“Johor’s fast-growing data centre sector faces grid delivery challenges as connection timelines and infrastructure approvals become key hurdles for new projects.”
Kuala Lumpur, 09th March 2026, 10.40am – Johor’s rapidly expanding data centre sector is increasingly constrained by electricity grid delivery rather than power generation capacity, according to industry observers.
While Malaysia has sufficient generation capacity to support new projects, experts say delays in grid connections and infrastructure approvals are becoming the key factor determining whether developments proceed on schedule.
A recent report by real estate intelligence firm Area Market Intelligence highlighted that Johor rejected up to 30% of new data centre applications in 2024, citing issues such as misaligned utility timelines, uncertainty over responsibility for substation infrastructure and late-stage planning complications.
The report also noted that some electricity and water approvals may take up to 18 months, based on industry feedback.
Grid delivery emerging as key challenge
Ben Scuffins, founder of digital infrastructure recruitment firm NuboSearch, said the main challenge for Johor’s data centre growth now lies in the practical execution of grid delivery and regulatory approvals.
“Time-to-power risk in Johor is increasingly driven by execution in grid delivery and approvals rather than overall generation capacity,” he said.
According to Scuffins, the pace of substation construction, grid connection sequencing and regulatory processes will play a critical role in determining which projects stay on track.
As multiple large-scale developments come online simultaneously, the demand for experienced power infrastructure leaders, project directors and commissioning specialists has also intensified.
Data centre capacity expected to surge
Malaysia’s data centre capacity has expanded rapidly in recent years, rising from 10 megawatts in 2021 to around 1.3 gigawatts (GW) in 2024.
Industry projections suggest this could grow to between 3GW and 4GW by 2028, driven largely by hyperscale cloud investment in the Johor-Singapore Special Economic Zone.
Mark Bennett, Asia-Pacific energy and resources customer experience transformation leader at EY, said data centres alone could require between 5GW and 6GW of electricity by 2035, equivalent to about one-fifth of Peninsular Malaysia’s current power capacity.
Although other sectors such as manufacturing, logistics and port-related industries will also contribute to electricity demand, their power consumption is expected to be significantly smaller compared with hyperscale data centres.
Infrastructure investment and energy transition
The surge in electricity demand coincides with Malaysia’s broader push toward electrification and energy transition.
According to EY research, 91% of Malaysian businesses expect electricity consumption to increase within the next three years, driven by digitalisation and electrification trends.
To support demand growth while meeting decarbonisation goals, Malaysia plans to add 6GW to 8GW of new gas-fired power generation and up to 10GW of renewable energy capacity by 2030.
Johor is also expanding clean energy supply through initiatives such as the Southern Johor Renewable Energy Corridor, a collaboration involving the International Finance Corporation, Permodalan Darul Ta’zim and Ditrolic Energy.
The project is expected to include up to 4GW-peak of solar capacity and 5.12 gigawatt-hours of battery storage, supplying renewable electricity to manufacturers and data centre operators in the region.
Policy pressure and rising competition
Johor has already begun tightening approvals for new data centre developments amid concerns about heavy water usage and infrastructure strain.
As of November 2025, the state had approved 51 data centre projects with a combined investment value of US$44.3 billion.
However, experts warn that infrastructure bottlenecks could affect Johor’s competitiveness, particularly as other Malaysian states such as Selangor and Negeri Sembilan actively pursue similar investments.
The key policy question now revolves around how the costs of expanding power generation, transmission and distribution infrastructure will be funded.
Bennett noted that such investments will ultimately be borne by consumers through a mix of tariffs, taxes or subsidies, making affordability and regulatory reform critical to sustaining long-term growth.
He added that delays in grid upgrades or tariff reforms could slow infrastructure investment, potentially creating larger systemic bottlenecks in the future.
