Recent news reports about the deferment of water supply for data centers in Johor had some in the industry worried. Last week (November 17), South China Morning Post (SCMP) reported that Johor had told data centers using evaporative or water-intensive cooling systems that they have had to wait until 2027 for their water supply request to be approved.
Even more drastic, two days ago, Johor announced that it would no longer approve new Tier 1 and Tier 2 data centers, preferring instead to welcome investments which meet stricter international environmental, social, and governance (ESG) standards, likely to be Tier III and Tier IV data centers. Tier 1 and Tier 2 data centers are said to have more basic infrastructure and can consume as much as “50 million litres of water a day which is up to 200 times bigger than that of higher-tiered data centers”, it was claimed.
So, what’s really happening in Johor?
The fact is this is not the first time that industry players are apprised of this possibility. This is a foreseeable problem that industry players have known since last year or even earlier. Early warning signs had been building up through the last few months.
A week before the SCMP’s report, Vivian Wong, senior analyst from DC Byte had already written that Sedenak Tech Park, one of Johor’s flagship sites, had been telling potential tenants they’ll need to wait until the fourth quarter of 2026 for the promised water and power hookups under its second-phase expansion.
Also, the fact that Johor has raised its water tariffs for industrial and high volume users since August reflected the administration’s concern that a potential crunch is a real possibility if precautionary measures are not taken. The guiding principle is that data centers’ usage should not pressure the state’s water supply to local households.
Having said that, how serious is the water problem in Johor? By all accounts, no one has mentioned that there is any water shortage. What is happening is a potential water distribution issue – “It’s not the sufficiency, it’s the management … how to make sure that water is channelled to the right place,” Lee Ting Han, Johor’s state executive councillor for investment and trade, had reportedly said.
The issue came to the fore due to the increasingly frequent water supply disruptions in recent weeks caused by droughts and pollution incidents such as the closure of four water treatment plants arising from a sand-mining accident. This triggered mounting public pressure. There is a perception that data centers are somehow tied to the various water issues affecting the state.
Ironically, data centers in both Johor and Selangor are currently only allocated less than a third of their initial water supply request, as revealed by Malaysian Energy Transition Minister Datuk Seri Fadillah Yusof in Parliament.
JLL’s Head of Data Centre and Industrial, Malaysia & Indonesia, James Rix, explains that the fear could have stemmed from a global backlash on evaporative cooling that caused water shortages in some areas in the US where the quantity of usage had become staggering. The fear contagion has spread to the EMEA which as a result is reducing their reliance on evaporative cooling. “I think Asia got caught in the global backlash,” Rix says, explaining the seemingly extreme measures.
Rix is of the view that evaporative cooling is a “20th century design that uses tonnes of water” which has the potential to precipitate a water crisis. “Facilities really should be designed using a closed loop cooling system or an air-cooled system.”
He estimates that about 60 per cent of data centers in Malaysia still use evaporative cooling, thus the temporary water supply deferment in Johor would apply to them especially the newer ones.
Practical Solutions
What then can affected data centers do? “They could pivot their design to a waterless or low water usage solution or join the growing crowd of alternative water sources users,” suggests Rix. Alternative water sources include treated wastewater, treated river water, and water from rain harvesting.
One data center in Johor that did not wait for a ‘water crisis’ to happen is Bridge Data Centres which has taken the initiative to build a multimillion-dollar water reclamation plant in Johor. Completed within 10 months, the plant will treat sewage effluent and use reverse osmosis similar to Singapore’s Newater technology. The plant currently processes five million litres of water daily, with plans to expand to 20 million litres depending on the demand of its upcoming Ulu Tiram hyperscale data centre.
Currently, Indah Water Konsortium Sdn Bhd, in collaboration with Johor Special Water Sdn Bhd, is supplying 12 million litres of treated effluents from 13 waste treatment plants a day to data centres in the state, according to reports.
Other data centers in Johor that had decided to own the potential problem are DayOne, Computility Technologies, a subsidiary of Beijing-based ZDATA TECHNOLOGIES PRIVATE LIMITED and AirTrunk. The Johor government is fully encouraging data centers in the state to use alternative water sources.
Johor is in fact rushing the construction of two water treatment plants to meet the rising demand. To be completed within the next two years, the plants are located at Semanggar Plant Package (50 MLD) for the Kulai and Sedenak areas; and the Layang 2 Phase 2 plant (160 MLD) for the Johor Bahru and Iskandar Puteri areas. Two others, namely Semangar 3 and Kayu Ara Pasong, are currently at the conceptual and detailed design stages. They have a combined capacity of 290 MLD and will supply to Johor Baru, Kulai and Pontian.
The state expects consumption of treated water to continue rising especially with the development of the Johor–Singapore Special Economic Zone (JS-SEZ) and data centres. It currently hosts 48 water treatment plants with a total design capacity of 2,352 MLD, while the average production for 2025 stands at 2,037 MLD. Demand is expected to rise to 2,700 MLD in 2030, to 3,000 MLD in 2035, and 3,300 MLD in 2040, hence there is an urgent need for new water supply infrastructure development, the Johor state assembly heard recently.
Hyperscale facilities are known to consume more than 15 MLD, mainly for cooling purpose. According to experts, a data centre with a capacity of 100MW uses about 4.16 MLD for cooling, equivalent to the daily water usage for a town of 10,000 people.
The state now hosts 17 operational data centers with about 11 under construction bringing the total capacity to possibly more than 5GW by 2030, making it Southeast Asia’s largest data center hub. Cooling them, as per experts’ estimates, might require about 675 million cubic metres.
In the meantime, while waiting for the water supply to increase, data centers in Johor are buying water manually using their own tankers, the Malaysian Parliament heard recently. Though the authorities were silent on the implementation date of the deferral and ban, it is assumed that the new policies are effective immediately after their respective announcements until further notice.
“More and more data center operators will start investing in water treatment or more sustainable methods to reduce their reliance on the municipal supply,” says DC Byte’s Wong, on the outlook beyond the deferral and ban.
The deferral of water supply only applies to data centers that are running 24-hour cooling using evaporative cooling systems where the water comes from the municipal supply. These data centers also happen to be mostly Tier 1 and Tier II, hence with the ban, the deferral would no longer be a huge issue.
Meanwhile, Johor can look forward to more ESG-compliant data centers which would help in its efforts to manage the huge water and power consumption needs of the over 51 data centers the state has approved as of November.