Data centres and clean power: Tricky marriage in the spotlight at Singapore’s energy forum

[SINGAPORE] Clean energy – from both domestic projects and the Asean Power Grid (APG) – could fuel Singapore’s data centres sustainably, but there remain many compatibility issues to be overcome.

Hope and concerns over the issue surfaced at the Singapore International Energy Week (SIEW), attended by the region’s policymakers and power industry leaders from Oct 27 to 31.

The conference kicked off with Singapore announcing plans to build a low-carbon data-centre park on Jurong Island with a capacity of up to 700 megawatts – about half of the Republic’s present data-centre capacity of more than 1.4 gigawatts (GW).

The industry is watching this development closely. For instance, Singapore’s Tuas Power is looking at how it can contribute to the data-centre park, its chief operating officer Michael Wong told The Business Times.

The company operates Singapore’s only active coal plant on Jurong Island, among other assets. But during SIEW, it announced that the facility would fully transition to biomass – a renewable fuel produced from waste wood and palm kernel shells – by 2028.

“When we have successfully converted to 100 per cent biomass, this (could) potentially… be counted as green power for data centres,” Wong told BT on the sidelines of the conference.

Biomethane may become another viable source of clean power for data centres, with Singapore piloting the import of the fuel, a renewable variant of natural gas.

The Republic’s data centres may also be able to tap clean power from the region, thanks to the growing momentum of the APG – the effort to connect South-east Asia’s power systems by 2045 and trade clean energy, completing the regional power union.

Singapore is looking to import 6 GW of clean power from its neighbours, and has already awarded conditional licences for 8.35 GW worth of projects.

Tom Capel, a counsel at law firm Clifford Chance, expects that the majority of these projects will be banked on the basis that data centres are the offtakers, or purchasers of the power, either directly or indirectly.

The diversification of sources “is key to ensuring that the Singapore data-centre market has access to affordable, reliable and clean energy”, he said.

During SIEW, Singapore also announced that it is drafting a framework for the cross-border trade of renewable-energy certificates (RECs), instruments that provide proof of clean-energy usage.

Frank Phuan, chief executive of Equator Renewables Asia, noted that for offtakers, having more clarity on cross-border RECs will be critical.

“We certainly don’t want to go into the path of greenwashing, so I think it’s important to make sure that there’s no double counting (of clean-energy purchases),” he said. “Therefore, having a standard developed for cross-border transactions is important to give that clarity to the offtakers.”

Challenges

However, there are also many challenges that stand in the way of data centres adopting clean power, from the lack of transparency around clean-power procurement to the challenges of financing APG projects.

These were raised in a position paper on Oct 28 by the Sustainable Energy Association of Singapore (Seas) and industry body SGTech.

Kavita Gandhi, executive director of Seas, said there are many variants on power purchase agreements (PPAs) for clean energy, and “nobody knows which is the best one”.

She emphasised the need for a PPA template that is fair to both the APG project developers and clean-power buyers.

And while Singapore’s clean-power import projects are very promising, there is a “chicken-and-egg” problem.

The project developers need sufficient offtakers, such as data centres, in order to attract investments. But data centres also have to be mindful of the risk they take on when they sign PPAs, which can be for as long as 20 to 25 years.

Some players feel that “there’s too much risk that is being transferred to the private sector”, said Gandhi. “So there was a lot of feedback that there should be some kind of support from the government,” she added, citing public-private partnerships as an example.

Goals for the next SIEW

Despite the challenges, Gandhi is optimistic about the APG, which has been in discussions since the 1990s.

“We talked a lot about the APG this SIEW,” she said. “My hope is that by next year, some of these projects (would) have already reached financial close, and that there’s more clarity on how much clean energy can be produced out of these projects.”

Jothilingam Thiraviam, CEO of Senoko Energy, highlighted another key objective to achieve by next year’s edition: ensuring interoperability across power grids in the region.

“The energy sector has a vital role to play in working with data-centre operators, policymakers and technology providers to address practical barriers around scalability, grid integration and cost,” he said.

Senoko Energy is working with partners to explore biomethane and hydrogen as fuels, as well as renewable energy imports.

Sharad Somani, head of the infrastructure advisory at KPMG in Singapore, said the coming year “will be pivotal in shaping the future of clean-energy adoption for Singapore’s data centres”.

He expects progress to be made on three fronts, the first being a clearer framework for the APG. This would involve harmonising grid codes, aligning technical standards and formalising financing structures.

“Second, unlocking financing for cross-border transmission infrastructure will be essential,” said Somani, noting that blended finance – a combination of public, private and philanthropic capital – can de-risk investments.

Finally, the development of a regionwide REC framework will be a “game changer”, prioritising transparency to attract capital from green data-centre operators.

“By the next SIEW, I believe we will be in a stronger position… that will make clean-power adoption not just viable but also scalable for Singapore’s data centres,” said Somani.