Asia’s Energy Markets and Data Centre Resilience
Asia’s energy markets are unique, shaped by a complex interplay of power sourcing strategies and the region’s vast digital infrastructure requirements. These factors have played a crucial role in underpinning the sector’s resilience, especially in the face of global energy shocks.
Singapore Foreign Minister Vivian Balakrishnan has been vocal about the implications of regional energy disruptions. In an interview with Reuters, he described Iran’s closure of the Strait of Hormuz as “in a sense, an Asian crisis.” Many industry experts concur, highlighting how the region is deeply intertwined with global energy flows.
Before the conflict in Iran escalated, China, India, Japan, and South Korea accounted for a significant portion of oil and liquefied natural gas (LNG) flows through the strait. A report from Nomura on March 6 emphasized that Asia is at the epicenter of the energy security shock, warning of potential stagflation if disruptions persist beyond a month.
As the war continues into its second month, physical shortages of oil, gas, and other strategic commodities are expected to linger long after the conflict ends. Supply chain disruptions and the need to rebuild inventories will likely prolong these challenges.
The Impact on Asia’s Data Centre Market
The acute vulnerability of the region to such shocks has brought the power-hungry data centre market under scrutiny. In 2024-25, the Asia-Pacific region accounted for about 30% of global data centre operational capacity, with nearly a quarter of facilities currently under construction. According to MSCI data, transaction volumes in this sector were higher than those in the professionally managed rental housing and hotel sectors.
Unlike traditional commercial properties, data centres require more than just capital investment. They depend heavily on sourcing electricity to support rapid growth. Deloitte highlighted that the sector needs affordable, reliable, and clean energy to reach its full potential.
The energy crisis has exposed vulnerabilities in the data centre sector, prompting a closer look at the economics of building and financing these facilities. Power generation is a particular concern in Asia, where several countries rely on imported fuel for electricity. For instance, nearly 30% of South Korea’s power generation comes from gas, with the Middle East accounting for almost a quarter of its LNG imports.
If the conflict persists and energy prices continue to rise, the $770 billion needed to add another 24 gigawatts of data centre capacity in the Asia-Pacific over the next five years could be at risk.
Resilience in Asia’s Energy Markets
Despite these challenges, a closer examination of Asia’s energy markets suggests that data centres may be less vulnerable than they appear. Electricity sectors in some economies most reliant on Gulf oil and gas imports are relatively insulated from the shock. In India, gas accounts for less than 3% of power generation, while in China, coal provides over 50% of power generation, with electricity prices heavily regulated.
China is also rapidly expanding its renewable energy capacity, which met 84% of electricity demand growth in 2024. James Wang, a general partner at venture capital firm Creative Ventures, emphasized that oil, natural gas, and electricity are distinct commodities with different supply chains and price dynamics.
Innovative Power Sourcing Strategies
Another source of resilience in Asia’s data centre market is the development of sophisticated power sourcing strategies. To manage high and volatile prices, as well as meet sustainability goals, leading operators have entered into power purchase agreements with clean energy providers.
These contracts allow operators to bypass national grids and secure power at a fixed price for up to 20-25 years. This provides a revenue anchor that supports the bankability of new generation and storage projects, accelerating the deployment of additional electricity supply, according to Deloitte.
Pritesh Swamy, head of research and advisory in the Asia-Pacific data centre group at Cushman & Wakefield, noted that the energy shock will enhance the sophistication of power sourcing strategies, helping the sector navigate natural resource-related constraints.
Strong Leasing Demand and Sector Resilience
Fierce leasing demand in Asia’s data centre market further adds to the sector’s resilience. Strong commitments from hyperscalers—leading cloud service providers—have pushed down vacancy rates to just 7%, despite tight supply. According to JLL, 78% of new supply across the region in the next two years is already pre-leased.
While there has been a shift in development activity towards countries with lower construction costs, operational capacity and development pipelines remain concentrated in five countries. Two of these—Japan and Australia—are among those with the highest construction costs due to scarce land availability and intense competition for power-ready urban sites.
“If it was all about power and construction costs, there would be far fewer data centres in Asia,” Swamy said. Factors such as digital development, urban infrastructure quality, capital market liquidity, geopolitical considerations, and the availability of AI-ready data centres are key determinants of leasing and investment activity in the region.
Conclusion
The global energy shock presents new challenges for data centres. However, the nuances of Asia’s energy markets, innovative power sourcing strategies, and the region’s vast digital infrastructure requirements continue to underpin the sector’s resilience.
