KUALA LUMPUR (June 19): Global energy research and analytics firm Wood Mackenzie (WoodMac) has cautioned that Johor’s rapidly expanding data centre sector could account for approximately 40% of the state’s electricity demand by 2035, significantly increasing pressure on the region’s power infrastructure.
According to WoodMac’s report titled “Powering Johor’s Data Centre Boom: Supply, Demand, and Grid Constraints”, the primary challenge is no longer the availability of power generation but ensuring that electricity can be delivered efficiently to areas experiencing the highest concentration of data centre investments.
WoodMac research analyst Alvin Tan noted that regions attracting major data centre developments are also the areas facing the greatest strain on transmission and distribution networks. As a result, grid readiness is becoming a critical factor in determining the pace of future industry growth.
Johor has emerged as Southeast Asia’s leading alternative data centre hub following Singapore’s temporary moratorium on new data centre projects between 2019 and 2022. By September 2025, Johor’s data centre capacity had reached approximately 3.8 gigawatts (GW), nearly one and a half times the state’s existing electricity demand.
The growth momentum is further supported by initiatives such as the Johor-Singapore Special Economic Zone (JS-SEZ), Malaysia’s National Data Centre Framework and Tenaga Nasional Bhd’s Green Lane Pathway, which streamline approval and grid connection processes for qualifying projects. However, WoodMac warned that accelerated project approvals could result in data centre developments expanding faster than supporting grid infrastructure can be delivered.
As of 2025, Johor had 27 operational data centre projects, with an additional pipeline of approximately 50 projects reported by April 2025. This substantial expansion is expected to drive electricity demand significantly higher over the next decade.
The report highlighted that Johor currently has around 6.8GW of installed power generation capacity, largely dependent on natural gas and coal-fired power plants. However, Malaysia’s energy transition plans present new challenges, as approximately 2.1GW of coal-fired generation capacity is scheduled for retirement during the 2030s under the New Energy Transition Roadmap.
To address future power supply requirements, WoodMac suggested several measures, including strengthening on-site substations, deploying decentralised solar generation systems and developing dedicated renewable energy infrastructure specifically designed to support data centre operations.
The report also identified Malaysia’s NewGen26 programme, which aims to procure between 6GW and 8GW of new gas-fired power generation capacity through open tender, as an important initiative to ensure long-term grid reliability and support continued industrial growth.
In addition, the Southern Johor Renewable Energy Corridor is expected to play a significant role in diversifying the state's energy mix. Planned renewable energy projects in Mersing and Kota Tinggi could contribute up to 4GWp of solar generation capacity integrated with battery energy storage systems, helping offset the impact of future coal plant retirements.
WoodMac emphasised that while Johor remains one of the fastest-growing data centre markets in Southeast Asia, future expansion will depend heavily on whether infrastructure development can keep pace with demand. Delays in substations, transmission upgrades or new power generation projects could ultimately become the main constraint on the sector’s growth.
What I Learned
This article highlights that the success of Johor’s data centre industry depends not only on attracting investments but also on ensuring sufficient power infrastructure is available to support long-term growth. While Johor has become a major regional data centre hub due to favourable policies and its proximity to Singapore, the rapid expansion is creating significant pressure on electricity transmission and distribution networks. The report demonstrates the importance of forward-looking infrastructure planning, renewable energy integration and grid modernisation. It also shows how energy security and sustainability have become critical factors in supporting digital economy growth, particularly as Malaysia transitions away from coal-fired power generation while continuing to attract large-scale industrial and technology investments.
Yao Mu Realty, based in Kuala Lumpur, Malaysia, specializes in industrial real estate for factories and land, delivering professional and efficient solutions.
Posted by Yao Mu Realty Sdn Bhd on 19 Jun 26
Malaysia