Malaysia's Data Centre Boom Tests Net-Zero Ambitions

KUALA LUMPUR, 21 JULY 2026 —

Headline: Malaysia's Data Centre Boom Tests Net-Zero Ambitions Lead: Southeast Asia's leading data centre hub is gaining momentum, with global technology giants such as Google, Microsoft, Amazon Web Services (AWS) and Oracle committing billions of ringgit in ... Body: M alaysia's ambition to become Southeast Asia's leading data centre hub is gaining momentum, with global technology giants such as Google, Microsoft, Amazon Web Services (AWS) and Oracle committing billions of ringgit in investments as demand for artificial intelligence (AI), cloud computing and digital services continues to surge. At the same time, the country has pledged to achieve net-zero greenhouse gas emissions by 2050 and increase the share of renewable energy (RE) in its electricity generation mix to 70 per cent under the National Energy Transition Roadmap (NETR). For now, those two ambitions appear to be pulling in opposite directions. According to Baxtel, a data centre research platform, Malaysia has 125 operational data centres as of this year, with 36 located in Cyberjaya, 29 in Johor Bahru and 25 in Kuala Lumpur. Smaller clusters are found in Shah Alam, Bayan Baru and Kuching. Global real estate consulting company, JLL Malaysia's second-quarter 2026 report projected that Malaysia's data centre capacity will more than double to 2,055 megawatts (MW) by year-end, positioning Johor as one of the fastest-growing data centre markets in the Asia-Pacific (APAC) region. The rapid expansion has raised concerns over whether the country's power system can keep pace with soaring electricity demand without compromising long-term decarbonisation goals. Prime Minister Datuk Seri Anwar Ibrahim acknowledged the challenge during Tenaga Nasional Berhad's (TNB) Energy Transition Conference on June 4, while highlighting AI's potential to accelerate the energy transition. He said AI could improve grid efficiency, enhance renewable energy forecasting and optimise industrial energy consumption. However, he cautioned that the growth of AI and data centres must not outpace the sustainability ambitions they are expected to support. While data centres are increasingly viewed as critical infrastructure for the digital economy, they are also among the world's most energy-intensive facilities, requiring vast amounts of electricity to power servers, cooling systems and round-the-clock operations. According to Ember's 2025 report, From AI to Emissions: Aligning ASEAN's Digital Growth with Energy Transition Goals, electricity demand from data centres could account for up to 30 per cent of Malaysia's total power consumption in the coming years. Emissions linked to the sector are also projected to rise significantly across the region if renewable energy deployment fails to keep pace. The concern comes as governments across ASEAN race to expand renewable energy capacity through large-scale solar projects, battery storage systems and regional initiatives such as the ASEAN Power Grid, which aims to facilitate cross-border electricity trade and unlock renewable energy resources from countries including Vietnam, Thailand and Cambodia. For Malaysia, the debate is no longer whether to welcome data centre investments, but whether the country's energy transition can advance quickly enough to support the sector's rapid growth while remaining on track to meet its climate commitments. Ajita Mishra, Head of Market Development at climate technology non-profit TransitionZero, said the rapid expansion of data centres across Southeast Asia, including Malaysia, could pose a challenge to the region's climate ambitions if renewable energy deployment fails to keep pace with rising electricity demand. However, she stressed that data centres themselves should not be viewed as the problem, but rather how the additional demand is supplied. "If data centre demand is met mainly through additional fossil fuel generation, it could increase emissions, place pressure on power grids and make it more difficult for countries to achieve their clean energy and climate goals," she said in an email interview. She added that growing electricity demand could also create competition for renewable energy resources if clean power development lags behind the pace of digital infrastructure expansion. "Data centres can serve as anchor customers for renewable energy, energy storage and grid upgrades. They can help create demand for cleaner electricity if the right planning, procurement and grid frameworks are in place," she said. According to Mishra, the key issue is not whether data centre growth should occur, but whether it is integrated into the region's broader clean energy planning agenda. A joint report released in May 2025 by Bain & Company, Google, Temasek and industry partners projected that Malaysia may need between six and eight gigawatts (GW) of additional gas-fired power generation capacity by 2030 to support rising electricity demand from data centres. The report estimated that data centres' share of national electricity consumption could triple to 21 per cent by 2027 from seven per cent in 2022 as global technology companies continue expanding their digital infrastructure in the country. Behind AI applications, cloud services, and digital platforms used by millions of consumers are thousands of server racks operating around the clock. These facilities require substantial amounts of electricity not only to power computing equipment but also to run cooling systems that prevent servers from overheating. Increasingly, that demand is expected to be met by gas-fired power plants. The 500MW gas turbine combined cycle (GTCC) power plant is located in Miri, Sarawak, and was developed by PETROS, equipped with cutting-edge Mitsubishi Power hydrogen-ready turbines. (Pix credit to Mitsubishi Power) The projection raises a key question: Can Malaysia remain on track to achieve net-zero emissions by 2050 if a significant share of the additional electricity demand is supplied by natural gas, which remains a fossil fuel? Some industry players argue that natural gas will continue to play a critical role in supporting both economic growth and the energy transition. Mitsubishi Power executive vice-president for global sales and marketing, Daichi Nakajima, said Southeast Asia's electricity demand has traditionally been driven by industrialisation, urbanisation and economic development, but data centres have emerged as a major new growth driver. Speaking on the sidelines of the TNB Energy Transition Conference 2026, he noted that Malaysia is expected to account for 44 per cent of Southeast Asia's data centre power capacity currently under construction or in development, with demand projected to reach 7.7… (AI-assisted rewrite, based on the original source)

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