Blog — 15 May, 2023
Focus on Indonesia: 2050 climate change scenarios show significant physical risk to datacenters
By Zaneta Kucerova, Dan Thompson, and Farees Zubair
Highlights
In recent years, Indonesia has become an important hub for hyperscale cloud service providers like Amazon, Google, and Microsoft, which has boosted the digital transformation.
Indonesia’s datacenter construction activity was at a record high in 2021, according to 451 Research Datacenter KnowledgeBase data.
Given these investments alongside growing concerns over climate change, one cannot help but wonder about the physical risk exposure of these new and planned datacenters.
Indonesia, the world’s 4th most populous country, has a vibrant digital startup scene - including GoTo Gojek Tokopedia (IDX:GOTO), an on-demand ride services and payments company with a market cap of $7.83B, and Traveloka, a private online travel company that has raised $1.3B in funding and has a $2.75B post-money valuation. Emerging digital enterprises like these have helped to transform Indonesia’s economy.
In recent years, Indonesia has also become an important hub for hyperscale cloud service providers like Amazon, Google, and Microsoft, which has boosted the digital transformation. Plus, it doesn’t look like they’re going anywhere. Four out of the five hyper-scalers have committed to long-term investments in Indonesia, including Amazon Web Services (AWS), which opened AWS Asia-Pacific Jakarta region in 2022 and, according to a recent statement, plans to invest approximately IDR 71 trillion ($5B USD) over the next 15 years.1
Cloud service providers and social media companies alike are driving the demand for datacenters in the region. Indonesia’s datacenter construction activity was at a record high in 2021, and according to 451 Research Datacenter KnowledgeBase data, 15 colocation datacenter providers plan to expand their operations in Indonesia over the next three years. As Dan Thompson, Research Director for 451 Research, states, “the market is expecting a surge of datacenter supply coming online in 2023, while operational floor space is increasing at a CAGR of 22% from 2020-2025”.2
Given these investments alongside growing concerns over climate change, one cannot help but wonder about the physical risk exposure of these new and planned datacenters. In addition to social unrest and riots, Indonesia frequently experiences tropical cyclones, wildfires, and draughts, which calls into question physical risk hazards as well as fiber network connection, electricity prices, tax rates, and water availability.
To calculate the physical risk to this region, we looked at two datasets: S&P Physical Risk, which shows asset and company-level physical risk exposure scores to assess the impact of climate change on portfolios, operational assets and supply chains, and Datacenter KnowledgeBase, which is a proprietary datacenter dataset with asset-level data and estimates.
In the dashboard below, we show our findings using a Databricks Workbench notepad.
Highlighted findings:
Coastal Flooding
Singapore has become a hub for digital infrastructure in the Asia Pacific region. However, after enacting a moratorium on new datacenter construction in 2019 due to strain on resources and contribution to global warming, authorities announced last year that any new datacenters constructed in the country would have to adhere to strict sustainability standards.
This has caused investors to look for alternative datacenter locations in places like Batam, which is only 5.6km away from Singapore and has become a hotspot for datacenter construction. However, according to our findings, Batam shows a high score for coastal flooding by 2050, exposing the datacenters and the companies who own them to significant physical risk.
Water Stress
Datacenters across the globe have come under criticism due to their high energy consumption. 451 Research estimates that U.S. datacenters consumed about 268 TWh of energy in 2019.3 For comparison, the entire United Kingdom’s electricity demand was 346 TWh in the same year.4 The recent energy crisis has sharpened scrutiny of datacenter energy usage, and fast-growing cloud computing platforms and datacenter developers are responding to the critique by making their facilities more power efficient.
However, electricity is not the only resource datacenters consume. Many large-scale datacenters, including Google Cloud and AWS, rely on vast amounts of clean, potable water for their evaporative cooling system, which is an effective method when the goal is to reduce electricity consumption.5 Datacenters are not required to report their water usage, but we know that Google Cloud was permitted to use up to 549 million gallons of water (over 2bn liters of water) per year for its Berkeley County datacenter campus in South Carolina.6
Considering the above, datacenters using cooling methods that consume clean water are not sustainable in locations with high physical hazard risk of water stress. Indonesia is already experiencing water stress is some parts of the country. Adding large-scale datacenters that compete for potable water with local citizens creates a significant social issue. This does, however, underscore the dichotomy datacenter providers and operators are faced with; which is the greater goal, less energy consumption or less water consumption? Without better transparency around water usage its impossible to have great dialog about the topic. Perhaps it is time to publicize water consumption and water usage efficiency of datacenters in the same way we monitor their power usage?
Interested in conducting your own analysis? Explore our solutions:
Datacenter KnowledgeBase Marketplace
References:
- NS Business. ‘AWS opens data centres in Indonesia ‘Available: www.ns-businesshub.com/technology/aws-asia-pacific-jakarta-region-data-centres/ [March, 5th 2023]
- Thompson, D., Kanch, S.C., 2021.’ Indonesia: Leased Datacenter Market’451 Research, part of S&P Global Market Intelligence.
- Thompson, D., Wilson, A. 2022. ‘Datacenter Sustainability 2022’. 451 Research, part of S&P Global Market Intelligence.
- Department for Business, Energy & Industrial Strategy. ‘Digest of UK Energy Statistics 2020’ Available: https://www.gov.uk/government/statistics/digest-of-uk-energy-statistics-dukes-2020 [March, 16th 2023]
- Thompson, D., Wilson, A. 2022. ‘Datacenter Sustainability 2022’. 451 Research, part of S&P Global Market Intelligence.
- Bloomberg. “Google Datacenters’ Secret Cost: Billions of Gallons of Water” Available: https://www.bloomberg.com/news/features/2020-04-01/how-much-water-do-google-data-centers-use-billions-of-gallons?leadSource=uverify%20wall [March 8th, 2023]