Malaysia’s data-centre boom is becoming a national infrastructure issue rather than a niche commercial trend. Electricity demand from these facilities could reach 73,274 GWh—31% of Malaysia’s total electricity demand—in 2035, up from 7% in 2026. Water pressure is most acute in Johor, where a typical 100 MW data centre has been reported to use about 4.2 million litres a day and utilities have received hundreds of millions of litres per day in project applications.
The effects will not be identical everywhere. They depend on each facility’s peak load, cooling system, water source, location and contribution to network upgrades. Current policy calls for data-centre operators to pay additional grid-strengthening costs, while new water-supply rules promote efficient cooling, reuse, rainwater harvesting and recycling.
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How large is Malaysia’s data-centre electricity demand?
The fastest-growing impact is electricity. PETRA reported that, through the first quarter of 2026, Tenaga Nasional Berhad (TNB) was supplying 36 operating data centres with about 4.5 gigawatts (GW) of planned supply. Another 23 projects were under construction, with a combined maximum demand of 3.8 GW. Planned supply is not the same as electricity actually consumed: it is the capacity reserved or requested for those facilities. Nevertheless, it shows the scale of connections the grid must be able to serve.
| Measure | Reported figure | What it means |
|---|---|---|
| Operating data centres, Q1 2026 | 36 centres; about 4.5 GW planned supply | Capacity TNB was planning to serve, not a measured national consumption total |
| Projects under construction, Q1 2026 | 23 projects; 3.8 GW maximum demand | Potential additional peak load when those facilities operate |
| Malaysia peak demand projection | 21.3 GW in 2026; 33.5 GW in 2035 | Growth in the entire electricity system, including data centres and other users |
| Data-centre share of national demand | 7% in 2026; up to 31% (73,274 GWh) in 2035 | PETRA’s projection for annual electricity demand attributable to data centres |
| Other reported count | 18 centres with at least 800 MW demand in February 2025; 81 centres projected by 2035 | A separate government statement using different timing and counting criteria |
The figures come from different statements and definitions, so they should not be added together. A planned connection, a maximum demand request and annual energy consumption describe different stages of a project. The consistent message is that data centres are moving from a small load to one of the country’s largest sources of new electricity demand.
Why the load is difficult to serve
Data centres run continuously and require highly reliable power for servers, cooling and backup systems. Their demand is therefore less flexible than that of many ordinary commercial customers. A cluster of facilities can also create a local transmission or distribution constraint even when Malaysia has enough generation in aggregate. The critical planning questions are where the centre is built, when its peak occurs, how quickly additional phases are energised and whether the nearby network has spare capacity.
Is Malaysia’s grid ready for the boom?
Readiness is a moving target, not a simple yes-or-no condition. PETRA and the national electricity planning process project peak demand rising from 21.3 GW in 2026 to 33.5 GW by 2035. Meeting that increase requires generation, transmission lines, substations, reserve capacity and fuel or renewable-energy procurement to arrive together.
The government approved RM43 billion in TNB capital expenditure under the fourth rolling plan (RP4) for 2025–2027. TNB’s response to data-centre growth combines grid investment, ultra-high-voltage tariffs, renewable procurement and efficiency requirements such as power usage effectiveness (PUE). PUE compares a facility’s total energy use with the energy delivered to its computing equipment; a lower value indicates that less electricity is being spent on cooling and other overheads. Malaysia’s cited policy materials do not establish one Malaysia-wide PUE threshold, so a project’s promised value must be checked against its design and operating conditions.
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Who pays for additional grid capacity?
Malaysia has adopted a “user pays” approach for infrastructure strengthening attributable to data centres. Deputy Minister Akmal Nasrullah Mohd Nasir said on 8 December 2025 that operators would bear the additional costs of strengthening grid infrastructure under the new tariff structure. This is intended to prevent a data-centre-specific upgrade bill from being spread across households and unrelated businesses.
The approach does not mean every future electricity cost disappears for other users. Generation costs, fuel prices, regulated charges and general network investment affect all customers through the normal tariff framework. It means that identifiable reinforcement required because of a particular data-centre connection should be recovered from that user rather than automatically charged to domestic customers.
Will data centres raise household electricity bills?
There is no reported policy decision to raise household electricity tariffs solely because data centres are expanding. The stated protection is the user-pays treatment for additional grid-strengthening costs. Whether a household bill changes depends on Malaysia’s wider tariff decisions, generation costs, subsidies, exchange rates and overall system investment—not on the existence of a data centre alone.
There can still be indirect economic effects. Large loads may accelerate construction of power plants, substations and transmission corridors; those projects have financing and operating costs. Conversely, data centres can improve utilisation of infrastructure and attract investment. The available figures do not quantify a separate per-household surcharge or show that a specific residential tariff increase was caused by data centres.
Why water pressure is concentrated in Johor
Water demand varies much more by cooling design than electricity demand does by server count. Google reported average data-centre water use of about 450,000 US gallons per day (approximately 1.7 million litres per day, or 1.7 megalitres per day) in 2021. A 2024 report described a typical 100 MW data centre as using about 1.1 million gallons per day, approximately 4.2 million litres (4.2 megalitres) per day. The second figure is a reported typical value, not a Malaysia-wide standard.
