DATA centre projects in areas with low water reserve margins will not be considered, as the government tightens water and electricity requirements to prevent growing industrial demand from undermining public supply.
Deputy Prime Minister II Datuk Seri Fadillah Yusof told the Dewan Rakayat today that developers must provide on-site water storage equivalent to at least two days’ consumption, while project locations will be screened based on water availability and recommendations from state water operators.
Fadillah, who is also Energy Transition and Water Transformation (PETRA) Minister said under the Water Supply Guidelines for Data Centre Development, the requirements are intended to reduce pressure on public supplies during disruptions.
The National Water Services Commission (SPAN) also requires water operators and developers to explore alternative sources for cooling systems, including recycled and reclaimed water, as well as rainwater harvesting.
The measures were outlined in a written parliamentary reply to Wan Ahmad Fayhsal Wan Ahmad Kamal (PN-Machang), who asked how the government would ensure data centre operations did not disrupt public access to water and electricity during droughts or supply emergencies.
For electricity, every application for data centre power supply undergoes a technical assessment by the Energy Focus Group, coordinated by the Energy Commission, before consideration by the Data Centre Task Force (DCTF).
The assessment examines projected energy demand, transmission and distribution networks, and the infrastructure investment needed to accommodate additional consumption while maintaining grid stability and adequate operating reserves.
The government has also approved a requirement for data centres to obtain at least 30% of their energy capacity or consumption from renewable sources. Operators are encouraged to use the Corporate Renewable Energy Supply Scheme (CRESS) to secure green electricity directly.
To reduce the risk of additional costs being passed on to other electricity consumers, operators are encouraged to generate their own electricity through the Solar for Self-Consumption (SELCO) initiative, which allows solar power to be used on site without exporting excess electricity to the national grid.
Data centres must also install backup generators to support operations during supply disruptions, peak demand and periods of low operating reserves. Demand-side management measures are expected to help ease pressure on the grid.
Fadillah said water operators had emergency response plans to address unplanned disruptions and supply crises. Depending on the severity, measures could include tanker deliveries, static water tanks, inter-state supply assistance and scheduled rationing or restrictions if conditions became critical.
The DCTF, jointly coordinated by the Investment, Trade and Industry Ministry and the Digital Ministry, considers local water and electricity capacity when assessing proposed developments.
The government will continue monitoring the sector’s growth and updating electricity generation and grid planning in line with actual demand, he added. - October 28, 2026
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