Asian markets have tightened scrutiny on artificial intelligence (AI) demand as grid strain lifts thermal power’s upside, BMI Country Risk and Industry Research said on Thursday.
The research house said in a note that grid capacity constraints across Asia are becoming increasingly binding, as AI and data center-driven load growth shows no sign of slowing.
“This quarter, we revised up our electricity consumption forecasts for several markets, including Thailand, Malaysia and Vietnam,
“Data center investment and the expansion of AI workloads are the main drivers of these revisions,” BMI said.
Over the next decade, it now expects electricity consumption to grow by an annual average of 2.9 percent in Thailand, 3.3 percent in Malaysia and 5.6 percent in Vietnam.
It is noted that in Malaysia, data center and cloud projects reportedly accounted for nearly 44 percent of approved investment in the first half of 2026.
BMI expects this trend to continue as hyperscaler capital expenditure continues to rise year-on-year, and we see no sign of a near-term slowdown.
This bullish view is held by its technology team, which forecast AI capital expenditure by the four largest hyperscalers to increase by 22 percent, from $785 billion in 2026 to $960 billion in 2027.
In Thailand, data center capacity is forecast to more than double, from 242MW in 2025 to 550MW in 2026.
Data center capacity in Malaysia and Indonesia will each increase by approximately 50 percent year on year, reaching 1.6GW and 1.1GW, respectively, in 2026.
These systems are absorbing substantially larger loads in 2026.
“We expect supply constraints to peak in Malaysia and Thailand in 2026, before easing in 2027 as more generating capacity comes online,” said BMI.
However, its data center forecasts exclude hyperscalers’ self-built data centers.
Self-built facilities are increasingly the main source of new load, rather than colocation facilities.
“We therefore expect supply pressure to persist into 2027 and potentially beyond,” it added.
According to BMI, hot weather is also a factor in driving up cooling loads, with El-Nino resulting in heatwaves and record temperatures in many parts of Asia.
During the second week of August 2026, Malaysia’s data centers reportedly accounted for a record 9.3 percent of total electricity consumption, compared with an average of 7 percent over the year.
“We expect short-term supply pressure to increase through to early 2027 as El Niño strengthens and power demand rises further,” said BMI.
BMI also highlighted that regulatory tightening is evident in Thailand, Malaysia and Australia, and it expects this to continue as regulators seek to protect grid stability.
In its mid-year update of 2026 power-sector key themes, the research house highlighted that tighter regulatory scrutiny and selective approval regimes were limiting grid-connected load growth, posing downside risks to data center expansion.
Although this discussion focused largely on the United States, BMI noted the same dynamic is now evident in Asian markets as interconnection capacity becomes saturated.
IT added that data centers face increasingly stringent grid-connection requirements.
It is noted that in Thailand, the government recently suspended the construction of 49 data centers in September 2026, with new industry regulations expected within a month.
There are estimated to be more than 70 data center projects, out of which 40 are operational.
Chonburi province alone has at least 13 projects in construction or planning, and is already facing localized blackouts.
In addition, in July 2026, a new tariff category was approved for data centers, requiring them to pay higher, cost-reflective electricity rates of roughly THB5-6/kWh and provide grid-use bonds before new infrastructure is built to serve them.
In Malaysia, data center operators are now required to demonstrate their own sources of power and water before grid connection is approved.
Similar to Thailand, the government has also introduced separate, higher electricity tariffs specifically for data centers under RP4 regulatory period.
In Australia, the government announced in July 2026 a legal obligation for the next generation of large-scale data centers, where they have to bring their own clean, firmed energy, operate flexibly and connect efficiently.
Additional measures include demand flexibility during periods of grid stress, as well as onsite backup generation and storage, said BMI.
It sees a thermal resurgence is likely, particularly in emerging markets, as policymakers turn to dispatchable capacity amid stronger demand and deteriorating grid conditions.
“Coal and gas remain the default stopgap source of generation to short-term supply tightness, given their dispatchable and baseload characteristics,
“This was clearly demonstrated by the US-Iran war, which has seen coal generation make a comeback and many governments lifting anti-coal regulations and quotas,” said BMI.
It is noted that in Vietnam, coal output increased by 9.8 percent year on year in the first half of 2026 amid strong demand and liquefied natural gas (LNG) price spikes.
In July 2026, the Vietnamese government signaled that it may revise the national power plan to add coal-fired capacity, citing LNG supply disruption.
Shortly after, in September 2026, Gulf Development announced plans to revive previously shelved gas projects in Vietnam, citing rapid economic growth and rising electricity
demand.
Over the longer-term, BMI said the region’s governments face a trade-off between AI-driven investment and clean power commitments.
“We expect them to forgo the latter, even if it means using thermal sources, specifically coal and gas, to meet power demand growth,” it said.
This is reinforced by the fact that many of these markets benefitting from the AI boom are emerging markets (EMs), where economic growth remains their top policy objective.
Hence, if the AI boom prolongs over the next decade, thermal will be the obvious answer to power the industry’s growth, given that grid upgrades and new transmission lines have a lead time of five or more years, much longer than the time it takes to build a new coal or gas-fired power plant.
BMI noted developed markets are also making concessions. In August 2026, the Australian federal government reversed its position on fuel restrictions, agreeing to carve-outs that allow Queensland and the Northern Territory to power new data centers with coal and gas.
This followed statements from the energy ministry just a month ago that data centers using only gas-fired power would be barred from grid connection.