Powering Change: Data centre opportunities across the Asia Pacific

Bree:

Hello everyone and thank you for tuning in to the Ashurst Business Agenda podcast. Today's special episode is the latest from our Powering Change 2025 mini-series, where we take a deep dive into the insights from our recently released Powering Change: A New Era for the Energy Transition report. I'm Bree Miechel and I'll be your host for this episode, where we'll be focusing on the topic of data centres. I'm a partner within the projects and energy transition team at Ashurst, where I specialise in project development. I'm pleased to be joined by our special guest, Simon McFadden, industry director for digital infrastructure at Aurecon, an Asia-Pacific Design, engineering and advisory company that specialises in helping their clients bring innovative ideas to life for a better future.

Hi Simon, and welcome to the podcast.

Simon:

Hi, Bree, lovely to be here. Thanks for the invitation.

Bree:

As the industry director for digital infrastructure, Simon provides expert advice to clients within the digital infrastructure, cloud, data centre and telecommunications sectors. He brings with him over 20 years of international experience in leadership, sales, engineering, commercial and investment development roles. It's probably helpful to add that whilst Simon works in digital infrastructure, he has also worked in power project development, both in renewables and traditional power projects around Europe.

Over the past five years, our Powering Change reports have surveyed the global energy sector for its views on the energy transition. These reports have given us a comprehensive data set, offering unique insights into the way the market is evolving, the barriers businesses face, and the steps that can be taken to stay ahead. In what is a rapidly evolving global energy market, understanding the way these trends are impacting technology, investment and policymaking is more critical than ever. These insights raise an important question for organisations across the globe. Are you prepared for the opportunities the new era of the energy transition presents? Simon, grateful if you could share with us some of the work you and the Aurecon team are involved with in the data centre space.

Simon:

Thanks, Bree. Well, at Aurecon, I suppose we're one of the top design firms in Asia-Pacific, designing digital infrastructure. So, really if you're using a computer or a wireless device here in Australia, you'll be using infrastructure that we've designed somewhere. We cover the full data centre development cycle, so we help clients evaluate sites, set out the campuses, get the permits, design the full data centre, including all the power and water connections, and help them through construction to make sure it's built as designed. I should probably add that we also work on transactions, both doing buy-side and sell side, technical due diligence and many other things, but that's the core of it.

Bree:

Simon, data centres are often described as the factories of the digital age. Can you shed some light on why their energy consumption is escalating so rapidly?

Simon:

Thanks, Bree. I like this analogy. I suppose there are two points in it. Firstly, are they factories and secondly, why are they using more electricity? So, on the first point, the analogy of a factory is probably a helpful one in that the large language models, which most people mean when they're talking about artificial intelligence now. Those large language models produce tokens or just bits of words or small words, and the AI data centres function is to produce tokens. People have often compared this to intelligence. So, the production of tokens is the same as producing artificial intelligence, and if you want more of that artificial intelligence product, you need more tokens. And if you need more tokens, you need more processing and therefore you need electricity to produce them.

Bree:

Is the need to develop data centres at scale though being overestimated globally?

Simon:

Very hard question to answer. I think it's a bit like, how long is a piece of string? The answer is: It depends. There are a few things to consider here. Firstly, are the data centres being used right now? So, the existing ones, are they being used? And then secondly, how much AI will be used over time and what will the market structure be? So, I know that data centres have been built and are leased and in some cases are not using their full allocated power. Sometimes a fraction of this. But on the other hand, if AI turns out to be as powerful as people think, we'll be using it all the time for everything. So, we're probably not building anywhere near enough data centres right now.

And if you take account of the market structure, for example, some organisations are building data centres for them to use themselves or a large cloud provider building it for themselves to use, but others are building data centres to rent, which is similar to property development, really. And I think that in practise there's an overlap between this demand, meaning that there will be some duplication there in terms of the sites that are planned, permitted and so on. But I would hope that the bulk of the sites that actually go through and are constructed are used. And I would say if I summarise everything, I think there's more development to come.

Bree:

And with this demand, many regions are facing challenges in providing sufficient grid power. We've seen countries like Ireland impose moratoriums on new data centre grid connections due to capacity concerns with requirements on operators to develop captive generation to meet their power needs. Are we witnessing similar trends elsewhere?

