It’s good that many green data center investors are trying to figure out if they should invest in green data centers because it would mean they’re looking at long-term benefits. Some of these benefits may be immediate, but others will most likely be seen in 10 or 20 years.
Green data centers that use recyclable products, renewable energy, and water-efficient cooling systems have been growing for years.
Green Data Center Investors Must Know the Momentum
The data center is the backbone of people’s activities in the digital era. The problem is data centers use a massive amount of electricity. The source of electrical energy used by data centers has contributed to 2% of global carbon emissions.
Countries have agreed to reduce carbon emissions by 50% in 2030 to 100% carbon-free in 2050. Data centers must use clean energy sources to 100% carbon-free sources such as renewable ones.
Indonesia has more than 200 million internet users and a robust information technology infrastructure. In addition, government support, cheaper skilled labor, and a cleaner electricity supply are available in Indonesia.
Currently, the majority of data centers in Indonesia still use electricity from coal and diesel fuel, which has a 100% carbon footprint.
Starting from the Paris Agreement, which formed the Net-Zero coalition, which was later emphasized at the G-20 and COP-27, all data centers in the world must be transformed into green data centers.
As a green data center investor, you have seen the right momentum to make a decision immediately.
This momentum is strengthened by the scarcity of gas which data centers in Europe widely use. The difference between data center electricity costs in Indonesia and Europe is enormous. In Europe, it is at least five times more expensive than electricity costs in Indonesia.
Commercial Real-Estate Trends After the Pandemic
Commercial real estate investors should take advantage of the current market opportunity to invest in green data centers. Commercial real estate investment is a $7 trillion industry leveraged by many factors, including the economic and political environment. However, real-estate trends have changed with the recent outbreak of a pandemic.
Contagion has caused potential tenants to seek alternative locations for their businesses, causing occupancy rates to decline. The spread of the virus has caused an increase in the demand for disaster recovery facilities, which will spur investment in these buildings.
The spread of the virus initially made people no longer go to the Mall or the Office. All their activities were carried out from home during the pandemic. After the pandemic, the world community has gotten used to doing everything from home.
One of the results of the shift in behavior after the pandemic (read: new normal) is decreased occupancy in commercial real estate. Of course, investors in the green data center can see this situation as a golden opportunity.
The need for data centers has increased after the pandemic. Thus, data center capacity grows with increasing internet penetration and usage. Investors can start diverting their investment from building hotels, shopping centers, and office buildings to Green Data Center Investment.
Green Data Center Market in Indonesia Starts to Grow
The data center market in Indonesia has increased since before the pandemic. This increase was due to the relatively high penetration of internet users. After the pandemic, more and more people used the internet for their needs.
With the agreement to reduce carbon emissions, all data centers must increase efficiency while switching to electricity from cleaner energy sources. Thus, Indonesia’s green data center market will replace the conventional data center market.
Efficiency and energy sources make a green data center different from a conventional data center; transparency and flexibility are differentiating factors.
Several market research consultants predict green data center market growth in Indonesia of 13% to 19% per year until 2030. However, this growth rate could be more than expected because Indonesia’s green data center market is not only for the local market.
As in Europe, which is experiencing a dramatic increase in electricity prices, many European companies must follow compliance, such as using a disaster recovery center (DRC). The use of DRC is to ensure the availability of business access or prevent loss from downtime.
Technically, DRC can be in a data center in Indonesia, but European companies are very strict about data center requirements. Especially for sustainability which is also included as a compliance factor in European companies.
Therefore, the prospects for the green data center market in Indonesia are tremendous, and it’s too good to be missed by green data center investors.
Why is ESG Investing on the Rise?
With the current climate of environmental and social responsibility, it’s no wonder that a recent report found that ESG investing is on the rise. Green data center investing is key to sustainable computing—a big deal in today’s world.
For the past couple of years, investors have been increasingly interested in supporting companies taking steps to minimize their environmental impact by investing in ESG. Recent studies have shown that investors expect more companies to demonstrate their commitment to reducing their carbon footprint and other negative environmental effects.
This is because many major institutional investors believe it will be necessary for companies to incorporate environmental concerns into their future business plans, along with their focus on financial results. Some firms are now requiring their portfolio companies to report ESG data alongside traditional financial information to provide a better understanding of how well a company is performing.
As a result, more and more companies are making strategic investments in clean technology initiatives and other methods of reducing the environmental impact of their products. According to recent studies, these efforts have become increasingly profitable, reducing the overall cost of operating these businesses and improving the company’s operational efficiency.
By using renewable energy or implementing sustainable materials sourcing practices, many firms have found that they can cut their operating expenses while also increasing productivity and improving employee satisfaction.
Therefore, green data center investors must find the right business partners in investing. ROI takes a longer time, between 7 to 10 years. However, green data centers still have excellent prospects until 2035.
Green data center investors should seek partnerships.
A lot of money is being invested in the green data center industry. If a company wants to invest long-term, it should consider partnering with other investors. This ensures that the initial investment on their part will be worth it in the long run.
In terms of ROI, green data center investors must consider capital expenditure. The most strategic cooperation is with local parties who own land and have experience in building and operating data center facilities safely and efficiently. You can realize your investment more quickly when you partner with a company like this. And this also means being able to guarantee your ROI better.
Green data center investors can work with companies trying to transform into green data centers. However, they need your funds to buy land, and sometimes the land buying and selling process is quite complicated and takes a long time.
Building a data center with a capacity of 10 Megawatts requires at least USD 100 million. This amount does not include land acquisition costs. If with land, for a total of 10 Megawatts, you must prepare USD 10 million to 50 million in Jakarta, Indonesia.
Read more: Why Investing in Green Data Centers More Prospective?.
Meanwhile, annual revenue per 10 MW is around USD 85 million, with a gross income of 30% to 50% of the total payment. At first glance, you will quickly get ROI, but the data center cannot be fully loaded in the first year after completion because it has to be constantly tested. Ideally, only after the 3rd year can the data center be filled.
Of course, it will take longer when you can only find partners with experience building and operating data centers. You have to take care of land acquisition which is quite tricky, risky, and prolonged.
Conclusion
Even though the green data center industry has been growing, it’s still relatively small compared to the rest of the IT industry. Investors are still trying to figure out how green data centers, and any other environmentally friendly technology, will fit in among all of their other investments.
In the past few years, investors have been pouring more and more money into the green data center market. Analysts have predicted that green data center investments will continue to rise as businesses and data centers become more environmentally conscious.
Green data center investors should take the plunge before it’s too late. The market for renewable energy is growing, and those that jump on board now will reap the rewards when profits roll in.
There are many reasons to get involved, ranging from the ability to drive down costs to a competitive advantage in the marketplace. The time is now for green data center investors to take advantage of this market.
GreenexDC, an APIC Group subsidiary, has 6 locations in Jakarta to build data centers. We are open to discussions with leading investors to build a data center that is more environmentally friendly and more prospective in the future.