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South-east Asia reins in datacentre growth amid power and water constraints
South-east Asia’s rapid datacentre expansion is slowing as governments confront limits on power and water, alongside concerns about regulation and environmental oversight. The pause matters because the region has become a major destination for companies seeking capacity for growing artificial intelligence demand, with about half of Asia-Pacific’s datacentre capacity under construction located there.
Malaysia’s Johor state has grown from 94MW of operational capacity in 2023 to 1,110MW in 2026, with a further 3,088MW planned or being built; its datacentres already use an estimated 24% of state electricity. Thailand paused construction on 49 projects and decisions on 117 applications in September, while West Java halted a project over permit and environmental-assessment issues. Singapore’s earlier restrictions helped shift investment to neighbouring markets, but the scale of new development is now raising questions about grid capacity and resource use.
In short
- Power and water limits are slowing the regional datacentre boom.
- Johor capacity rose to 1,110MW in 2026.
- Thailand paused 49 projects and 117 approval decisions.
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The case for
A pause or tighter rules can be justified if rapid datacentre growth risks putting essential electricity and water supplies under pressure or proceeding without adequate environmental review. Governments have a responsibility to assess cumulative impacts, protect local communities and ensure that new projects can be served sustainably before approving more capacity.
The case against
Restricting projects can slow investment and the infrastructure needed to meet growing demand for AI and other digital services, while weakening South-east Asia’s appeal as a destination for that investment. A more predictable approach—expanding grids and water capacity while setting clear environmental standards—could address resource concerns without broad pauses that delay viable projects.
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Originally published by The Guardian as “The datacentre arms race hits pause in south-east Asia”.