going to
be another pandemic. We are using more and more digital apps to focus on education, on telemedicine, on genomics research and as we do that we need more digital infrastructure and hence it is extremely important that we ensure data centers are sustainable because if we are in the current situation that we are in Singapore with the monetary um and the data centers are limited, then our ability to thrive in the digital economy is going to be constrained
and we really don't want to do that because in order that sample remains to be a competitive hub. We need to ensure that we have data centers that allow the optionality of supporting hybrid and multi clouds so that we enable this global digital economy right, which ensures that we equally attract data that comes into Singapore and we also ensure that we have a platform that enables these companies to go out to the rest of the world because of that. It is extremely important that we make
our data centers more sustainable. And the sector continues to focus on this aggressively because it is each and every one of our role to ensure that we make the planet a future that exists for our Children. And that means lots of opportunities ahead as Singapore gets set to craft a new landscape for building more sustainable data centers. The industry is exploring renewable energy sources including hydrogen technology, but it will take time to develop commercially
viable alternatives. And such solutions will also need to be adapted to local environments, including climate and population. So plenty of challenges ahead for green data centers, but they also already pay off in many ways lower cost of operations for businesses and for property investors, they could command a green premium for rentals. And those were the five things you need to know about green data centers.
My guest Today leon, managing director, South Asia at the clinics and they'll lie research analysts at DBS bank catch money mind on C N A and online at me Watch sienna dot asia and on youtube.