Data center investment and domestic data processing
Brazil has outlined plans to attract investment in AI data centers and expand its domestic data processing infrastructure by drawing on its renewable energy supply capacity. The special tax incentive scheme for data centers, enacted in September 2026, already includes a requirement for participating companies to meet all their electricity demand with renewable or low-emission generation.
Brazilian President Luiz Inácio Lula da Silva said in the first speech after his reelection was confirmed, on October 25 local time, that Brazil would attract data centers by using its abundant renewable energy resources. Lula also set out goals to store and process Brazilian data domestically and reduce dependence on artificial intelligence technology from the United States and China.
Lula emphasized that, when attracting data centers, some of their facilities must be reserved for processing and storing Brazilian information. Identifying the digital and green economies as investment priorities for the new term, Lula also said training in mathematics and engineering would be expanded.
The remarks relate to data center investment support policies the Brazilian government has already established.
Tax incentives and eligibility requirements
On September 15, 2026, Brazil enacted Law No. 15.504, introducing the special tax incentive scheme for data centers, known as Redata. The scheme provides tax benefits to companies building new data centers in Brazil or modernizing and expanding existing facilities.
Eligible facilities include those processing data for cloud computing, high-performance computing, and AI model training and inference.
The scheme suspends payment of certain federal taxes when companies purchase or import electronic components and information and communications technology equipment needed to build data centers. Covered taxes include PIS/Pasep, Cofins, the tax on industrialized products, known as IPI, and import duties under certain conditions. If the obligations specified by law are fulfilled, the suspended taxes may qualify for a zero rate.
Companies seeking the tax benefits are subject to electricity procurement requirements. The law requires data centers to meet their entire electricity demand with power generated from renewable or low-emission sources.
To do so, companies must sign supply contracts to purchase that electricity or procure it through their own generation facilities. Solar, wind and hydropower can be major renewable energy sources, but eligibility is not restricted to solar and wind.
Alongside electricity procurement, securing domestic data processing capacity is also a condition of support.
In principle, Redata participants must reserve at least 10% of the data processing and storage service capacity of data centers built with the tax benefits for provision to Brazil’s domestic market. However, the law also includes a provision allowing this obligation to be replaced with additional investment in research, development and innovation projects equivalent to 10% of the purchase value of equipment receiving the benefits.
Companies must also invest an amount equivalent to 2% of the purchase value of equipment receiving the benefits in research, development and innovation projects in Brazil. Separate water-use efficiency standards also apply to data center cooling facilities.
Renewable electricity supply and demand forecasts
Brazil’s high share of renewable electricity generation underlies the government’s use of renewable energy as a key condition for attracting data centers.
According to the national energy balance report released by Brazil’s Energy Research Office, EPE, in June 2026, renewables accounted for more than 86% but less than 87% of Brazil’s electricity supply in 2025. Hydropower accounted for the largest share, while solar and wind generation were also expanding.
Brazil’s solar generation totaled 88.1 terawatt-hours, or TWh, in 2025, up 24.7% from the previous year. Cumulative installed solar capacity increased 33.7% to 64.79 gigawatts, or GW.
Wind generation also rose 8.2% over the same period to 116.5 TWh. Solar and wind accounted for 26.4% of Brazil’s total electricity generation in 2025.
The rise in electricity demand associated with data center expansion is also being incorporated into the government’s electricity planning.
According to demand projections in the Ten-Year Energy Expansion Plan to 2036, or PDE 2036, released on October 26 by Brazil’s Ministry of Mines and Energy, MME, and EPE, annual electricity consumption by Brazilian data centers is expected to reach 30 TWh in 2036.
The same projections put combined consumption by new large electricity users, including data centers, electric vehicles and hydrogen production facilities using water electrolysis, at approximately 47 TWh in 2036. That is more than 10 times the demand expected in 2026.
Brazil’s total electricity consumption is expected to reach 979 TWh in 2036. Of that, consumption supplied through the power grid was estimated to increase from approximately 620 TWh in 2026 to 878 TWh in 2036.
Expanded data center investment could create opportunities for solar and wind developers to secure long-term power purchase agreements, or PPAs, and pursue new generation projects. However, because data centers require continuous and stable electricity supplies, actual locations and investment volumes are affected by grid connection capacity, transmission and distribution infrastructure, and supply reliability.
Lula has presented the attraction of renewable-powered data centers as a future policy direction, but did not announce a separate new investment amount, data center construction scale or target for expanding dedicated solar power plants in this speech.
In the October 25 speech, Lula said, “We will teach more mathematics and engineering. I do not want to keep depending on Chinese or American AI. I want to create Brazil’s own AI.” Lula added, “We need to use the energy potential of Brazil, which may have the world’s greatest renewable energy production capacity, to attract the data centers we need here so that our data is also stored in Brazil. And these companies must reserve part of their data centers for Brazilian information.”
Original Korean article: aitimes.com
English brief by Korea Wind Intelligence, koreawindintel.com
