Power struggle: will Brazil's booming datacentre industry leave ordinary people in the dark?

The Guardian

04-03-2025

Thirty-six hours by boat from Manaus, the capital of Amazonas state, Deodato Alves da Silva longs for enough electricity to keep his tucumã and cupuaçu fruits fresh. These highly nutritious Amazonian superfoods are rich in antioxidants and vitamins, and serve as a main source of income for farmers in Silva's area. However, the lack of electricity to refrigerate the fruit makes it hard to sell their produce.
Silva's fruit-growing operation is located in the village of Boa Frente, in Novo Aripuanã municipality, one of Brazil's most energy-poor regions, where there is only one diesel-powered electricity generator working for a few hours a day.
The 17 families in the community pay for the diesel, but because of the high price, everyone agrees to use the generator only between 6pm and 10pm. This is also the only time they can communicate with the outside world – the region has no mobile phone connection, only satellite internet.
'Power is supplied for just four hours a night. The motor is switched off and only switched back on the following night,' says Silva, 72, a rural health worker and fruit-grower who has lived in the area since he was born.
'I would have a much higher income if we had power to preserve the cupuaçu pulp. Our community is a big producer of tucumã, but the lack of power prevents conservation.'
More than 1.3 million Brazilians still live, like Silva, with little or no electricity. Even though it has one of the world's cleanest power grids, the country has a vulnerability: its reliance on hydroelectric power, which causes fluctuations in power generation and blackouts in times of severe drought.
Yet Brazil is attracting the attention of big datacentre companies, which consume huge amounts of energy. According to the Brazilian Data Centre Association (ABDC), 46 new datacentres are either under construction or being planned across the country. There are already 60 centres in operation.
The rush to build datacentres is part of the growing digitalisation of the Brazilian economy as large multinationals seek more data storage and processing for cloud platforms, apps, and critical private and government services.
Brazil has become a hub to meet growing demand in Latin America for streaming, e-commerce and AI apps, as expanding regional server capacity is critical to minimising delays in transferring data.
'If all the data was stored solely in the US, communication would be inefficient and delayed,' says João Xavier, director of institutional relations at ABDC.
Rodrigo Pastl Pontes, monitoring manager at Brazil's National Confederation of Industry, says the need to expand the number of datacentres is closely related to 'Industry 4.0' – the integration of technologies to make manufacturing more intelligent, automated and interconnected.
'Industry 4.0 offers flexibility that meets customer requirements in real time, allowing the company to reorganise constantly,' says Pontes. 'Secure datacentres are essential for this.'
One study put Brazil's Industry 4.0 market at $1.77bn (£1.40bn) in 2022 and expects it to reach $5.6bn by 2028.
With an eye on local and global markets, as well as its largely renewable power grid, Amazon and Microsoft have announced new investments in Brazilian datacentres.
Amazon plans to invest 10.1bn reais (£1.35bn) in expanding its datacentres and infrastructure over the next 10 years. The company claims to have established solar and windfarm projects with the capacity to match its energy consumption in Brazil – enough to supply 100,000 homes.
Microsoft is planning to invest R$14.7bn in the country. With datacentres in São Paulo and Rio de Janeiro, the company has signed a deal with the energy company AES Brasil to be supplied for 15 years from a Rio Grande do Norte windfarm.
Campaigners and experts say the problem is that implementing new energy projects, even renewable ones, could harm local communities just as the country needs to adapt its power grid to the climate crisis.
Vinícius Oliveira, a specialist at the Energy and Environment Institute, says: 'The impact of datacentres depends on where they are installed and on the type of energy the Brazilian power grid will need to meet the load demanded.
'We may have environmental impacts in soil, deforestation, building road access. Native flora will be eliminated. We may have real-estate speculation, with land becoming more expensive and families being displaced.' Oliveira also anticipates greater demand for water, as datacentres generally require vast amounts to cool servers.
'By using cooling systems with excessive water use, these companies consume more than small cities,' he says, stressing that better infrastructure for distribution and power generation will also be required.
'This level of investment may affect energy rates,' he adds. 'In the end, the consumers bear the cost.'
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According to last year's National Energy Balance report, the industry consumes about 31% of Brazil's energy, second only to transport. Projections suggest Brazil's electricity demand will grow by more than 30% by 2050.
Experts fear that datacentres' high water consumption will raise pressure on the power grid, as hydroelectric plants supply about half of all power. Lower water levels in reservoirs raise the chances of blackouts and increase demand for pricier and more polluting thermal power plants, fired by oil, gas and coal.
Incidents such as the 2001 water crisis, which caused rationing, and the severe 2014-15 drought, when reservoirs reached record lows, show how a lack of rainfall can threaten the national power supply.
Yet the energy ministry remains optimistic. In a statement, it said: 'The growth of the datacentre sector in Brazil shows the country's capacity to become a technological hub in South America, driven by a robust and predominantly renewable power grid.'
By 2026, global datacentre power demand is projected to reach up to 1,050 terawatt-hours – equivalent to about four times the UK's annual electricity consumption. This has prompted greater interest in alternative energy sources such as small modular nuclear reactors (SMRs), as seen in the plan by Alphabet, Google's parent company, to use them in the US.
According to Raul Lycurgo, president of the state-owned company Eletronuclear, nuclear power can meet Brazil's needs. 'Nuclear is the only [power source] that does not generate greenhouse gases,' he says.
But the idea faces opposition due to high capital costs and concerns about how to manage radioactive waste. 'Countries with no alternatives can afford to use a more expensive energy,' says Ricardo Lima, an energy consultant. 'We have much cheaper alternatives than nuclear – we have solar, wind, hydroelectric.'
Energy has been an issue as the climate crisis increasingly tests the Brazilian power grid. Roraima, in the Amazon region, the only state in the country not connected to the national grid, experienced blackouts last year due to severe drought and poor infrastructure.
Rio Grande do Sul faced dramatic floods, leaving millions of residents in the dark. In São Paulo, the country's wealthiest city, a recent blackout caused by heavy rain affected more than 3 million people.
Plans to expand the datacentre industry also contrast with the energy poverty affecting millions – a problem not limited to the Amazon. A study using the Multidimensional Energy Poverty Index indicated that 11% of Brazilian households lived in energy poverty in 2018 – a percentage rising to 16% in rural areas.
Even in São Paulo, the country's largest metropolis, residents face increasingly frequent blackouts. Elaine Santos, a researcher in energy poverty at the University of São Paulo, faces the problem herself, as she lives in Santo André, a suburb of the city.
'People lose food and their medication; the bakery closes,' she says of the power cuts. 'The shortages create tension, as everyone knows they will have to cope with their losses alone in neighbourhoods where people live in extremely vulnerable conditions.'
Santos believes the tech companies must look at the local effects caused by their growing share of the country's power supply.
'If they are going to build datacentres where people don't even have access to power, the companies need to provide compensation,' she argues. 'Since Brazil is being sold, the compensation must be robust.'