KUALA LUMPUR (July 2): Malaysia is strengthening its electricity planning and infrastructure as data centres are projected to consume about one-third of the country's total electricity supply by 2035, driven by the rapid expansion of artificial intelligence (AI) and digital infrastructure.

According to the Ministry of Energy Transition and Water Transformation, electricity consumption by data centres is expected to increase significantly from the current 10,544 gigawatt-hours (GWh), representing about 7% of national electricity consumption, to 73,274GWh by 2035.

Minister Fadillah Yusof said in a written parliamentary reply that the rapid growth of AI technologies and data centre investments has contributed to rising peak electricity demand across the national power system.

Peak electricity demand in Peninsular Malaysia is projected to grow at a compound annual growth rate (CAGR) of 5.1% between 2026 and 2035, increasing from 21.3 gigawatts (GW) in 2026 to 33.5GW by 2035.

To maintain a stable and reliable electricity supply, the government and the Energy Commission are implementing several measures. These include extending the operating life of existing thermal power plants as a short-term solution while introducing additional gas-fired generation capacity through an open competitive bidding process.

The government is also expanding access to renewable energy by allowing data centre operators to purchase electricity directly from private renewable energy developers under the Corporate Renewable Energy Supply Scheme (CRESS), while continuing to support large-scale solar development programmes.

In addition, data centre operators are encouraged to develop their own power generation facilities based on their operational requirements instead of relying entirely on the national electricity grid. This approach is intended to reduce pressure on the grid and improve overall system stability.

Fadillah added that the government, through the Data Centre Task Force, has adopted a stringent evaluation process for all new data centre applications as well as proposals to expand existing facilities.

He said approvals will only be granted if the projects align with local electricity grid capacity planning and do not compromise the reliability and security of the national power supply.

The government aims to ensure that the continued expansion of Malaysia's data centre industry remains sustainable, competitive and attractive to investors while safeguarding the country's long-term energy security.

Key Takeaways

The rapid growth of AI and cloud computing is transforming electricity demand in Malaysia, making energy planning increasingly important. As data centres become one of the country's largest electricity consumers, balancing economic growth with energy security will require investments in generation capacity, grid infrastructure and renewable energy. The government's strategy of combining stricter project approvals, greater use of renewable energy and encouraging self-generation demonstrates a proactive approach to supporting digital investment while maintaining a stable and resilient national power system.