Moody’s Ratings expects data center power demand in Asia-Pacific (APAC) to grow at a 15 percent to 20 percent compound annual growth rate (CAGR) over the next five to six years, as capacity more than doubles over the same period.

This will require substantial investment by utilities in power generation, storage, and grid infrastructure, amid broader challenges of growth, decarbonization, and affordability, the rating agency said in a note on last Thursday.

“While utilities’ capital spending will rise to meet this demand, we expect rated issuers to maintain credit strength, supported in some cases by regulated cost recovery mechanisms,” Moody’s noted.

Moody’s expects total installed data center capacity in APAC to increase to 92 GW in 2030 from 36 GW in 2024, similar to the International Energy Agency’s (IEA) projections.

It noted that capital spending by utilities to meet the associated increase in power demand will be $90 billion to $110 billion, depending on the technology chosen and the location of the facility.

Moody’s also projected that information technology (IT) installed capacity will increase from 24 GW to 67 GW over the same period.

Per the IEA, APAC’s share of overall data center capacity globally is forecast to rise to around 41 percent from 37 percent over this period.

Investments made in building and improving the grid infrastructure will be in addition, said Moody’s.

According to the rating agency, grid connectivity and the availability of firm dispatchable renewable energy are vital to meeting growth requirements and transitions goals.

Material investment in grid expansion, renewable energy and storage will also be required over the next decade to ensure reliable round-the-clock delivery of power for data centers while maintaining energy transition goals.

It is noted that data centers typically draw power directly from the grid and have the same carbon intensity as the broader market.

For example, in Malaysia, the Corporate Renewable Energy Supply Scheme (CRESS) allows data centers to purchase electricity directly from power producers while using grid operators’ infrastructure for transmission.

For Moody’s, data center demand will spur utility investments, especially in smaller markets.

In smaller APAC power markets, like Malaysia (A3 stable) and Australia (Aaa stable), it opined that data center related power demand may require a sharp increase in investment.

For instance, in Malaysia, utility firm Tenaga Nasional Berhad (TNB)’s capital spending under the fourth regulatory period has increased by over 100 percent, which is split approximately 60:40 between base and contingent capital spending (part of the contingent capital spending is linked to incremental demand from data centers).

According to TNB, it has secured electricity supply agreements for 38 data center projects as of the end of 2024, with a total capacity of 5.9 GW, compared to the
installed generation capacity of around 28.4 GW.

However, actual utilization in December 2024 was only at 405 MW versus the total connected capacity of 1.9 GW, reflecting the consumption step-up nature of data centers over five to six years from date of commission.

As for larger markets like India (Baa3 stable) and China (A1 negative), incremental data center related demand will also add to existing development pipelines to meet economic growth.

Meanwhile, capital spending risk will be managed through regulations, government backing, or financial strength, according to Moody’s.

It noted that regulated networks are better placed to handle high capital spending as they can earn a return on investment.

Utilities making extra investment in generation plants may be subject to a temporary period of higher leverage, to the extent the investment is debt funded, as well as execution risk (time and cost overruns), it added.

Moody’s also highlighted that design efficiency and artificial intelligence (AI) will help reduce power consumption.

It opined that reductions in the energy intensity of data centers can be achieved through the adoption of advanced cooling systems, improved design, or more efficiently run operations.

It is noted that the projected CAGR of power consumption by APAC data centers over 2024-2030 will reduce to 14 percent to 15 percent from 17 percent, with power usage effectiveness (PUEs) improving from 1.35 times (on average) to 1.20-1.25 time.

“Some countries, like Singapore, have mandated that PUE for all new data centers should be 1.3 time or lower, and we expect such conditions to be implemented across most APAC countries in future,” said Moody’s.

Utilities and power transmission operators are increasingly turning to AI to strengthen grid resilience and increase renewable energy generation utilization, it added.

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