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Data Centres: Boom and Backlash
18OCT

Malaysia bills data centres' unused grid

3 min read
13:11UTC

Johari Abdul Ghani told Malaysia's parliament on 15 October that a data centre booking 200 MW of grid and drawing 100 MW now pays for all 200.

IndustryDeveloping
Key takeaway

Malaysian data centres now pay for every megawatt of grid they reserve, whether they use it or not.

A data centre in Malaysia that books 200 megawatts (MW) of grid capacity and draws 100 MW will now pay for all 200. Johari Abdul Ghani, the Investment, Trade and Industry Minister, set out the rule in the Dewan Rakyat (the lower house of parliament) on 15 October⁠1. Operators also pay a market electricity tariff set apart from other customers' rates, carry the cost of upgrading the transmission network of Tenaga Nasional Berhad (TNB), the national utility, recycle their water and buy at least 3% of their services locally⁠2.

"It is no longer about cheap energy," Johari said, according to Free Malaysia Today. He told state governments to be careful when approving new applications⁠3.

Some 57 data centres run on 6,237 MW supplied by TNB, while 60 more projects at approval or construction stages want 11,172 MW, almost double the operating fleet and roughly the capacity of eleven large nuclear reactors, the minister said as reported by Free Malaysia Today⁠4. A different count in June, of contracted capacity, put 38 projects at 5.9 gigawatts (GW), more than two-fifths of everything TNB had contracted to customers. The two tallies measure different things and cannot be joined into a trend.

A developer who books capacity before signing a tenant now pays for it every month, on take-or-pay terms like those of a gas pipeline contract. Total reported investment in the sector stands at 385.7bn Malaysian ringgit (RM385.7bn), and the minister put its economic contribution at RM14.1bn this year, up from RM900m in 2021⁠5. Johor, the southern state across the strait from Singapore, halted approvals over water in April; the federal government has now chosen to price access rather than stop it.

Deep Analysis

In plain English

Data centres are warehouses full of computers that run websites, apps and artificial intelligence. They use huge amounts of electricity. In Malaysia, companies building them ask the national power company, Tenaga Nasional Berhad, to set aside grid capacity. Some ask for far more than they use, which blocks others. The government now makes them pay for everything they set aside, used or not. It is like paying for a whole restaurant table you reserved, even if half your party never turns up.

Deep Analysis
Root Causes

Malaysia regulates Tenaga Nasional Berhad under Incentive-Based Regulation, which recovers approved network spending through tariffs paid by every customer. Until now a developer could book transmission capacity cheaply while the upgrades it triggered flowed into everyone's base tariff.

Singapore's 2019 freeze pushed regional demand across the causeway into Johor, where land was cheap and the grid had headroom. That displacement, not domestic demand, explains why the queue grew faster than the operating fleet.

Water compounds the grid problem. Johor halted approvals over water in April, so the federal water-recycling condition now applies the state's constraint nationwide.

What could happen next?
  • Consequence

    Developers holding capacity without signed tenants may release part of their bookings, shortening the queue behind them.

    Short term · Assessed
  • Precedent

    Other Southeast Asian grids facing Johor-style queues gain a worked model for charging on reservation rather than use.

    Medium term · Suggested
  • Risk

    If hyperscale tenants absorb the charge easily, the queue may shrink only at the speculative fringe while water stress persists.

    Medium term · Suggested
First Reported In

Update #16 · Malaysia bills data centres for idle grid

Free Malaysia Today· 18 Oct 2026
Read original →
Causes and effects
This Event
Malaysia bills data centres' unused grid
Malaysia now prices every megawatt a data-centre developer reserves, so a speculative grid booking costs money before any server arrives.
Different Perspectives
Nexus Core Systems
Nexus Core Systems
Hired FiveNines Group, in a deal announced on 8 October, for early design, feasibility and permit work on a 20 MW AI data centre near Casablanca. It is the first named site of a planned 180 MW programme, still at concept design.
MC Digital Realty
MC Digital Realty
Began building the 24 MW KIX15 data centre in Osaka Prefecture on 7 October, due to open in the fourth quarter of 2028. The joint venture of Digital Realty and Mitsubishi Corporation says it will then run 10 data centres in Japan with about 220 MW of IT capacity.
KT Cloud
KT Cloud
Said on 7 October that it and Hyundai Engineering will build a 50 MW AI data centre at Cheongna, Incheon, from the fourth quarter of 2026. Completion is due in the first quarter of 2030, part of KT Cloud's target of more than 1 GW of AI capacity by 2031.
Town of Trebbin
Town of Trebbin
Said on 7 October that work has begun on two data-centre buildings and a substation under building permits already granted. The operating permit under the Federal Immission Control Act is still with Brandenburg's environment agency, so the town postponed its public presentation.
Óscar López, Digital Transformation minister
Óscar López, Digital Transformation minister
Said in Madrid on 8 October that he hopes to approve the data-centre royal decree shortly, with urgent processing to reach the cabinet before the 29 November election. He said the final text will take the more than 600 submissions into account, without saying what changes.
Hydro-Québec
Hydro-Québec
Defended its proposed Tarif CD before the Régie de l'énergie du Québec from 1 to 9 October, a rate for data centres of 5 MW or more that adds a premium when peak demand stays below 60% of forecast. Industrial consumers filed their own wording for the clause on who the rate covers.

Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.