What’s Driving the Energy Demand?

Much of the electricity powering data centres goes into two areas: running the servers themselves and keeping those servers cool and reliable.

Artificial intelligence (AI) is now a major driver of electricity demand, adding to steady growth in cloud services and digital activity. The International Energy Agency (IEA) warns that AI could soon be the biggest factor behind rising data centre energy consumption.

It links this to the rapid rollout of accelerated servers used for AI.

These machines are power hungry. The agency projects electricity use in accelerated servers will rise about 30 percent a year, compared with just 9 percent for conventional servers. Accelerated servers alone are expected to account for nearly half of the net increase in global data centre electricity consumption, while conventional servers contribute around 20 percent.

Global data centre electricity consumption began accelerating sharply around 2017. This was driven by cloud growth, online media consumption and social media – and more recently, AI’s hunger for high-performance computing.

Between 2015 and 2024, the IEA says accelerated server capacity grew four times faster than total server capacity, contributing to rising power density in data centres.

Cooling is also a major part of that demand. As servers get denser, more electricity is needed not only to run the chips but also to remove the heat they generate.

A 2024 white paper from the Electric Power Research Institute (EPRI) notes that cooling systems account for 30 to 40 percent of a data centre’s total energy use.

How Much Energy Do Data Centres Use?

The IEA warns that data centre energy demand is skyrocketing globally.

“Global electricity demand from data centres is set to more than double over the next five years, consuming as much electricity by 2030 as the whole of Japan does today,” said IEA Executive Director Fatih Birol.

The effects will be particularly strong in some countries, he notes.

“In the United States, data centres are on course to account for almost half of the growth in electricity demand. In Japan, it’s more than half while in Malaysia, as much as one-fifth.”

This aligns with a Tenaga Nasional Berhad (TNB) projection cited by Kenanga Research, which estimates that by 2035, data centres in Malaysia could draw more than 5 GW. This is roughly 20 percent of the country’s total electricity generation capacity.

Another research note from Kenanga citing TNB data reveals a massive gap between what data centres are using today and what they are building for tomorrow.
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As of March 2025, data centres were drawing 485 MW from the grid. This is a nearly five-fold jump from the previous year (100 MW). But this is just the tip of the iceberg.
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There are 21 projects currently operating that have actually reserved enough grid capacity to draw 2.8 GW. This means they are currently running at less than 20 percent of their potential maximum.
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And the queue is getting longer. Seventeen projects (2.9 GW) are under construction while another five (0.7 GW) have just signed supply agreements, bringing the total potential demand to 6.4 GW across 43 projects.
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To visualise that load: that is more than the current total power generation capacity of the entire state of Sarawak (≈ 5.7 GW).
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Those pipeline numbers matter because the grid has to be planned for what developers declare they may need at peak – not only what they draw today. Kenanga estimated Malaysia would likely need 6-8 GW of new generation capacity by 2030 to meet rising demand, showing how quickly power-sector planning is being pulled into the data centre buildout.

Data Centres’ Growing Demand

Electricity demand in Peninsular Malaysia has been climbing for decades, and it is now hitting new highs more frequently. According to Malaysia’s Energy Commission and the Ministry of Energy Transition and Water Transformation (PETRA), the maximum demand for electricity has gone up from 3.4 GW in 1990 to 20 GW in 2024.

The largest electricity users are typically hyperscale data centres, particularly those optimised for AI. The IEA notes that a hyperscale, AI-focused data centre can have a capacity of 100 MW or more, consuming as much electricity annually as 100,000 households.

In early November 2025, the then Deputy Minister of Investment, Trade and Industry Liew Chin Tong told the Parliament that Energy Commission data showed data centres were consuming 603 MW as of June 2025.

This is roughly 47 percent of their declared maximum demand of 1,276 MW.

This raised concerns about “speculative applications” and the possibility of stranded assets if infrastructure is built for demand that does not materialise on schedule. He said the government wants data centres to reach 85 percent utilisation of their declared maximum demand to support overall grid stability.

Longer-term projections from the government show why the issue is now central to national energy planning. Earlier this year, PETRA projected that data centre electricity demand could reach 12.9 GW by 2030 and 21 GW by 2045.

This has prompted the Electricity Supply and Tariff Development, Implementation and Committee to approvethe Peninsular Generation Development Plan 2024-2050, including new gas-based generation and a larger role for renewables to meet demand growth.

