Malaysia’s electricity demand is entering a new structural growth phase, driven by the rapid expansion of data centres that are replacing traditional industrial users as the main source of baseload demand, according to Kenanga Research.
The research house said Peninsular Malaysia’s power consumption, once closely tied to industrial growth, is now being reshaped by large-scale investments from global hyperscale technology firms such as Amazon Web Services (AWS), Google and Microsoft, which have collectively committed more than US$16.5 billion to data centre development in Malaysia.
Historically, electricity sales in Peninsular Malaysia served as a reliable indicator of macroeconomic growth. During the industrial expansion of the 1990s, electricity demand growth averaged 13.8%, maintaining a 1.5 times multiplier against GDP growth.
However, demand growth moderated to 5.9% between 2000 and 2010 and further slowed to 4.6% from 2011 to 2019, with consumption increasingly lagging broader economic output. Post-pandemic, growth averaged just 3.9%, pushing the multiplier below 1.0 times.
That trend shifted in 2024, when the “data centre wave” triggered a 6.2% rebound in electricity demand.
Kenanga said the softer 2.3% growth recorded in 2025 reflected a timing mismatch rather than weakening demand, noting that non-residential construction surged 16.3% as developers rushed to build data centre shells that typically require 12 to 18 months before becoming operational.
“This points to Malaysia’s next major load cycle as these facilities begin full operations,” the report said.
Tenaga Nasional Berhad’s 2025 disclosures showed a 7,500MW pipeline across 56 data centre-related projects, with total completed capacity reaching 4,500MW. However, actual load currently stands at only 850MW, indicating substantial latent demand.
Kenanga noted that data centre load has already surged six-fold since early 2024, suggesting significant upside as facilities achieve full server-rack population through 2026.
At the same time, Malaysia faces a major supply challenge as 6,400MW of coal-fired generation capacity, including plants at Kapar and Tanjung Bin, is scheduled for retirement between 2029 and 2031.
To offset these retirements and meet rising data centre demand, the country will require around 12,000MW of new generation capacity by 2031.
This places strong focus on the upcoming NewGen26 power generation tender, where players such as Malakoff Corporation Berhad and YTL Power International Berhad are seen as having an advantage due to pre-secured turbines and faster execution capability.
Kenanga said bridging the supply-demand gap would require aggressive greenfield development, strategic power purchase agreement extensions and, eventually, a transition toward nuclear baseload generation.
Natural gas is expected to serve as Malaysia’s key transition fuel, with Petronas developing the Regasification Terminal 3 (RGT3) in Lumut and Gas Malaysia Berhad advancing an offshore regasification terminal in Yan.
Strategic vertical integration is also emerging, with Tenaga and Malakoff exploring equity stakes in these terminals to secure fuel supply for future combined-cycle gas turbine projects.
Meanwhile, Tenaga has entered what Kenanga described as an “infrastructure super-cycle,” with regulated capital expenditure rising 108% to RM42.82 billion for the current regulatory period.
This spending is largely driven by the Green Lane Pathway initiative for data centres and is expected to structurally expand Tenaga’s regulated asset base, supporting long-term earnings growth as the national grid modernises.
Kenanga maintained its OVERWEIGHT call on the utilities sector, naming Tenaga as its top pick for leading the grid expansion cycle, while YTL Power and Southern Cable Group Berhad were identified as key beneficiaries of the data centre boom and associated grid reinforcement works.
