Without careful management, the demand for energy to supply data centres in the next 10 years could surpass the available power supply, as reported by the Straits Times in Singapore.

The report said that electricity demand from data centres is expected to exceed 5,000 megawatts (MW) by 2035, with Tenaga Nasional receiving applications for 11,000 MW, equivalent to 40% of Peninsular Malaysia’s existing installed power-generation capacity of about 27,000 MW.

Data centres in Malaysia are mainly located in Selangor and Johor. They also consume vast amounts of water for cooling.

A data centre with a capacity of 100 MW uses about 1.1 million gallons of water per day for cooling, the equivalent of daily water usage in a city of 10,000 people according to a US study cited in the report.

UOB Kay Hian Research analyst Chong Lee Len advised the government to implement policies to address the high energy and water usage by data centres.

“They enjoy uninterrupted supply of power but currently pay the same rate as other commercial entities. Data centres are also concentrated in areas like the Klang Valley and Johor which have for decades grappled with water supply shortages,” she said.

Johor executive councillor Lee Ting Han was quoted as saying that the state government will implement guidelines this month requiring new data centre operators to demonstrate efforts to use green energy hardware and software.

Lee said new data centre developments in Johor will be assessed on their sustainability efforts, including power and water efficiency.

“If data centre operators do not show efforts to use green energy, the committee can recommend to reject the building permission application of their data centre,” he said.

Some RM76 billion was invested in data centres in Malaysia between January 2021 and March 2023, according to government figures.

Global tech firms Microsoft and Google recently announced investments totalling over US$4.2 billion (RM19.7 billion) to build data centres in Malaysia.