Malaysia's Data Centre Boom Could Leave People Dry - Experts

This issue has been the subject of ongoing discussions, particularly as Malaysia positions itself as a growing hub for energy-intensive data centres in Asia.

Malaysia’s rise as a major player in the data centre industry is no accident. With the surge in demand driven by Artificial Intelligence (AI) and social media, the need for data centres has skyrocketed, and the Malaysian government has been quick to capitalise on this trend.

In response, major tech companies like Microsoft, Google, and Nvidia have announced billions of dollars in investments to establish their data centres and other digital technologies in the country.

Data centres, which collect, store, and transmit the data powering services from social media to ChatGPT, consume vast amounts of electricity. Depending on their location, the heat they generate requires cooling, either by using additional energy for air-conditioning systems or drawing on thousands of gallons of water.

In Malaysia, where water is abundant, this means relying on water for cooling. While the country embraces this growing industry, experts are concerned that insufficient guardrails are in place to protect water resources for public consumption and the environment.

At the recent Sustainability Environment Asia 2024 Conference, Chair of the National Water Services Commission (SPAN) Charles Santiago stressed on the importance of developing a long-term strategy to manage water and ensure equal access. 

"In other countries, data centres have faced opposition from local communities. In Guatemala, for example, residents protested their continued use because of a lack of drinking water," he said.

He also urged the government to conduct a long-term Environmental Impact Assessment (EIA) for data centres and new tech facilities.

 

Singapore hosts more data centres but Malaysia may soon eclipse it if the current trend continues. Currently, there are 87 data centres operating in Malaysia, according to market analysis website Data Centre Map. 

Multiple news reports on tech giants’ decision to locate and host data centres in Malaysia cited – among others – the country’s infrastructure and low electricity tariffs compared to its neighbours Singapore and Thailand. The planned energy capacity for these centres is 1.6 gigawatts (GW), enough to power 750,000 to 1 million homes, according to DC Byte’s 2024 Global Data Centre Index. 

Kenanga Investment Bank Research estimates that electricity demand from data centres in Malaysia may hit a total of 5 GW by 2035. Tenaga Nasional’s current installed electrical capacity for Malaysia is about 27 GW, according to news reports.

Another reason for the shift to Malaysia is because Singapore has begun moderating data centre capacity growth in 2019 due to their energy and water consumption.

Industry leaders also pointed to Malaysia’s favourable government policies, such as tax incentives and subsidies, and industrial space for the centres. Having abundant access to water is also a plus, as using a water-cooling system at data centres would lower carbon emissions.

With the growing demand for AI, so has the demand for water to help it work.

The amount of water used to keep data centres cool is tremendous. In a series by The Washington Post, journalists working with researchers at the University of California, Riverside, found that a 100-word email written by an AI chatbot using GPT-4 used 519 millilitres (ml) of water. 

Sending just one email weekly increases water consumption to 27 litres - roughly equivalent to three water cooler bottles. Multiply that by Malaysia's population, and the total could fill about 350 million Olympic-sized swimming pools.

“Researchers at the University of California estimate that for every 20 to 50 questions ChatGPT answers, it uses – or perhaps ‘consumes’ – approximately 500 ml of fresh water. So the next time when you use ChatGPT, think carefully,” said Santiago.

 

As several experts noted, relying on water risks depleting the area of a precious natural resource, especially in the face of climate change.

While Malaysia is not in danger of drying out, it is not immune to drought. 

This year alone, the country experienced wildly fluctuating weather, with El Niño causing heatwaves and droughts in the early months and La Nina expected to bring heavier rainfall till early next year.

Malaysian Water Association (MWA) president Dr Mohmad Asari Daud told Bernama that although Malaysia has plenty of water, with some water storage holding enough water for 100 days, there was room for improvement.

“As of right now, we have a lot of water, (but) we have a lot of storage that is not managed. 

“So I think the challenge to all states actually is to devise off-river storages or river storages or adjacent river storages – storage that actually will complement (other) water sources, whenever there is a long drought,” such as figuring out a way to store all the excess water during flood season for use during dry seasons, he said.

