Malaysia’s energy sector is poised for demand growth, with industrial expansion, digitalization and especially data center development. As Malaysia has become a hotspot for new data centers in Southeast Asia, physical bottlenecks are starting to emerge. On February 24, 2026, Prime Minister Anwar Ibrahim announced that the government has restricted developments in non-AI data centers over the past year and a half to two years, citing concerns over security of power and water supply. Therefore, providing reliable delivery to data centers requires more than just incremental generation additions. It requires coordinated investments across the system, such as sufficient switchable capacity to meet rising peak demand and strengthening the grid to maintain system stability as solar penetration increases.
These system developments have cost implications that are addressed within the Malaysian Incentive-Based Regulation (IBR) framework. Under the IBR, network revenues and regulated returns are determined for fixed regulatory periods, balancing core principles of efficiency, cost-reflectivity and affordability. Recent tariff reforms, including the introduction of a special ultra-high voltage (UHV) category specifically for data centers, reflect a clearer application of the ’cause pays’ principle. These large consumers, whose demand drives network expansion and system balancing requirements, are increasingly expected to bear a proportionate share of these costs.
At the same time, companies’ sustainability goals ensure that the demand for sustainable energy increases. Data centers are facing increasing pressure from global customers and investors to secure the long-term supply of green electricity. Solar power purchase agreements (PPAs) provide a way to achieve decarbonization goals while aligning cost management.
In this context, the Corporate Renewable Energy Supply Scheme (CRESS) was introduced to facilitate the direct procurement of renewable energy while maintaining grid integrity and regulatory coherence. As stakeholders move from policy ambition to commercial execution, attention is increasingly focused on a crucial variable shaping project economics: the System Access Charge (SAC).
For developers, banks and corporate buyers, understanding the structure and potential evolution of the SAC is now critical to evaluating the financial robustness of CRESS-linked investments.
How CRESS works: commercial structure and cost allocation
CRESS represents the next step in corporate power procurement in Peninsular Malaysia, going beyond utility green programs following the retirement of the Corporate Green Power Program (CGPP). As of early 2026, publicly announced plans for CRESS projects totaled ~4 GW, with developers such as TNB Renewables, UEM Lestra, Gentari, Gamuda and Solarvest announcing their participation.
Under CRESS, an eligible business customer enters into a long-term PPA with a renewable energy developer. Planned terms of the PPAs are generally up to 21 years, which is in line with the common project financing horizon.
To ensure that the regulator ensures that total system costs are allocated appropriately, CRESS participants are subject to the System Access Charge (SAC). While the solar developer contracts bilaterally with the off-taker, the developer is liable for paying the SAC. Depending on risk appetite and bargaining power, these costs are included in the PPA negotiations, together with the developer’s project costs, influencing the all-in supplied price of renewable electricity.
Image: Aurora Energy Research
For context, Malaysia has mandated a coal phaseout and cheap domestic gas supplies are expected to dwindle. Based on a recent non-representative poll of power industry experts, two-thirds expect the TNB base rate to rise from the current 46 sen/kWh to 50-60 sen/kWh within ten years. CRESS therefore offers business buyers the potential to secure long-term sustainable supply and hedge against exposure to retail tariff structures. For developers and financiers, the commercial attractiveness of a project depends not only on the solar and capital costs, but also on the trajectory and risk profile of the SAC over the life of the PPA. It is this intersection between policy design, system cost allocation and long-term price risk that makes the SAC central to CRESS’s bankability.
System access costs: from regulatory instrument to investment variable
At its core, the SAC is a regulatory instrument designed to ensure that sustainable purchasing by companies remains consistent with the principles of system cost recovery. Because CRESS projects use the national grid for electricity distribution and increase the complexity of operations due to the volatility of solar energy, the Energy Commission applies its originator-pays principle when subjecting CRESS developers to the SAC.
