Malaysia accelerates towards a smart, renewable-led energy future amid digital boom

The recent International Energy Week held in Sarawak underscored Malaysia’s ambitions to become a regional leader in low-carbon energy and digital innovation. As highlighted by Edwin Kong, Business Vice President for Power System Malaysia at Schneider Electric, the event brought together over 400 companies from 25 countries, focusing on transformative topics such as smart grids, carbon capture, artificial intelligence (AI), and financing solutions for energy transition.

Sarawak already generates approximately 70% of its power from renewables and aims to become the “Battery of ASEAN” by attracting investments aligned with its clean energy vision. Schneider Electric showcased technologies around renewable energy, green hydrogen, smart-grid modernisation, and carbon management during the event, aligning with Malaysia’s broader national objectives.

Malaysia is gearing up for the implementation of its 13th Malaysia Plan (13MP) spanning 2026 to 2030, which allocates RM611 billion focused on clean energy, digitalisation, and infrastructure resilience. The 13MP aims to digitise 95% of public service operations and provide 5G coverage to 98% of the population, setting the stage for an AI-enabled economy. A draft AI Technology Plan for 2026-2030 from the National AI Office promotes local talent development, research, and technology commercialisation to harness AI’s potential.

One significant driver behind Malaysia’s energy and digital transformation is the rapid growth of data centres. Johor, in particular, has become a hotspot, with 42 new data-centre projects approved in the second quarter of 2025 alone. The arrival of hyperscale centres , exemplified by DayOne Data Centres, which has secured RM15 billion in green financing for a 500MW campus , reflects the surging demand for near-continuous base-load power. Government data project server hall investments to increase by 185% between 2023 and 2025, creating more than 30,000 jobs annually by 2030 while adding substantial pressure on the electricity grid.

To address these demands, Malaysia is boosting grid resilience and digitalisation through unlocking new renewable energy corridors and enhancing grid interconnectivity. Plans include linking power grids between Peninsular Malaysia and Sarawak to expand green electricity exports and exploring nuclear energy feasibility for long-term sustainable supply. These measures align with climate adaptation needs, considering rising temperatures and extreme weather events threatening grid stability.

Three key trends shaping this regional interconnectivity are the deployment of smarter, shared infrastructure leveraging real-time data and analytics; the integration of intermittent renewable sources like solar, hydro, and green hydrogen; and the need for rapid self-healing networks to counter climate-induced stress. Advanced technologies, such as Fault-Location, Isolation, and Service-Restoration systems that mitigate power outages in under a minute, are critical for protecting vital facilities like hospitals and data centres. Dynamic grid reconfiguration abroad has shown CO2 reductions of up to 75 kilotonnes annually, an approach Malaysia could replicate to support its emissions trading ambitions.

Complementing these initiatives, state utility Tenaga Nasional Berhad (TNB) announced a RM43 billion (around $10.1 billion) investment in upgrading the national grid with AI-driven solutions and battery energy storage. This move was highlighted by Prime Minister Anwar Ibrahim in June 2025, emphasizing the importance of enhanced grid capacity and resilience to support AI infrastructure and green energy integration. Concurrently, Petronas is advancing carbon capture, utilisation, and storage (CCUS) projects offshore, collaborating with global partners such as Japan’s Eneos and South Korean firms to decarbonise the oil and gas sector and other industries. Petronas’ CEO, Tengku Muhammad Taufik Tengku Aziz, noted these efforts are crucial in meeting the growing energy demand from data centres, a sector attracting investments from multinational tech giants like Microsoft, Google, Amazon, Nvidia, and Oracle.

Malaysia’s energy landscape is also seeing a strategic shift away from coal towards a balanced mix prioritising solar and natural gas. Tenaga Nasional’s CEO pointed out solar energy’s falling costs now make it the cheapest electricity source per unit, a key factor as Malaysia plans to add 6-8 gigawatts of gas-fired capacity alongside doubling its renewable capacity from 9 gigawatts starting 2029. This strategy aims to enhance energy affordability and environmental sustainability while reducing reliance on coal.

Government commitments are ambitious, targeting 31% renewable energy in the national grid by 2025, rising to 40% by 2035 and 70% by 2050. This corresponds with the rapid expansion of data centres, expected to increase from 18 centres demanding roughly 800MW to 81 centres by 2035. Officials assure that this growth will be matched by sufficient renewable energy supply, avoiding grid disruption or tariff increases.

Together, these developments, coupled with Malaysia’s emphasis on digital infrastructure under the 13MP, including ambitious AI integration and widespread digitalisation, paint a picture of a country actively future-proofing its power grid for the twin challenges of rising energy demand and climate change. The transition to a smart, flexible, and sustainable grid infrastructure is critical in supporting Malaysia’s goal to be a regional powerhouse in clean energy, AI technology, and digital economy over the next decade.