Indonesia possesses the essential elements necessary to establish itself as a prime location for AI data centers, especially given its abundant potential for renewable energy. However, industry stakeholders express their disappointment over the missed opportunity, attributing it to the lack of convincing incentives from the government. This stands in stark contrast to the significant expansion of data center capacity in neighboring Malaysia during Singapore’s data center moratorium.
The Indonesian Data Center Association (IDPRO) has reported that, while Johor State in Malaysia saw a substantial increase in its data center capacity from 10 megawatts to 1.3 gigawatts during Singapore’s moratorium, Indonesia currently operates at only around 300 MW. Despite its close proximity to Singapore, Indonesia has not been able to fully seize the potential for AI data centers.
Industry stakeholders maintain a positive outlook on Indonesia’s capacity to attain a data center capacity of 2.3 GW in the next decade, primarily driven by the escalating demand for artificial intelligence computing and the abundance of renewable energy sources within the country. However, they emphasize the pivotal role of the government in providing compelling incentives to attract investors and ensure Indonesia’s competitiveness in the regional AI data center market in order for this potential to be realized.
The emergence of AI as the next energy-intensive technological innovation has brought attention to the energy consumption of AI data centers. For instance, OpenAI’s ChatGPT is estimated to consume approximately 10 times more electricity than common computing tasks such as Google Search, as reported by the International Energy Agency. Consequently, the significance of renewable energy for data centers has been underlined not only for environmental reasons but also to mitigate the increasing regulatory risks associated with coal-powered infrastructure.
According to Niccolò Lombatti, an industry analyst at Fitch Solutions’ BMI Research, primary data center markets tend to align with major economic centers. However, due to competition with real estate firms in metropolitan areas, data center investments have been shifting to secondary cities offering competitive land and electricity prices while being in proximity to urban hubs. Furthermore, the appeal of sustainable debt for data center investment is on the upswing.
Lombatti also anticipates a shift in data center investment within Southeast Asia, with Malaysia’s Johor and Indonesia’s Batam expected to attract more demand from Singapore. Although both countries have substantial potential for renewable energy, Malaysia has taken the lead in attracting demand from Singapore, underscoring Indonesia’s missed opportunity.
In conclusion, Indonesia finds itself at a pivotal moment where it has the potential to emerge as a significant player in the AI data center market. However, for this to become a reality, the government must enhance its efforts and provide the necessary incentives to attract investors and capitalize on the country’s renewable energy potential.
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