A conservative energy efficiency improvement of 20 per cent in the existing stock of commercial DCs in Singapore can yield combined annual savings in excess of S$34 million.

A new tax incentive has been introduced to encourage data centre operators to be more energy efficient. Under the Investment Allowance Scheme for Energy Efficiency Projects (Data Centres), eligible companies will be granted an Investment Allowance (IA) to offset the fixed capital expenditure incurred in implementing energy efficiency retrofits for their data centres.

The incentive was announced by the Minister for Information, Communications and the Arts Dr Yaacob Ibrahim at the opening of imbX on 19 June 2012. It is part of a wider Green Data Centre drive spearheaded by the Infocomm Development Authority of Singapore (IDA) in partnership across the whole of Government, to improve energy efficiency.  The other initiatives include the Singapore Standard for Green Data Centres (SS564), the Green Mark for Data Centres, and the Green Data Centre Innovation Challenge.

Data centres are considered to be the pillars of the new digital economy as a result of the exponential growth in digital information. This has resulted in a boom in data centres that are needed to store, process and manage the data. Globally, the data centre market is projected to grow to US$150 billion by 2015, according to the Pike Research Report on Data Centres 3Q 2010.

IDA is positioning Singapore as the data centre hub of the region, capitalising on its central location in Asia, excellent telecoms infrastructure, security, safety from natural disasters and power reliability. Research firm IDC estimates that the data centre services market in Singapore is worth about US$326 million (S$456 million) annually.

Measures to rein in energy consumption will have a significant impact on the overall cost efficiency of the data centre. According to IDA, a conservative energy efficiency improvement of 20 per cent in the existing stock of commercial DCs in Singapore can yield combined annual savings in excess of S$34 million.

The new tax incentive is aimed at providing the impetus for data centre operators to take immediate action to measure the energy efficiency performance of their facilities and make improvements through the introduction of new design and/or equipment.

As IDA explained, a typical data centre has a lifecycle of about 15 to 20 years whereas the IT systems that it supports are typically expected to last five years or less. This means that during the lifecycle of a data centre, the IT systems would have been refreshed at least four times. This often results in a mismatch between the energy requirements of new IT systems based on more efficient technologies, and the data centre’s infrastructure which was designed to support legacy IT equipment. Retrofits are hence needed to optimise the data centre and improve its energy efficiency performance by upgrading the support infrastructure.

To encourage data centre operators to invest in these retrofits, companies awarded the incentive will be granted an IA from 30 per cent to 50 per cent of the fixed capital expenditure incurred. The fixed capital expenditure must be incurred within the qualifying period of three years to be eligible for the IA, which will be set off against chargeable income of the company. The unutilised IA can be carried forward indefinitely for set-off against the chargeable income in future years.

This IA scheme for data centres is open to companies operating a data centre with a minimum capacity of 400 sq m. The data centre must also be compliant to the Singapore Standard for Green Data Centres – Energy and Environmental Management Systems (SS 564).