Microsoft, Rolls-Royce Power Systems push treated vegetable oils to green Singapore’s data centres

[SINGAPORE] Microsoft and Rolls-Royce Power Systems are pushing for the adoption of hydrotreated vegetable oil (HVO) as a sustainable backup fuel for data centres in Singapore and beyond, as the region races to balance the booming demand for energy with climate goals.

However, the limited availability and elevated pricing of this biodiesel remain significant bottlenecks to enable its adoption at scale.

The two companies released a policy position paper on Wednesday (Aug 27), calling on regulators and industry players to enable wider adoption of HVO.

As a transitional fuel with limited supply, it is omitted in Singapore’s Green Data Centre Roadmap (GDCR). Launched in May 2024, the GDCR sets the strategic tone of making the data-centre sector a sustainable one through the use of green and low-carbon energy sources.

Giovanni Spadaro, president of global markets at Rolls-Royce Power Systems, noted at a media roundtable on Wednesday that the shift to HVO to power engines is “technically straightforward”, but hampered by market constraints.

“The technology is ready today,” he said, adding that the real challenge lies in the unsupportive ecosystem in which limited supply and lack of subsidiaries to bridge pricing gaps hinder adoption among data-centre operators.

HVO prices can now be two to three times higher than that for traditional diesel, and global supply remains tight, given that carbon-intensive industries such as aviation and shipping are all fighting for the same molecule.

Kavickumar Muruganathan, ESG (environmental, social and governance) policy and planning director for the Asia-Pacific at Microsoft, stressed that Singapore’s data-centre sector has a unique opportunity to lead in the region, given the Republic’s focus on decarbonisation.

“It (the adoption of HVO) can progressively reduce the burden under the carbon tax regime in Singapore… the savings can play a huge role in offsetting the current costs of HVO for data-centre operators,” he said.

HVO is an advanced biofuel made from waste vegetable oils and animal fats. The hydrotreatment process that this waste oil undergoes changes its chemical structure, making it near-identical to fossil diesel.

Both companies argue that the adoption of HVO can cut lifecycle carbon emissions by up to 90 per cent compared to conventional diesel. HVO is fully compatible with existing backup generator infrastructure as well.

HVO’s longer shelf life – about 10 years – compared to traditional diesel also makes it an ideal choice as a stable backup fuel, noted Lawrence Chong, vice-president of power solution business engineering and execution and power generation in the Asia-Pacific at Rolls-Royce Solutions Asia.

Microsoft’s Muruganathan said HVO could play a significant role in building a supportive ecosystem under the GDCR, especially given a positive momentum among data-centre operators to make the transition to using HVO.

Nonetheless, there is no extensive adoption of HVO for backup engine solutions in Singapore, noted Rolls-Royce Power Systems’ Spadaro, highlighting high prices in a competitive market as a main roadblock.

He noted that in Europe, the pricing gap between fossil diesel and HVO is much smaller than in the region – at about 10 per cent – thanks to a push by governments and subsidy schemes.

Spadaro added that the bulk of available HVO today, even though manufactured from feedstocks in the region, comes from Europe and North America, where renewable fuel mandates have already locked in significant volumes, leaving limited availability in Asia.

Singapore is a key refinery hub and price-discovery centre of oil products in the world, but it lacks a domestic HVO refining capacity, meaning any large-scale rollout would depend on imports, further inflating the prices.

Both companies advocate public-private partnerships and collaborations with international certification bodies such as the Roundtable for Sustainable Biomass to scale domestic production.

A more developed supply chain, together with governmental subsidies, would stabilise the prices and encourage wider adoption of HVO, said Microsoft’s Muruganathan.

Blueprint for South-east Asia

Spadaro of Rolls-Royce Power Systems, the engine manufacturer under Rolls-Royce Holdings, noting Singapore’s “lighthouse” status on promoting sustainable practices in the region, asked: “If Singapore won’t do it, then who else?”

The Republic’s data centres accounted for about 7 per cent of the country’s total electricity consumption, according to the latest figures in 2021. The country itself still relies heavily on gas for its electricity supply.

Singapore could become a regional test bed for sustainable backup power and provide a scalable model for other South-east Asian markets facing similar energy-security and emissions challenges amid the data-centre boom.

Microsoft’s Muruganathan noted that the HVO as a backup fuel solution aligns with Microsoft’s net carbon-negative goal by 2030 and Singapore’s goal of reaching net-zero emissions by 2050.

Meanwhile, Rolls-Royce has pledged to make its engine product portfolio net-zero by 2050. It has already trialled HVO in multiple facilities.