Concerns are mounting over the ability of Malaysia’s expanding data centre (DC) sector to secure adequate power supplies amid new regulatory requirements mandating that developers provide their own electricity generation. Approved projects are now expected to operate off-grid power sources, a move that has raised questions about the availability of gas supply and turbine equipment necessary to meet these demands.
RHB Research highlighted that, alongside the obligation for self-sufficient power generation, DC operators must incorporate at least 30% renewable energy into their overall consumption. This adds a layer of complexity to operations and heightens the challenge of meeting reliability and sustainability goals.
Senior analyst Royce Tan Seng Hooi from MBSB Research said it was “inevitable” that data centre developers would need to take on the responsibility of securing electricity independently, rather than relying on the national grid. "Given the rapid growth of Malaysia's DC industry and the substantial energy requirements involved, this shift was bound to occur," he noted.
Recent communications to DC developers emphasize the need to arrange for “off-grid” energy sources. This condition likely means constructing dedicated power plants or engaging alternative suppliers. Tan suggested that a practical solution could come from forming partnerships with independent power producers (IPPs), such as YTL Power International Bhd and Malakoff Corp Bhd, which have experience managing large-scale generation assets. These collaborations might include on-site generation, collocated plants, or off-site arrangements with grid access.
The 30% renewable energy requirement is expected to drive more DC operators toward agreements under the Corporate Renewable Energy Supply Scheme (Cress). RHB Research pointed out that a recent reduction in the national grid system access charge (SAC) to 18 sen per kilowatt-hour—down from a previous 20 sen—may further boost uptake of long-term green energy contracts. The SAC adjustment incorporates a 14 sen rate from the Cress Acceleration Package, supplemented by a 4 sen charge on consumers opting for green energy.
Tan emphasized that sustainability commitments will compel DCs to procure renewable energy regardless of SAC rates. “At 18 sen, solar projects remain commercially viable, and even higher SACs don’t deter interest in Cress,” he said. Nonetheless, he acknowledged the limitations of renewable sources like solar, which provides only four to five hours of daily output, extendable to eight hours with battery storage.
An industry source affirmed that solar-plus-storage systems can serve as supplemental power but cannot reliably support continuous 24/7 operation without firm backup options. With direct grid connections from Tenaga Nasional Bhd no longer guaranteed, operators may need to consider alternatives such as diesel generators.
Adding to operational challenges, securing large gas turbines appears difficult amid a global shortage, particularly for the type suited to data centres. High demand in markets like the United States and significant bulk orders from the Middle East have delayed turbine deliveries until 2030 or later.
The insider noted that developers might instead turn to smaller-scale, modular solutions such as reciprocating gas engines or aeroderivative gas turbines. Although less efficient than large combined cycle units, these options can be deployed in phases aligned with growing load demands, offering more immediate availability to meet initial power needs as DC facilities expand.