Data Centres Drive a Structural Shift in Power Demand
Malaysia’s utilities sector is entering a new earnings phase as data centres reshape electricity demand across the grid. What once appeared as incremental load growth has evolved into a sustained structural driver with long-term implications for generation, transmission, and fuel planning.
Analysts continue to project electricity demand growth at 3.5% this year. Rising data centre utilisation supports that outlook. Loads from data centres climbed sharply to 710 megawatts by September last year, according to sector research.
The demand pattern changed noticeably over the past year. Electricity sales dipped seasonally in the first quarter. Demand rebounded strongly in the following quarter across Peninsular Malaysia. Commercial consumption from data centres drove the recovery, rather than industrial or residential use.
Contracted Load Strengthens Grid Utilisation
Utilities secured eight new electricity supply agreements on a year-to-date basis. These contracts added 1,100 megawatts of committed demand to the system. Most agreements involved large-scale data centre operators requiring high reliability and high-voltage connections.
Malaysia’s incentive-based regulation framework caps revenue growth. Even so, higher load demand improves asset utilisation across the grid. Utilities operate plants more efficiently as utilisation rises. Transmission networks also require expansion to meet technical requirements from data centres.
“While demand growth is embedded within the incentive-based regulation framework and capped by revenue mechanisms, stronger demand still enhances plant efficiency and drives higher transmission capital expenditure to meet data centre-related high-voltage requirements, both of which are earnings-positive for Tenaga Nasional Bhd (TNB),” the report said.
Grid investment now reflects technical necessity rather than discretionary expansion. High-density data centre clusters require stronger and more resilient infrastructure.
Capacity Expansion Accelerates Toward 2030
Attention has shifted toward generation capacity requirements later this decade. Analysts now point to rising opportunities in brownfield expansion projects. Malaysia needs between 6 gigawatts and 8 gigawatts of new generation capacity by 2030.
Fuel mix constraints shape this expansion cycle. Authorities have not planned any new coal-fired plants. Gas-fired generation will meet most incremental demand as a result. Electricity growth therefore aligns closely with rising gas consumption.
“Both TNB and Malakoff Corp Bhd possess land suitable for greenfield developments, while YTL Power International Bhd is reportedly partnering with a landowner for new capacity bids. In our view, the 6GW to 8GW capacity pipeline provides sufficient scale to be meaningfully shared among the major contenders,” Kenanga Research noted.
Analysts expect gas-fired plants to account for nearly 50% of Malaysia’s total generation capacity by 2030.
Gas Infrastructure Returns to Strategic Importance
The shift toward gas generation has renewed focus on import infrastructure. Rising power-sector demand has strengthened the case for additional liquefied natural gas facilities.
Petroliam Nasional Bhd has confirmed plans for a third regasification terminal. Market observers expect Petronas Gas Bhd to operate the facility. The company already owns terminals in Sungai Udang, Melaka, and Pengerang, Johor.
“Lumut has also been cited as a preferred location due to its proximity to Malakoff’s gas assets while we also understand Gas Malaysia Bhd is keen to participate in future regasification developments to support longer-term earnings growth,” Kenanga Research said.
These projects signal a longer-term role for gas infrastructure beyond transitional use.
Utilities Maintain Earnings Visibility
Sector analysts continue to emphasize earnings durability across listed utilities. Regulated asset frameworks provide predictable cash flows. Demand visibility has improved as data centres anchor long-term consumption.
Kenanga Research has maintained an “overweight” rating on the sector. It continues to identify Tenaga Nasional Bhd as its top pick. The assessment reflects exposure to demand growth, grid capital expenditure, and new generation development.
“Overall, the sector offers earnings resilience underpinned by regulated assets and stable cash flows, supporting attractive yields of up to 6%, particularly from Gas Malaysia Bhd.”
As Malaysia’s digital economy scales, data centre power demand has moved beyond a marginal influence. It now stands as a central factor shaping utility earnings, infrastructure strategy, and the national energy mix through the next decade.
