Data centre investors must fund grid upgrades, pay for unused capacity, says Johari

Data centre investors in Malaysia will have to bear the cost of grid upgrades and pay for committed electricity capacity even when it is not fully used, says Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani. He also announced a minimum 30% local content requirement for data cent

KUALA LUMPUR (Oct 15): Data centre investors must bear the cost of grid upgrades needed for their projects and pay for committed electricity capacity even when it is not fully used, Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani told the Dewan Rakyat on Thursday (Oct 15).

Malaysia also wants the investments to create more opportunities for local suppliers and technical workers, while giving Malaysian companies and universities access to computing resources and technology. According to The Edge Malaysia, Johari said transmission upgrade costs should form part of investors’ project expenditure, with Tenaga Nasional Bhd (TNB) advising on the infrastructure required.

“This is our strategy to ensure that economic activities that existed before the arrival of data centres are not adversely affected,” he said during question time. Johari was responding to Rodziah Ismail (PH-Ampang), who asked how the government assessed data centres’ net economic contribution after accounting for their use of electricity, water, land and infrastructure, alongside incentives and the opportunity cost of national resources.

On electricity capacity, Johari said operators would be charged for allocations committed to them even if actual usage fell short. He cited an operator reserving 200 megawatts (MW) but using only 100MW once its facility and power supply were ready. TNB could not freely reallocate the unused capacity because it remained committed to meeting the operator’s future requirements, he explained.

Johari said electricity supplied to data centres should carry no subsidy element, with the market price of gas reflected in supply costs where it was used for generation. He also said data centres’ electricity requirements should be managed separately from those of households and other industries to protect capacity needed by existing users and other economic activities.

Beyond infrastructure costs, Johari said a data centre task force had agreed on a minimum 30% local content level, The Edge Malaysia reported. Areas for domestic participation included construction, engineering services, cooling systems and electrical equipment. Responding to a supplementary question from Datuk Seri Dr Wee Ka Siong (BN-Ayer Hitam), he said Malaysia wanted local companies, engineers, technicians and universities to benefit from the sector’s expansion, according to The Sun.

The government also wanted Malaysian companies and universities to gain access to computing capacity for research and development, helping build domestic expertise in areas such as artificial intelligence, cloud computing and cybersecurity. On water, Johari cautioned state governments against committing supplies to data centre investors without first assessing available resources, Malaysiakini reported. He said water supply fell under state jurisdiction and that he had repeatedly reminded state governments to exercise caution. Operators were also required to use water-recycling technology to reduce pressure on existing supplies, according to The Star.

Johari said approved data centre investments since 2021 totalled RM385.7 billion, although not all projects had been fully realised.