Jakarta, INTI - Indonesia’s Energy and Mineral Resources Minister Bahlil Lahadalia has offered the country’s islands as potential locations for data center development, seeking to attract investors while highlighting the country’s extensive land and energy resources. However, the proposal also raises concerns over potential ecological and social impacts.
Bahlil made the offer while opening Electricity Connect 2026 in Tangerang, Banten, on September 22, 2026. He said Indonesia has a vast territory and numerous islands that could still be utilized for investment, including data center operations.
“Investors should not hesitate to build data centers in Indonesia. Our territory is among the largest in Southeast Asia, and we still have many islands,” Bahlil said.
He also highlighted Indonesia’s competitive electricity supply and its significant potential for new and renewable energy sources, which could support the substantial power requirements of data centers.
Data Centers Raise Water and Energy Concerns
Despite the investment opportunities, data center development can create significant demand for electricity and water. These large-scale facilities require substantial resources for cooling, data processing, storage, and computer operations.
Trend Asia Research Manager Zakki Amali said large quantities of water can be required for data center cooling systems. Current cooling technologies include air-conditioning systems, water evaporation, and immersion cooling.
In Batam, for example, the EGS AI Data Centre project in Teluk Mata Ikan, Nongsa, relies on surface water to meet its water requirements.
“In several areas where water shortages have already occurred, conflicts over access to water have emerged,” Zakki said.
The Batam project also currently relies on electricity supplied by PLN, while future plans include meeting part of its electricity needs through a captive coal-fired power plant.
According to Zakki, this could create additional concerns related to electricity capacity and carbon emissions from coal-fired generation.
He also noted that data centers located on islands would still need to be relatively close to settlements because they require access to telecommunications and internet infrastructure. Many facilities are being developed to provide storage and computing capacity for artificial intelligence applications.
Data center development is currently also concentrated in special economic zones, including areas in West Java and Central Java. If facilities are built near agricultural areas, competition over water resources could potentially create conflicts involving the needs of local communities and agriculture.
Batam Faces Water Supply Challenges
Separately, during a discussion titled “Data Center Projects and Challenges in Energy and Water Resource Management in Batam” at the 2026 Malacca Strait Media Festival (FESMED) at Batam State Polytechnic on September 20, BP Batam Director of Investment Promotion and Facilitation Dendi Gustinandar said data center development remains part of the investment sectors being promoted in Batam, including the Nongsa area.
However, he acknowledged that the resources required to support the industry remain an important consideration for the government.
Batam has limited raw water resources because the island does not have a major natural water source. Its water supply has historically depended heavily on rainfall collected through reservoirs.
“Batam does not have a natural water source. Our water comes from rainfall. That is why Batam has developed reservoir projects since the beginning, and there are currently eight reservoirs,” Dendi said during the discussion.
The government is continuing to develop measures to manage water and electricity requirements as new investments enter the region, including data center projects.
Conclusion
Indonesia’s vast island geography and renewable energy potential create opportunities for data center investment, but the sector also requires careful management of electricity and water resources. As development expands, balancing investment opportunities with environmental sustainability and local resource needs will remain an important consideration.
Read more: PLN Batam Strengthens Power Reliability to Support Growing Data Center Demand