Malaysia’s data center operators struggle due to power cost hike

Malaysia’s data center sector is projected to grow at a 22% CAGR from 2023 to 2029 due to cost competitiveness, skilled workforce, and a robust digital ecosystem, according to a report by global investment bank ARC Group.

Data centers in Malaysia are reassessing their operation costs after a spike in power tariffs. The new tariff introduced last December took effect on July 1, increasing operational costs for data centers and charges on network capacity.

Samuel Tan, founder and CEO of Olive Tree Property Consultants, revealed that Corporate Renewable Energy Supply Scheme policies aim to prevent such effects. However, the overall effect would still increase data center operational costs.

From July 1, 2025 to December 31, 2026, the new tariff aims to boost electricity costs by 10-14% before surcharges for major consumers such as data centers.

Gary Goh, founder and director of data center advisory firm Sprint DC Consulting, revealed that unprepared investors have been left to wait and see in the meantime, adding that a 100-megawatt facility could expect an additional cost of $15 million to $20 million per year without the fuel surcharge.

Tenaga Nasional Berhad (TNB) – Malaysia’s national power corporation, revealed that the government will announce a monthly fuel surcharge based on changes in fuel prices and foreign exchange rates. This could trigger more fluctuations in electricity prices, which is expected to affect SMEs within the sector.

Samuel Tan, CEO of Olive Tree Property Consultants, said several data centers rushed to sign Power Purchase Agreements (PPAs) with TNB before the effective date.

Malaysia has kept energy and land prices low compared to competitors like Singapore to lure investors. However, the new tariffs risk driving away investors to neighboring countries such as Vietnam and Thailand, according to Mahadhir Aziz, president of the Data Center Association of Malaysia. He appealed for the government to re-evaluate the issue from a regional perspective.

Malaysia’s Energy Commission argued that the approved new tariff structure will provide a more equitable and progressive electricity tariff for 23.6 million users in Malaysia.