Asia's energy security is critically linked to the Strait of Hormuz, a strategic waterway over which it holds no control. The implications of renewed conflicts in this region would ripple beyond just fuel supplies.
To secure its place in the burgeoning AI landscape, Asia must develop more robust and interconnected electricity networks without delay. Almost all significant Asian economies have formulated national AI strategies, with Japan recently announcing a substantial budget of 370 trillion yen (approximately $2.3 trillion), allocating over a quarter of this amount specifically for artificial intelligence and semiconductor investments over the next 15 years.
Establishing advanced AI models demands a considerable amount of computing power concentrated in limited locations, while the requirements for low-latency operations drive the need for data centers to be established in densely populated urban areas. In fact, power consumption for data centers across the Asia-Pacific region is projected to soar by about 165% between 2023 and 2030.
However, a substantial portion of the purported megawatt capacity in the region consists of what are termed “bragawatts”—impressive figures on paper that often fail to translate into actual energy production in a timely manner.
The challenge lies in the fact that, despite strides made in renewable energy generation, establishing reliable renewable energy systems necessitates significant upgrades to existing grids. Since renewable energy sources are typically located far from consumption hubs and provide power intermittently, unless there are advances in transmission and storage infrastructure, data centers will struggle to operate effectively. The International Energy Agency’s Southeast Asia Outlook indicated that grid and storage investments in 2025 amounted to a mere $13 billion, significantly short of the $50 billion required annually until 2050.
In a climate of rising fuel costs and energy insecurity, concerns over immediate electricity supply may overshadow the needs of data centers, as policymakers prioritize reliable power for residential and commercial use.
The U.S. serves as a warning sign in this regard, with nearly half of planned projects potentially remaining offline this year. In the initial quarter alone, 75 data center projects worth about $130 billion faced delays or cancellations due to local opposition, matching the total for the entirety of 2025.
Asia is experiencing similar challenges. According to a joint report with Oxford's Smith School, only around 38% of projected data center capacity was realized in 2024, making it one of the largest gaps between plans and actual deliveries globally. This issue is particularly pronounced in Malaysia and India, both of which are relying on a digital infrastructure surge.
In Johor, Malaysia, the construction of Tier 1 and 2 facilities has been prohibited due to concerns regarding local water resources, while India's ambitions to double its projected capacity by the next fiscal year face significant delays in grid reliability.
The excitement surrounding AI is creating a widening gap between what is promised and what can actually be achieved. Currently, commodity markets are responding to announced expansions rather than executable plans, leading to inflated copper prices and transformer costs that are now two to three times their pre-2020 levels due to high demand for limited equipment.
If interconnection delays persist, as seen in the U.S. and Europe, the disconnect between projected and realized capacity could lead to a volatile boom-bust cycle reminiscent of past metal market fluctuations.
In response, countries like Singapore, Malaysia, and South Korea are developing regulatory frameworks that require data center builders to include plans for battery storage and management of energy curtailments, along with assessments of grid impacts. This development may slow Asia's AI expansion, while the U.S. continues to push forward with an additional $4 trillion slated for data center construction through 2028. Each quarter of delay for Asian companies translates into lost opportunities for computing power, talent, and investment that may be redirected elsewhere.
Transitioning to a more open energy generation and trading environment—basically allowing wholesale markets the flexibility of price competition—will attract further investment needed to reduce dependency on imported oil and gas. Achieving this goal, however, requires building more transparent and sophisticated energy markets.
Currently, Asia's electricity markets do not provide the transparency necessary for investors. Most systems still operate under a traditional model of vertically integrated, state-run utilities that serve as sole purchasers, while retail rates are set administratively and trading options for third parties are extremely limited.
As a result, renewable energy investors face uncertainty regarding long-term returns, heightened by government interventions during peak demand periods. This raises the risk of grid projects being stalled due to financial constraints—projects that are essential for connectivity to Asia’s data centers.
Some progress is being made to liberalize electricity markets. For instance, Japan’s power futures market is becoming the fastest-growing electricity derivatives market globally, and India’s power exchange, IEX, is now operating day-ahead and term-ahead markets. Moreover, since 2022, electricity has been commercially exchanged between Laos, Thailand, Malaysia, and Singapore.
Marex, my organization, is playing a role in enhancing the liquidity of Japan's power derivatives market. In New Zealand, Marex was recently appointed to support a standardized super-peak electricity contract through an over-the-counter (OTC) trading platform, adding depth to a local market that historically has been fragmented and sparse.
These initiatives illustrate a vision for the deeper energy markets of Asia, offering instruments and platforms that equip generators, industrial consumers, and investors with the capability to hedge and price electricity with the same assurance they apply to other commodities.
For Asia to successfully scale its AI ambitions, the electricity market must operate with the level of rigor found in global crude oil trading. Realizing the region's desired AI infrastructure will ultimately hinge on establishing power markets that are resilient and transparent enough to instill investor confidence, allowing them to build in anticipation of future demand rather than merely responding to it.
