Palm oil companies in Malaysia are turning parts of their vast tracts of land into industrial parks to be filled with data centers and solar farms spurred by foreign interest in setting up data centers in the country. Palm oil giants control more land than any other entity in the country and this is a golden opportunity to monetise aging palm oil plantations.
In an interview with Bloomberg News, SD Guthrie’s group MD Helmy Othman Basha said the company wants to generate income from every inch of their land. By siting solar farms next to the industrial parks, it would generate enough energy to power up data centers. SD Guthrie is working towards 1GW of solar energy to be generated within three years, enough to power up 10 hyperscale data centers. This is based on its calculation of one megawatt of solar requiring 1.5 ha of land. When operational, the data centers and solar farms are expected to contribute about one third of its profits by the end of the decade.
SD Guthrie is the world’s largest palm oil planter by acreage, controlling more than 340,000 ha. The US$8.9 billion palm oil producer has reserved 10,000ha for such projects over the next decade, starting with clearing old rubber estates and low-yielding palm plots in areas near data centres and semiconductor investment hubs. As both landowner and green-power supplier, the company also stands to benefit from being hailed as a green champion instead of being a ‘polluting palm oil producer.’
The other two palm oil giants in Malaysia – Kuala Lumpur Kepong Bhd (KLK), Malaysia’s second-biggest palm planter, and IOI Corporation Bhd, are following suit. KLK plans to build a 3,000-acre park in Johor, while IOI has allocated land in Johor for solar energy projects of minimum 300 MW.
Large scale solar ventures appear profitable – analyst reports suggest estimated profits to be more than 50 times the average profit from palm oil cultivation.
Sites however require a minimum of 50 acres for large data center campuses – presenting a risk when building industrial parks. If built at the wrong place, it could create acres of unused data centers, warned an analyst. Tropical heat could also cause 25 per cent more energy to be consumed.
Last year, Malaysia was the fastest-growing data centre market in the Asia-Pacific region and about 40 per cent of all planned capacity in Southeast Asia is now slated for Malaysia, according to industry consultant DC Byte. In the past four years, the country has attracted over US$34 billion in data centre investments from the likes of Big Tech such as Alphabet Inc’s Google, Microsoft Corp, and Amazon.com Inc. The government has stated it aims for 81 data centres by 2035.
Despite its rapid growth, the market is nowhere near saturation, with 6 GW of capacity expected to be built out over time. Johor’s vacancy rate for live facilities is almost zero or about 1.1 per cent, according to real estate consultant Knight Frank.