Malaysia’s electricity demand is being pushed higher by the rapid growth of data centres and prolonged hot weather, creating a new challenge for a power system that is also undergoing a transition away from coal, according to the country’s energy sector regulator.
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Peak electricity demand has already risen to just over 21 gigawatts (GW) during the current period of unusually hot weather with overall electricity consumption is said to be about 5 per cent higher than last year.
“We expect power demand to increase in the fourth quarter of the year because there are a few data centres that are anticipated to come online or become operational somewhere else in November [this year],” said Siti Safinah, Chief Executive of the Energy Commission of Malaysia on the sidelines of the Energy Regulatory Insights 2026 event in Selangor yesterday.
Over 70 per cent of Malaysia’s operational IT capacity is currently located in the state of Johor, with data centres accounting for 0.8 GW in live capacity. The Commission expects this to increase further where data centres are projected to represent 31 per cent of Peninsular Malaysia’s electricity demand by 2035.
Safinah told reporters that data centre consumption had reached 9.28 per cent of total electricity consumption so far.
That share can rise even without new facilities being added because hotter weather increases the amount of energy needed to cool data centres, she noted.
“With the hotter weather, the cooling system requires a lot more energy, that’s where the consumption increases.”
The prolonged hot weather associated with the current El Niño conditions, coupled with transboundary haze affecting much of Malaysia, is also driving up household electricity consumption as people rely more heavily on cooling to cope with the heat.
The commission had expected temperatures to begin easing after July and August, but the hotter conditions have continued, prompting it to rerun its electricity demand projections for the rest of 2026 and early 2027.
The rapid expansion of data centres is now forcing Malaysia to rethink how large electricity users are integrated into the grid.
In her special address at the event, Safinah said the regulator had previously assumed that data centres could be connected and supplied in broadly the same way as other consumers.
But the Energy Commission now has to balance the interests of data-centre developers and investors with the wider requirements of the electricity system, including reliability, costs and environmental considerations in its power planning.
Safinah added that there is a “very healthy pipeline” of applications and interest in Malaysia’s Corporate Renewable Energy Supply Scheme (CRESS), which allows corporate consumers to procure renewable electricity directly from renewable energy generators through open access to the national grid. Around 3GW of data-centre capacity is already in the pipeline, she said, with some projects at an advanced stage.
The immediate effect of new data centres may be more pronounced in overall electricity consumption than in peak demand, she said. But their arrival will nevertheless add to the system’s overall load.
The commission currently maintains a reserve margin of about 25 per cent, providing a buffer between available generation capacity and peak demand.
Balancing rising demand with the energy transition
This growth in electricity demand comes as Malaysia is simultaneously reshaping its generation mix.
The country’s power system remains dominated by thermal generation, particularly coal and gas, although renewable energy is taking an increasing share.
Gas is expected to remain an important part of the mix through 2040 as a transition fuel. At the same time, Malaysia plans to progressively retire its coal generation capacity.
About half of the country’s existing coal capacity is expected to expire by 2035 or 2036, with some older plants reaching the end of their operating lives before 2030. The final coal plant is expected to retire in 2044, Safinah said.
The regulator is not, however, slowing renewable energy deployment because of heightened energy-security concerns stemming from geopolitical tensions.
In fact, Malaysia has increased its planned renewable deployment, Safinah said.
Under the Large Scale Solar 6 (LSS6) programme, 2.5GW of hybrid renewable energy capacity combining solar and battery storage is expected to enter the system from 2029.
She said there had been no delay or change to Malaysia’s renewable energy development plans despite the energy-security concerns arising from the Middle East conflict.
Beyond solar, work is also underway to develop biomass and smaller renewable energy projects such as mini-hydropower. But Safinah said biomass development would require consideration of the wider supply chain, including the availability of feedstock.
With electricity demand rising, Safinah noted reducing consumption should be part of the response, alongside building new generation capacity.
She called for the 2027 national budget to include measures to encourage energy efficiency and renewable energy investment.
“We need to encourage energy efficiency because typically most people avoid investing in energy efficiency because they think it’s not so exciting. I think it really needs to be incentivised, adding that the government should also support consumers and businesses to invest in their own renewable energy systems,” said Safinah.
