Malaysia Mandates 30% Renewable Energy for Data Centres

Malaysia's government has approved a mandatory requirement for data centres to source at least 30% of their energy from renewable sources, Deputy Prime Minister Datuk Seri Fadillah Yusof announced on Tuesday, as the country moves to reconcile its ambitions as a regional data centre hub with the need to keep electricity costs and grid stability in check.

The requirement, which applies based on total capacity or energy consumption, is intended to ensure that the rapid buildout of data centre infrastructure does not place an undue burden on the national power system or shift costs onto ordinary consumers. Fadillah, who also serves as energy transition and water transformation minister, told the Dewan Rakyat during the winding-up of the Budget 2027 debate that data centre operators are further encouraged to generate their own electricity through solar power, reducing the risk that meeting the industry's growing energy demand would inflate tariffs for other users.

The Energy Commission is developing a comprehensive framework and guidelines covering self-generation facilities and the 30% renewable energy requirement, Fadillah said. Every application for electricity supply for a data centre development already undergoes a comprehensive technical assessment that considers the power system's ability to meet projected demand as approved by the National Energy Council, along with the capacity of transmission and distribution networks and the infrastructure investments required. He emphasised that the government prioritises system security, sufficient capacity and reserve margins, grid stability and continuity of supply to all consumers amid rising demand from the data centre industry.

On grid charges, Fadillah clarified that the system access charge payable by renewable energy developers under the Corporate Renewable Energy Supply Scheme (CRESS) remains at 14 sen per kilowatt-hour, while green electricity users pay a separate charge of four sen per kWh that was already in effect before the announcement. The two charges should not be combined and reported as an 18 sen per kWh fee, he said. CRESS allows renewable energy developers to sell electricity directly to corporate customers through the national grid. The developer charge was initially set at 20 sen per kWh following industry engagement before being reduced to 14 sen, and covers operations and regulatory costs, market development and system augmentation. Fadillah added that the Energy Commission had discussed the charges with industry players, who accepted the rates.

The policy underscores the balancing act facing Southeast Asian governments as hyperscale and colocation operators race to expand capacity in markets such as Malaysia, where abundant land and power have attracted billions in investment. By tying grid access to renewable procurement and encouraging self-generation, regulators aim to shield the wider public from the cost of upgrading transmission and distribution infrastructure, while still capturing the economic benefits of data centre investment. The move also adds a new compliance dimension for operators and renewable developers, who will need to align their supply arrangements with the Energy Commission's forthcoming framework.