Malaysia to penalise speculative data centre power applications
Data centres in Malaysia are using less than half their declared power demand.
Malaysia will prevent speculative power applications for data centres by applying a penalty per kilowatt of shortfall. What is it about?
Earlier this month, The Edge reported that Malaysia's Energy Commission (EC) has revised its electricity supply planning methodology for data centres in Peninsular Malaysia.
The story so far
Data centres in Malaysia are currently consuming less than half of their declared electricity demand, according to the Ministry of Investment, Trade and Industry (Miti).
Specifically, as of June 2025, data centres are consuming 603MW of electricity, about 47% of their declared maximum demand of 1,276MW, as reported by The Edge in November.
Water usage by data centres is similarly lower than what news headlines are suggesting.
Data centres in Selangor, Kuala Lumpur, and Putrajaya now consume 0.47 million litres (0.012% of total water use), while those in Johor consume 9.07 million litres (0.6% of the state's total).
The new requirement calls for achieving 85% of declared electricity utilisation throughout the first four years. Failure will attract a penalty of RM8.50 per kilowatt of shortfall, and this will appear as a distinct item in the electricity bill.
Power, the new superpower
Malaysia has seen a surge of unprecedented data centre construction, with much of it taking place in Johor. For context, Johor had zero data centres in 2020.
Current data from JLL shows Malaysia is set to overtake Singapore and Korea in data centre capacity by 2027, and every other major data centre market in APAC by 2029.
Globally, there is a massive surge in data centre construction, driven by demand for generative AI. At the heart of data centres is access to power. Without it, nothing else matters.
Conversely, power, whether in terms of grid access or contractual commitments by power firms to supply it, gives operators an advantage in negotiations.
The result? Spurious or overly optimistic applications for electricity. How much of this demand is real? Or is the majority of it a mirage?
The penalty is how authorities in Malaysia seek to pierce the veil.
Treading a fine line
Policymakers would prefer that operators don't build speculatively so resources can be judiciously managed. On the other hand, I've heard operators counter that the very nature of data centres is speculative by default.
I don't think there is a simple answer to this.
For what it's worth, my opinion is that we need far more data centres in the region to meet organic demand.
However, we need to be wary of transposing the current global AI euphoria to this region, given the fewer tech giants here with the requisite billions to spend on AI training.
Unfortunately, social media posts with hyperbole or grandiose claims about data centres gain far more engagement and unwittingly shape opinions, including those of investors.
What do you think?
