Data centers in Malaysia's Johor state could account for about 40% of total electricity consumption by 2035, increasing pressure on grid infrastructure, Wood Mackenzie strategists said in a note on Thursday.
Wood Mackenzie said Johor, which borders Singapore, has emerged as one of Asia's most attractive destinations for data center investments, attracting about 165 billion Malaysian Ringgit ($42 billion) in cumulative commitments from hyperscalers and technology firms.
The consultancy projected that the maximum data center demand in Johor has reached about 3.8 gigawatts, equivalent to about 1.5 times the state's current electricity demand.
Data centers already account for about 24% of Johor's end-user electricity consumption, and the share is projected to rise to about 40% by 2035.
"Many investors still view power supply as the main hurdle for data centre development in Johor, but our analysis suggests the challenge is becoming much more localised," said Alvin Tan, research analyst for power and renewables at Wood Mackenzie.
"The issue is increasingly about where power is available rather than whether it is available," analysts said.
Wood Mackenzie said Johor currently has about 6.8 GW of installed power generation capacity, largely from natural gas and coal-fired plants. Power demand in the state stands at about 2.6 GW, providing what the consultancy described as a healthy supply buffer.
However, demand is concentrated around major data centre clusters such as Sedenak Tech Park and Nusajaya Tech Park, creating bottlenecks at substations and grid connection points.
Wood Mackenzie identified shortages in 132-kilovolt main intake substations and limited nodal injection points for renewable energy integration as among the most immediate constraints facing developers.
The consultancy said higher-voltage 275-kV connections, on-site substations, and greater use of decentralized solar generation could help ease the strain, while dedicated renewable energy infrastructure serving data center clusters would be needed over the longer term.
Risks to Johor's future supply include about 2.1 GW of coal-fired generation capacity scheduled to retire in the mid-2030s, while reserve margins across Peninsular Malaysia are expected to tighten due to rising demand and expiring power purchase agreements for several gas-fired plants.
Wood Mackenzie said Malaysia's NewGen26 program, which aimed at adding 6-8 GW of gas-fired capacity through an open tender, would be critical to maintaining long-term reliability.
The Southern Johor Renewable Energy Corridor, with planned projects in Mersing and Kota Tinggi, could add up to 4 GWp of solar capacity combined with battery storage. Malaysia has also accelerated renewable energy procurement, with 1.3 GW of Corporate Renewable Energy Supply Scheme agreements signed in Peninsular Malaysia as of June 2025.
Tan said the real test for Johor is whether its infrastructure planning can keep pace with a pipeline growing faster than in almost any other Southeast Asian country.
"Delays in substations, transmission upgrades or new generation projects could ultimately become the limiting factor on future expansion," Tan said.