Govt puts 24 data centre applications on hold pending water, power checks

In a recent development, the Malaysian government has placed 24 new data centre applications on hold while conducting assessments for water and electricity requirements, according to Investment, trade and industry minister Johari Ghani. The government aims to be highly selective in approving future data centre projects to avoid impacting other industries.

Minister Ghani emphasized that all previously approved 117 data centres should proceed before any new ones are allowed. Developers must first verify water availability with state governments before the federal government evaluates electricity supply through Tenaga Nasional Bhd (TNB). States with insufficient water resources should not host data centres, as the federal government has no jurisdiction over state water supplies.

The government also encourages investors to adopt water-recycling technology and proposes higher water tariffs for operators compared to ordinary consumers. For electricity, the government plans to consider renewable energy, battery storage, and off-grid generation if grid capacity is insufficient. The assessment of investors' financial strength, including their ability to fulfill electricity supply agreements, is also crucial.

Despite contracting for a specific electricity capacity, data centre operators must pay for the full contracted amount even if they consume less, protecting TNB from financial risks. Currently, the 117 approved data centres have resulted in RM385.7 billion in investments and will require between 23,000MW and 23,500MW of electricity upon completion.

Of these, 55 are operational, 19 are under construction, and 16 have yet to begin development. Another 27 are at various stages of development and are expected to use off-grid electricity. The expansion could create a domestic market for Petronas to supply natural gas for electricity generation at market prices, providing an alternative to long-term export contracts as the national oil company currently exports about 30 million metric tonnes of gas annually.