Revised electricity tariff reforms in Malaysia aim to enable businesses to accurately assess the real cost of burning fossil fuels, according to the head of the Energy Commission.
Peninsular Malaysia is set to witness a significant change in its energy landscape for data centres. The new tariff mechanism, effective from July 2025, is expected to increase energy costs for data centres by approximately 15%, as they are classified as ultra-high voltage users under the revised tariff structure.
This tariff reform aims to increase cost transparency and reflect the true costs of fossil fuels, such as gas and coal, which significantly impact heavy energy users like data centres. The new mechanism responds monthly to fuel price volatility, encouraging companies to consider renewable energy investments such as solar and battery storage to manage exposure to fluctuating fossil fuel prices.
The tariff reform separates users into voltage categories, charging heavier industrial users like data centres more. While this leads to higher monthly energy bills for data centres, it also encourages greater adoption of clean energy and better energy cost management through AI-enhanced demand forecasting and predictive analytics.
The increased costs are likely to be offset by the benefits of investing in new solar power and battery storage systems, which would reduce businesses' exposure to volatile gas prices. The Corporate Renewable Energy Supply Scheme (CRESS), launched in September 2024, enables companies to buy power directly from renewable energy producers.
AI can support predictive analysis on both the supply and demand sides of renewable energy. For instance, it can analyse factors affecting solar power generation, as well as cloud cover and usage patterns to improve demand forecasting, reducing uncertainty and enhancing predictability.
Malaysia's Minister for International Trade and Investment (MITI) Tengku Zafrul Abdul Aziz announced that Malaysia's framework for sustainable data centres will be introduced in October. This framework will come under the purview of the Ministry of Digital, with the Malaysian Investment Development Authority (MIDA) serving as the focal point for all applications of new data centre projects and expansions.
Under its Transitioning Industrial Cluster initiative, MyDigital, a government agency, has worked with organisations to collectively agree to reduce 21.35 billion metric tonnes of carbon emissions by 2040 in Bintulu, Sarawak. Signatories to this initiative include Petronas, Sarawak state oil firm Petronas, Thai oil company PTTEP, steelmaker Press Metal, and petrochemicals giant Neste.
Malaysia is also in the process of crafting the Asean Sustainable Data Centre Guide to tackle emissions at an industrial level. The Malaysian government has tabled several policies in recent years to improve corporate access to renewable energy. MyDigital, in collaboration with the World Economic Forum, has been working with the Economic Planning Unit of Sarawak to reduce carbon emissions.
The new tariff structure categorises users into low, medium, and high voltage, with heavier industrial users facing higher energy, capacity, network, and retail charges. The Energy Commission of Peninsular Malaysia has announced a reform of the electricity tariff mechanism, introducing the Automatic Fuel Adjustment (AFA) scheme, which reflects changes in the market price of fuel and foreign currency exchange rates on a monthly basis.
The internal policies of technology giants on sourcing clean energy have evolved, with some no longer accepting unbundled renewable energy certificates (RECs). Companies will have to be sensitive to the price volatility of fossil fuels such as gas and coal under the new structure.
In conclusion, the new tariff mechanism in Peninsular Malaysia is a significant step towards encouraging data centres to invest in clean energy solutions, improve energy cost management, and reduce carbon emissions. The reform is expected to increase cost transparency, respond to fuel price volatility, and encourage the adoption of renewable energy technologies such as solar and battery storage. Despite the initial increase in energy costs, the changes are unlikely to significantly deter investor interest in data centres but will push for cleaner energy commitments.
- The energy transition in Peninsular Malaysia is particularly prominent for data centres, preparing for a substantial change in their energy landscape from July 2025.
- The upcoming tariff mechanism aims to enhance cost transparency and reflect the true costs of fossil fuels, significantly impacting heavy energy users like data centres.
- This revised tariff structure separates users into voltage categories, leading to increased energy costs for data centres as they fall under the ultra-high voltage user category.
- The reform encourages companies to consider investments in clean energy, such as solar and battery storage, to manage exposure to fluctuating fossil fuel prices.
- The tariff reform also promotes greater adoption of AI-enhanced demand forecasting and predictive analytics for better energy cost management.
- The Corporate Renewable Energy Supply Scheme (CRESS), launched in September 2024, allows companies to buy power directly from renewable energy producers.
- Artificial Intelligence (AI) can support predictive analysis on both the supply and demand sides of renewable energy, analysing factors like solar power generation, cloud cover, and usage patterns.
- Malaysia's Minister for International Trade and Investment, Tengku Zafrul Abdul Aziz, announced the introduction of a framework for sustainable data centres in October.
- The Malaysian government has initiated the Transitioning Industrial Cluster initiative, aiming to reduce 21.35 billion metric tonnes of carbon emissions by 2040 in Bintulu, Sarawak.
- Malaysia is crafting the Asean Sustainable Data Centre Guide to address emissions at an industrial level, focusing on sustainable-living and technology.
- The tariff structure categorises users into low, medium, and high voltage, with the higher category facing increased charges for energy, capacity, network, and retail.
- The Energy Commission of Peninsular Malaysia introduced the Automatic Fuel Adjustment (AFA) scheme, reflecting changes in fuel prices and foreign currency exchange rates monthly.
- In conclusion, the new tariff mechanism in Peninsular Malaysia encourages data centres to adopt clean energy solutions, improve energy cost management, and reduce carbon emissions through initiatives such as renewable energy investments, AI-powered demand forecasting, and the introduction of sustainable data centre frameworks.
