[Column] AI boom will drive up electricity prices in Malaysia: The practical application of the "green electricity battle" that began behind the surge in data centers

✅ Roughly speaking

• 🏭 As megatech companies evade Singapore's regulations and flood Johor and Klang Valley, Malaysia's data center (DC) electricity demand is predicted to exceed 5 GW in 2035
• ⚡ National power company TNB is investing heavily in the grid, but is facing a "green dilemma" as the growth in demand for power and cooling for its AI servers outpaces it, leading to a prolonged reliance on gas-fired power plants
• 🌱 DC operators are rushing to "self-sourcing" green electricity in Malaysia using three practical schemes: CGPP, CRESS and Green Lane
• 🛡️ We believe that renewable energy procurement and ultra-efficiency are no longer CSR but are becoming "business continuity costs (defense costs) to continue operating in Malaysia."

✅ Audio summary of this post here

Spotify

[Audio Summary] AI Boom Will Raise Electricity Prices in Malaysia The "Green Power Battle..." Started Behind the Surge in Data Centers Mitsuru Misawa Podcast Episode

Introduction

This time, we will discuss Malaysia's burgeoning AI data centers and the "battle for green electricity" that is intensifying behind the scenes.

In Johor and the Klang Valley near Kuala Lumpur, there is currently a rush to build empty data centers (Data Centers, hereinafter referred to as "DCs").
This is because megatech companies are moving their bases to Malaysia in a move to avoid the strict land and electricity regulations of neighboring Singapore.
While it is a welcome investment "light," the infrastructure "shadow" of where the vast amounts of electricity and cooling water will come from is also rapidly deepening.

I am a lawyer in Japan and a manager of a local corporation in the renewable energy sector, and I am following the Malaysian electricity system in practice, but the rules in this field have changed significantly in the last year or two.
In this paper, I would like to review the supply and demand realities and then organize the specific systems that DC operators use to ensure green electricity and the "social licensing" issues behind them.

Why DCs are flocking to Malaysia — The starting point of "Singapore's Shadow"

The starting point for this movement is Singapore's regulations.
Singapore faces concerns about resource consumption A "selective" stance even after a temporary freeze on new data center construction in 2019 and a conditional lifting in 2022 We are maintaining it.
This was because, given the limited land area and limited electricity, it was not possible to tolerate unlimited DC expansion.

As a result, Malaysia, particularly Johor, became a receptacle for demand that had lost its way.
According to the Malaysian government, Between 2021 and June 2025, 143 DC projects were approved, with investments of approximately 144.4 billion ringgit .
The Johor-Singapore Special Economic Zone (JS-SEZ) will also be officially established in January 2025, further accelerating the accumulation of DCs across the two countries.
This is considered a typical example of how "regulatory differences" are driving investment flows within the ASEAN region.

The question is where on earth they're going to get all this "electricity" and cooling "water" and who's going to pay for it.
There are real concerns that if AI companies use up the country's infrastructure, ordinary households and other industries will experience a "wrinkle" in the form of rising electricity prices.

National grid (power grid) approaching its limits

Shocking demand forecast

The growth in electricity demand has reached a level that can no longer be considered transient.
According to Malaysia's Energy Commission and others, Peninsular Malaysia's maximum electricity demand has expanded from 3.4 GW in 1990 to 20 GW in 2024 .

This is where DC demand comes in.
According to figures cited by Kenanga Research as a forecast for TNB (Tenaga Nasional Berhad, the national electricity company), By 2035, Malaysia's DC will consume more than 5 GW, which is equivalent to about 20% of the country's total power generation capacity .
The International Energy Agency (IEA) also noted that as global DC electricity demand doubles over the next five years, It has been pointed out that in Malaysia, DC accounts for up to one-fifth of the growth in electricity demand .
In the longer term, Government agency PETRA predicts that DC's electricity demand will reach 12.9 GW in 2030 and 21 GW in 2045 .

However, there is a significant gap between the actual demand at the foot of the problem and the "application-based demand."
According to Energy Committee data presented to Parliament in November 2025 by the then Deputy Minister of Investment, Trade and Industry: As of June 2025, DC's actual consumption was only 603 MW, which is only about 47% of the declared maximum demand of 1,276 MW .
Concerns about speculative applications and the rise of "stranded assets" (stranded assets) have reportedly led the government to ask DCs to increase their occupancy rates to 85% of declared demand.
This discrepancy is thought to make planning difficult, as the power grid is forced to plan based on "the amount declared to be used in the future" rather than "the amount used now."

TNB's "Green Dilemma"

The supply-side TNB is not sitting idly by.
According to reports, TNB plans to invest approximately 45 billion ringgit in strengthening the power grid between 2025 and 2027 .
Still, the growth in demand for power and cooling to reduce the heat generated by AI servers could outpace investment.

This is where the "Green Dilemma" comes in.
The criticism is that they are ultimately forced to prolong their reliance on gas-fired power plants in order to compensate for short-term electricity shortages.
Malaysia's electricity supply plan also To compensate for the phase-out of coal-fired power plants, the construction of new gas-fired power plants is envisioned to be completed by the 2030s .
The idea of remaining dependent on fossil fuels while promoting clean growth is likely a common concern for many countries transitioning to renewable energy.

Another type of permission called "social permission"

It is important to emphasize here that DC operators are no longer just concerned with "legal permits" for land and electricity.

I believe the days of "paying for land and electricity" are already coming to an end.
If local residents and other industries see us as "a force that takes away our infrastructure and increases our electricity bills," governments will be forced to impose strict regulations, such as limiting electricity quotas and imposing penalties.
This is a concept called social license to operate (Social License), which refers to the "acceptance" implicitly given by society to continue a business, separate from legal permits.

