Apac’s data centre boom threatens to strain power grids, reliability at risk: report 

[SINGAPORE] Asia Pacific’s (Apac) soaring demand for data centres and other energy-intensive sectors is starting to weigh on power systems across the region, affecting grid reliability and increasing costs for some.

According to a report released on Thursday (Jun 11) by construction consultancy Linesight, the demand for reliable electricity has become a critical challenge as energy-intensive sectors expand. These include data centres, semiconductor and electrical vehicle battery manufacturing, as well as pharmaceutical and life sciences.

Data centres alone consumed an estimated 415 terawatt hours (TWh) of electricity last year – around 1.5 per cent of global electricity demand. The adoption of artificial intelligence is expected to push that demand up by 160 per cent.

Meanwhile, the semiconductor industry consumed 149 TWh of electricity in 2021, and is projected to grow nearly 60 per cent to 237 TWh by 2030.

In 2025, Apac is predicted to account for half of the world’s electricity consumption, with demand growing faster than the global average, said Linesight.

“In the current landscape, energy has become more than just a utility,” it said. “It is a strategic consideration in site selection and a critical factor in enabling future development, particularly for mission critical sectors.”

Even with increases in both energy demand and supply, grid reliability remains inconsistent across the Apac region.

The consultancy noted that advanced economies – such as Singapore, Japan, Australia and South Korea – are now seeing more strain on their power grids, putting pressure on aging assets.

In Singapore, for example, significant portions of the electricity network were built between the 1980s and 2000s. This calls for design and planning upgrades to meet evolving energy needs, said Linesight.

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More than half of Australia’s thermal power plants are over 40 years old, causing grid instability and sharp price increases, it added.

Meanwhile, Linesight said emerging economies, such as India and much of Southeast Asia, suffer from reliability gaps amid rapidly expanding demand, and are still reliant on fossil fuels. This is despite strong investment momentum over the last decade.

Japan, South Korea and Taiwan are also highly dependent on importing energy due to limited domestic resources, it said. “This structural reliance on foreign energy sources heightens exposure to global market volatility, and reinforces the need for resilient, diversified and digitally-enabled power systems.”

Many in Apac are now looking to expand their renewable energy capacities to meet this surging demand and hit decarbonisation targets, said Linesight.

“Though fossil fuels dominate, renewables are scaling fast – particularly wind, solar and geothermal – offering new opportunities for clean power sourcing and alignment with long-term sustainability goals,” said Garvan Barry, the consultancy’s regional director for North Asia.

This bodes well for data centre operators targeting a lower power usage efficiency and reduced power consumption-based emissions, said Linesight.

Both emerging and advanced economies are also making significant investments to upgrade their power grids, it said. This makes up for Apac’s 14 per cent decline in power grid infrastructure investment to US$61 billion in 2024, from US$71 billion in 2016 – which Linesight attributed to reliance on public funding, challenges in attracting private sector investments and complex regulatory frameworks.

Steady growth

Construction output is likely to grow steadily across Apac, on the back of strong activity in data centres, infrastructure, industrial and energy sectors, Linesight’s report also showed.

This is mainly driven by government spending, coupled with large scale projections and industrial expansion, it said. For instance, the region is poised to see the fastest growth of data centre colocation over the next five years, commanding a massive construction pipeline of US$56.4 billion.

On the home front, Linesight predicts that the construction industry will see an average annual growth of 4.1 per cent from 2025 to 2028, fuelled by investments in oil and gas, transport, and renewable energy projects.

This is up from the 3.3 per cent increase in 2024. Construction contracts also surged 34 per cent year-on-year in the first nine months of that year.

The industry’s projected improvement is further boosted by the government’s push to achieve 2 gigawatt-peak of solar power by 2030 and carbon neutrality by 2050, said the consultancy.

Billions of dollars have also been set aside for its Land Transport Master Plan 2040, which charts Singapore’s land transport strategies, and the undersea energy cable project, it said.

Companies could also benefit from commodity price corrections witnessed in 2024, said Linesight, though new tariff policies may disrupt global supply chains in the near term.

In Singapore, prices for key materials such as copper, steel rebar and cement had declined due to global trade uncertainties. Steel rebar prices, in specific, are predicted to fall 13 per cent year on year in Q2 this year, driven by oversupply and competitive exports from China.

The consultancy pointed out that labour inflation eased in the city state as well, to 1.5 per cent in 2024, from 9 per cent in 2023.

“(But) global geopolitical tensions continue to contribute to the overall inflationary risk premium in the construction industry,” said Linesight. “Trade restrictions, tariff uncertainties, and raw material bottlenecks are creating unpredictable cost scenarios for developers and contractors. These factors, coupled with energy market volatility, are amplifying volatility in cost planning and procurement.”

Nonetheless, Linesight regional director for Southeast Asia Scott Halyday remains cautiously optimistic that Apac’s construction industry will see resilient growth with a strong pipeline of planned projects.

“In an environment of heightened risk and volatility, risk management and robust scenario planning will be crucial for developers and businesses to pre-empt and cushion impacts,” said Halyday.