Asia’s AI boom has a dirty secret: the coal that powers it

Asia sits atop vast amounts of coal, nearly three-fifths of the world’s known reserves by some estimates. Cheaper and more reliable than imported oil and gas, and far less vulnerable to disruptions caused by foreign wars, coal is also dirty, polluting – and the region’s No 1 “stopgap source” to power the AI infrastructure roll-out. “AI demand is materialising faster than clean energy generation can be commissioned,” said Alexander Kheder, a market research analyst at BMI who tracks global AI infrastructure spending and data centre expansion. Solar and wind, for all their recent progress, still could not deliver the relentless, round-the-clock baseload that the data centres powering artificial intelligence demanded, he said. In Malaysia’s pioneering smart city of Cyberjaya, dozens of data centres are already in operation, with more planned for the future. “The impact is going to be very, very visible,” said Adit Rahim, 49, a local resident and communications executive who worries about the strain all this development is placing on utilities. “What no one is really addressing is whether resources like water and electricity are keeping pace,” he said. Data centres never sleep. Their servers hum around the clock, training and running the artificial-intelligence models that are transforming the global economy – and their appetite for electricity is voracious. That hunger has been a boon for companies such as Johnson Controls, whose Asia-Pacific vice-president for project delivery and data centre solutions, Ali Badreddine, has been fielding a flood of urgent requests from his base in Singapore. “Customers are telling us they need everything faster,” he told This Week in Asia. His company’s backup power systems – essential to prevent catastrophic data loss at AI data centres, where an unexpected power outage can destroy months of model-training progress – used to ship within months, but now come with waiting times of two years or more. “Even if you are willing to pay, there simply isn’t enough manufacturing capacity available,” Badreddine said. Southeast Asia’s AI workload demand will, in all likelihood, continue outpacing renewable energy supply for some years yet, according to Kheder, which is why coal has become the No 1 “stopgap source to bridge this gap”. War woes Asia imports the bulk of its oil and gas, much of it through a chokepoint strait that has been largely sealed off amid the US-Israel war on Iran. Oil prices have whipsawed this year from lows of around US$60 a barrel in January to nearly US$120 at the height of the conflict in April. A ceasefire agreed in June helped stabilise the market for a few weeks until US President Donald Trump declared the truce “over” on July 8 following a fresh round of tit-for-tat attacks, sending prices rising again. Soaring natural gas prices, meanwhile, have driven electricity tariffs to all-time highs of nearly 35 cents (27 US cents) per kilowatt-hour in Singapore, while sky-high prices in the Philippines have pushed households towards solar and Vietnam has rolled out peak-hour energy pricing to manage the strain. Malaysia’s rates have held steady so far, largely thanks to government subsidies, but those living in the shadow of Cyberjaya’s server farms are nervous about the future. “At the end of the day, there will be a choke point in electricity supply,” Rahim said of Malaysia’s proliferating data centres. “And there will definitely be an impact on water supply.” Big data centres had two key questions when it came to power, said Ashwin Balasubramanian, a partner at management consultancy firm McKinsey: how soon can we get it and how reliable is the supply? “That is much more important than just green power. Less than 40 per cent have actually made those [green] commitments,” he said, predicting a short‑term increase in fossil fuel emissions. Mayank Maheshwari, an energy analyst for India and Southeast Asia at multinational investment bank Morgan Stanley, said the priority for policymakers across the region would be securing steady energy supplies. “Energy consumers worldwide are price-sensitive and discerning. They always gravitate towards the most affordable and reliable forms of energy,” he said – adding that Asia, with its enormous coal reserves, had an easily accessible option close at hand. Morgan Stanley projects that the region’s coal consumption will climb by 130 million tonnes between now and 2030, which equates to an 8-10 per cent increase. It also forecasts Asia’s annual energy spending will double over that same period, with more than US$5 trillion being spent on clean and fossil fuel investments, making it the region’s second-largest funding destination after AI itself. Separately, Asian buyers are expected to snap up a decent chunk of the more than 100 million tonnes of natural gas that analysts predict the US will release onto global markets this year alone. “Asia is preparing to absorb the supply, as it is expected to be cheaper than the imported natural gas prices Asian consumers have paid in recent years,” Maheshwari said. In a coal hole? Fossil fuels offer a quick fix to power the AI boom when demand outstrips supply, but not everyone is convinced that a full-blown coal revival is inevitable. “A major new coal wave would be a blunt and expensive answer to a more complex problem,” said Aditya Lolla, interim managing director at energy think tank Ember. He argues that the sums simply do not add up, as new coal plants take years to build and would not come online until long after the current AI-driven demand spike has passed. In the longer term, Lolla said more coal and gas would only lead to increased air pollution while saddling the region with power plants ill-suited to grids increasingly built for renewables. Renewables are certainly more cost efficient, according to the International Renewable Energy Agency, which found that more than 90 per cent of all newly commissioned utility-scale renewable projects globally last year delivered power cheaper than the lowest-cost new fossil-fuel alternative. In Indonesia, Thailand and the Philippines alone, renewable generation has already displaced an estimated US$5.7 billion of coal and gas imports that would otherwise have been bought, the agency found in a recent report. “In many markets, it is already the most cost-competitive source of new electricity generation and is increasingly the preferred procurement option for major technology and industrial companies,” said Joe Phelan, executive director for the Asia-Pacific at the World Business Council for Sustainable Development. Yet analysts say there exists a divergence between the region’s most advanced, supply-constrained economies such as Singapore – which is increasingly positioning itself as a regional hub for clean-power imports – and less constrained markets that tend to lean more heavily on coal and gas because they are so readily available. Michael Goh, vice-president and general manager for the Asia-Pacific and other regions at Iron Mountain Data Centres – one of the world’s largest operators, with a facility in Singapore – said higher electricity costs had indeed affected the industry, though he credited the city state’s government with working to contain them. He said his own group had focused on boosting energy efficiency and tapping resources otherwise considered waste output, such as heat recovered through the regasification of liquefied natural gas, rather than drawing more heavily on water and power. Singapore had also met additional demand through partnerships with Indonesia and Australia to import renewable energy, he added. Cross-border connectivity may be the key to solving the region’s energy challenge, according to specialist project management consultancy TBH. The Association of Southeast Asian Nations’ long-stalled integrated power grid plan, first sketched out decades ago, could offer such a path to sharing surplus clean power across borders rather than each country going it alone. “Southeast Asia’s energy transition is entering a new phase,” said Ali Nami, a director and energy lead at TBH. “The ability to coordinate these investments and translate them into reliable outcomes will play a major role in shaping the region’s long-term energy future.” Additional reporting by Ushar Daniele

Asia’s AI boom has a dirty secret: the coal that powers it

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}In the rush to build the digital future, regional tech hubs are digging up the past

In the rush to build the digital future, regional tech hubs are digging up the past