Govt puts 24 data centre applications on hold pending water, power checks

 Investment, trade and industry minister Johari Ghani says authorities will prioritise the 117 approved projects, and ensure that new developments do not strain existing resources.

Investment, trade and industry minister Johari Ghani said the government will have to be ‘very selective’ when deciding on new applications to set up data centres. (Bernama pic)

KUALA LUMPUR:

The government is holding back decision on 24 new data centre applications until it is satisfied that there is sufficient water and electricity to support them without affecting other industries.

Investment, trade and industry minister Johari Ghani said the priority was to ensure that the 117 previously approved data centres could proceed before more projects were allowed.

“We have to be very selective,” he said when winding up matters pertaining to his ministry during the 2027 budget debate in the Dewan Rakyat today.

Johari said developers must first confirm water availability with state governments before the federal government assesses electricity supply with Tenaga Nasional Bhd (TNB).

He said states without sufficient water resources should not host data centres, noting that the federal government had no jurisdiction over state water supplies.

He also encouraged investors to introduce water-recycling technology, saying Malaysia could benefit from the expertise brought in by foreign companies.

Given the substantial water requirements of data centres, Johari suggested that state governments charge operators higher water tariffs than ordinary consumers.

On electricity, he said the government would consider renewable energy, battery storage and off-grid generation where grid capacity was insufficient.

He cautioned against allowing investors to spend billions building data centres only to find that electricity supplies were unavailable.

The government would also assess investors’ financial strength, including their ability to honour electricity supply agreements, Johari said.

Under these agreements, operators must pay for their full contracted electricity capacity even if they consume less.

For example, a data centre that contracts 300MW but consumes only 100MW would still have to pay for the unused 200MW, which protects TNB from financial risks.

Progress on approved data centres

The 117 approved data centres represented RM385.7 billion in investments and could require between 23,000MW and 23,500MW of electricity once completed, Johari said.

Of these, 55 were operating, 19 were under construction, and 16 had yet to begin development.

Another 27 were at various stages of development and were expected to use off-grid electricity.

Johari said the expansion could create a domestic market for Petronas to supply natural gas for electricity generation at market prices, offering an alternative to long-term export contracts, given that the national oil company exports about 30 million metric tonnes of gas annually. - FMT