Thailand pauses 49 datacentre projects as AI buildout strains grids

Thailand paused construction on 49 datacentre projects and froze approval decisions on 117 more in September 2026, halting a buildout that had drawn a planned $27bn from TikTok, UAE-based Skyline Datacentre and Singapore's Bridge Datacentres. The pause, driven by what officials describe as insufficient detail for regulation and monitoring, marks the sharpest reversal yet in south-east Asia's AI-driven datacentre boom — a region that now holds roughly 50% of Asia Pacific's under-construction capacity, according to a 2026 report by real estate firm Cushman and Wakefield.

The stakes are large. AI demand has pushed hyperscalers and operators to pour capital into Malaysia, Thailand and Indonesia at a pace the region's grids and water systems were never designed to absorb. Governments that spent two years courting the investment are now scrambling to price, ration and police it.

Why did Thailand stop the bulldozers?

Thailand's Board of Investment opened 2026 with headline approvals: TikTok, Skyline and Bridge Datacentres together planned $27bn of datacentre investment. By September, the government had stopped work on 49 projects and suspended decisions on 117 more, citing the lack of sufficient details for regulation and monitoring.

Thailand's energy minister, Akanat Promphan, has said datacentres require large amounts of power generated from expensive imported gas, and he has called for a new electricity user category with higher tariffs to reflect that demand. The government has since announced an approval framework for new projects that weighs energy and water use, imposes power guarantee requirements and sets higher tariffs for operators.

Water is the second fault line. In the country's Eastern Economic Corridor, residents fear the projects will drain already depleted reservoirs. Somnuck Jongmeewasin, research director of advocacy group EEC Watch, said: "The Khlong Luang Reservoir in Chonburi (in eastern Thailand) is a primary flashpoint. Despite the reservoir being shallow and under strain, authorities are piping its water to industrial estates."

Indonesia has moved in the same direction. The governor of West Java, the country's most populous province, halted construction on a datacentre for lacking permits and an incomplete environmental assessment.

How did Johor become the region's biggest hub?

The boom traces back to Singapore, south-east Asia's datacentre capital through the 2010s, where Alibaba and Facebook opened facilities. Singapore imposed a moratorium on new datacentres from 2019 to 2022 because they were "intensive users of water and electricity", in the words of a Ministry of Energy, Trade and Industry press release. Approvals since then have remained selective under land and sustainability constraints: just 95MW of operational capacity was added between 2023 and 2026, per Cushman and Wakefield.

Malaysia absorbed the overflow. Operational capacity in the southern state of Johor grew more than tenfold, from 94MW in 2023 to 1,110MW in 2026, with a further 3,088MW under construction or planned. Johor is now the largest datacentre hub in south-east Asia, and it has attracted $40bn of datacentre investment as of 2026, according to Menteri Besar Onn Hafiz Ghazi, the head of the state government.

Microsoft anchors the American presence: it announced a $2.2bn investment for cloud and AI infrastructure across Kuala Lumpur and Johor in 2024. AirTrunk, an Australian datacentre company and one of Asia-Pacific's largest platforms, said it plans to invest $3bn to double its Johor datacentres from two to four.

Elsewhere in the region, the pipeline keeps growing. Indonesia has 1,699MW of development in greater Jakarta and is building up the island of Batam as a secondary hub; Microsoft is constructing five datacentres there under a $1.7bn investment, while Singapore-based operators Princeton Digital Group and Digital Edge expand in parallel. Bangkok's pipeline stands at 2,084MW, and secondary markets in Manila and Ho Chi Minh City are ramping up, per Cushman and Wakefield's analysis. China still holds the largest operational capacity in Asia Pacific, but the construction edge has shifted south.

What is the strain on power and water?

The growth is colliding with hard resource limits. Energy consultancy Wood Mackenzie estimates datacentres in Johor already consume 24% of the state's total power, a share that could reach 40% by 2035.

"The rapid growth of datacentre developments in Johor has the potential to create localized grid connection bottlenecks and increase the need for transmission network upgrades as well as new power supply capacity," said Alvin Tan, research analyst at Wood Mackenzie.

Water pressure is equally acute. Johor is drought-prone, and current operational datacentres are estimated to need about 675m cubic metres of water per day. In Indonesia, a report by research firm Tenggara Strategics found many datacentres are water-cooled and sited in hot, humid lowland environments, raising consumption compared with facilities in cooler climates.

Are communities pushing back?

Yes, and increasingly in public. In February, Johor saw its first public protest against datacentre construction, with demonstrators picketing a project by China's ZData Technologies over dust pollution near a residential area and the potential impact on water supply.

The economics of the deal are also under scrutiny. "While datacentres may create substantial investment and construction activity, they generally generate fewer long-term jobs than many other industries requiring comparable amounts of land, electricity and water," said Jie-Sheng Tan-Soo, an assistant professor at Singapore's Lee Kuan Yew School of Public Policy. "Communities may therefore reasonably ask whether they are receiving a proportionate share of the benefits while bearing the environmental and infrastructure costs."

He argues national governments should adopt integrated policy frameworks that force datacentre operators to face the full social opportunity cost of the resources they consume. "South-east Asia is increasingly aware but only partially prepared," he said, adding that preparedness for environmental impacts needs to keep pace with the speed of investment.

What are operators doing about efficiency?

Operators point to engineering fixes. Bridge Datacentres, among Malaysia's top operators, built a water reclamation plant and pipe network in Johor to cool an upcoming datacentre expected online next year. AirTrunk announced a partnership in April with sewage treatment operator Johor Special Water to recycle unused wastewater for its datacentres' operational needs. A representative said its "campuses are designed to operate significantly more efficiently than conventional datacentres and incorporate advanced technologies to optimise energy performance," but did not respond to detailed queries for data on efficiency and energy optimization.

The record on efficiency remains mixed at the top of the market. Microsoft has said it is looking at south-east Asian clean energy projects to fuel its datacentres, but its published Power Usage Effectiveness data — the industry metric for datacentre energy efficiency — shows its Asia-Pacific facilities are its least efficient globally.

How are regulators responding?

Tightening, everywhere. Singapore ties post-moratorium approvals to power efficiency and carbon emissions. Malaysia has set up a datacentre taskforce to review new projects for energy and water security. Johor announced it will no longer approve Tier 1 and Tier 2 datacentres, which used up to 50m litres of water per day — the daily drinking water needs of 25 million people. Thailand's new framework adds power guarantees and higher tariffs to its energy and water tests.

The region's bet, explicit in Johor's $40bn tally and Thailand's $27bn pipeline, is that AI demand will keep compounding. Whether regulators can impose the full cost of water and power on operators before the grids hit their limits will decide how much of that pipeline is ever switched on.