KUALA LUMPUR: Johor has emerged as the largest data centre (DC) hub in Malaysia.
But recent comments by the Johor Bahru city council on the availability of water called into question the viability of the state for data center build out.
Investors revently raised similar questions.
In contrast, JP Morgan's analysis shows that Malaysia has ample planned water treatment plant additions to accommodate expected DC builds.
The US investment bank does not see the availability of water as a near-term barrier for continued DC deployment given Malaysia's natural endowment and low water stress status.
However, the supply of treated water could prove an issue should capacity additions not materialise, or water supply interruptions exacerbate variability in the system, which could introduce an element of competition with the high domestic water user base in Johor.
JP Morgan noted that from 2018-2022, Johor maintained an average water reserve margin of about 10 per cent, highlighting existing excess capacity.
Over the next five years, it calculates about 61,000 million litres of annual water treatment capacity (up 33 per cent versus 2023) will be added.
Assuming about 1,500MW of DC capacity additions at a WUE (water usage effectiveness) of 2.0, JP Morgan projects 27,700 million litres of annual associated incremental water demand by 2028 (4.0 per cent of current water consumption in Johor).
Taking account of general water consumption growth of 3.0 per cent per annum, it expects total annual water demand of 851,000 million litres by 2028, compared to about 1,000,000 million litres of forecast annual water treatment capacity.
"On our calculations, water is not a limiting factor for data centres in Johor, at the state level, over the next five years.
"Our analysis shows similar result for Selangor, the other data centre hub in Malaysia."
Johor could accommodate three times the current planned DC additions out to 2028, it added.
"On our numbers, the water reserve margin actually expands to 19 per cent by 2028, higher than Malaysia's 15 per cent target, even taking account of data centre growth, suggesting additional headroom for data centre builds."
JP Morgan said should water reserve margins remain stable at 10 per cent, Johor could accommodate up to 5,500MW of DC capacity by 2028.
Overall, it said Malaysia is well positioned as a DC host in Asia given low water stress and ample power.
"Malaysia is one of the least water stressed countries In Asia, with low projected baseline water stress under every climate scenario."