Taken together, these figures describe the challenge facing the national grid.

Electricity demand is rising, and new data centres keep adding more to the “queue” of future load. Planners are trying to distinguish between what is declared, what is contracted, and what is actually drawing power at each stage of rollout.

Who’s Paying For It?

Data centres do not necessarily contribute to an increase in energy tariffs, but they can drive costly grid upgrades – and the key question is how those costs are shared.

Ireland offers a useful reference point for how quickly the issue can come under close public scrutiny. Ireland’s Central Statistics Office reported that data centres accounted for 22 percent of metered electricity consumption in 2024, up from 5 percent in 2015.

In 2024, it also showed data centres’ share exceeded that of urban residences (18 percent) and rural residences (10 percent).

As supply constraints tightened, concerns grew over grid reliability, including the risk of rolling outages, as well as over meeting climate targets. Ireland’s grid operator EirGrid said in 2022 it would not connect new data centres in the Dublin region for the foreseeable future, with reports at the time indicating new connections were unlikely before 2028.

In December 2025, Ireland’s utilities regulator, the Commission for Regulation of Utilities (CRU), published a new connection policy for large energy users, including data centres.

Under this rule, new data centres must provide extra electricity from renewable sources or other flexible generation. These resources must participate in the wholesale electricity market.

Electricity prices have also remained a closely watched affordability issue. Eurostatreported that in the first half of 2024, Ireland’s household electricity prices (including taxes and levies) were the second highest in the European Union at €37 per 100 kWh.

Ireland’s experience highlights the broader question of cost-sharing when large new electricity users enter a system. S. Piarapakaran, president of the Association of Water and Energy Research Malaysia (AWER), said a key risk is “cost socialisation”, where some of the costs of managing risks created by a new industry end up being absorbed by the wider system and ultimately reflected in tariffs.

“Transparency of the process and regulatory approaches can help reduce the risk of this,” he said, adding that the government could form a dedicated team to evaluate emerging technologies and their impacts.

In Malaysia, the government has sought to address that concern directly. On December 8, 2025, the then Deputy Energy Transition and Water Transformation Minister Akmal Nasrullah Mohd Nasir told the Dewan Negara that costs related to upgrading electricity and water grid infrastructure to support data centres will be fully borne by developers. This is to ensure there is no additional burden on consumers, particularly domestic users.

He said major upgrades to the grid are needed during the Fourth Regulatory Period, which runs from January 1, 2025, to December 31, 2027. This follows more than 7 GW of committed demand from data centres, secured through Electricity Supply Agreements with TNB, on top of already completed projects as of September 2025.

“In this regard, the government has introduced a ‘user pays’ approach under the new tariff structure, whereby data centre operators are required to bear the additional costs of strengthening grid infrastructure,” he said, adding that a dedicated Ultra High Voltage (UHV) tariff category has also been introduced for data centres operating at high and extra-high voltage levels.

We saw this during a recent visit to the upcoming hyperscale Google facility in Selangor, where a substation was being built on-site.

In practice, this does not automatically mean the data centre will draw more electricity than the surrounding area can provide. Rather, large facilities commonly require a dedicated, high-reliability grid connection and on-site electrical infrastructure to step down and distribute power safely, particularly when power is supplied at higher voltages.

(An aerial view of Google’s first hyperscale data centre in Bandar Elmina, Selangor, showing a substation under construction on-site.
Photo: Hafzi Mohamed/BERNAMA)

Such infrastructure is not unusual for hyperscale developments and is, in fact, anticipated under Malaysia’s planning framework. PLANMalaysia’s planning guidelines for data centres reflect this reality, pointing to the need for a main intake substation sized to the facility, with higher-voltage configurations recommended for large-scale projects. 

The guidelines also emphasise efficiency standards such as Power Usage Effectiveness, adequate backup generation, and early engagement with Tenaga Nasional Berhad requirements before finalising investments and land purchases.

Taken together, these policies and planning requirements reflect a clear shift in approach.

Grid expansion is no longer being treated as a pre-requisite for attracting data centre investment. Instead, growth is expected to follow confirmed demand, on-site electrical infrastructure, and a framework where developers bear the costs of strengthening the grid.

-- BERNAMA