Government Flags Underutilisation of Data Centre Power Capacity, Warns of Stranded Asset Risks

KUALA LUMPUR, Nov 5, 2025 — Malaysia’s booming data centre sector has come under renewed scrutiny as the government revealed that most facilities are consuming less than half of their declared electricity capacity — a situation that could lead to stranded infrastructure and resource inefficiency if left unchecked.

Deputy Minister of Investment, Trade and Industry Liew Chin Tong told the Dewan Rakyat that an Energy Commission study showed the nation’s data centres were using only 603 megawatts (MW) of electricity as of June 2025 — representing just 47% of their declared maximum demand of 1,276MW.

“This indicates a likelihood of speculative applications, where declared power requirements do not reflect actual operational needs,” said Liew. “To maintain power system stability, the government will now require data centres to achieve at least 85% utilisation of declared capacity to minimise the risk of stranded assets and cost transfers to other consumers.”

Addressing Speculative Applications

According to the Energy Commission’s analysis, some project submissions appear to overstate energy demand, often based on anticipated end-user requirements rather than confirmed client commitments. Such speculative applications can distort grid planning and delay the allocation of power to other sectors — including industrial property developments in Selangor and Subang area, which also require significant and stable energy access.

As a result, the projected national energy capacity for data centre operations has been revised to better align with actual usage patterns, ensuring the sector’s growth remains sustainable, efficient, and resource-conscious.

Water Usage Remains Manageable

While energy use has drawn concern, data centre water consumption remains relatively modest. Based on data from water operators in Selangor, Kuala Lumpur, Putrajaya, and Johor, the facilities’ combined water usage is minimal compared to total state consumption.

Liew said that in Selangor, Kuala Lumpur, and Putrajaya, data centres collectively use 0.47 million litres daily — equivalent to just 0.012% of total water demand. In Johor, which houses several hyperscale data parks, daily consumption is 9.07 million litres, or roughly 0.6% of the state’s total.

These figures suggest that, while energy sustainability poses a challenge, water resource impact remains contained — a positive sign for developers planning new industrial land projects in Selangor or factory expansions in Puchong that rely on shared infrastructure networks.

RM144.4 Billion in Data Centre Investments Approved

Between 2021 and June 2025, Malaysia approved 143 data centre projects valued at RM144.4 billion in total investments. Of these, 25 projects received Malaysia Digital status under the Digital Ecosystem Acceleration Scheme, which are expected to create 1,429 skilled jobs.

To ensure coordinated growth, the Data Centre Task Force — co-chaired by the Investment, Trade and Industry Ministry (MITI) and the Digital Ministry — is currently developing a roadmap for the sustainable expansion of Malaysia’s data infrastructure.

The task force includes key national regulators such as the Energy Commission (EC), the National Water Services Commission (SPAN), the Malaysian Communications and Multimedia Commission (MCMC), and the Malaysia Digital Economy Corporation (MDEC).

Towards Smarter Regulation and Energy Efficiency

Moving forward, the government plans to establish a single licensing authority for data centres to simplify regulatory processes and ensure adherence to environmental and energy-efficiency standards. This streamlined system will particularly monitor carbon emissions and renewable energy integration within large-scale facilities — an increasingly vital step as global clients demand low-carbon, green-certified data infrastructure.

Liew also announced that Malaysia will soon establish a dedicated government data centre facility to safeguard national information sovereignty, ensuring that sensitive data is stored within the country.

Balancing Growth with Sustainability

As Malaysia cements its position as one of Asia Pacific’s fastest-growing data centre markets, industry leaders are being urged to balance rapid expansion with responsible energy and land use. Ensuring accurate power forecasting not only protects national grid stability but also strengthens the long-term viability of commercial property in KL, industrial property in Subang area, and office space developments in Bukit Jalil that depend on stable infrastructure ecosystems.

By combining technological ambition with regulatory precision, Malaysia aims to achieve sustainable digital growth — building a data-driven economy that is both competitive and resilient.