Next door to Malaysia is Singapore, which paused the construction of new data centres in 2019. The moratorium was over concerns that the energy-guzzling infrastructure was straining the tiny country’s limited resources.
In 2019, data centres consumed 7% of the total electricity in the city-state that imports both power and water while aiming to reach net-zero emissions by 2050. They have been trying to build data centres sustainably since 2022, when the moratorium ended.
In the meantime, Malaysia has stepped in to fill the void, attracting investments of over $31 billion—three times the investments for 2023—in the first 10 months of 2024, according to research by real estate firm Knight Frank. Johor already has 22 mostly foreign data centres spanning over 21 hectares, according to the research firm Baxtel. That’s the equivalent of nearly 40 football fields, although not all of the data centres are operational.
Concerns over power and water shortages
The data centres that are running look anonymous from the outside. But they can be identified by the tell-tale signs of barbed wire fences, CCTV cameras and patrolling security guards. Elsewhere, a thicket of cranes and workers operating construction machinery is transforming the landscape in the sleepy province.
Salgame said that he hoped data centres could accelerate clean energy growth, and experts like Putra Adhiguna of the Jakarta-based think tank Energy Shift Institute agreed that this could happen but warned that the sheer volume of unforeseen future demand complicates the transition. “Add data centres on top of that, it just becomes much more challenging,” he said.
Tropical Malaysia is warmer than the countries that were initially preferred by data centres, including Ireland, and would require more water and power for cooling, said Alex de Vries, the founder of Digiconomist, a research company studying the unintended consequences of digital trends.
He said that these companies are moving to new countries after their promises of economic growth were found to be “empty.” And while new solar or wind farms can be built faster than other forms of energy, data centres need a lot of electricity from the get-go. “These big tech companies are trying to distract you from the really simple math,” de Vries said.
Malaysia acknowledges that the energy demand from data centres is “substantial” but believes that Johor’s rise as a “data centre powerhouse” will make it a “key player in Southeast Asia’s digital ecosystem,” said Malaysian Investment, Trade and Industry Minister Tengku Zafrul Aziz in an email.
He added that Malaysia was writing efficiency guidelines for data centres and has a policy to let them buy clean energy directly from producers.
But concerns are rising among residents about potential water shortages in the future—echoing the concerns of other developing countries like Chile. Malaysia, like much of Southeast Asia, is at risk of extreme weather, including drought, according to a 2022 UN climate change report.
Francis Hutchinson, an analyst at Singapore’s ISEAS-Yusof Ishak Institute, said that Johor has faced recent disruptions and new stressors, like a growing population and water parks to boost tourism, could exacerbate the crisis. “Water, more than power, is a potential issue,” he said.