SINGAPORE - Singapore plans to be more selective in its data centre investments after a review of how to grow the industry in a more sustainable manner was recently completed.

"While we continue to welcome data centre investments, we intend to be more selective of which data centres we can accommodate. In particular, we seek to anchor data centres that are best in class in terms of resource efficiency, which can contribute towards Singapore's economic and strategic objectives," Trade and Industry Minister Gan Kim Yong said on Jan 11 in a written reply to a parliamentary question from Workers' Party MP Louis Chua (Sengkang GRC).

There is currently a moratorium in Singapore under which the development of new data centres on existing state land and release of state land for data centres has been temporarily paused. This was put in place in 2019 to moderate the growth of data centres and enable the Government to conduct its review.

There is now a need to be selective as data centres are big consumers of electricity, said Mr Jonathan Koh, research director at UOB Kay Hian.

Data centres accounted for 7 per cent of total electricity consumption in Singapore in 2020, said Mr Koh.

"The Singapore Government has committed to halving carbon emissions by 2050. Our commitment to climate change and to protect the environment means that we have to be very selective when granting approvals to build new data centres," he added.

Nevertheless, there is a need to balance between environmental sustainability and business needs and growth.

Some companies that The Straits Times spoke to said that Singapore's rapid digitalisation still makes it an appealing space to build data centres.

Mr Yeoh Keong Hann, executive director of YTL Power International, said the company sees growth potential in Singapore as it is one of the countries in South-east Asia with a high rate of digitalisation. The Kuala Lumpur-based multi-utility group acquired a 12.5MW green hyperscale data centre in Singapore in December last year.

Data centres are needed to store data and provide connectivity to support online activities, said Ms Eing Kar Mei, real estate investment trust (Reit) analyst at CGS-CIMB Research.

"Technologies like video streaming and Internet of Things (IoT) require data centres to support Internet-connected devices. Companies under digital transformation also require data centres to store and manage their information as well as keep their data up to date," said Ms Eing.

The growth in digital apps and e-commerce is one of the reasons why data centres remain lucrative despite high land cost, said Mr Koh.

"Be it private companies or the public sector, we are all trying to digitalise our interactions with customers and to streamline the back-end processing for greater efficiency. All these data traffic in the form of voice, video or plain data files is processed and stored at data centres," said Mr Koh.

CapitaLand Investment managing director Eugene Seo said that Singapore will continue to attract new data centre investments.

"(This is due to) the country's good infrastructure, robust network connectivity, strong cyber-security framework, and stable government," said Mr Seo.

CapitaLand Group currently has four data centres in Singapore.

YTL Power International's subsidiary YTL Data Centre is working closely with its electricity business YTL PowerSeraya and its retail arm Geneco on green energy solutions to power the company's existing and new data centre developments, said Mr Yeoh.

"This further places us in a good position to contribute towards the sustainable growth of data centres," he said.