Powering Up: Navigating the Energy Crossroads of Malaysia’s Data Centre Boom

Malaysia’s ambition to become a digital powerhouse has placed data centres at the forefront of its economic strategy. These facilities, the backbone of cloud computing, artificial intelligence, and a myriad of other digital advancements, are essential to the nation’s goal of establishing itself as a regional tech hub. The influx of global tech giants like AWS, Microsoft, Google, Bridge Data Centres, GDS, Airtrunk, and Vantage Data Centres into strategic locations like Greater Kuala Lumpur and Johor underscores this commitment. Data centres are more than just infrastructure; they are the engines driving innovation across crucial sectors – from finance and healthcare to logistics and education, representing a significant investment in Malaysia’s future, promising to unlock new economic vistas and enhance the lives of its rakyat.

However, this digital revolution comes with a significant energy footprint. The very technologies that promise progress also demand substantial power, creating a complex challenge for Malaysia. Projections indicate that data centre energy consumption could surge to over 5,000 MW by 2035, a figure representing a staggering 40% of Peninsular Malaysia’s current power capacity. This rapid increase in demand raises concerns about the strain on the national grid and, more critically, the environmental implications. With total energy supply applications already exceeding 11,000 MW, the writing is on the wall: Malaysia must forge a sustainable path forward that balances digital ambitions with environmental commitments.

The tension between economic growth and environmental responsibility is a defining challenge of our era. For Malaysia, this tension is particularly acute as it strives to achieve carbon neutrality by 2050. The rapid expansion of data centres, traditionally reliant on fossil fuel-based energy sources, poses a direct threat to this goal. Without careful management and a decisive shift towards sustainable practices, the very infrastructure designed to propel Malaysia forward could inadvertently undermine its environmental commitments. This is not to suggest that Malaysia should shy away from its digital ambitions. On the contrary, embracing the digital economy is essential for long-term prosperity. The key lies in finding innovative solutions that mitigate the environmental impact of data centre operations. Fortunately, Malaysia has recognised this challenge and is taking proactive steps to address it.

Government initiatives and regulatory frameworks have been implemented to balance the growth of data centres with environmental objectives. A key measure introduced by the Ministry of Investment, Trade, and Industry (MITI) is the incorporation of Power Usage Effectiveness (PUE) and Water Usage Effectiveness (WUE) metrics into its sustainability guidelines. These metrics aim to enhance energy and water efficiency in data centre operations, with PUE measuring total energy consumption against energy used for IT equipment and WUE tracking water usage in cooling processes. Recently announced as part of the Digital Ecosystem Acceleration Scheme (DESAC), these metrics now serve as critical criteria for data centre incentives, further reinforcing sustainability in the sector.

As data centres continue to grow in both number and energy demand, their reliance on sustainable energy solutions becomes increasingly critical. Transitioning to renewable energy sources not only supports the National Energy Transition Roadmap, which aims for 70% of Malaysia’s energy to come from renewable sources by 2050, but also addresses the high energy demands of data centres, helping to reduce their carbon footprint.

Malaysia’s data centre sector has attracted RM184.7 billion in investments in data-centre-related projects from 2021 to December 2024, with companies like Amazon & YTL pledging to power their global data centres with 100% renewable energy. These commitments set a benchmark for other operators in Malaysia. Furthermore, technological innovations such as AI-powered cooling systems, which adjust temperatures in real time, are becoming essential. Implemented by industry leaders, these systems have achieved up to 40% energy savings, demonstrating how advanced solutions can significantly improve energy efficiency and reduce environmental impact. By integrating sustainable practices, advanced technologies, and regulatory frameworks, Malaysia ensures its data centre industry remains competitive, resilient, and aligned with its environmental goals.

The transition to renewable energy is another crucial piece of the puzzle. Malaysia’s National Energy Transition Roadmap, with its ambitious target of 70% renewable energy by 2050, provides a strong foundation for this shift. Data centres, with their massive energy demands, have a vital role to play in achieving this target. Existing programmes such as the Corporate Green Power Programme (CGPP) and Large-Scale Solar (LSS) provide access to renewable energy. Moreover, the Corporate Renewable Energy Supply Scheme (CRESS), launched in September 2024 offers a mechanism for data centre operators to procure green power directly from renewable energy developers (RED) like TNB, Solarvest and Samaiden Group via the national grid, aligning their operations with national sustainability goals.

However, technology alone is not enough. Effective collaboration between the government, energy providers, and technology companies is essential to navigate the complex energy landscape of the data centre boom. Balancing rapid development with the availability of renewable energy solutions requires careful planning and coordination. Integrating sustainability metrics into incentive frameworks, as MIDA is doing through DESAC, is a crucial step in this direction. By harmonising technological advancements with robust sustainability strategies, Malaysia can create a virtuous cycle, where data centres drive economic growth without compromising environmental goals. This approach aligns stakeholders towards a shared goal.

The challenge before Malaysia is significant, but it is not insurmountable. By embracing innovation, fostering collaboration, and prioritising sustainability, Malaysia can transform its data centre boom from a potential environmental liability into a powerful engine for green growth. The decisions made today will shape not only the future of Malaysia’s digital economy but also the health of its environment. Malaysia stands at a critical crossroads. Choosing the path of sustainable development is not just an environmental imperative; it is an economic one. It is the only way to ensure that the digital revolution truly benefits all Malaysians, now and in the generations to come.

To learn more, please reach out to the Business Services and Regional Operations Division at https://www.mida.gov.my/staffdirectory/business-services-and-regional-operations-division/.

References

Energy Watch. (2024, August 29). Malaysia’s digital crossroads: Balancing data centre growth and sustainability.
https://www.energywatch.com.my/blog/2024/08/29/malaysias-digital-crossroads-balancing-data-centre-growth-and-sustainability/

Tenaga Nasional Berhad (TNB). (2023). Supporting the growth of data centres: The Green Lane Pathway initiative.
https://www.tnb.com.my/news-events/tnb-green-lane-initiative-data-centres

AirTrunk. (2024, July 30). AirTrunk opens AI-ready data centre in Malaysia, accelerating innovation and the energy transition.
https://www.airtrunk.com/newsroom/ai-ready-data-centre-malaysia/

Vantage Data Centers. (2023). Vantage Data Centers announces second Cyberjaya campus in Malaysia.
https://www.vantage-dc.com/cyberjaya

Microsoft. (2023). Microsoft’s renewable energy strategy for data centers.
https://www.microsoft.com/sustainability

Google. (2023). How Google’s AI-powered cooling systems are reducing energy consumption.
https://www.google.com/sustainability

TNB website
https://www.tnb.com.my/announcements/tnb-establishes-exclusive-green-lane-pathway