By Ts Dr. Hj Ramli Amir, former President of the Chartered Institute of Logistics and Transport (CILT) Malaysia and Vice-President of CILT International for Southeast Asia
KOTA KINABALU: Malaysia’s rapid expansion in the data centre industry presents a complex challenge, balancing technological advancement with environmental sustainability. As reported by The Star, experts warn of an alarming amount of electricity being consumed by these facilities, raising concerns about the country’s ability to meet growing energy demands while maintaining ecological responsibility.
Energy and Water Demands
Data centres in Malaysia are projected to consume over 5,000 megawatts of electricity by 2035, with applications proposed for setting up of data centres already exceeding 11,000MW – about 40% of Peninsular Malaysia’s current power generation capacity.
26 projects have signed energy supply agreements (ESA), with a total maximum demand of 4,000MW services demand. Of these, 16 projects (1,700 MW) have already been completed, and 190 MW of data centre capacity was operational as of June 2024, up from 150MW in March 2024.
This surge in energy demand is compounded by significant water usage, with a 100 MW data centre consuming approximately 4.16 million litres of water daily, equivalent to the usage of 10,000 people.
The National Water Services Commission has warned of potential widespread water shortages within five years due to climate change, wastage, and aging infrastructure highlighting the urgent need for sustainable resource management in the face of rapid technological expansion.
The environmental impact of data centres in Malaysia extends beyond energy and water consumption. With the country’s power supply still heavily reliant on fossil fuels and renewable energy projected to reach only 22% by 2050, the increased energy demand from data centres could significantly contribute to carbon emissions.
This situation is made worse by the rapid growth of the industry, particularly in Johor, which has become the largest data centre market in the country.
The environmental issue is not unique to Malaysia; in Chile, protests and legal action were sparked by concerns over a planned Google data centre that would consume 7.6 million litres of potable water daily in a region already suffering from high water stress.
These issues the need for a balanced approach to technological advancement and environmental preservation in Malaysia’s pursuit of becoming a digital hub.
While data centres promise significant economic benefits and job creation, the reality often falls short of expectations. The bulk of employment opportunities are transitory, primarily occurring during the construction phase. Once operational, a data centre employs only about 30 people on average with many roles being outsourced or filled by non-local workers. For instance, when Microsoft established a large data centre in Virginia, USA in 2012, only about 25 local residents secured jobs, mainly in administrative or menial positions. The rapid advancement of AI in data centre operations further threatens to reduce the need for local labour.
This discrepancy between promised economic benefits and actual local impact raises concerns about the long-term value of data centre investments for Malaysia’s workforce and economy.
To address the challenges posed by data centres, Malaysia should focus on developing sustainable solutions. Investing in renewable energy sources is crucial, with Sabah offering significant potential due to its high solar irradiance and capacity for 99.4GW of solar power.
Additionally, implementing stricter regulations for energy-efficient technologies and sustainable practices in data centres could mitigate environmental impacts. Promoting green data centres that use innovative cooling systems and energy-efficient hardware is essential.
Malaysia can also diversify data centre locations to prevent overloading specific regions, upgrade national power grids and water supply infrastructure, and support research into energy-efficient technologies.
These strategies could position the country as a leader in sustainable data centre development while balancing economic growth with environmental preservation.
Encouraging collaboration between the government, industry, and environmental experts will be key to developing comprehensive, long-term solutions that address both technological advancement and ecological concerns.
Sabah’s Electricity Challenge
Sabah faces significant challenges in its electricity sector, which are particularly concerning given the growing importance of data centres for economic development.
The state’s electricity system suffers from reliability issues, with the System Average Interruption Duration Index (SAIDI) standing at 219.38 minutes per customer annually as of May 2024.
This means Sabah residents experience nearly four hours of power outages each year on average, with some districts like Ranau experiencing much higher disruption rates of up to 853 minutes.
To address these issues and support the development of data centers, Sabah should:
- Invest in grid infrastructure upgrades to improve reliability and reduce SAIDI.
- Diversify power sources by implementing large-scale solar projects, which could reduce dependency on costly fuels and lower tariffs for consumers
- Address non-technical losses due to electricity theft, which currently exceed RM200 million annually
- Explore the potential for Sabah’s first tier-four data centre, as proposed by Poseidon Technologies and Permodalan RISDA Berhad, incorporating green energy elements like solar power.
- Develop a comprehensive strategy involving key stakeholders to address Sabah Electricity’s financial challenges, operational efficiencies, and integration of renewable energy sources.
By implementing these measures, Sabah can improve its electricity infrastructure, attract data centre investments, and support sustainable economic growth while addressing its current power supply challenges.
Sabah’s Solar Potential
Sabah’s renewable energy potential, particularly in solar power, offers a promising solution to address the challenges posed by data centres in Malaysia. The state receives the highest solar irradiance in the country, with a theoretical potential capacity of 99.4GW from solar resources. Solar irradiance refers to the amount of solar energy received per unit area on a surface at a given time. Irradiance is a crucial factor that directly impacts energy production potential.
This vast potential could be harnessed to power data centres sustainably, reducing reliance on fossil fuels and mitigating environmental impacts.
To capitalise on this opportunity, Sabah has set ambitious targets, aiming to generate 40% of its energy from renewable sources by 2030. The state is actively promoting solar power development, with current capacity at 84 megawatts and plans to increase this significantly.
Initiatives like the Corporate Renewable Energy Supply Scheme (CRESS) allow large consumers, including data centers, to utilise Malaysia’s renewable energy potential. By leveraging these resources and implementing innovative technologies such as battery energy storage systems, Sabah can position itself as a leader in sustainable data centre operations while addressing its own electricity challenges and supporting economic growth.
Battery Energy Storage Systems (BESS) are playing a crucial role in Sabah’s renewable energy transition and efforts to address electricity challenges.
These systems offer numerous benefits that can support the state’s ambitious renewable energy targets and improve overall grid stability. BESS addresses the intermittent nature of renewable energy sources like solar by storing excess energy during peak production periods and releases stored energy when demand exceeds production.
It enhances the reliability and usability of renewable energy. This capability will be crucial for Sabah to achieve its 40% renewable energy target by 2030.
