This article first appeared in Digital Edge, The Edge Malaysia Weekly on December 29, 2025 - January 4, 2026

To prevent speculative power applications, the Ministry of Investment, Trade and Industry (Miti) says that the Energy Commission (ST) has revised its electricity supply planning methodology for data centres in Peninsular Malaysia to focus on verified accuracy.

This comes after Miti announced that data centres must meet 85% of their declared maximum electricity demand, following revelations that many currently use far less than requested, putting the system at risk of stranded assets.

ST will directly engage with hyperscalers to understand their business models and operations to eliminate phantom demand. This approach will ensure that power forecasts are based on validated data, strengthening grid reliability.

“Specific contractual and regulatory mechanisms are enforced to align power supply with actual usage patterns. Since data centres typically phase their energy consumption over several years, the Electricity Supply Agreement (ESA) requires facilities to declare their annual demand rather than locking in maximum capacity immediately, allowing supply to be tailored to specific needs,” says Miti.

Additionally, filtering out speculative ventures will require new data centre projects to obtain mandatory approval from the Data Centre Task Force (DCTF), co-chaired by the Miti and Digital ministers, prior to any implementation.

This decision will verify that approvals of foreign direct investments are based on secured deployment plans rather than speculative power reservations to ensure that investments translate into digital economic growth.

Miti says it is strengthening the approval framework to ensure investors provide concrete evidence of secured demand, such as offtake agreements, along with proof of financial closure.

The DCTF will also feature high-level representation from key federal agencies and utility providers such as the Ministry of Energy Transition and Water Transformation (Petra), ST, Tenaga Nasional Bhd (KL:TENAGA) and The National Water Services Commission (SPAN) for more coordinated planning.

Under the ESA, the requirement to achieve 85% of demanded electricity utilisation will apply throughout the first four years with a penalty of RM8.50 levied per shortfall of kilowatt, which will be calculated on a monthly basis and will appear as a distinct item in the consumer’s electricity bill whenever the utilisation target is missed.

“It is important to note that this rate is subject to prevailing changes from time to time. Despite the enforcement of these charges to ensure grid efficiency, Tenaga remains committed to providing the necessary electricity supply to data centre customers, meaning the penalty is financial in nature rather than a disruption of service,” Miti says.

Data centres also operate under the Connected Load Charge (CLC) framework, which applies only to consumers that require supply at medium or high voltage levels. It spans six years from the date of supply connection to accommodate a gradual increase in their energy usage to the fully planned capacity.

The 85% utilisation requirement will apply only for the first four years, and compliance will be measured against each facility’s declared annual demand rather than its total final capacity, providing a practical grace period.

Going into the fifth and sixth year, the utilisation requirement will be lowered to 75% as the reference point for compliance shift to total declared demand instead of the declared annual demand.

“This adjustment allows for a transition to full operational status before standard tariff structures apply. Any failure to meet these utilisation targets within the six-year timeframe will trigger a financial penalty known as a makeup charge in the monthly electricity bill,” Miti says.

While there is no official published estimate of the monetary cost of the possible stranded assets, the government and ST are fully aware of the risks.

Miti also shares that Tenaga has clarified that its infrastructure planning is anchored on long-term strategic requirements, including declared maximum demand, projected growth and the evolving needs of Malaysia’s digital ecosystem.

“Consequently, lower current utilisation levels are consistent with global data centre practices, where capacity is typically developed ahead of demand to ensure reliability and future scalability.

“Tenaga remains committed to ensuring that all grid investments are optimised, sustainable and aligned with national priorities, while continuing to monitor utilisation trends and working closely with data centre operators in line with the Sustainable Data Centre Guideline by Mida (Malaysian Investment Development Authority),” Miti says.

With data centres underutilising their declared power capacity — raising concerns about a potential slowdown in the country’s digital-economy growth — the government is prioritising the development of high-density artificial intelligence (AI) computing clusters to ensure Malaysia captures the higher segments of the digital value chain and maintains its momentum.

Miti shares that the government is creating pathways to expedite approvals for projects that bring advanced technology, such as graphics processing unit (GPU) clusters and high-skilled job opportunities. The DCTF will be the sole licensing authority to prioritise high-value investments and ensure critical resources are directed to high density AI computing clusters.

This ensures that Malaysia’s digital infrastructure growth is powered by dynamic projects with high technical merit and not slowed down by dormant approvals.

“This consolidated approval process enables the task force to rigorously monitor project performance. By maintaining a centralised view of industry progress, the task force can identify underutilised projects that are slow to ramp up and reallocate their reserved utility capacities to active AI-driven investments,” says Miti.

Efforts are also being made to prevent reserved capacity from creating a bottleneck in digital progress as Tenaga is continuing its heavy investment in grid modernisation and the Green Lane pathway, which fast-tracks power connections for critical digital infrastructure.

These mechanisms are complemented by the introduction of the Corporate Renewable Energy Supply Scheme, which allows data centre operators to alleviate pressure on the national grid by sourcing renewable energy directly from third-party producers through the open grid.

Furthermore, the government is adopting a dynamic approach to manage power capacity through routinely reviewing the pipeline of reserved capacity in order to identify stalled projects and redirect resources to high-priority, ready-to-deploy AI initiatives. This ensures that the grid actively supports the most transformative projects.

“On the regulatory front, ST is continuously monitoring the rising trend of electricity demand from data centres and works closely with relevant stakeholders such as Miti, Petra and Mida through the DCTF to ensure that the entry of these facilities brings higher added value to the country,” Miti says.

The government is also executing a “Build by Malaysia” strategy to prevent the formation of a dual economy where foreign infrastructure remains isolated from domestic industries.

“Through active matchmaking initiatives such as the Data Centre Nexus and Vendor Development programmes, global operators are being connected with local suppliers in high-value areas including precision cooling and chip design,” Miti says.

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