Kuala Lumpur, July 2, 2025 — Malaysia’s data centre industry is facing a major challenge as electricity tariffs increase by 10–14% starting July 1, 2025, significantly raising operational costs across the sector. The hike could translate into an additional US $20 million annually in energy expenses, threatening the nation’s competitive edge in Southeast Asia’s booming data infrastructure market.
Electricity Cost Surge Alarms Data Centre Operators
The new electricity rates, introduced by Tenaga Nasional Berhad (TNB), are part of a broader utility adjustment to cover rising energy production and distribution costs. However, for hyperscale data centres, which consume vast amounts of electricity 24/7, the change presents a major cost burden.
“Power is one of our largest operating expenses. A sudden double-digit tariff hike forces us to reevaluate long-term commitments,” said a regional data centre operator.
Malaysia’s Competitive Edge at Risk
Malaysia has traditionally been considered a cost-effective destination for cloud infrastructure and data centre investments, benefiting from stable policies, low land costs, and relatively cheap electricity. The latest price hike may undermine that positioning.
With global cloud players like AWS, Microsoft Azure, Google Cloud, and Alibaba Cloud investing heavily in Malaysia’s digital ecosystem, the tariff increase raises questions about future expansions.
Analysts warn the move could shift investor interest toward more energy-competitive markets like Indonesia, Vietnam, or Thailand.
Sector-Wide Response and Calls for Support
Industry leaders and trade bodies, including the Malaysia Digital Economy Corporation (MDEC), are urging the government to consider incentives, subsidies, or green energy credits to offset the impact on data centre operators.
Key suggestions from the industry include:
- Energy efficiency incentives
- Access to renewable energy at competitive rates
- Tiered tariffs for strategic digital infrastructure
Push Toward Green Data Centres
In response to the rising electricity costs, some operators are accelerating plans to shift toward renewable energy such as solar, hydro, and biomass, aiming to improve sustainability and reduce reliance on traditional grid power.
The tariff hike may inadvertently drive innovation, with data centre operators investing in smart cooling systems, AI-powered energy management, and regional diversification.
Key Implications for Malaysia’s Digital Economy
- Cost Pressures: Operators may increase service prices or delay expansion.
- Investment Risk: Malaysia’s attractiveness to tech investors could decline.
- Policy Shift Needed: Industry calls for immediate dialogue on energy and digital competitiveness.
- Opportunity in Sustainability: Renewables and energy efficiency may offer long-term relief.
Conclusion
As Southeast Asia’s digital economy continues to expand, Malaysia must strike a balance between fiscal sustainability and digital infrastructure competitiveness. With rising electricity costs now affecting a critical sector, proactive government engagement and private sector innovation will be key to sustaining Malaysia’s position as a regional data centre powerhouse.
