Malaysia is tightening its rules to prevent speculative power applications by requiring data centers to declare their annual demand rather than locking in maximum capacity immediately, says the Ministry of Investment, Trade and Industry (Miti) recently as quoted by The Edge. Following Miti’s announcement that data centres must meet 85 per cent of their declared maximum electricity demand, the Energy Commission has revised its electricity supply planning methodology by directly engaging with hyperscalers to understand their business models in order to come up with power forecasts based on validated data.
This measure is taken due to the huge gap between requested demand (or “phantom demand”) and actual utilisation by data centers which risked stranded assets.
“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 data centers to declare their annual demand rather than locking in maximum capacity immediately, thus allowing supply to be tailored to specific needs,” Miti said.
In addition, new data centers must now obtain mandatory approval from the Data Centre Task Force (DCTF), co-chaired by the Miti and Digital ministers, prior to any implementation. This helps to verify that approvals of foreign direct investments are based on secured deployment plans rather than speculative power reservations. Concrete evidence such as offtake agreements and financial proof is required.
Under the ESA, data centers must achieve 85 per cent of demanded electricity utilisation during the first four years, failing which, a penalty of RM8.50 is levied per kilowatt shortfall, calculated on a monthly basis. Furthermore, under the Connected Load Charge (CLC) framework, applicable for medium or high voltage users, the applicable period starts from the date of supply connection and spans six years from that date. This would hopefully accommodate a gradual increase in their energy usage to the fully planned capacity.