Institute of Strategic and International Studies (ISIS) Malaysia researcher Zayana Zaikariah has been studying data centres and water consumption in Johor where many of the centres are located. She said based on 2022 figures, water storage should be sufficient to serve the industry and the public for now. 

“(If I recall correctly), we have about 11.5 per cent of water reserve. And I think based on the calculation that we did and based on all the other assumptions as well, there's only about an increase of about 5 per cent. But if that is the case, then I think given the water reserve, I think it should be sufficient moving forward,” she said via Zoom.

She added that Johor authorities also plan to increase their water reserves by 25 per cent by 2029. Coincidentally, Kulai, home to several data centres, experienced water shortages during the Eid holiday season in April this year.

Additionally, the country lacks sufficient water infrastructure, such as dedicated pipelines and treatment facilities, to support data centres. These centres, along with semiconductor facilities, rely on treated water for cooling their systems, as impurities can cause corrosion, scale buildup, microbial growth, and other issues that reduce equipment efficiency and lifespan.

Asari said many water infrastructure companies are hesitant to build the pipes and storage needed to service the centres’ water needs, as they were worried the data centres would not stay in Malaysia for the long haul.

"There is concern that the demand may only be short-lived, despite the millions being invested," he explained.

However, he suggested an easy solution - requiring tech companies to invest in building their own water infrastructure. This approach makes it less likely for companies to pull out before recouping the millions or billions of dollars they have invested.

 

The high energy and water consumption associated with data centres is a significant environmental concern. Environmentalists worry that the government may be compromising natural resources in its pursuit of becoming a regional data powerhouse.

Big tech companies have pledged to be green with lofty goals, which have largely failed to materialise.

Instead, tech giants have reported an increase in carbon emissions this year, driven by AI and data centre operations. Google, for example, saw its emissions rise by 48 per cent. Additionally, it fell short of its 2030 goal to replenish 120 per cent of the water it consumes, managing to replenish only 18 per cent so far.

Microsoft’s emissions have increased by 30 per cent since 2020 primarily due to the construction of data centres. Both Microsoft and Google have pledged to become carbon-neutral or carbon-negative by 2030.

Pertubuhan Alam Sekitar Sejahtera Malaysia (GRASS) President Mohd Yusaimi Md Yusof expressed concern to Bernama via WhatsApp that Malaysian regulators may not take a strong enough stance against these trillion-dollar companies should their emissions be higher than allowed.

“(And) sometimes we already have the necessary laws, but monitoring and enforcement are lacking. The courts also don’t always prioritise the environment,” he said, citing a recent case where river polluters received a lighter sentence after appealing to the Court of Appeals.

Water pollution happens more often than not in Malaysia. For example, Klang Valley has experienced several water disruptions due to illegal effluent discharges into rivers, which are key water sources. Asari of MWA said these discharges have led to the suspension of water services to clean and restore the water supply. While a few polluters have been arrested, charged, and made to pay restitution, many others have not faced consequences.

Cognisant of the fact, Lembaga Urus Air Selangor (LUAS) has implemented a Zero Discharge Policy, requiring 33,000 industries to register for a licence to discharge water. The policy also mandates businesses to pay a fee based on the amount of discharge, encouraging them to recycle water.

Another guardrail is to require data centres to implement rainwater harvesting and wastewater recycling, as well as involving local communities in the planning and development of these centres.

Both Zayana and Santiago emphasised the need for Malaysia to conduct a climate assessment with various 'what if' scenarios.

Santiago said a speculative EIA report, projecting 10 to 15 years into the future, could help prepare Malaysia for any unforeseen pitfalls. It would also identify potential threats to the region’s wildlife, as well as risks to the health, peace, and well-being of local communities.

"You don’t know when a drought will hit, or when a flood will strike. These events are unpredictable," he explained.

"When you make promises, you need to be 100 per cent certain, because it's a massive investment—billions of dollars. You don’t want to realise three years down the line that it was a mistake," he added.

 

Edited by Salbiah Said