In fact, the Malaysian government has begun to address the cost burden issue head-on.
In December 2025, the then Deputy Minister of Energy Transition and Water Conversion stated: The Senate has stated that the development companies will bear the full cost of the power and water infrastructure to support DC, and that this will not create an additional burden on consumers, especially household users .
The new pricing structure introduces the principle of "beneficiary pay (user pays)," requiring DC operators to bear the additional costs of strengthening the power grid, and also includes a dedicated ultra-high voltage (Ultra High Voltage, UHV) pricing category for DCs operating under high and ultra-high voltage.

This means that securing and increasing the efficiency of green electricity is also becoming a condition for avoiding criticism from residents and other industries and maintaining "social permission" to operate.

Three practical schemes for "self-procuring" green electricity

To deflect criticism from local communities and at the same time achieve the Global Headquarters' Scope 2 (indirect emissions derived from electricity purchased by operators) reduction targets, DC operators are scrambling to "enclose" green electricity within Malaysia. The three systems that serve as means to achieve this are as follows:

CGPP (Corporate Green Power Programme)

CGPP is a system in which a company (offtaker) enters into a virtual power purchase agreement (VPPA) with a solar power provider.
It is unique in that companies purchase the environmental value of re-energy without physically handing over electricity. It was launched in 2022 with a total capacity of 800 MW (maximum per operator of 30 MW) .
The CRESS described below was introduced as a successor system to expand and liberalize the CGPP, which had filled this framework.

A prime example is Google's procurement. TotalEnergies announced in December 2025 that it had signed a 21-year power purchase agreement (PPA) to supply Google with certified renewable energy of 1 TWh (equivalent to approximately 20 MW) per year from the Citra Energies solar power plant in Kedah .
The case was awarded to TotalEnergies (49%) and local partner MK Land (51%) in August 2023 within the framework of CGPP.

Furthermore, Google We have also signed a long-term contract to purchase electricity from the approximately 30MW (29.99MW) solar power plant in Gurung, Kedah, which is being operated by a consortium led by Shizen Energy of Japan .
It will also be developed under CGPP, with commercial operation scheduled for 2027. The intensity of the competition is likely reflected in the fact that one company is holding down multiple solar power projects.

CRESS (Corporate Renewable Energy Supply Scheme)

CRESS emerged as the successor to CGPP.
Malaysia's Ministry of Energy and Natural Resources launched CRESS on September 20, 2024, introducing a third-party access (Third-Party Access) scheme that allows companies to buy and sell green electricity directly from renewable energy operators via the TNB grid .
Users pay a "system access charge" (system access charge) in exchange for using the power grid.
This rate is set at 25 cents per kWh for stable-supply models with batteries and 45 cents per kWh for variable, unstable models .

DC operators, who are reluctant to take advantage of the risk of fuel price fluctuations, are flocking to the system, leading to a series of large contracts with TNB.
For example DC operator DayOne has reportedly signed a contract to secure up to 500MW of energy reuse from TNB under CRESS .
The fixed pricing and direct procurement nature seem to be compatible with DC's business plan, which is based on long-term operations.

Green Lane Pathway (Green Lane Pathway)

The third is the fast track power supply that TNB provides for DC.
TNB's Green Lane route will shorten the network connection time, which normally takes 36〜48 months, to approximately 12 months at approximately three times the speed, and will support the launch of DC through a one-stop service .
For DC businesses, where speed determines competitiveness, fast connectivity is of great value.

However, the premise for receiving these preferential treatments tends to be a need for high levels of energy efficiency, which leads to the following point.

"Buy" isn't enough — The defense of ultra-efficiency (PUE)

Securing green electricity is not enough on its own. At the same time, the question is efficiency: how to run and cool the server with less power.

The metric is PUE (Power Usage Effectiveness).
The total DC power consumption divided by the power consumption of IT equipment, with values closer to 1.0 meaning less waste.
The cooling load is not small, A report by the U.S. Power Research Institute (EPRI) states that cooling systems account for 30〜40% of DC's total energy use .

In this respect, Malaysia's hot and humid climate is a major handicap.
High temperatures and extremely high humidity throughout the year can easily reduce the efficiency of conventional air conditioning and evaporative cooling.
According to local reports, the PUE for a typical Malaysian DC is around 1.4〜1.8, but the new DC that has introduced liquid cooling aims for around 1.2 .
The transition from air cooling (Air Cooling) to more efficient liquid cooling (Liquid Cooling) is likely becoming a de facto prerequisite for new DCs.
Malaysia's planning guidelines also emphasize efficiency standards such as PUE and early consultation with TNB, and it appears that efficiency is shifting from being a "recommendation" to being a "requirement."

summary

As we have seen, green electricity procurement and ultra-efficiency in Malaysia is no longer an effort to promote corporate social responsibility (CSR).
I believe this is changing the nature of the business to a "business continuity cost," a defense cost, in a sense, in order to continue operating in Malaysia while avoiding friction with residents and other industries, and avoiding government regulations and penalties.

The days of simply "paying to buy electricity" are over.
Going forward, companies that cannot secure green electricity for themselves and are unable to go into efficiency improvements will likely be effectively shut out of the Malaysian market or continue to pay the rising costs and fees of grid strengthening.
Designing how to combine systems such as CGPP, CRESS and Green Lane, and who will bear the costs at what stage, has already become a central theme in legal and contractual practice.

Malaysia's rapid institutional design within ASEAN appears to be a precedent that will be useful for other countries in the region.
For companies considering entering the market or investing in DC, we hope this article will help them gain a comprehensive overview of the entire system.