JAKARTA (ANN/THE JAKARTA POST) – Between 2019 and 2022, while Singapore had a moratorium on data centres, Johor State in Malaysia expanded its data centre capacity significantly, from 10 megawatts to 1.3 gigawatts.
In comparison, Indonesia, despite being similarly close to Singapore, currently operates only about 300 MW, as reported by the Indonesian Data Centre Association (IDPRO).
Industry experts predict that Indonesia’s data centre capacity will grow to 2.3 GW within the next decade, fueled by the increasing demand for AI computing and the country’s substantial renewable energy resources.
However, they suggest the government provide compelling incentives to ensure the country stays ahead of its regional competitors.
Following the crypto mining boom of the past decade, AI has emerged as the latest energy-intensive technological advancement.
Estimates from the International Energy Agency indicate that OpenAI’s ChatGPT uses about 10 times more electricity than typical computing tasks like Google Search.
Niccolò Lombatti, an industry analyst at Fitch Solutions’ BMI Research, explained that major economic hubs are typically primary data centre markets.
Nevertheless, due to competition with real estate developers seeking to construct office spaces in metropolitan areas, data centre investments are shifting to secondary cities. These cities offer competitive land and electricity costs while maintaining proximity to urban centres.
Speaking to the source on Friday, Lombatti highlighted the critical role of renewable energy in data centres. This shift helps safeguard both existing and new customers from the growing regulatory risks linked to coal-powered infrastructure.
Furthermore, sustainable debt is gaining traction as a favoured option for data centre investments.
In Southeast Asia, Lombatti anticipates a shift in data centre investment from Singapore to Johor in Malaysia and Batam in Indonesia. ‘
Despite the substantial renewable energy potential in both Malaysia and Indonesia, Malaysia has been more successful in attracting demand from Singapore.
Hendra Suryakusuma, chairman of the IDPRO, said the data centres of the association’s members had a combined capacity of 200 MW. That number might increase to around 300 MW if data centres of foreign companies, such as Amazon and Microsoft, were included.
The association forecasts that data centre capacity in Indonesia will grow to 2.3 GW in the next 10 years, but Hendra admits that growth in Johor has been much faster.
“To be honest, Malaysia has capitalised on Singapore’s data centre moratorium in a really perfect way,” he told the source on Thursday.
Hendra explained that the majority of its members were still using CPU servers instead of GPU servers, which could be used for AI development. Currently, only three of the 14 members of the association provide GPU services.
Regarding the usage of renewable energy, he stated that many companies from Europe and the United States specifically request green data centres to accommodate their decarbonisation pledges.
“In fact, many of our members cannot comply with that. Thus, we’ve responded by buying renewable energy certificates from [state-owned electricity firm] PLN, which come at an additional cost of Rp 35 per kilowatt-hour [KWh],” Hendra said.
According to him, Indonesia has the potential to be a data centre hub in the region due to its green energy potential. He suggested the government provide incentives beyond income tax subsidies to attract more investors to build data centres in the country rather than elsewhere in the region.
Andreuw Thonilus Albert, CEO of Telkom Group’s data centre subsidiary NeutraDC, agreed that, as data centre capacity in Singapore was maxed out, many investors were shifting to Johor and Batam.
“How could Johor increase [its data centre capacity] so quickly? Because the government offers many incentives, such as tax exemptions and lower electricity prices to attract data centre players. We need to collectively determine what kind of incentives we should provide to turn Indonesia into a data centre hub,” Andreuw said on May 30, as quoted by Detik.
Abra Talattov, head of the Center of Food, Energy and Sustainable Development at the Institute for Development of Economics and Finance (INDEF), opined that Indonesia had enough electricity supply to support data centre demand. He cited PLN’s long-term electricity procurement plan (RUPTL) for 2021-2030, which projects a power reserve of 40 to 63 percent over expected organic demand in 2030.
Regarding renewable energy, PLN is also in the process of building a green super grid that could increase the renewable energy baseload to 34 GW by 2040, according to Abra.
The term super grid refers to the network of high-voltage transmission lines carrying electricity over long distances.
“With such a huge renewable energy supply, I think Indonesia has a competitive advantage in attracting data centre investments. At the same time, that could accelerate the utilisation of renewable energy in the country, as the challenge is more on the demand side rather than the supply side,” he told the Post on Saturday.
BMI’s Lombatti agreed that its proximity to Singapore gives Batam a competitive edge for data centre investment, but on the other hand, as an island, construction there would take longer and real estate prices would rise more quickly than in Johor due to the limited space.
Another key issue that may discourage foreign data centre investors is that Indonesia still did not allow foreign vessels to manage subsea fibre-optic infrastructure, Lombatti argued.
“For firms like Google, Amazon and Microsoft, this is a disadvantage, because it does not allow them to easily connect their Indonesian data centres to their proprietary global fibre-optic network. Malaysia changed its law in March to allow foreign vessels to manage such infrastructure, boosting its competitiveness vis-à-vis Indonesia,” he said.
In 2021, the Transportation Ministry issued a regulation that allows the usage of foreign vessels to conduct subsea work in Indonesian territory with a special permit.
“However, if the job can be conducted by Indonesian ships, we still prioritise using local ships,” a ministry official said on September 22 last year, as quoted by another source.
