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Southern Malaysia plays a growing role in Southeast Asia’s data center boom. (Photo: Hsu Tsu-lin)
As demand for AI-powered infrastructure surges across Southeast Asia, Malaysia is fast becoming a critical hub for data centers. But with the sector’s soaring electricity and water consumption, the country now faces a pressing question: how to strike a balance between economic growth and sustainability?
At the “Data Centres toward Net Zero” conference, held on Sept. 23 to 24 and co-organized by the Malaysia Digital Economy Corporation (MEDC), government officials and industry leaders gathered to explore solutions. RECCESSARY was the only Taiwanese media invited as a partner, offering exclusive coverage and insights from the ground.
Malaysia to unveil sustainable data center framework focused on efficiency and green energy
Limited energy and water resources in Singapore have naturally curbed the expansion of data centers, promoting demand to spill over into southern Malaysia. Johor, Kuala Lumpur and Penang have since emerged as prime locations for data center development.
Akmal Nasrullah bin Mohd Nasir, deputy minister of Energy Transition and Water Transformation (PETRA), noted that data centers are vital engines of Malaysia’s digital economy. However, he warned that without proper planning and oversight, their rapid expansion could place significant pressure on the country’s energy and water resources.
The much-anticipated Sustainable Data Centre Framework is set to be released in October. According to Akmal Nasrullah, the new framework will offer clear guidelines for investors, covering energy efficiency standards, green energy procurement, and sustainable resource management. The goal is to ensure Malaysia can attract investment in its digital economy without compromising its sustainability goals.
When asked whether data centers would be required to use a fixed proportion of renewable energy, Akmal Nasrullah said Malaysia is leaning toward an incentive-based approach. Measures such as tax breaks could be used to encourage investors to adopt sustainable practices, rather than imposing strict mandates. The final version of the framework is still under review by the Ministry of Investment, Trade and Industry (MITI), with PETRA set to offer input on energy and water-related considerations.
Akmal Nasrullah also noted that to ensure RE100-compliant data centers can use green certificates without the risk of double-counting, the government has initiated amendments to the Electricity Supply Act. The goal is to standardize green energy ratings and certifications, establishing a consistent and transparent mechanism.
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The upcoming Sustainable Data Centre Framework will offer investors clear guidelines on energy efficiency, green energy procurement and sustainable resource management, according to Akmal Nasrullah. (Photo: Hsu Tsu-lin)
Malaysia’s CGPP, CRESS programs boost green power access for data centers
Akmal Nasrullah said the Malaysian government has introduced two initiatives for large-scale electricity users — the Corporate Green Power Procurement (CGPP) and the Corporate Renewable Energy Supply Scheme (CRESS) — to encourage data centers to adopt renewable energy by allowing companies to directly purchase green power. He added that the government recently reduced the system access charge (SAC) under the CRESS to further boost the incentive for attract data centers to switch to renewables.
On solar energy development, Akmal Nasrullah said the government just announced thirteen winning bidders under the latest phase of the Large Scale Solar PETRA 5+ programme (LSS 5+), with new plants expected to come online as early as 2027. To date, Malaysia has approved 121 LSS projects, representing a combined capacity of 6,228 MW and total investment exceeding MYR 21 billion.
To safeguard the stability of Malaysia’s power supply, Akmal Nasrullah stressed that natural gas will remain a transitional energy source while the country continues upgrading its grid to integrate more renewables. He added that the government has completed procurement of 400 MW of battery energy storage systems (BESS) to enhance grid flexibility and reliability.
On the question of nuclear power, Akmal Nasrullah acknowledged that without it, Malaysia would struggle to achieve net-zero emissions by 2050. However, he stressed that the country must address challenges related to financing, safety and technical feasibility, while adhering to three principles: affordability, energy security and sustainability. If carefully planned, he said, nuclear power could play a role as a stable source of baseload electricity.
Alongside efforts to expand low-carbon energy, Malaysia is also seeking to fast-track grid connection approvals to attract more data center operators. Ezziliah Kamal Effendi, customer engagement lead at state-owned utility Tenaga Nasional Berhad (TNB), said Malaysia has already entered the top 10 data center markets in the Asia Pacific. To meet growing demand for rapid power access, TNB has introduced the Green Lane Pathway programme, which shortens the data center grid connection process from 36 months to just 12 months.
TNB has partnered with the government to establish a one-stop center dedicated to handling grid connection applications for data centers. As of the second quarter of fiscal 2025, Malaysia had 45 data center projects nationwide, of which 24 have been completed.
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TNB’s Green Lane Pathway shortens the data center grid connection approval from 36 months to 12 months. (Photo: Hsu Tsu-lin)
Malaysia to face server replacement surge, sparking e-waste concerns
Beyond energy management, data centers can also reduce emissions during the construction phase. James Rix, head of data center and industrial for Malaysia and Indonesia at real estate and investment firm JLL, said operators can use materials such as recycled steel, green cement or timber. For example, using timber as a structural material can cut carbon content by more than 40%, while also reducing weight and shortening construction time.
In terms of infrastructure, Rix recommended incorporating technologies such as renewable energy integration, waste recycling and rainwater storage. He added that existing buildings can also be converted into data centers. As an example, he pointed to the former Financial Times printing facility in London, which was successfully transformed into a data center thanks to its stable power supply and suitability for cooling systems.
However, sustainability challenges for data centers go beyond construction materials. Tan Tze Meng, an expert at the MEDC pointed out data centers not only consume vast amounts of electricity but are heavily dependent on water for cooling. Given Malaysia’s hot and humid climate, operators cannot rely on outside air for cooling and must instead depend on water-based systems.
Tan said the key challenge is that most data centers still rely on drinking water for their cooling systems. Finding alternatives has become one of the industry’s most pressing issues. At least three operators have already invested in building their own water treatment facilities dedicated to cooling, a sign that the sector is increasingly aware of the urgency of the problem.
He further stressed that e-waste recycling has become an urgent issue. With data centers expected to undergo large-scale server replacements in the next three to four years, managing the recovery of gold, silver, copper and rare metals will be a critical challenge. Proper recycling is essential not only to avoid resource waste but also to minimize environmental pollution.
Malaysia currently lacks large-scale, regulated facilities for e-waste recycling. “We have less than three years to plan and implement a proper recycling mechanism,” said Tan. He stressed that government and industry must work together to promote a circular economy and prevent data center e-waste from ending up in illegal facilities that could cause environmental damage.
Read more: 'Race to green data centers' series
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