The quest for green data centres

Regulations on energy in Singapore

The global uptick in the adoption of digital technologies and the use of artificial intelligence has spurred the demand for data centres as well as the energy demands of these data centres. Southeast Asian countries are vying to draw more investments into the data centre space. In the coming years, Singapore plans to add at least 300MW more of data centre capacity to the existing 1.4GW of combined computing capacity of more than 70 data centres in Singapore. Malaysia is seeing enormous growth in the data centre scene, attracting data centre investments including from tech giants such as Google, Nvidia and Microsoft.

However, there are concerns over the high energy consumption of data centres. High energy consumption not only drives up operational costs, but also increases carbon emissions, which poses a threat to global decarbonisation efforts and net zero targets.

The Singapore government has signalled its commitment to advancing the growth of data centres in a sustainable manner. The government has expressed its preference to allocate new data centre capacity to operators that “prioritise both sustainability and economic value”. This is in line with Singapore’s overarching sustainability goals, including achieving net-zero emissions by 2050. To this end, the Singapore government launched the Green Data Centre Roadmap (Roadmap) in May 2024.

The successful management of data centre projects necessitates a thorough understanding of and close adherence to local regulations. Building on our earlier published 4-part series on legal issues relating to the management of data centres in Singapore, this article offers an overview of regulations for energy use in Singapore and Malaysia.

Regulations on Energy Use

Energy efficiency is a crucial aspect of Singapore’s energy policies, and sometimes billed as the “first fuel” in its clean energy transition. In addition to mitigating greenhouse gas emissions, adopting energy efficient systems results in significant cost savings for consumers and businesses and has spawned a good number of innovative business models such as Energy as a Service (EaaS). Moreover, energy efficiency contributes to energy security and the resilience of energy systems by reducing the overall demand and strain on energy infrastructures.

Within the next 10 years, the Singapore government aims for all data centres in Singapore to (i) achieve a power usage effectiveness performance of ≤1.3 at 100% IT load; and (ii) use only energy-efficient compute/IT infrastructure.

Climate reporting

Companies operating data centres should be mindful of any applicable climate reporting requirements. For the present financial year (FY) 2024, climate reporting is required of listed issuers (i.e. issuers of equity securities listed on the Singapore Exchange) in the (a) financial industry; (b) agriculture, food and forest products industry; (c) energy industry; (d) materials and buildings industry; and (e) transportation industry. Climate reporting is required on a “comply or explain” basis for other listed issuers while non-listed issuers need not make climate-related disclosures.

From FY 2025, all listed issuers must report annual climate-related disclosures, using International Sustainability Standards Board (ISSB)-aligned requirements.

From FY 2027, large non-listed companies (defined as those with annual revenue of at least S$1 billion and total assets of at least S$500 million) must provide climate-related disclosures.

Government incentives

To encourage energy efficiency in data centres, the Economic Development Board (EDB) offers the Investment Allowance for Emissions Reduction (IA(ER)) and Enhanced Resource Efficiency Grant for Emissions (REG(E)).

The IA(ER) is an investment allowance granted on capital expenditure incurred for energy-efficient or green data centre projects.

The REG(E) offers enhanced support to data centres to improve their energy efficiency and reduce carbon emissions. The grant quantum will be calculated based on the carbon abatement achieved by the project, capped at 50% of qualifying costs.

The EDB also has an Energy Efficiency Grant (EEG), which offers businesses co-funding to invest in energy-efficient equipment. Eligibility for the EEG will be expanded to cover data centres by end-2024.

BCA-IMDA Green Mark for Data Centres

Jointly developed by the Building and Construction Authority (BCA) and Infocomm Media Development Authority (IMDA), the Green Mark for Data Centres (GMDC) certification scheme recognises data centres that demonstrate superior sustainability and environmental performance (e.g. energy efficiency, sustainable design and construction, use of digital tools and maintainability). The GMDC was recently updated in 2024.


For more information, please contact Sandra Seah and Genessa Chew.