by Nathania Azalia

Southeast Asia is in a race to go digital, and there is a critical infrastructure quietly transforming the region’s future—data centres. They are the unseen backbone of everything from cloud storage to e-commerce, and most importantly, the massively growing use of artificial intelligence (AI). By 2030, the region’s data centre market is projected to reach USD 11.80 billion, presenting a substantial opportunity for economic growth. However, data centres pose a critical energy-climate dilemma, as they require extensive computing power, thus consuming large amounts of energy to function. With ASEAN’s energy mix still dominated by non-renewable resources, concerns over environmental footprint arise. All the while, each ASEAN country has a commitment to their Nationally Determined Contribution (NDC) under the Paris Agreement to reduce carbon emissions as well as a regional goal of 32% energy intensity reduction by 2025.  

Beyond the blinking servers lies a question demanding swift answers: how can a region chasing decarbonisation power this digital infrastructure boom without overheating the planet? 

What is driving Southeast Asia’s data centre boom? 

There are several factors driving Southeast Asia’s data centre boom. First, there is a rapid rate of digital transformation and digital infrastructure demand due to a strong push for digitalisation efforts in the private and public spheres. This includes e-commerce, financial technologies (fintech), government digital infrastructure, and cloud technologies. Second, computing powers are growing rapidly, pushed by innovations such as AI, Internet of Things (IoT), edge computing, and 5G networks. By 2030, general computing power and AI computing power will expand by 10 and 500 times, respectively. AI itself is seeing a surge in deployment and civilian use with Large Language Models (LLMs) like ChatGPT becoming accessible to the public supported by the widening internet penetration. Third, Southeast Asia is seen as a strategic and stable location for long term investments of data centre infrastructures. ASEAN countries offer 20% lower costs for data centre construction and operation than the global average at less than USD 9/megawatt (MW), with Philippines having the lowest cost at USD 4.6/MW and Japan the highest at USD 12.7/MW. On power costs, Indonesia, Malaysia, and Viet Nam present the lowest cost (per unit electricity), 40% below the United States and 70-80% lower than Australia and Japan. 

Fourth, ASEAN countries are setting up incentives to push for digitalisation. We can see this in Malaysia with its Digital Economy Blueprint (MyDIGITAL) and the Malaysia Digital (MD) Tax Incentive, Singapore with its Digital Economy Partnership Agreement (DEPA), Vietnam with the Digital Transformation Plan, and Indonesia with its Making Indonesia 4.0 strategy. Moreover, the Philippines established the CREATE MORE bill to attract power-intensive industries by giving substantial power costs reduction. At the regional level, ASEAN has also established the ASEAN Digital Masterplan 2025 signaling a greater need for connectivity and the scaling up of information technologies. Fifth, ASEAN’s digital economy is projected to grow from USD 300 billion to almost USD 1 trillion by 2030, highlighting opportunities for stronger foreign direct investments (FDIs) flows to the region, especially with the negotiations for the Digital Economy Framework Agreement (DEFA) as the region’s foundation for stronger digital economy connectivity are underway. 

Surging power demands and concerns in the energy-climate nexus 

Looking at those factors, it is clear that digital growth in the region is inevitable. Nevertheless, concerns over energy consumption and climate risks loom overhead. Globally, data centres take up approximately 1.5% of electricity consumption in 2024, equal to 415 terawatt-hours (TWh) and are set to shoot up to around 945 TWh by 2030, according to the International Energy Agency (IEA). Moreover, some cooling technologies, vital to the infrastructure, guzzle substantial amounts of water for cooling. According to the World Economic Forum, a 1 MW infrastructure can consume up to 25.5 million litres of water every year, comparable to the daily consumption of around 300,000 people.  

AI, with its recent surge in usage, is the main driver of this demand as it requires large computing power to process data. Average per-rack power density, the amount of electric power consumed by servers in the racks, in AI data centres has risen from 8 kilowatts (kW) in 2021 to 12 kW and is projected to reach 30 kW by 2027 in line with AI development. In practice, ChatGPT training models can demand over 80 kW of power per rack. On the other hand, Nvidia’s GB200 chip, paired with its server hardware, could push this figure up to 120 kW per rack. With more and more people gaining access to the digital world and integrating AI into daily lives, stress on power resources will be much bigger—pressuring electricity grids, risk of increasing carbon emissions, and further impacting the climate crisis. 