Simon:

Yeah. It probably prompts a few things, Bree. Singapore has had a well-known moratorium on data centre development for some time with some recent, in the last couple of years, exceptions to that where small projects are being developed. But there are also power constraints at local levels right around the world. So, if you think about areas where many data centres are being developed, for example, the data centre alley in the US, there's very significant demand on power and some constraints there. And I think the challenge for utilities is twofold in that having sufficient generation available, but also getting it to the right place. And I think if we reflect on our challenge in Australia with the goal to get to 82% renewables by 2030, our challenge will be getting enough power at the right availability to the right place to match up with the demand for digital infrastructure.

Bree:

And how can the design of data centres influence energy consumption and efficiency?

Simon:

Well, there are different elements to it, of course. There's been quite a bit of work done on the building itself to have it as efficient as possible. And people often talk about PUE or power utilisation efficiency, and that has been improving over time to make sure that all of the things that are not computer chips or servers are as efficient as possible in the building. But also with the computer chips and servers, the way the software is used and the hardware itself can make a significant impact on power efficiency. So, we've seen that NVIDIA, for example, often talk about the increasing power efficiency that their chips have over time. So, whilst the power demand of those chips is increasing because they're doing more work, they're becoming more efficient in the production of the tokens that we talked about earlier.

Bree:

Just honing back in on the challenges for grid infrastructure across jurisdiction, and the fact that most new energy generation is being established in regional areas where the best resources is located and land is available, could data centre siting offer a strategic solution to alleviate both the inadequate or no longer fit for purpose grid infrastructure and that curtailment risk that poses for power producers?

Simon:

I think that's a really interesting point, Bree and one that I've been discussing with many clients over the last few years. So, can you put a data centre or many data centres in a rural area, say in Australia, where there's a very large, say, solar renewable energy development? And the answer is so far, if you observe the behaviour of the large cloud providers, so the large hyperscaler cloud providers. They typically need to have their data centres close to a population centre. They're typically in, what they call, an availability zone. So, there's usually two or three, four data centres close together to provide redundancy and they often need skilled workforce nearby, and they also need to have supply chains that work effectively.

So, these buildings have a lot of computers, servers in them. They need to be able to get those in and out easily. And all of those factors together have meant that most data centres, at least the large ones, are close to population centres. You mentioned AI factories earlier. I've seen conversations where people are talking about developing AI-specific data centres in more regional or rural remote areas even, which would afford them the ability to have a behind-the-metre, so a co-located energy project, renewable energy project, together with an AI-specific data centre, potentially even not using the data centre much at night when the solar energy isn't generating.

Bree:

Really interesting. In our Powering Change survey, 77% of respondents viewed renewable energy investment as essential to their strategic growth, underscoring the commitment of organisations to drive forward lower-carbon-intensity business operations. Can you explain how this has extended to the data centre sector?

Simon:

I often think about this. I suppose if you think globally, some of the most progressive firms that we see on renewable energy and carbon emissions would be American hyperscalers like Microsoft, Google and Amazon. They require their teams to focus on the use of renewable energy. They all have hard targets that they've either achieved or are close to achieving for 100% renewable energy by certain dates, and they're often involved with the development of renewable projects or sometimes they lead them to source that energy. We have organised power purchase agreements and can attest to their desire for renewable energy. They all want it. The challenge is that it's not available 24/7 and so often this energy is not time-matched, but in terms of total megawatt hours going in and coming out, they have it covered. I think over time as we see more storage that balance will improve.

Bree:

With the intermittent nature of renewable sources and the need to ensure a stable power supply are data centre operators turning to utility-scale battery storage solutions?

Simon:

Interesting again, Bree. Pretty much all data centres have batteries as part of their design to ensure they don't go offline, of course. But these batteries are typically, their capacity really just covers short periods until the generators can be started and come online. We've looked at battery storage for data centres as part of larger developments of campuses with renewable energy development. And the challenge that the developers have is to have energy on all the time, but as you add more battery capacity, obviously the capital expenditure for that increases. And I haven't seen it yet work economically, but that doesn't mean it hasn't happened. And the sites I am thinking of were close to urban centres, so maybe they could work in a location that's more rural or remote and land costs are very low.

Bree:

What other options are available to data centres to manage their power demands and usage?

Simon:

Well, Bree, I suppose if we're thinking what other options are available other than renewables, I suppose all the traditional power generation technologies are available and they're used around the world. There has been talk, particularly in the US around small modular nuclear reactors. I think one of the things that is attractive about that as I talk to people in the industry is that the size of one of these reactors matches roughly with the size of a data hall. I do think that there are some complexities to work through with that about, for example, what is the actual demand from the data hall? Does it go up or down? How quickly does that happen and can the technology match with that?