Johor has the clearest documented pressure because its data-centre pipeline is large relative to normal demand growth. SPAN chairman Charles Santiago said Johor’s organic annual water-demand growth was about 50 megalitres per day, while data-centre requests averaged 26 megalitres per day each year through 2036. He described that as an additional 1.3% per year above normal organic growth. Johor Bahru City Council mayor Datuk Mohd Noorazam Osman summarised the local concern as “water and power.”
What the Johor applications show
Reporting based on data from Ranhill SAJ (RSAJ) listed 439.67 megalitres per day of data-centre water applications for 2024–2035. Of that amount, 316.38 megalitres per day had been supported and 30.51 megalitres per day remained unsupported at the time of the cited reporting. “Application” and “supported” do not mean that all projects were already operating or consuming those volumes; they describe stages in the utility’s assessment and allocation process.
Johor’s reported water-reserve margin was 11.5% in 2022. Selangor’s was 15.34% in the cited reporting. A reserve margin is a buffer between available treatment capacity and expected demand. A lower margin leaves less room for droughts, plant outages, leaks or faster-than-expected project commissioning. Planned treatment plants, pipelines, dams and leakage reduction therefore matter as much as the headline application totals.
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- Withdrawal is not consumption. Water taken from a source may be returned, evaporated or discharged after treatment. A reported daily requirement may represent a supply allocation rather than net loss.
- Facility size matters. The 4.2-megalitre figure is associated with a typical 100 MW centre; it cannot be multiplied across every centre without knowing each site’s load and operating schedule.
- Cooling technology matters. Evaporative systems generally use more water than designs that rely mainly on air cooling or closed-loop systems, although they may have electricity trade-offs.
- Climate and operating conditions matter. Hot, humid weather, seasonal drought and server utilisation change both cooling energy and water demand.
For context, TNB reported 8,920 megalitres of town-water use in its FY2025 operations. It also reported 4,503,668 megalitres of seawater and surface-water withdrawal, nearly all discharged. That comparison illustrates why source, treatment and discharge must be specified before industrial water figures are compared.
How can data centres reduce cooling-water use?
Malaysia’s Water Supply Guidelines for Data Centre Development, which took effect on 1 September 2025, cover planning through operation. PETRA encourages operators to combine efficient cooling with non-potable sources and reuse rather than treating municipal drinking water as the default for every cooling task.
Use a cooling design matched to the site
- Specify high-efficiency cooling and measure its water-use effectiveness under local temperature and humidity conditions.
- Use closed-loop or hybrid systems where they reduce freshwater demand without creating an unacceptable electricity penalty.
- Design for higher server densities and future equipment changes so cooling capacity is not oversized and running inefficiently.
- Separate potable-water demand for people from process-water demand for cooling, with independent meters for each.
Substitute and reuse water
- Capture rainwater for approved cooling or utility applications where storage and treatment make it reliable.
- Use treated wastewater or other reclaimed sources when quality, public-health controls and the local utility permit it.
- Recycle cooling-tower blowdown and other process streams through a controlled Cycle of Concentration programme. This reduces the frequency with which water must be discharged and replaced.
- Recover condensate from air-handling equipment where the water quality and volume justify collection.
Monitor the number that matters locally
Operators should publish water-use effectiveness, source mix, maximum daily withdrawal, annual consumption and discharge quality—not just a single design-day estimate. Utilities and approving authorities can then compare a proposal with the local reserve margin and the capacity of treatment plants, pipelines and dams.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.A practical framework for evaluating a proposed facility
Communities, utilities and investors can use the same six questions when comparing projects:
- Electricity load: What is the contracted capacity, maximum demand and expected annual consumption? When will each construction phase reach its peak?
- Efficiency and supply: What PUE is guaranteed, how will it be measured, and how much electricity will come from renewable procurement or on-site generation?
- Cooling: Which technology is specified, and what are its water-use and electricity-use figures during Malaysia’s hottest operating conditions?
- Water source: How much demand relies on treated potable water versus recycled, rainwater, seawater or other approved sources?
- Local resilience: What are the area’s reserve margin, transmission capacity, treatment capacity and drought contingencies?
- Cost allocation: Which connection, reinforcement, treatment and pipeline costs will the developer pay, and which remain part of regulated system investment?
A proposal that looks efficient nationally can still be unsuitable for a water-stressed district if it depends on potable water. Conversely, a water-saving design may require more electricity, so both systems must be assessed together rather than optimised separately.
What policy changes are shaping future growth?
Malaysia is pairing infrastructure expansion with a higher renewable-electricity target: 31% of the electricity mix by 2025, 40% by 2035 and 70% by 2050, according to PETRA statements reported by the Malaysian Investment Development Authority. Renewable procurement can reduce the emissions associated with data-centre electricity, but it does not remove the need for firm capacity, transmission upgrades or water planning.
The electricity and water policies point in the same direction: growth is possible only when a project demonstrates that the networks can support it and that the developer will pay costs directly attributable to its demand. For Johor, the decisive constraint is likely to be the timing of new water infrastructure and the amount of potable water each centre requires. For the national grid, the decisive issues are the pace of commissioning, local connection capacity and whether efficiency improvements keep the projected 2035 share from becoming an even larger burden.
What this means through 2035
Data centres could account for nearly one-third of Malaysia’s electricity demand by 2035 while adding a substantial, location-specific water requirement. The country is investing in generation and networks, setting renewable targets and applying user-pays rules, but those measures do not make every project automatically sustainable. A centre with a large continuous load, evaporative cooling and a potable-water connection creates a very different impact from one with efficient cooling, reclaimed water and a connection designed around available network capacity.
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