KUALA LUMPUR: Malaysia's electricity infrastructure stands resilient and ready to meet the growing needs of both residential and industrial sectors including energy-intensive data centres, economists said.
They pointed out that the country's current power reserve margin at around the low 40 per cent range should be more than sufficient for the current needs of the data centres.
Sunway University economics professor Dr Yeah Kim Leng said the current excess electricity reserve margin in Peninsular Malaysia is estimated at about 35 per cent.
Therefore, he said the current and projected supply is adequate to support the rise in household consumption and industry usage, including data centres.
"Importantly, an increased take-up could increase Tenaga Nasional Bhd's (TNB) profitability and therefore its ability to sustain the existing tariff structure that is favourable to the low and middle income households," he told Business Times.
Tradeview Capital Sdn Bhd vice president Tan Cheng Wen concurred that Malaysia's current power reserve margin should be more than enough for data centres' power consumption.
He said to put in context, the International Energy Agency recommends an ideal reserve margin of 20-35 per cent, while industry players have quoted a 30 per cent reserve margin to be ideal.
"In terms of deriving clean energy for data centres, our government has committed to an estimated 40 per cent of power generation coming from renewable sources by 2035. This bodes well from an environmental, social and governance (ESG) standpoint and in promoting our country as the premier Southeast Asia Green data centre provider.
"This has been encapsulated and enshrined in the National Energy Transition Roadmap (NETR) policy launched by our government and we are looking forward to the execution of these policies to spur our nation forward," he noted.
Malaysian Institute of Economic Research economist Dr Shankaran Nambiar opined that aside from the availability of resources, Malaysia offers a favourable ecosystem, making the country an attractive destination.
He noted that other countries such as Singapore is not particularly keen on data centres and does not have an abundant supply of resources unlike Malaysia.
"Therefore, of course, TNB will have to ensure an adequate supply of power both for existing users as well as for data centres. In addition to energy, we will need to supply adequate water. Singapore does not have this advantage," he said.
Malaysia is an attractive hub for data centres
According to Yeah, Malaysia's comparative advantages as a hub for data centres include ample land with good quality transport and communications infrastructures.
He added that there is an abundance of relatively cheaper electricity supply compared to Singapore and other Asean countries.
He said other favourable factors include access to multi-lingual labour, investor-friendly policies and alignment with the country's digital economy aspirations.
Yeah also noted that Malaysia apparently has emerged as the most favoured investment destination for global tech companies, given Singapore has exhausted its capacity to host more data centres.
"These companies are accelerating investments in data centres that have become a critical component in their ability to harness generative artificial intelligence (AI) in all spheres of economic activities.
"Malaysia, with its comparative advantages, is strategically placed to tap on this trend and further advance its digital economy transformation aspirations," he said.