Too Hot to Compute: The Water Crisis Behind Southeast Asia’s Data Centre Boom

As AI workloads demand more processing power, the data centre industry is at an inflexion point. Sustainability mandates are tightening, and the heat is on Southeast Asia, where hyperscalers like Microsoft and Google have committed over a billion dollars in investments. The sector must innovate to meet the dual challenge of handling increasingly complex computing needs while mitigating environmental impact.

The Water Crisis and Cooling Challenges

Data centres, often described as the backbone of the digital economy, require vast amounts of water for cooling. A data centre with 100 MW of capacity, for example, guzzles roughly 4.2 million litres of water daily—equivalent to the daily consumption of a city of 10,000 people. In Malaysia, where water supply is already stretched, the sustainability of such water usage is a growing concern.

Malaysia's data centre push has put a strain on resources, with demand for water exceeding capacity, according to the National Water Services Commission. The commission said it had approved less than 18 per cent of water applications for the 101 data centres operating across Selangor, Negeri Sembilan, and Johor in the peninsula's south over the risks of using treated water meant for the public.

Governments and industries face mounting pressure to find solutions that balance technological progress with environmental stewardship.

Traditional air cooling systems, which rely on energy-hungry fans to circulate cool air, are increasingly unable to meet the demands of AI-driven data centres. These systems generate more heat due to the higher computing power of AI workloads, as CPUs (which handle general processing tasks) and GPUs (which specialise in complex calculations like image recognition and machine learning) work harder and consume more energy.

In a typical data centre, fans draw cool air into the servers, absorbing heat before being expelled from the back. To maintain optimal temperatures, the environment must remain calm enough to ensure efficient airflow. The hot air released from the servers requires additional infrastructure to be cooled and recirculated, creating a continuous, energy-intensive cycle. Between 2019 and 2023, data centre capacity in Southeast Asia more than doubled, growing from approximately ~0.8 GW to ~1.7 GW. As the data centre sector grows, the energy and infrastructure required to sustain this cooling process multiply, making the water- and energy-intensive system increasingly unsustainable for large-scale operations. 

The Rise of Liquid Cooling

Hybrid cooling technology has emerged as a promising alternative to traditional air cooling, offering a far superior ability to absorb and remove heat. This approach encompasses various methods, including direct-to-chip cooling (circulating liquid directly over key components to absorb heat), immersion cooling (submerging entire servers in a special fluid that efficiently removes heat), and precision liquid cooling (targeting specific hot spots with liquid for more efficient cooling).

Iceotope’s next-generation hybrid cooling combines the best aspects of immersion and direct-to-chip cooling. Instead of cooling the entire data centre, Iceotope’s system targets the hottest components within each server. This focused approach makes it far more energy-efficient, reducing the need for large-scale air cooling systems while ensuring optimal performance.

The system uses a special non-conductive liquid to cool key parts while partially covering others. Unlike fully submerged setups, this makes maintenance easier since servers can be serviced without turning everything off or worrying about spills. This innovative design keeps servers cool, reduces energy use, and saves water—especially important in water-scarce regions.

Iceotope’s precision liquid cooling system has garnered significant attention for its potential to reduce both energy and water consumption, securing a £30 million investment from a syndicate of investorsled by the Singapore-based impact private equity firm ABC Impact. According to Jason Low, regional director for Asia-Pacific at Iceotope, the company's fanless system uses just a 25-watt pump to circulate coolant, resulting in up to 40 per cent energy savings per server compared to traditional air-cooled systems, which rely on 350-watt fans. In a typical air-cooled server, these internal fans consume about 20 per cent of the energy to circulate cool air through the system. At the same time, Iceotope's fanless solution significantly reduces this energy consumption.

Additionally, the closed-loop design of Iceotope's system nearly eliminates water usage—a crucial benefit in regions like Southeast Asia, where water scarcity can be a concern. Unlike traditional systems that rely on evaporative cooling—consuming large amounts of water to cool hot air—Iceotope’s system directly targets the heat at the server components, reducing the need for extensive external cooling. This approach allows it to operate efficiently at higher ambient temperatures (28-29°C) without relying on water-intensive processes or costly air conditioning. The company’s solutions are designed to be deployed alongside existing air-cooled servers, making it easier for data centres to transition without overhauling their entire infrastructure.

Low says this makes it an ideal solution for resource-constrained regions, such as Southeast Asia, where energy and water conservation are crucial.

Another advantage is the system’s ability to operate in diverse environments, including remote and underserved areas. For example, in Australia’s mining regions or telecommunications base stations, where traditional cooling infrastructure is impractical, Iceotope’s sealed, dust-proof, and humidity-resistant systems offer a viable solution.

According to Low, Iceotope has seen growing interest across Asia, with significant inquiries from regions such as Korea, Japan, Taiwan, Southeast Asia, India, and Australia, including government agencies. The UK-based company, founded in 2005, has evolved from an R&D-focused organisation and now serves a diverse clientele, including cloud providers, hyperscalers, and enterprise customers from various sectors. It has publicly announced a collaboration with SK Telecom.

Charting a more sustainable path forward

As Southeast Asia’s population grows and cloud services become more integral, the demand for data centres has surged. Malaysia’s Johor has emerged as a key hub, thanks to affordable land, water, and power. This growth is driven by the increasing need for AI and advanced cloud services, alongside the region’s focus on sustainability, creating a prime environment for innovative cooling solutions.

Iceotope is among several companies vying for a market share, alongside industry leaders like Schneider Electric and Hewlett Packard Enterprise, who are also advancing liquid cooling technologies. While demand for its technology is increasing, Iceotope faces challenges like the inertia of switching from traditional air-cooling systems. Low explained that many data centre operators remain hesitant to adopt new technologies, particularly in regions where infrastructure is already well-established. The technology requires significant upfront investment and a shift in infrastructure, which can be a barrier for many data centre operators. Additionally, while liquid cooling is highly effective for high-density workloads, it may not be necessary for low-density applications, leading to a hybrid approach where liquid and air cooling coexist.

"Liquid cooling is still a relatively new technology, and most people want to fully understand it before adopting it. Right now, many are still trying to grasp what liquid cooling at the server level entails,” he said. Low, with 25 years in the data center industry, is driven by the potential to create more efficient and sustainable solutions. "Having spent years in data centres, I’ve seen how computing needs have evolved. While today’s data centres are more efficient, traditional methods are sustainably hitting their limits in managing new computer demands. You can keep pumping cold air, but it’s neither cost-effective nor environmentally friendly," he explains. "Iceotope’s technology addresses the need for cooling high-performance servers while being beneficial to both the environment and our customer’s bottom line."

As Southeast Asia’s demand for AI and high-performance computing rises, the region faces growing pressure to balance technological progress with sustainability. The shift toward more energy-efficient cooling solutions will be essential, but implementing these technologies requires thoughtful planning. Data centre operators must consider factors like infrastructure, regional energy resources, and cost to ensure a sustainable transition that meets environmental and economic needs.

Image by Lightsaber Collection.