Johor's data centres could swallow 90 percent of Malaysia's new power by 2031: the AI boom's electricity problem

How much power will Johor's data centres need? Far more than Malaysia is on track to add. BMI Country Risk and Industry Research forecasts that new data centre capacity in Johor will require about 30 terawatt hours of electricity a year by 2031, equal to 18 percent of Peninsular Malaysia's electricity supply, up from a level equivalent to 6 percent in 2026, as reported by Xinhua.

The striking part is the comparison with new supply. That extra demand would exceed 90 percent of the net increase in electricity generation expected across the peninsula over the same period. In other words, almost all the new power Malaysia plans to build could be absorbed by servers in one state. For investors, utilities and the businesses competing for electricity, the AI boom in Johor is becoming an energy story.

Why Johor's data centres need so much power

Johor has become one of Asia's fastest growing data centre hubs, drawing hyperscale cloud providers and colocation operators with land, connectivity and proximity to Singapore. Microsoft announced plans in November 2025 for a second Malaysian cloud region in Johor, and NTT DATA is building a campus there with its first facility scheduled to open in 2027, according to a Research and Markets report.

AI is the accelerant. Servers that train and run AI models consume far more electricity than traditional computing, and they need constant cooling. A single large AI campus can draw as much power as a small city, and Johor has many such projects in the pipeline. The same report valued Malaysia's data centre market at 6.14 billion dollars in 2025 and projected 11.40 billion dollars by 2031.

The national picture shows the scale. Malaysia's parliament was told this month that 12.3 gigawatts of energy capacity had been approved for data centres as of August, a huge figure relative to the country's existing generation base.

Where the bottleneck really is

BMI expects Malaysia's thermal power capacity to rise by a net 3 gigawatts between 2029 and 2031, from 33.3 GW in 2028 to 36.3 GW in 2031, with gas fired generation forecast to increase by 13.6 TWh to 106.7 TWh. That is significant new supply, but it still falls short of the demand implied by Johor's data centre plans.

Generation is not the only constraint. BMI said grid connections could pose a bigger bottleneck than generation capacity, as local substations and transmission lines become increasingly constrained in key data centre hubs. Building power plants is hard, but getting electricity from those plants to specific sites in Johor can be even harder.

The AI boom in Johor will not be limited by land or demand. It will be limited by how fast Malaysia can move electricity to the right substation.

The peninsula's limited access to Sarawak's hydropower adds to the challenge. Sarawak, on Borneo, has abundant hydroelectric resources, but transmitting that power to Peninsular Malaysia requires major undersea cable investment that is still years away.

Malaysia's response: tougher rules and grid spending

Utility Tenaga Nasional plans to invest 43 billion ringgit in grid upgrades, but BMI noted that major projects typically take five to ten years to complete. That timeline does not match the speed at which data centres are being built.

Regulators are already tightening the rules. Malaysia now requires operators of new data centres to demonstrate access to their own power and water supplies before connecting to the grid, according to BMI. Electricity tariffs introduced in July 2025 could also raise energy costs for data centres by 10 to 14 percent, with facilities above 100 megawatts classed as ultra high voltage users facing additional annual costs of 15 to 20 million dollars, according to the Research and Markets report.

These measures aim to make data centre operators bear more of the cost and risk of their power needs, rather than relying on the public grid and other users. We tracked the early stages of the boom in our report on Johor's data centre surge.

What it means for Malaysia's economy

Data centres bring investment, construction jobs and prestige, but they create relatively few permanent jobs compared with their power use. If they absorb most new generation, other users, from factories to households, could face tighter supply or higher prices. That raises political questions about who gets priority access to electricity.

There are also environmental implications. Much of Malaysia's new capacity is gas fired, which means the data centre boom could slow the country's progress toward cleaner energy unless operators invest in renewables and efficient cooling. The key issues for policymakers and investors include:

• Whether generation and grid investment can keep pace with data centre approvals
• How much of the cost data centre operators should bear directly
• The impact on electricity prices for factories and households
• The role of renewable energy and power purchase agreements for data centres
• Competition with Singapore, Indonesia and Thailand for data centre investment

What it means for the region

Johor's experience is a warning for every Southeast Asian country chasing AI infrastructure. Singapore limited new data centres for years because of power and land constraints, which pushed much of the demand across the Causeway into Johor. Indonesia is now pushing data centres beyond Java and Batam, and Thailand is courting cloud investments of its own.

The common constraint is energy. Countries that can offer reliable, affordable and increasingly green power, along with fast grid connections, will win the next wave of data centre investment. Those that cannot will see projects delayed or diverted, regardless of how much land or tax incentives they offer.

For Malaysia, the challenge is to turn Johor's data centre boom into lasting economic value without overloading the grid. That will require faster transmission projects, clear rules on who pays for new capacity and a credible plan for clean power.

Johor's data centre boom is colliding with the physics of electricity. If BMI's forecast holds, servers in a single state could consume almost all the new power Peninsular Malaysia builds this decade, and the grid may struggle to deliver it. Malaysia's tougher rules and grid spending are a start, but the speed of the AI boom means energy, not demand, will decide how big Johor's data centre industry becomes.