KUALA LUMPUR (Oct 23): Johor's booming data centre industry could consume more than 90% of the additional electricity generated in Peninsular Malaysia in the next five years, raising concerns over power supply and grid infrastructure constraints, according to a report by BMI, a Fitch Solutions company.

BMI estimated that Johor’s data centres would require about 30 terawatt-hours (TWh) of electricity annually by 2031, accounting for 18% of Peninsular Malaysia’s total electricity supply, up from 6% in 2026.

BMI warned that Johor could face the tightest electricity supply constraints among the data centre hubs it researched in the region, including Sydney and Melbourne in Australia, and Batam in Indonesia.

Johor currently has about 825 megawatts (MW) of operational data centre capacity, with another 3.9 gigawatts (GW) expected to be added over the next three to five years, due to growing demand for cloud computing and artificial intelligence (AI).

Major projects include YTL Power International Bhd’s (KL:YTLPOWR) 1.2GW data centre campus, which is expected to have its first 300MW operational by the first quarter of 2027, and a 300MW facility in Sedenak owned by Vantage Data Centers — backed by US alternative asset manager DigitalBridge Group Inc.

BMI expects some planned data centres to face delays, particularly those that have yet to secure electricity connections, even as demand for AI computing continues to grow.

It said the bigger challenge lies in connecting new data centres to the electricity grid, rather than generating enough power.

“Grid infrastructure takes considerably longer to develop than data centres, meaning headline generation capacity can overstate how much power is actually accessible to new projects,” said the macroeconomics research firm.

Although Peninsular Malaysia's grid is operating at an estimated 30% of its overall capacity, data centre developments are concentrated in areas such as Sedenak and Nusajaya, where local electricity infrastructure is becoming strained. 

BMI noted that Tenaga Nasional Bhd (KL:TENAGA) plans to invest RM43 billion in grid upgrades, but major infrastructure projects typically take five to 10 years to complete, potentially delaying new data centre developments.

The research unit also expects Malaysia to increase its gas-fired electricity generation to meet growing demand, with some scheduled power plant closures potentially postponed to ensure sufficient supply.

While electricity generation is expected to meet demand under BMI's base-case projections, higher-than-expected data centre activity could strain supply.