Malaysia has seen accelerated data centre capacity plant-up and is expecting new and emerging investments, with over 800MW capacity projected to come on stream in phases over the next five years due to lower land and energy costs. The country is already home to about 41 enterprise data centres.

A report by Arizton Advisory and Intelligence said the domestic data centre market is projected to grow at a compound annual growth rate (CAGR) of 7% to US$1.6 billion (RM7.57 billion) by 2027 from US$1.1 billion in 2021. Growth is said to be driven by rapid hyperscale investments and strong co-location demands.

Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said Malaysia has gained a strong reputation in the global data centre sector in Southeast Asia, thanks largely to the country’s strategic location and its attractive investment landscape. He further stated that Malaysia’s market share is expected to increase by US$2.08 billion from 2021 to 2026, representing a CAGR of 15.72%.

However, the setting up of data centres comes with a set of challenges, especially when supplying electricity to the premises, which can take up to three years. Data centre operators, particularly those of global size, need to swiftly implement their data centre footprint in terms of size and geographic expansion to meet customer demand and the growing cloud computing market.

Speed to market is essential to meet this demand, says Tenaga Nasional Bhd (TNB) chief retail officer Kamal Arifin A Rahman, so that data centre operators can be competitive and meet market demand quickly. This prompted TNB to set up the Green Lane Pathway, exclusively for data centre operators, to ensure the electricity supply process is accelerated.

Before the establishment of the Green Lane Pathway, the electricity supply process was still within the permitted period and based on the Electricity Supply Application Handbook, which is between 36 months and 48 months. With the Green Lane Pathway, the time has been reduced to 12 months and works alongside a one-stop centre with dedicated support services for data centre investors.

Many mitigating factors determine the time frame in providing electricity supply, Kamal explains, such as the distance between the data centre and the nearest power substation, permit approvals for when the cabling route crosses over third parties’ private property (railway, highway, local council) and handover procedures of available land to build infrastructure and upgrades to power data centres.

“Another potential delay is during the surrendering process of identified land by property developers, landowners and state authorities for TNB to construct the infrastructure and upgrade the existing grid and distribution network. But with the existence of the one-stop centre and joint efforts with data centre operators to address potential blockers, the coordination of bulk electricity supply requests can be shortened,” says Kamal.

“Once the infrastructure is in place, extensive tests are conducted to ensure reliable and continuous supply before the electricity supply is fully commissioned.”

To further nurture the growing data centre industry, Kamal says it is important for ecosystem players to provide timely support to accelerate electricity supply infrastructure development. This includes expediting the surrendering process of the required land by landowners, developers or state development authorities for TNB to build the required infrastructure and upgrade its grid and distribution network.

“To support the fast-growing data centre industry, TNB welcomes closer collaboration with the relevant ministries and state authorities in identifying other key strategic locations within Malaysia that are close to the grid or distribution network. This would help facilitate further foreign direct investment into the country and create more job opportunities in the data centre industry at these new strategic locations,” he says.

This initiative was launched by TNB with four strategic partnerships that were sealed through Electricity Supply Agreements: Yellowwood Properties Sdn Bhd (Yondr), AirTrunk Malaysia Sdn Bhd (AirTrunk), SIPP Power Sdn Bhd (SIPP) and GDS IDC Malaysia Sdn Bhd (GDS). Other companies have since come on board including K2 Strategic (K2) and Princeton Digital Group (PDG).

Data centre operators have also been embarking on a sustainability journey, utilising technology and other methods to reduce their carbon footprint. For data centres exploring green technology, TNB offers three potential green schemes that are dependent on the customers’ long-term requirements: rooftop solar photovoltaic solutions, Malaysia Renewable Energy Certificates and Green Electricity Tariff.

“As a leader in energy transition, we always look forward to further extending our collaboration with digital infrastructure providers by providing smart energy solutions and helping power Malaysia’s digital economy,” says TNB president and CEO Datuk Seri Ir Baharin Din.

“The partnership between TNB and data centre operators holds numerous benefits for all stakeholders involved. The development of data centres also creates job opportunities for Malaysians and benefits small- and medium-sized enterprises (SMEs) in the surrounding areas. More importantly, this collaboration directly creates demand for renewable energy in the data centre sector, supporting the country’s efforts to achieve net zero emissions by 2050, in line with the National Energy Transition Roadmap.”

With the TNB Green Lane Pathway in place, Kamal says the utility is poised to help realise the nation’s New Industrial Master Plan 2030 objectives and draw more hi-tech investments that would further fuel the growth opportunities for SMEs and create better-paying jobs for Malaysians.

“With the national mandate in place, TNB is geared to foster a conducive environment for the data centre market to thrive in Malaysia while providing reliable and sustainable energy for the long term,” he says.

Rooftop solar PV solution:

Service from TNB’s wholly-owned subsidiary GSPARX with zero capital expenditure outlay, which can power the data centres’ non-critical areas and any extra solar energy generated can be exported back to the grid by leveraging the Net Energy Metering 3.0 and self-consumption schemes via a Supply Agreement with Renewable Energy contract. This helps to address Scope 1 emissions.

Malaysia Renewable Energy Certificates:

Globally recognised as a tool for corporations to purchase renewable energy transparently and credibly via TNB’s wholly-owned subsidiary TNBX. The certificates can be purchased to offset part of the data centres’ electricity consumption and help meet their sustainability goals. This tool addresses Scope 2 emissions.

Green Electricity Tariff:

Enables organisations with environmental, social and governance goals to offset their carbon footprint by subscribing to the programme and powering their businesses with green electrons from hydro and solar sources. Subscription to the government programme is set at a premium rate of 21.8 sen/kWh for the total green electricity consumed on top of the standard electricity tariff rates as per the tariff schedule.