Data centers in Johor, Sydney, Melbourne and Batam could absorb most of the additional electricity generation planned for their respective markets over the coming years, raising concerns over power availability as cloud computing and artificial intelligence (AI) workloads expand, according to BMI Country Risk and Industry Research.
In a report on last Thursday, BMI said Johor would face the tightest electricity supply balance, followed by Sydney and Melbourne, while planned generation growth in Batam should broadly support its data center pipeline. However, securing grid connections is emerging as a bigger constraint, as electricity infrastructure struggles to keep pace with development and regulators impose stricter requirements on new projects.
BMI’s analysis shows that data center utilization rates, rather than power usage effectiveness (PUE), will be the main determinant of electricity demand. While planned generation could meet demand under its base-case scenario, little capacity would remain for households, industrial users and electrification.
Johor’s data center capacity is expected to expand significantly, with 825 megawatts (MW) of live capacity currently and another 3.9 gigawatts (GW) expected over the next three to five years, including publicly disclosed facilities built by cloud service providers.
In comparison, Sydney and Melbourne have a combined 1.76GW of live capacity, with another 3.6GW expected, while Batam has 70MW of live capacity and a further 747MW in the pipeline.
BMI’s Technology team forecasts live data center capacity in Malaysia to increase from 1.6GW to 1.9GW between 2026 and 2030, while Indonesia’s capacity is projected to rise from 1.1GW to 1.2GW. These forecasts exclude self-built facilities operated by cloud service providers such as Microsoft, Amazon and Google because publicly disclosed data on these projects is limited, potentially understating future power requirements.
Major developments include YTL’s 1.2GW data center campus in Johor, with 300MW expected to become operational by the first quarter of 2027. In Sydney, Equinix’s 504MW campus includes its own 720MVA substation, while NEXTDC began construction of its 350MW S4 facility in March 2026. In Batam, DayOne, Firmus Technologies and Nvidia began building a 360MW campus in June 2026.
Johor faces the tightest electricity supply
Under BMI’s base-case utilization scenario, new data center capacity in Johor could require about 30 terawatt-hours (TWh) of electricity annually by 2031, accounting for around 18 percent of Peninsular Malaysia’s electricity supply, compared with 6 percent in 2026.
This would absorb more than 90 percent of the net additional electricity generation BMI forecasts for Peninsular Malaysia over the same period, leaving limited room for other sources of demand growth.
The supply challenge is compounded by the fact that Peninsular Malaysia’s electricity grid is not connected to Sarawak, where much of Malaysia’s hydropower expansion is expected to take place.
BMI forecasts Malaysia’s thermal power capacity to increase by a net 3GW between 2029 and 2031, from 33.3GW in 2028 to 36.3GW in 2031. Gas-fired generation is expected to rise by 13.6TWh to 106.7TWh as electricity demand grows.
The report also noted that planned capacity additions may not fully materialize as scheduled, potentially prompting delays to the retirement of existing coal and gas-fired plants to maintain supply security.
Australia and Batam face different challenges
In Australia, data centers are expected to account for about 10% of national electricity consumption and absorb 84 percent of additional generation over the next five years. This comes as the country transitions towards renewable energy while retiring coal-fired power plants.
Sydney and Melbourne remain attractive data center locations because of their connectivity, population centers, enterprise demand and subsea cable infrastructure. However, higher electricity costs and limited grid capacity could make project locations increasingly difficult to secure, BMI said.
Batam’s data center sector benefits from its proximity to Singapore, with sub-five-millisecond connectivity and access to more than 15 operational and planned subsea cables. The island is attracting demand spilling over from Singapore, including cost-sensitive deployments and workloads requiring local data storage.
Data centers could account for more than half of Batam’s electricity consumption, absorbing 89 percent of additional generation. The island has about 0.9GW of installed generating capacity, while state utility PLN plans to add 860MW by 2032, including two 300MW gas-fired plants.
However, DayOne’s Kabil campus has contracted about 450MW, equivalent to half of Batam’s current installed capacity. BMI estimates the island’s data center pipeline could reach 747MW by 2031, exceeding PLN’s projected data center demand of 605MW for the Batam system by 2034.
Under BMI’s high-utilization scenario, all three markets could face electricity generation shortfalls. The challenge is particularly pronounced as data centers require reliable, round-the-clock electricity while a growing share of new generation comes from intermittent renewable sources.
Grid connections emerge as key bottleneck
Despite the planned expansion of generation capacity, BMI said physical grid infrastructure and access to connections could prove more restrictive than headline electricity supply figures suggest.
In Johor, overall grid utilization is estimated at about 30%, but demand is concentrated in locations such as Sedenak and Nusajaya, where local substations and connections are becoming constraints. Tenaga Nasional Bhd plans to invest MYR 43 billion ($10.53 billion) in grid upgrades, although major projects typically take five to 10 years to complete.
Malaysia has also tightened requirements for new data centers, with operators facing restrictions on approvals for non-artificial intelligence (AI) facilities and requirements to demonstrate access to power and water supplies. In October 2026, the trade minister said investors would bear the cost of transmission upgrades and pay for allocated grid capacity even if it was not fully utilized.
In Australia, the Australian Energy Market Operator’s 2026 Integrated System Plan calls for about 6,000km of new transmission lines, while line costs have risen by 25 percent to 55 percent. Developers are increasingly investing in their own substations or considering locations west of Sydney where grid capacity is more readily available.
Batam faces a more fundamental constraint because its isolated grid cannot draw electricity from Indonesia’s wider power system during periods of tight supply. At full load, the island’s data centre pipeline could require about 1GW of electricity, exceeding its existing installed generating capacity.
BMI expects grid access to remain a major constraint on data centre development across the four hubs. Projects with secured power connections, committed tenants and sufficient financing are more likely to proceed on schedule, while those without confirmed electricity access face greater delays.
As a result, a significant portion of the announced data center pipeline could come online later than currently planned, even as demand for AI training and inference continues to expand.
Asian markets tighten scrutiny on AI demand as grid strain lifts thermal power’s upside – BMI