Avoiding grid impact assessments
Over 30 projects under 10MW in progress
Lack of viability checks raises concerns
Post-management and facility abandonment risks
As the capital region's power grid nears saturation, blocking new large-scale data centers, small-scale projects under 10MW—exempt from grid impact assessments—are rapidly increasing.
This trend reflects expectations of soaring AI-era data center demand, but facilities lacking differentiated functions risk losing competitiveness and being abandoned, raising concerns about post-management issues.
According to industry sources on the 28th, over 30 data center projects under 10MW are currently underway in the capital region. Multiple projects are progressing in Seoul's Gangnam-gu (Daechidong), Gangseo-gu (Magokdong), and Yeongdeungpo-gu (Yangpyeongdong). Most are around 9MW, equivalent to 5-6 units of AI data center (AIDC) infrastructure.
A well-informed industry insider noted, “Even areas like Gangnam, previously resistant to data centers, are now seeing project proposals. This trend will likely intensify.”
The regulatory framework drives this concentration. The Special Act on Distributed Energy mandates grid impact assessments for new projects exceeding 10MW or expansions reaching that threshold. In the capital region, only about 5% of applications pass.
Projects under 10MW are exempt and take roughly six months to build—far shorter than the 3+ years for large-scale facilities. Demand also supports this: CBRE's June 2023 report noted Seoul's data center capacity at 698MW, with growing interest in sub-10MW developments due to their relative ease of acquisition. Capital region vacancy rates are under 3%, and colocation rents rose 70% from KRW140,000/kW/month in 2019 to KRW250,000 in 2023. Current demand ensures tenants, reducing pressure on operators to validate demand.
While this reflects natural market dynamics, risks persist.
The primary concern is the proliferation of projects without proper viability assessments. Edge facilities—optimized for low-latency, real-time processing in urban areas—retain irreplaceable competitive advantages.
However, facilities scaled only to meet regulatory thresholds without pre-leased demand or differentiation may struggle to attract customers. Low occupancy or idle facilities could delay ROI and create underutilized infrastructure in city centers, potentially leading to post-management issues.
Demand volatility is another factor. Current demand stems more from scarcity of powered server space than from needs requiring rapid response times. This demand could shift if alternatives emerge. Major players like Samsung SDS, SK Group-AWS, and LG U+ are developing data centers in Gumi, Ulsan, and Paju, which may outcompete urban small-scale facilities on power and land costs once operational.
Song Joon-hwa, secretary-general of the Korea Data Center Energy Efficiency Association, stated, “Real estate investment is flooding into data centers, often without adequate feasibility reviews. Viability hinges not on being under 10MW but on functional edge capabilities. Facilities lacking these will struggle, and oversupply could strain the power grid.”