While the policy rationale is clear, the SAC’s trajectory is less so and the Energy Commission has provided little guiding advice to developers and financiers entering into a PPA with a term of 15 to 21 years. The SAC therefore represents a regulated cost component whose evolution depends entirely on future regulations, probably linked to system expansion needs, and capacity payments to switchable power plants.
The Energy Commission has indicated that the SAC could be reviewed every three years, with provisions allowing increases of up to 15% on a case-by-case basis. While such mechanisms provide regulatory flexibility, they introduce an asymmetry to long-term contracts. Solar developers and commercial buyers must negotiate how potential SAC adjustments are allocated, despite limited visibility into SAC cost drivers.
Although the Energy Commission has not formally specified the components of the SAC, its underlying intent can be inferred from regulatory principles. In practical terms, it represents the system operator’s cost recovery for the expansion and improvement of the grid, but also for guaranteeing system reliability and security of supply.
This can be fundamentally linked to measurable system variables: demand growth, generation mix evolution, peak capacity requirements, fuel prices and capital expenditure cycles. Yet, in commercial discussions, the SAC could be treated as an administrative parameter rather than an outcome of the underlying system economics.
This perception gap is important. Uncertainty about SAC escalation could widen bid-ask spreads in PPA negotiations, delay financial close, or require risk-sharing mechanisms that complicate contract structuring. In a market where UHV rates are already ~30% higher than the base rate in the fourth regulatory period, even moderate SAC adjustments could materially impact negotiations.
Aurora Energy Research does not approach the SAC as an opaque charge, but as a derivable result from the fundamentals of the energy system. Through a model that takes into account the cheapest operation of the energy system and capacity expansion in the long term, it is possible to predict the underlying factors. By linking these results to regulatory principles embedded in IBR, the SAC can be framed within a scenario-based forecasting methodology. This results in a fixed SAC ranging from 200-220 RM/MWh (20-22 sen/kWh), in real terms in 2024, in Aurora’s base case. If there is higher solar penetration, this range could increase by 10-20%, above the previously set 250 RM/MWh (25 sen/kWh).
Rather than viewing the SAC as an external and unpredictable input, stakeholders can assess it through scenario-based analyzes grounded in system fundamentals. By quantifying sensitivities to demand growth, network expansion and capacity requirements, developers and buyers can evaluate potential escalation paths and transparently reflect them in PPA structures. In this way, the SAC is no longer a black box, but a parameter that can be examined and included in long-term financial models.
Enabling Cress through analytical transparency
CRESS plays an important role in aligning Malaysia’s sustainability ambitions with the needs of major energy consumers. The SAC, meanwhile, ensures that the principles of system cost recovery remain intact as corporate purchasing increases.
Recent market announcements show clear momentum, but long-term investment decisions require insight into regulated cost exposure. For developers, SAC uncertainty could impact cost recovery structures, investment return thresholds and PPA negotiations. For business customers, especially data centers, this affects the comparison between CRESS PPAs and evolving retail rates. For financiers, it constitutes credit assessment and downside risk analysis.
Crucially, the SAC is not separate from the system economy. It reflects network investment cycles, adequacy requirements and regulatory provisions under IBR guidance that the government adopts, made clear through the Energy Commission’s positions. By applying fundamental energy market modeling, it is possible to link SAC components to system drivers and construct scenario-based forecasts.
Aurora Energy Research applies this approach and generates transparent sensitivities on demand growth, fuel prices, renewables penetration, regulatory parameters and more. This allows stakeholders to quantify plausible SAC pathways and incorporate structured risk-sharing mechanisms into long-term PPAs.
As Malaysia’s digital economy expands and renewable capacity scales, analytical clarity will be essential to translate policy intentions into bankable outcomes. By basing the SAC on the foundations of the energy market, CRESS can transcend uncertainty and better fulfill its role in enabling large-scale sustainable purchasing by companies within a financially sustainable energy system. Physical boundaries, from water to energy, can still hinder growth. Policy uncertainty should not be.
Authors: David Thoo (research associate) and Philipp Egli (research leader) from Aurora Energy Research
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