THE data centre industry in Malaysia is projected to see its power needs surge from 990 megawatts (MW) to 1,4000 MW by 2029, putting significant pressure on the national grid and water supplies particularly in Johor, according to Public Investment Bank Bhd (PublicInvest).
Tenaga Nasional Bhd (TNB) has already received applications for potential energy demand of 2,000MW from 10 data centres, highlighting the urgency of the situation.
Industry experts caution that without new installed capacity, traditional energy reserves may not support the data centre growth over the next decade. Some suggested exploring more sustainable alternatives such as nuclear power.
The construction of data centres typically takes 1.5-2 years, while adding new power to the grid could take over four years.
PublicInvest pointed out the concern over water supply, noting that a 100MW data centre uses around 4.2 million litres of water per day equivalent to the daily usage of 10,000 people in a city. They also foresee an imminent oversupply of data centres, with success hinging on access to necessary infrastructure and professional talent.
“Being the country’s leading communications solution provider with extensive terrestrial connectivity as well as global subsea cable network, Telekom Malaysia (TM) is in a sweet spot to leverage on the booming data centre market.
“Also, given that TM is a government-linked entity, insufficient power and water supply issue may well be an over-rated concern.”
Moreover, the growth of the energy-intensive industry will drive a surge in power demand, predominantly generated from coal and gas.
“Although TNB has plans to increase the capacity of renewable energy, we believe fossil fuel power plants will continue to generate the bulk of energy supply in the country.
“However, we note that contaminated water generated from the liquid cooling system can be minimised through advanced technology that could recirculate and evaporate used water,” it said.
In anticipation of expanding IT workloads, PublicInvest expects more infrastructure development, including power connectivity, internet exchange points, cable landing stations, and fiber optic cables.
TM is seen as the prime beneficiary in the telecommunications sector, and TNB is expected to see an unprecedented surge in power demand.
“For exposure in the construction sector, we favour Gamuda Bhd and IJM Corp Bhd for its track record in securing more data centre jobs.
“Their next- generation industrial building system would help shorten construction period as speed of deployment is crucial to these data centre operator,” it said.
PublicInvest has an “Outperform” call on TM with a target price (TP) of RM8.80, TNB (TP: RM16.00), Gamuda (TP: RM9.20), and IJM (TP: RM4.20). – July 19, 2024
Main photo credit: Freepik
