Malaysia's Data Centre Boom Tests Net-Zero Ambitions

KUALA LUMPUR, 21 JULY 2026 —

Malaysia’s data centre capacity will more than double to 2,055 megawatts by year-end, JLL Malaysia reported in its second-quarter 2026 outlook.

Prime Minister Datuk Seri Anwar Ibrahim highlighted the challenge at Tenaga Nasional Berhad’s Energy Transition Conference on June 4. He said artificial intelligence can sharpen grid efficiency and improve renewable-energy forecasting. Yet he warned that data-centre growth must not outpace the country’s sustainability targets.

“AI and data centres are enablers of the energy transition, but only if their demand is met with cleaner supply,” Anwar told delegates in Kuala Lumpur.

The urgency is rising because data centres are among the world’s most energy-intensive facilities, running tens of thousands of servers and cooling systems 24 hours a day. Ember’s 2025 report, From AI to Emissions: Aligning ASEAN’s Digital Growth with Energy Transition Goals, estimates these facilities could account for up to 30% of Malaysia’s total power consumption within a few years if expansion continues unchecked.

Ajita Mishra, head of market development at climate-technology non-profit TransitionZero, warned that the region’s climate ambitions could be at risk if renewable-energy build-out lags behind digital-infrastructure growth.

“Data-centre demand itself is not the issue; the problem is whether that demand is met mainly through additional fossil-fuel generation,” Mishra said in an email interview. “If it is, emissions rise, grids strain and clean-energy goals slip further away.”

She added that data centres can act as anchor customers for renewable power, energy storage and grid upgrades—provided the right procurement and regulatory frameworks are in place. “The question is not whether data centres should grow, but how we integrate their expansion into clean-energy planning.”

A May 2025 joint report by Bain & Company, Google, Temasek and partners projects Malaysia may need six to eight gigawatts of new gas-fired capacity by 2030 to keep pace. The study estimates data centres’ share of national electricity consumption could triple to 21% by 2027, from seven% in 2022.

Behind the growth are applications in AI, cloud services and consumer-facing platforms that run on thousands of server racks operating continuously. Cooling alone can consume as much as half of a facility’s power budget.

Industry players argue gas will remain a bridge fuel while renewables scale up. Daichi Nakajima, executive vice-president for global sales and marketing at Mitsubishi Power, said gas-fired turbines remain the most reliable way to match the steady, high-volume load demanded by data centres.

Mitsubishi Power recently supplied hydrogen-ready gas turbines for PETROS’s 500 MW combined-cycle plant in Miri, Sarawak—equipment designed to run on natural gas today and blend in hydrogen as supplies become available.

Bank Negara Malaysia’s 2024 Annual Report noted that while renewable capacity is expanding, coal and gas still account for roughly 75% of the national grid mix. Any rapid increase in data-centre load risks pushing that share higher unless new clean-energy procurement is accelerated.

Regional initiatives such as the ASEAN Power Grid aim to unlock renewable resources from Vietnam, Thailand and Cambodia. Analysts say cross-border trade could supply up to 15% of Malaysia’s incremental demand by 2030, but transmission links and regulatory alignment are still works in progress.

For Malaysia, the strategic choice is clear: accelerate renewable build-out or risk locking in gas infrastructure that could delay net-zero by decades. Mishra said it is technically feasible to align the two goals.

“With targeted power-purchase agreements, battery storage co-location and grid-scale renewables, Malaysia can host world-class data centres without derailing its climate trajectory,” she said.

Datuk Seri Dr Zulkifli Zaini, group CEO of Tenaga Nasional Berhad, told the conference that TNB is preparing 5 GW of solar and wind projects by 2027, alongside battery storage pilots in Kedah and Sabah.

“We are racing to decarbonise the grid faster than digital demand rises,” he said.

The stakes are high for Malaysia’s ambition to become Southeast Asia’s leading data-centre hub. The country already hosts 125 operational facilities, according to Baxtel, with Cyberjaya, Johor Bahru and Kuala Lumpur forming the core clusters.

If the energy transition stalls, the cost of carbon-intensive power could erode Malaysia’s competitive edge. If it succeeds, the country stands to attract more hyperscale investment and anchor a regional green-digital ecosystem.

Related: Microsoft