Data centre demand to sustain RE growth despite higher CRESS charges

KUALA LUMPUR: Malaysia's renewable energy (RE) developers are expected to see continued demand under the Corporate Renewable Energy Supply Scheme (CRESS) despite a higher grid access charge (SAC), supported by data centre operators' need for clean energy, said Hong Leong Investment Bank (HLIB).

In a note, the firm said the effective firm supply SAC had been revised to 18 sen per kilowatt-hour (kWh), from the 14 sen announced in September 2026, following a reported additional charge of four sen per kWh payable by green consumers until the end of 2027.

Citing The Edge, HLIB said the revised charge was slightly negative for RE developers but still represented a reduction of two sen per kWh, or 10 per cent, from the previous rate of 20 sen per kWh.

It estimated that green consumers would now save about 2.5 per cent on their monthly electricity bills, less than initially expected.

However, industry feedback remained positive, with data centre operators continuing to seek renewable energy supply to meet decarbonisation targets and hedge against potential increases in grid electricity tariffs and monthly Automatic Fuel Adjustment (AFA) fluctuations.

HLIB said further clarification was needed on the validity of the additional four-sen charge and the extent of potential adjustments during subsequent regulatory reviews.

Solarvest Holdings Bhd's management remained on track to secure 300 megawatts (MW) to 500 MW of CRESS contracts by the end of calendar year 2026, while Samaiden Group Bhd continued to target RM1 billion in order book replenishment by financial year 2027.

The firm said the revised charge had yet to materially derail near-term project pipelines, with opportunities likely to favour projects that had progressed to offtake negotiations and preliminary development before the package was announced in September 2026.

As of May 2026, 11 RE developers and eight green consumers had registered with Single Buyer, representing a combined capacity of 3,148 MW.

HLIB estimated this translated into an addressable market of RM12.6 billion to RM15.8 billion for solar players, with Solarvest, Samaiden, Tenaga Nasional Bhd and Northern Solar Holdings Bhd among the potential beneficiaries.

However, the tight commercial operation date deadline of end-2028 remained a key hurdle for newly initiated projects, limiting near-term opportunities largely to converting existing pipelines rather than generating significant incremental demand.

HLIB expects CRESS awards and deal announcements to gather pace in the near term, supported by the continued expansion of Malaysia's data centre sector.

It said a potential requirement for data centres to source 30 per cent of their energy from renewable sources could provide a strong structural driver for CRESS demand over the longer term.

Key re-rating catalysts include an extension of the CRESS Acceleration Package and the introduction of the 30 per cent renewable energy requirement for data centres.

Downside risks include further SAC revisions under Regulatory Period 5 and slower power purchase agreement conversions.

HLIB maintained its "Buy" calls on Solarvest, with a target price of RM4.85, and Samaiden, with a target price of RM3.13, while retaining its "Overweight" rating on the RE sector.