Malaysia’s Data Centre Boom Reshapes the PV-Grid Equation

Malaysia is entering a new phase of electricity demand as rapid growth in data centres and AI infrastructure increases pressure on the power system while the country continues to expand renewable energy.

According to government projections, data-centre electricity consumption is expected to increase from 10,544 GWh in 2026 to 73,274 GWh by 2035, raising its share of electricity demand from 7% to 31%. At the same time, peak demand in Peninsular Malaysia is projected to rise from 21.3 GW in 2026 to 33.5 GW by 2035.

The scale of this growth is already visible. TNB was supplying 36 operating data centres with around 4.5 GW of planned supply capacity by the first quarter of 2026, while another 23 projects under construction represented approximately 3.8 GW of maximum demand capacity.

At the same time, Malaysia is expanding renewable generation through programmes including Large Scale Solar (LSS) and the Corporate Renewable Energy Supply Scheme (CRESS). The government has also targeted an additional 4 GW of renewable generation capacity through LSS5 and LSS5+.

However, the growth of solar PV creates a supply-demand challenge for data centres, which require reliable electricity around the clock. Solar generation varies with weather and is unavailable at night, making flexibility increasingly important.

This creates a growing role for battery energy storage systems (BESS). During periods of high solar generation, excess electricity can be stored, while batteries can discharge when PV output falls or data-centre demand increases. Combined with grid reinforcement, forecasting, advanced inverter controls and intelligent energy management, this can improve the integration of variable renewable energy.

Grid stability and power quality are also becoming increasingly important. Data centres rely heavily on power-electronic equipment such as UPS systems and cooling systems, while PV and BESS installations also depend on power converters. As these technologies become concentrated in areas such as Johor, coordination between renewable generation, storage, grid infrastructure and data-centre loads will become increasingly important.

Energy efficiency is another key component of the equation. Malaysia’s National Energy Efficiency Policy and Action Plan 2026–2035 (NEEAP 2.0) targets an 11.6% reduction in national energy demand against business-as-usual projections by 2035, while the Energy Efficiency and Conservation Act 2024 establishes requirements for qualifying large energy consumers.

For Malaysia’s expanding data-centre sector, the emerging energy model is therefore moving beyond standalone solar deployment. PV, BESS, grid infrastructure, advanced power electronics and energy efficiency will need to work together to support reliable digital infrastructure while enabling the continued growth of renewable energy.