Could Brazil be the next global data center hub?

The wide supply of competitive and renewable energy positions Brazil as one of the most attractive countries for installing data centers, as pointed out in a recent Santander bank report.

Data centers are large buildings that consume a significant amount of electrical energy. With the advancement of regenerative artificial intelligence, the demand for cheap electricity, reliable infrastructure and renewable energy will increase substantially, and Brazil meets these three requirements.

There are currently 11.879 data centers distributed in 136 countries, of which 48% are in North America (45% in the USA), 29% in Europe and just 5% in Latin America, according to data from Banco Santander.

Both the United States and Europe face challenges related to the supply of energy and water (used for cooling). High energy prices in these regions are one of the biggest obstacles, in addition to environmental barriers due to CO2 emissions from the use of non-renewable sources of electricity.

According to IEA (International Energy Agency), electricity consumption in data centers, cryptocurrencies and artificial intelligence totaled 460 TWh in 2022 and can reach approximately 800 TWh by 2026 in a base scenario.

In of market size, data from the German platform Statista indicates that The data center market reached US$329,3 billion in 2023 and could grow 4,5% in 2024. In Brazil, this market reached US$4,6 billion (1,4% of the global market) and is expected to grow 8,7% in 2024, reaching US$5 billion, with a projection of reaching US$6,5 billion by 2028.

Most data centers in Brazil are located in the Southeast region, where electricity and fiber optic infrastructure is most developed. However, the Northeast region also has the potential to benefit from this market.

The Ministry of Mines and Energy (MME) and the Energy Research Company (EPE) have been working to meet the growing demand for energy from data centers. The current energy demand of data centers in the country could jump from 1 GW to 2,5 GW by 2037, which would represent more than R$54 billion in investments during this period, considering that the average value of investment per MW in data centers in the country Brazil is around R$36 million.

Two characteristics that favor Brazil are the high level of renewability of the electrical matrix (85%) and competitive energy costs. Currently, Brazil has competitive electricity prices compared to the US and European countries, where most data centers are located.

Furthermore, Brazil has an installed capacity of 200 GW, with EPE forecasting this to increase to 275 GW by 2031. “One of the most advantageous ways for Brazil to take advantage of excess electricity supply would be through powerhoring, that is, attracting foreign industries to establish factories in the country”, highlighted Santander.

Many data center companies have already established energy purchase agreements and investments in self-production in Brazil. AWS invested in a solar complex in Ceará (122 MW) and another in Rio Grande do Norte (49,5 MW).

 Odata entered into a partnership with Serena to acquire energy from a wind project in Bahia, with 212 MW of installed capacity. 

Takoda has a partnership with Casa dos Ventos and is supplied by a wind farm in Rio Grande do Sul. 

Microsoft signed a 15-year contract with AES Brasil (recently acquired by Auren) to supply renewable energy. Ascenty chose to purchase renewable energy on the Free Energy Market.

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