Malaysia draws up self-generation guidelines as Johor, Selangor data centre power needs surge

Malaysia's Energy Commission is developing a framework for data centres to generate more of their own electricity, as projected peak demand from the sector in Peninsular Malaysia reaches 8.39 GW by 2030. Johor and Selangor together account for about 70 per cent of the projected total, with 4.42 GW a

PETALING JAYA (Oct 28): Malaysia is drawing up guidelines for data centres to generate more of their own electricity, seeking to ease pressure on the national grid and prevent additional supply costs from being passed on to other consumers. Deputy Prime Minister Datuk Seri Fadillah Yusof said the Energy Commission was developing a framework covering self-generation facilities and renewable energy use, in line with the government's decision to require data centres to use at least 30 per cent renewable energy.

Operators were encouraged to develop solar facilities for their own consumption to reduce dependence on grid electricity, he told the Dewan Rakyat on Wednesday, according to Bernama. The push comes as the Ministry of Energy Transition and Water Transformation projects peak electricity demand from data centres in Peninsular Malaysia to reach 8.39 gigawatts (GW) by 2030, based on current planning estimates. Johor is expected to account for 4.42 GW and Selangor 1.48 GW — together about 70 per cent of the projected total — according to a separate parliamentary response reported on Oct 19.

Fadillah said on Wednesday that data centres should also be equipped with backup generators that could help manage demand during critical periods, particularly when electricity operating reserves were low. He was responding to Wan Ahmad Fayhsal Wan Ahmad Kamal (PN-Machang), who asked about contingency measures to prevent data centre operations from affecting public electricity and water supplies during droughts or supply disruptions. Beyond electricity supply, developers were barred from locating data centres in areas with critically low water reserve margins, while operators were required to provide on-site water storage sufficient for at least two days' use, RTM reported Fadillah as saying.

The National Water Services Commission (SPAN) also required developers to explore and use alternative sources for cooling, including reclaimed water, recycled water and rainwater harvesting, according to the report. On electricity demand, Fadillah said contracted demand from data centres stood at 2,346 megawatts (MW) as at August 2026, while actual usage was 1,374 MW, or 58.5 per cent of the contracted figure, according to Bernama. Estimates submitted when operators applied for supply contracts did not necessarily match their eventual usage, he added.

Every application for electricity supply to a data centre undergoes a technical assessment by the Energy Focus Group before referral to the Data Centre Task Force. The assessment considers available supply, transmission and distribution networks, and infrastructure investment requirements. Alongside self-generation, operators are encouraged to participate in the Corporate Renewable Energy Supply Scheme (CRESS), which allows renewable energy developers to supply corporate consumers through the existing grid.

In September, the ministry announced a CRESS acceleration package offering a system access charge of 14 sen per kilowatt-hour (kWh) for firm supply. The package sets a minimum contract period of 10 years and requires eligible projects to begin commercial operations by Dec 31, 2028. The Energy Commission subsequently clarified that eligible developers would receive the fixed 14 sen per kWh rate for 10 years, while green electricity consumers would pay a separate four sen per kWh charge under the prevailing Regulatory Period 4 tariff.

In its Oct 15 clarification, the commission said supplementary amendments to the CRESS guidelines incorporating the acceleration package, alongside technical and procedural enhancements, were expected to be published by November. The charges drew questions during Tuesday's parliamentary debate on the ministry's allocation under Budget 2027. Fadillah said developers and consumers bore separate charges, while Yeo Bee Yin (DAP-Puchong) argued that the effective cost of delivering electricity was 18 sen per kWh. Fadillah said the government was prepared to re-engage industry players to consider improvements to the fee structure.

On longer-term energy options, Fadillah said nuclear energy remained under government consideration, with national preparedness, supply security and public safety taking priority. International agreements would need to be addressed first, alongside compliance with International Atomic Energy Agency standards on safety regulation, workforce capacity and technological suitability, he said in response to a supplementary question from Wan Ahmad Fayhsal. Utusan Malaysia separately reported that Fadillah said the government would facilitate business-to-business cooperation between electricity suppliers and data centre operators interested in exploring nuclear energy, subject to the necessary requirements.