Johor’s growing data center sector could account for about 40 percent of the state’s electricity consumption by 2035, says a recent report by Wood Mackenzie, a research and consultancy firm. This represents an increase of 24 percent in current usage driven by data center demand in the state which doubled between 2024 and 2025, with Johor now accounting for an estimated 51 percent of total data center maximum demand across the Malaysian Peninsular.
According to the report titled Powering Johor’s Data Center Boom: Supply, Demand, and Grid Constraints, Johor has attracted MYR165 billion (US$ 42 billion) in cumulative investment from hyperscalers and technology companies, due to its close proximity to Singapore, lower operating costs and supportive policies with data center maximum demand reaching 3.8 GW, nearly one and a half times the state’s current electricity demand of 2.6 GW.
At present Johor has 6.8 GW of installed generation capacity, primarily from natural gas and coal-fired power plants, with strong connections to the wider Malaysian Peninsular grid. However, this overall system capacity figures do not reflect increasingly localized constraints around major data center hubs, particularly Sedenak Tech Park and Nusajaya Tech Park.
While power generation capacity is sufficient to support near-term growth, transmission and distribution infrastructure is emerging as the main challenge for future data center expansion. The report also identified shortages in 132 kV main intake substations and limited grid connection points as the most immediate infrastructure challenges as detailed in a company press release.
“Many investors still view power supply as the main hurdle for data center development in Johor, but our analysis suggests the challenge is becoming much more localised” said, Alvin Tan, research analyst for power and renewables, Wood Mackenzie, “The issue is increasingly about where power is available rather than whether it is available. Areas attracting the highest concentration of data center investment are also where grid infrastructure is under the greatest pressure, making transmission and distribution readiness a key determinant of future growth.”
To address these capacity problems, proposed solutions include higher-voltage 275 kV connections supported by on-site substations, increased use of solar generation for self-consumption and dedicated renewable energy infrastructure for data center clusters. Longer-term supply concerns as existing generation assets retire, about 2.1 GW of coal-fired capacity in Johor is expected to retire in the mid-2030s, while reserve margins across the Malaysian Peninsular are expected to tighten as electricity demand grows and several gas-fired power purchase agreements (PPA) expire.
The country has taken action to ensure its digital infrastructure growth is sustainable through Malaysia’s NewGen26 program, which will seek 6 GW to 8 GW of new gas-fired generation capacity for maintaining long-term reliability and supporting industrial growth. Renewable energy is also expected to become a larger part of Johor’s power mix with planned projects under the Southern Johor Renewable Energy Corridor in Mersing and Kota Tinggi could add up to 4 GWp of solar capacity combined with battery storage, helping offset future coal retirements.
Johor continues to attract data center investment through tax incentives, faster approval processes and grid connection initiatives. Renewable energy procurement is also increasing, with 1.3 GW of Corporate Renewable Energy Supply Scheme agreements signed in Malaysian Peninsular as of June 2025, all linked to data center projects in Johor.