Malaysia tightens oversight of data centres to protect water, power resources
Speaking in the Dewan Rakyat on June 24, Deputy Prime Minister and Minister of Energy Transition and Water Transformation Fadillah Yusof said the measure is aimed at eliminating “phantom demand”, where companies reserve large amounts of electricity and water but fail to use them fully.
Malaysia plans to impose penalties on data centre operators that overstate their electricity and water requirements, as part of efforts to improve resource management and safeguard essential supplies.
Speaking in the Dewan Rakyat on June 24, Deputy Prime Minister and Minister of Energy Transition and Water Transformation Fadillah Yusof said the measure is aimed at eliminating “phantom demand”, where companies reserve large amounts of electricity and water but fail to use them fully.
Under the new approach, data centre operators will be required to commit to the level of resources they request. Companies that do not utilise the approved capacity could face financial penalties.
The move comes amid growing pressure on infrastructure in Johor state, a major hub for data centre investments. According to Fadillah, 17 data centres are currently operating in the greater Johor Bahru area, where water demand stands at 1.27 billion litres per day and is projected to rise to 1.6 billion litres by 2030.
He stressed that ensuring sufficient water supplies for households remains the government’s top priority before meeting industrial demand.
To strengthen oversight, Malaysia has established a federal Data Centre Task Force, chaired by the Ministry of Investment, Trade and Industry, to assess the water and electricity needs of proposed projects before they are submitted to state authorities for approval.
The government is also encouraging operators to adopt advanced cooling technologies and increase the use of reclaimed water to reduce pressure on freshwater resources.
Johor is currently implementing major infrastructure projects, including new dams, riverbank storage systems and water treatment plants. The state has also become the first in Malaysia to supply 12 million litres of high-quality reclaimed water per day for data centre cooling, supporting its long-term strategy of balancing digital economic growth with sustainable resource management./.
