Balancing Growth: Sustainable Water Solutions Amid Malaysia’s Data Centre Boom
As Malaysia continues to attract massive investments in data centres, concerns are rising over the sustainability of their water usage, particularly in regions already grappling with water security.
Data centres have traditionally relied on water-cooled systems to manage the immense heat generated by their servers. However, this model is becoming increasingly unsustainable in water-stressed areas, said Wong Weng Yew, Founder and Managing Director of Open DC Sdn Bhd.
Since 2021, Malaysia has approved approximately RM145.4 billion in data centre investments, mainly in Johor’s Sedenak and Nusajaya, and Selangor’s Cyberjaya and Bukit Jalil, according to Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz.
“They chose Malaysia because land and energy costs are competitive,” said Tengku Zafrul in a recent parliamentary session. He acknowledged that data centres could strain local water supplies, though he did not specify the affected regions.
The National Water Services Commission (SPAN) reported that Selangor’s Air Selangor has received applications for up to 79 million litres per day (MLD) of treated water for data centres, with supply needs projected until 2032 — equivalent to 30 Olympic-sized swimming pools.
In Johor, water operator Ranhill SAJ Sdn Bhd has received requests for up to 440MLD of treated water for data centres through 2035. This demand, spanning areas such as Johor Baru, Iskandar Puteri and Kulai, accounts for nearly 23% of Johor’s total water usage in 2023.
Despite these figures, Johor Mentri Besar Datuk Onn Hafiz Ghazi dismissed concerns about water shortages, accusing detractors of spreading fear among investors. Speaking at a memorandum signing at the Invest Malaysia Facilitation Centre-Johor (IMFC-J) in Forest City, he asserted that Johor has sufficient water supply to support industrial use “beyond 2050”.
He stressed that the state, in collaboration with the federal government, is committed to providing reliable infrastructure for investors, including water and energy security. A special task force of three state executive councillors has been set up to evaluate incoming data centre applications.
To manage increasing demand, several states have introduced new water tariffs specifically targeting data centres. Starting this month, Johor is charging RM5.33 per cubic metre of treated water for data centres, with Selangor following at RM5.31 starting 1 Sept. Penang plans to match Selangor’s rate by July 2026.
“This RM5 per cubic metre rate will become standard across states,” said Pengurusan Air Pahang Bhd CEO Datuk Saiful Zaini Mohd Bokhari, noting that SPAN will prevent states from undercutting each other by offering cheaper water to attract data centre investments.
While water is managed at the state level, any tariff adjustments must be approved federally via SPAN. According to Saiful Zaini, data centre expansion will soon extend to east coast states like Pahang, which currently supplies raw water to Selangor via a pipeline through the Titiwangsa range.
To guide sustainable development, the Investment, Trade and Industry Ministry (MITI) has issued new guidelines addressing electricity, water use and carbon emissions for data centres. Promoting recycled or alternative water sources is central to this strategy.
In a significant step, Indah Water Konsortium (IWK) and Johor Special Water Sdn Bhd (JSW) recently signed an agreement to provide reclaimed water to data centres using treated effluent from three sewerage treatment plants.
Under the agreement, IWK will supply 12MLD of treated effluent to water reclamation plants built by Bridge Data Centres Malaysia IV Sdn Bhd and Computility Technology (Malaysia) Sdn Bhd. These plants will further treat the effluent into high-grade water suitable for cooling.
Meanwhile, JSW will deliver an alternative water source directly to DayOne Data Centre Malaysia II Sdn Bhd.
“With over 50 data centre proposals in Johor over the last two years, this surge in demand has prompted JSW and IWK to collaborate on long-term water solutions,” said JSW CEO Abdul Rashid Ismail.
IWK CEO Narendran Maniam added that the partnership is a major milestone in sustainable water management.
“By supplying reclaimed water, IWK is helping meet the high demands of the data centre industry while supporting Malaysia’s broader sustainability goals,” he said.