In the ASEAN region, power consumption by data centres is projected to account for 2% to 30% of national power demands and will reach 68 TWh by 2030 from 9 TWh in 2024. This is also due to high electricity demands for cooling in Southeast Asia’s tropical climate. Indonesia, Malaysia, the Philippines, Singapore, Thailand and Viet Nam are emerging as Southeast Asia’s data centre hotspots, with Malaysia having the largest pipeline currently under development (2.4 GW). Johor, located at the southernmost tip of the Malay peninsula and bordering with Singapore, is the fastest growing hub in the region, developing 4.5 times its operational capacity in early 2025.  

As long as Southeast Asian economies still rely on fossil fuels, the growth in power demand to operate these data centres may lead to a significant increase of emissions. Looking at global data, imbalance between data centre growth and low progress of grid decarbonisation can potentially lead to emissions 7.6 times higher than initial estimations. This is bad news for ASEAN countries, as the region is very vulnerable to climate change. Viet Nam, Myanmar, the Philippines, and Thailand are among the most at risk, with cyclones, heat waves, droughts, floods, severe salination, and rising sea levels becoming more prominent each year. Socio-economic risks, such as large economic losses (11% of GDP by 2100), poverty, food insecurity, and severe health risks, among other effects, may be felt if mitigation actions are not implemented.  

However, the rush for digitalisation is not showing signs of stopping any time soon, and countries will consume more and more energy. This development presents a challenge for ASEAN countries to balance economic development and environmental sustainability, but also opportunities to bring shifts in the energy sector by adopting energy efficiency strategies and developing clean energy capacity to curb emissions and fortify the grid. 

What can ASEAN do to balance data centre boom with decarbonisation goals? 

While data centre growth presents valuable opportunities for ASEAN, there are energy and climate challenges to be addressed. Currently, many ASEAN countries are still developing their renewable energy infrastructure and grid connectivity, making it challenging to rely solely on renewables to supply the high levels of energy these data centres demand. However, balancing digital infrastructure development and environmental sustainability can be done through several strategies under the umbrella of the ASEAN Plan of Action for Energy Cooperation (APAEC), particularly Programme Area No. 1 (ASEAN Power Grid), Programme Area No. 4 (Energy Efficiency and Conservation), Programme Area No. 5 (Renewable Energy), and Programme Area No. 6 (Regional Energy Policy and Planning).   

First, develop guidelines and/or regulations for new data centres, which will act as a framework for best practices, industry standards, and tools for operators and designers with energy efficiency as a primary focus. Energy rating standards and certifications can also boost incentives for data centres to adopt new energy-efficient technologies while supporting compliance with the guidelines.  

Second, establishing mechanisms to document and estimate greenhouse gas emissions generated from both existing and new data centres should be done to prevent exceeding pollution. The extensive growth of data centre needs to be considered with the respective countries’ NDCs and renewable energy goals to mitigate climate risks, integrating digital infrastructure growth into the energy transition equation.  

Third, enhance power interconnection to scale up renewable energy capacity and deployment to support data centre demands. National programmes and collaboration for the development and direct access to green energy have been established such as Malaysia’s Corporate Renewable Energy Supply Scheme (CRESS) and Indonesia’s collaboration with Amazon to develop a solar power plant to supply the company’s operations. Regional projects like the ASEAN Power Grid (APG) can also be strengthened to accommodate the increased demand for renewable energy from data centres.  

Fourth, establish multistakeholder collaboration at the regional level (which could include government agencies, regulators, utilities, research institutions, technology firms, financial institutions, civil society organisations, and international organisations) to exchange knowledge. Not only would this enhance regional capacity but also act as a platform to ensure that energy demands from digital infrastructures will be accounted for in future regional energy plans. Moreover, The ASEAN Energy Database System (AEDS) can also be utilised to store the acquired knowledge as well as further resources to establish a centralised information hub.  

In the long run, ASEAN could benefit from policy coherence, clear guidelines, as well as regional collaboration and interconnectivity. Combining these strategies could strengthen data centre competitiveness in ASEAN. Acting on this opportunity, ASEAN can become a model for sustainable digital development.