Probably another thing to mention is that we are seeing some conversations about the removal of backup generators at data centres. I haven't really seen any material evidence and practise of generators being removed from projects, but it's something that clients are thinking about. So, whilst backup generators don't run for very long, usually during the year because they're just for backup, typically they run on diesel. There is an appetite for some permitting authorities and from some clients to remove them. Plus they cost hundreds of millions of dollars in CapEx depending on the size of your data centre. That's something that whilst it doesn't affect the day-to-day operation of the data centre, it's something that people are thinking about both in terms of a carbon emissions impact, probably low, but cost and duplication of infrastructure perspective.

Bree:

But power's not the only challenge in the design and siting of a data centre. Let's also talk about water. Data centres require significant amounts of energy and water for cooling. In regions like Australia where water scarcity is a concern, how are data centres managing this resource?

Simon:

That's an interesting one. I think it's become more and more relevant in the last few years. I do reflect as an engineer, we have plenty of water around Australia. Most of people are living near the coast. We've plenty of solar energy available to turn it into drinking water. So, you could argue it's a cost and movement issue in the long run. But on the whole, data centres need to get rid of heat and you can do that simply through to the air using free cooling or air cooling or you can use liquids. And there's really a trade-off between how much electricity you use and how much water you use.

It's interesting that we're seeing some clients that are considering water that is treated, but not to potable or drinking water levels. And this can be more economic and isn't taking supply from drinking water. Obviously, when considering the water supply, we need to consult with local water authorities and understand whether water is needed for drinking water and they consider that when giving permits out for water and so on. So yes, more water is being used, but there are different strategies being considered to make it available and not affect drinking water supplies.

Bree:

And in Europe, data centres are being pressured to reduce water consumption to a maximum of 400 mils per kilowatt hour of computer power by 2040. Would similar efforts likely take place in the Asia-Pacific region?

Simon:

That's an interesting one. I worry about specific rules like this that have one metric because I often find they have unintended consequences in other areas. It might, in practise, if we limit water use, it might increase energy use and maybe has another consequence. But I recognise that's a challenge for regulators. And I do think if it's the case that water availability is restricted, if there isn't enough available, then I could see that similar things might happen. And I guess as engineers, we'll have to work with their clients and the approval authorities to make sure that what we're doing complies.

Bree:

APAC is becoming an increasingly attractive region for data centre investment and operations, evidenced by the rapid expansion throughout Asia and the recent sale of AirTrunk to Blackstone. What are some of the unique challenges facing data centres in this region?

Simon:

The thing that comes to mind, Bree, with that question is that the point that people in the industry often talk about, and it's simplifying greatly, of course, that people outside Asia-Pacific sometimes talk about it like it's one country and it operates like a country. Obviously, Asia-Pacific isn't one place, it's a vast region with very different topology, climates, cultures, economies and from a practical infrastructure perspective, different needs. So, if you want to develop a data centre in Johor, that's different from Sydney, and again from Jakarta. We're operating in 11 countries around Asia-Pacific and even inside those, there are different permitting requirements, climatic conditions, populations, and therefore different data centre designs. And I think that's different, in some respects, to other locations outside APAC.

Bree:

What lessons could data centres learn from other sectors such as energy and resources that have been focusing on decarbonisation for some time?

Simon:

I probably reflect that I think there's an opportunity for the data centre developers because they're really at the early stage of their large scale infrastructure development phase, that they can use more renewable energy than historically our energy and resources sectors have been able to. So they can have a lower carbon set of infrastructure assets, industries that developed 20, 30, 50 years ago.

Bree:

Certainly clear, Simon, that while there are significant challenges, there are also innovative solutions on the horizon. You've touched on some really interesting points today, Simon, and I hope our listeners have found this discussion to be as valuable as I have. Before we draw this episode to a close, would you like to share some final thoughts with our audience?

Simon:

Well, I suppose Bree, on a personal level, I'm excited that I've been lucky enough to work in an area that combines the main pieces of experience that I've had in power generation and telecoms, and now data centres, and also that it's enabling the next generation of technology with AI, which I find very interesting. And to anybody listening out there, I'd encourage you to look at the sector and it's thriving, so get involved.

Bree:

Thank you for sharing those thought provoking insights with us, Simon, and thank you to everyone who's tuned in to listen. You can learn more about the themes explored during today's episode by downloading the Powering Change report from the Ashurst website. You can find the link to the report in the show notes for this episode. To make sure that you don't miss out on any future podcasts, be sure to subscribe to the Business Agenda on Apple Podcasts, Spotify, or wherever you get your podcasts. And while you're there, please feel free to leave us a rating and/or review. Thank you so much for listening and goodbye for now.