INA bets on green data centres, eyes Singapore demand 'overflow'
Indonesia Investment Authority (INA), the country’s sovereign wealth fund, latest co-investment is another step in efforts to lead the development of digital infrastructure with a strong emphasis on sustainability.
Its latest co-investment is with GDS, a Chinese developer and operator of data centres, to develop data centres in Indonesia via an equity joint venture. The first project is an ongoing development of a hyperscale data centre -- Indonesia’s first -- in Nongsa Digital Park in Batam.
“We have confidence that their [GDS] data center design will be at the forefront in terms of PUE (power-usage-efficiency),” Stefanus Hadiwidjaja, chief investment officer of INA, told AsianInvestor, underlining the emphasis the SWF places on green principles and sustainability.
“However, in the long run, GDS and INA aim to incorporate more renewable sources such as solar and potentially wind for Batam," Hadiwidjaja said.
Furthermore, considering Indonesia's vast resources, like being home to one of the world's largest geothermal potentials and having significant hydropower capacities, the nation stands as an attractive location for green data centers in the foreseeable future."
The SWF has been a leader in Southeast Asia in driving green investments within the country and has been steadily making strategic and sustainable investments across industries.
The project has the potential to set an industry benchmark for the region.
INA declined to comment on the investment each side will bring to the joint venture.
HYPERSCALE AMBITIONS
INA’s ambition to build a sustainable hyperscale data centre in Batam will bring key advantages for the country, including helping with data demands of neighhouring countries like Singapore.
Hyperscale data centres are enormous facilities with thousands of servers to support companies that work with massive amounts of data, such as Google, Amazon or Facebook.
Singapore, one of the world’s most digital-savvy nations, imposed a four-year moratorium on the development of new data centres until recently, as it struggles to keep up with data demand amid increasing energy and land constraints and sustainability targets.
“Singapore, with its highly developed infrastructure and urbanised landscape, often encounters challenges related to land availability and power, coupled with relatively high operating costs,” said Hadiwidjaja.
“These factors create an opportunity for the increasing demand to overflow to its neighboring regions.
"Batam, given its close proximity to Singapore and its numerous subsea cable connectivity, is strategically positioned to cater to this demand, providing an experience to customers that is akin to what they would receive from a Singapore data centre.”
Other experts agree. “When Singapore imposed its moratorium, many data centre investors began to target neighbouring markets in Southeast Asia, such as Malaysia, Indonesia, Thailand and Vietnam," said Benjamin Chow, head of real assets research in Asia at MSCI Real Assets.
Asia Pacific is one of the fastest-developing data centre regions in the world, with the market for data centres estimated to be worth around $28 billion by 2024, as digitalisation and demand for cloud-based services soars.
Indonesia is Southeast Asia’s largest and fastest-growing internet economy – more than 200 million Indonesians had access to the internet as of January 2022.
"Indonesia's ramp-up in data centre demand largely derives from global hyperscalers looking to tap on the domestic consumer market," Chow told AsianInvestor.
Much of the demand across APAC comes from global cloud providers, social media and e-commerce platforms, video streaming and banking.
It’s no surprise then that data centres have been a red-hot target for institutional investors who have poured billions of dollars into the region.
Image credit: Ahmad Saifulloh / Shutterstock.com
ENERGY HOGS
Yet data centres are huge energy guzzlers.
From the servers and storage equipment to cooling infrastructure, everything consumes large amounts of electricity, and water. Cooling can consume up to 40% of a data centre’s energy consumption – and in the tropical climates of Southeast Asia, that is even more of an energy challenge.
Data centres are responsible for up to 5% of global greenhouse gas emissions, according to some estimates, so it has become imperative for investors and develops to prioritise green infrastructure.
Measures of sustainability for data centres include the efficiency of power and how that energy is generated.
"Efficiency of power usage is affected by how the facility is designed, such as how the facilities are cooled and how much energy is lost to the environment," said MSCI Real Assets' Chow.
"With the increase in digital demand, demand for data centres is only set to grow. If we can't reduce the amount of energy they consume, the next best alternative is to make them as sustainable as possible, and to incorporate as much renewable energy as possible," added Chow.
INA’s deal with GDS is the SWF’s third significant investment in the digital sectors – one of its four priority sectors for investment. It has also been systematically building its portfolio in energy transition, electric vehicle ecosystem and nature-based solutions.
Earlier this year, the Indonesian wealth fund also announced a partnership with ESR and Mitsubishi to build modern logistics warehouses in the country, to support the e-commerce and electric vehicles boom.
The SWF also participated in the initial public offer of a geothermal energy entity, which represented the start of efforts to build a comprehensive renewable energy portfolio, its deputy chief executive told AsianInvestor earlier this year.
The fund has been systematically building its portfolio in energy transition as well as nature-based solutions too.