Johor data centres hit ‘time to power’ bottleneck

[KUALA LUMPUR] Johor’s bottleneck is no longer power generation but grid delivery, with connection timelines now determining which data centre projects move on and which fall behind, said industry watchers.

The consequences of that shift are already visible. Johor rejected up to 30 per cent of new data-centre applications in 2024, based on industry guidance published this month.

The report by Area Market Intelligence cited misaligned utility timelines, lack of clarity on the responsibility for substation infrastructure, and planning issues that were identified late in the day for the delays and rejections.

The real estate market intelligence firm, which focuses largely on Malaysia, also noted that some water and electricity approvals for projects can take up to 18 months, though this is from unverified reports.

The concerns are real. 

Ben Scuffins, founder of NuboSearch, said: “Time-to-power risk in Johor is increasingly driven by execution in grid delivery and approvals, rather than headline generation capacity.”

NuboSearch is a search firm focused on leadership hires in digital infrastructure, including those in data centres and power – roles that are in growing demand as Johor’s data pipeline expands.

“Substation build-out, connection sequencing and regulatory cadence will determine which projects stay on schedule,” he added.

Scuffins also pointed out that as multiple high-power projects are set to come onstream at around the same time, the race for talent has heightened for experienced power-infrastructure leaders, project directors and commissioning specialists.

Installed data-centre capacity grew from 10 megawatts in 2021 to 1.3 gigawatts (GW) in 2024, and could rise to between 3 GW and 4 GW by 2028.

This will be led by hyperscale cloud investment in the Johor-Singapore Special Economic Zone (JS-SEZ), said Mark Bennett, EY Asia-Pacific energy and resources customer experience transformation leader.

He added that data centres alone may require 5 to 6 GW by 2035, which he said would be equivalent to roughly a fifth of Peninsular Malaysia’s current electricity capacity. 

While manufacturing, logistics and port-related activity will also contribute to load growth, these will happen on a far smaller scale than in data centres, he said. 

Indeed, the growth in large, “lumpy” loads is changing the nature of grid planning, EY said.

While data centres come onstream in phases, each phase can require significant capacity and higher reliability, raising the stakes for substation build-outs, commissioning readiness and the order in which projects are connected. 

Scuffins said this would shift attention to “grid delivery and approvals” – the practical work of building and energising substations, securing contractors and equipment, and moving projects through a regulatory cadence that determines whether timelines slip. 

Even if generation capacity is added, delays in commissioning and project delivery can still turn a manageable schedule into a connection queue made up of multiple large loads attempting to come online at once.

Demand growth meets decarbonisation

Bennett said Johor’s power-demand story sits within a broader national trajectory as electrification and the energy transition accelerate.

EY research shows 91 per cent of Malaysian businesses expect electricity use to rise in the next three years,  driven by electrification and the spread of digital technologies.

He said the JS-SEZ’s emphasis on energy-intensive sectors such as data centres, manufacturing and advanced digital industries will significantly increase future electricity demand.

Meeting that growth while decarbonising the system will require substantial investment in both new generation and networks.

Malaysia is now planning 6 to 8 GW of additional gas-fired generation and up to 10 GW of new renewable energy capacity by 2030 to support growth alongside decarbonisation and security-of-supply goals, said Bennett.

Policy spillover

Johor’s infrastructure constraints are showing up in policy. 

Last November, the state signalled that it would tighten approvals for new data centres, with reports citing concerns over heavy water use and broader strain on local infrastructure.

The move came as Johor’s data-centre pipeline continued to swell; the state had approved 51 projects as at November 2025, with total investment value cited at US$44.3 billion, said a chairman of one of the state’s development committees.

Johor is also trying to build supply-side capacity to match its investment push.

In November, the International Finance Corporation (IFC), Johor’s investment arm Permodalan Darul Ta’zim (PDT) and Ditrolic Energy said they would collaborate on a US$6 billion solar-and-storage corridor – the Southern Johor Renewable Energy Corridor. This would supply clean electricity to manufacturers, data-centre operators and other fast-growing industries linked to the JS-SEZ.

The initial phase is expected to include up to 4 GW-peak of solar capacity and 5.12 GW hours of battery storage.

But new supply does not solve the gating issue if grid reinforcements and commissioning timelines lag.

The bottleneck also has competitive implications. With Negeri Sembilan, Selangor and other states pursuing data-centre investment, grid delivery speed is emerging as a differentiator for operators comparing sites across Malaysia.

Malaysia’s national utility Tenaga Nasional and industry regulator, the Energy Commission Malaysia did not respond to The Business Times queries on the matter. 

The central question: “Who pays?”

“Ultimately these investments, whether in renewables, gas-fired plants or the supporting transmission and distribution infrastructure, will need to be paid for by consumers, through a combination of tariffs, taxes or subsidies,” Bennett said.

A hyperscale campus can require substantial upstream upgrades. How those costs are split – through connection charges, tariffs or public funding – will shape both project economics and public acceptability, making affordability a central policy issue.

Bennett warned that delays or resistance to tariff reforms can slow investment into new generation and grid assets. Bottlenecks can become systemic when investment and delivery fall out of sync, he said, and cited the UK’s experience of reprioritising a large queue of generation and storage projects awaiting grid connection.

“Malaysia now faces a similar inflection point,” he said.