Philippine grid instability limits data centre scale, says Moody's

Moody's Ratings has identified energy security shortcomings as a key bottleneck for the Philippines' data centre industry, which has not scaled to the extent of its regional counterparts. The Philippines and Vietnam are classed as "early-stage" markets, while Malaysia and Singapore have captured the

ENERGY SECURITY shortcomings are a key bottleneck for the Philippines' data centre industry, which has not scaled to the extent of its regional counterparts, according to Moody's Ratings.

In a report, Moody's identified the Philippines and Vietnam as "early-stage" data centre markets. "Among the markets covered here, (the Philippines) also faces the most acute power availability and energy security constraints, so delivery will depend heavily on new-generation capacity, financing and the pace at which announced projects move into construction," it said.

Rising oil prices due to the Middle East war have also exposed the vulnerability of the Philippine power supply to external shocks. Malaysia and Singapore are deemed to have captured the most economy-wide benefits from data centre investments, Moody's said. It also noted that data centre investments in India, Thailand and Indonesia are significant but not enough to be key growth drivers.

According to Moody's, South and Southeast Asia are well positioned to capture opportunities from digital trade, citing the regions' high openness to trade and rapid digital adoption. However, these regions face challenges in funding, construction and utilities access, it said. Specifically, delays in power or water access could constrain the pace of growth in some markets.

"Construction risks mainly reflect the scale and pace of development, which are pressuring global supply chains for key components such as transformers, electrical equipment and skilled labor across regions," Moody's said. To support data centre expansion, it also called for supportive policies and competitively-priced power, water and land.

"Timely utility access and consistently supportive government policies would help keep South and Southeast Asia an attractive destination for AI-related demand from other regions," Moody's said.

Data centres are expected to account for up to 30 per cent of Philippine grid capacity, according to the Philippine Energy Efficiency Alliance, Inc. This has raised concerns that growing data centre capacity could strain existing energy supply and drive up power costs. The Department of Information and Communications Technology expects Philippine data centre capacity to grow to 1.5 gigawatts by 2028.