After new power tariffs were put in place on Tuesday, operators of data centres in Malaysia have apparently expressed concerns that they are much higher than were expected.
Until recently, the country boasted fairly competitive rates for electricity. But the tariff hike, first announced in December (though its details were not finalised until recently) could, according to Reuters, boost electricity costs by 10% to 14% before planned fuel surcharges, depending on the data centre.
And that, of course, is the problem. Power is a big part of data centre operating costs, and the previously competitive pricing in Malaysia has attracted a number of data centre companies.
In addition, a proposed tiered pricing system seems to be causing some confusion. Most major data centres are expected to fall into the ultra-high voltage category with the highest tariffs. Thus a 100-megawatt (MW) facility could face an additional US$15 million to US$20 million expenditure per year before considering any fuel surcharges. Smaller data centre operators may thus account for a lower share of grid management costs than their bigger competitors.
Confusingly, a monthly fuel surcharge is also on the horizon that reflects changes in fuel prices and foreign exchange. Could this be difficult to plan for? This month the surcharge stands at zero, according to state grid operator Tenaga Nasional Berhad.
Until recently data centre power demand in Malaysia has been surging; demand will triple by 2027 from 2022, according to some estimates.
So what happens next? Will some companies follow the Equinix example and look at providers of alternative energy? Could data centre companies even go to other countries, like Vietnam? Or could investment just slow down?
The government argues that these increases are necessary to boost social spending, so may be unwilling to compromise just yet. However, as Reuters points out, until now, Malaysia had used lower power prices and a stable power grid to attract investment in data centres. New pricing systems could undermine this model.
