South Korea to build 1 GW data center campus

The South Korean government has announced plans to build a 1 GW solar-powered data center campus by 2037. The region chosen for the project is located in the southwest of the country, in a complex that will integrate up to 25 data centers in the city of Haenam in Jeollanam province. The area was assessed as suitable for exploiting solar energy and for having a robust electricity grid.

To conduct the construction work, the Ministry of Trade, Industry and Energy signed a commercial agreement on August 24 with Jeollanam, Haenam, Korea Electric Power Corporation (South Korea’s largest power utility), Jeonnam Development Corporation and seven investment companies (Samsung C&T, LG CNS, NH Investment & Securities, Bosung Industry, TGK, Korea DRD and Deus Systems).

The data centers will be built in phases – the first with five buildings and a 300 MW substation; five more data centers and a second substation will be built in a second stage; and eight more facilities should be built by 2037. According to the South Korean government, the entire project is expected to consume around US$7.5 billion. The government will also implement a plan to mitigate the potential negative impacts of the data center complex.

According to Ron Vokoun, a specialist in data center construction, the most important variable that impacts the costs of this type of environment is the amount spent on building the physical facilities, which represents, on average, around 45% of the total cost of data centers. Estimates of construction costs can vary widely, from $200 to over $1,000 per square foot. Of course, it is possible to repurpose existing facilities to serve as data centers.

The market is heating up

The data center construction market is expected to grow by 10.2% between 2022 and 2027 to meet the rising demand for Artificial Intelligence (AI) and cloud computing solutions, according to a recent report by research and consulting firm Technavio.

Google, Amazon.com, Apple and Facebook have all invested heavily in building their own data centers. At the end of August, work also began on the construction of Microsoft’s US$1 billion data center campus in Mount Pleasant, Wisconsin (USA), which was revealed last March. Oracle, meanwhile, according to its president Larry Ellison at a conference with analysts, plans to build “hundreds of data centers” around the world, with at least one “in every country”. They will probably be relatively small and low-cost, unlike what their peers in the market are doing.

Whatever the size of the data centers, an important market trend is for them to be sustainable and more energy efficient, while also minimizing environmental impacts. They must also create an ecosystem concerned with recycling waste and use building materials with low levels of carbon emissions. In addition, the so-called green data centers must apply advanced technologies and strategies in the construction and operation of the facilities. This market for sustainable data centers is expected to show compound annual growth of 24.63% between 2022 and 2027, driven mainly by the increase in consumption and cost of electricity.

There is no shortage of reasons to invest in the sustainable data center market. Because they are large consumers of energy, the pressure to make data centers sustainable is growing – some governments and regulatory bodies are already imposing stricter standards for data centers that are newly built or under construction. Although it may seem like an obstacle, this limitation can represent opportunities for investors who set out to help data centers ensure carbon-free energy consumption, points out an article by McKinsey.

Another factor that should further stimulate the growth of the sustainable data center market is Artificial Intelligence (AI). According to calculations by Marc Ganzi, CEO of DigitalBridge, a global digital infrastructure investment company, this technology’s demand for processing power and storage is expected to reach 38 GW and consume hundreds of billions of dollars to provide data center, fiber and tower resources. This represents business opportunities for digital infrastructure companies that could eventually overtake the cloud services market, which currently totals around 13 GW of capacity with an annual value of $300 billion.

Just to get an idea of the resource consumption of these facilities, we can consider the example of the United States, where more than 30% of the world’s data centers are located. There, the energy consumed by data centers represents around 2% of the country’s electricity consumption. In addition, they are among the sectors of activity that consume the most water on US soil.