Data centre expansion could unlock RM36bil renewable energy opportunity

Malaysia's data centre expansion could unlock a potential renewable energy market worth between RM9 billion and RM36 billion, according to Hong Leong Investment Bank Bhd (HLIB). If data centres are required to source at least 30% of their electricity from green energy, newly approved projects could present a significant opportunity for renewable energy (RE) players. Currently, the Data Centre Task Force has approved an additional 5GW of data centre capacity, which could be subject to this 30% renewable energy requirement.

HLIB's analysis suggests that this new requirement could turn the additional 5GW pipeline into a substantial market for RE, potentially expanding the total addressable market to RM36 billion if based on actual energy consumption. To meet this demand, an estimated 9GW of solar capacity and 4.5GW/18GWh of battery energy storage systems would be needed, based on a cost of RM4 million per MW for solar projects.

This potential market could be smaller if the requirement is based on capacity-matching, with only about RM9 billion calculated.

The firm notes that legacy data centre projects with signed electricity supply agreements may be exempt from this new requirement. However, they anticipate strong demand for green electricity as global data centre operators continue pursuing environmental, social, and governance (ESG) and renewable energy (RE) targets. The Malaysian government has recently introduced a new package offering a 14 sen per kilowatt-hour System Access Charge for firm green electricity supply, which aims to accelerate RE projects and improve bankability.