Will fresh regulatory threats turn China Tech green?

Chinese tech firms could be hit with more regulations after the government threatened to crack down on the “blind and disorderly development” of energy-sapping data centres. Alibaba [BABA], Tencent Holdings [TCEHY], Baidu [BIDU], and China Mobile’s [HKEX:941] could face the brunt of the changes.

The Chinese government is determined to reach peak carbon emissions by 2030 and achieve carbon neutrality by 2060. The local administration believes that improving the energy efficiency of data centres, in a country dependent on coal-fired power plants, would be a huge step towards meeting this goal.

According to Reuters, a plan drawn up by the National Development and Reform Commission (NDRC), plus cyberspace, renewable energy and telecommunications departments, states that: “Data centres and 5G are ... the most critical link when it comes to saving energy and reducing consumption of new infrastructure.

“All localities must strengthen overall guidance for the construction of data centres, and resolutely avoid the blind and disorderly development of data centres.”

 

Outsourcing energy

Data centres use vast amounts of energy in their operations, particularly when cooling down their servers. A report from China’s State Grid Energy Research Institute found that data centres used an estimated 200 billion kWh-plus of electricity in 2020, accounting for nearly 3% of the nation’s total consumption. By 2030, that is tipped to increase to nearer 4%.

 

The NDRC also said that data centres in the east of China should outsource some of their processing work to new national data centre clusters in the west of the country to take advantage of the abundant wind and solar power supply there. The agency also stated that local governments should not grant preferential treatment in land, finances and tax matters related to data centres built outside these national clusters.

 

Tech going green

New, more energy-efficient, technologies would also be encouraged, such as refrigeration systems, involving liquid cooling, power supply and distribution systems. These would feature high-voltage direct current, lithium batteries and hydrogen storage.

Environmental pressure group Greenpeace wants the Chinese government to go further by mandating the use of 100% renewable energy by internet companies.

However, major Chinese tech companies are already realising that investing in green data centres could give them first-mover advantage with eco-conscious customers and investors. It could also mean avoiding further government regulations on the use of personal data, competition, and how much time children spend playing video games – all of which have battered their share prices this year.

Since the NDRC announcement on 8 December, tech company shares have hardly moved.

Alibaba has dropped 3.8% up to 16 December, Tencent Holdings is also down 5.9% and Baidu and China Mobile’s shares have been flat.

Baidu has already declared it is increasing its efforts to lower carbon emissions from its data centres by moving to clean energy and reducing electricity consumption by using integrated artificial intelligence (AI) applications.

Data centre operator GDS Holdings [GDS], which hosts sites for groups such as Alibaba and Tencent, is aiming to be carbon neutral by 2030. Tencent has declared that it too intends to work towards carbon neutrality.

Wang Xin, head of global IT service, Alibaba Infrastructure Service Group, told CGTN that his organisation had been exploring the use of liquid immersion cooling technology to cut heat from data centres since 2016.

In addition, the Ant Group, which earlier this year pledged to become carbon neutral by 2030, said it had cut its data centres electricity consumption by 640MWh during the Global Shopping Festival in early November. It said using green computing technologies, such as online-offline hybrid development and AI-based auto-scaling, had reduced carbon emissions by 394 tonnes over the 11-day festival. Ant Group said this was achieved by supporting more business demands with fewer servers, minimising wasted electricity and reducing energy intensity.

Although they are clearly making progress in China, the main domestic tech groups need to do more to catch up with their US rivals.

 

International rivals race to be green

As reported by CGTN, Google [GOOGL] is aiming to have 100% renewable energy and be carbon-free by 2030. Apple [APPL] and Meta [FB] had already achieved 100% renewable usage by 2020.

Guo Liang, deputy chief engineer of China Academy of Information and Communications Technology, told CGTN that in addition, domestic companies "have big potential to improve in carbon disclosure”.

Green is the future for Chinese tech, and it needs to happen sooner rather than later if it wants to stay competitive at home and abroad.