Brazil’s power sector prepared for data center expansion but transmission bottlenecks and regulatory uncertainty pose risks

Brazil’s national electricity regulator ANEEL confirmed the power sector is positioned to accommodate major infrastructure demands from data centers, electric vehicles, and upcoming market liberalization that will allow over 90 million consumers to choose their electricity supplier. Director-General Sandoval Feitosa stated the sector arrives at this expansion phase after achieving 99.8% electrification coverage and implementing three decades of regulatory development. The assessment came during the LAWINFRA Summit 2026 in Brasília on September 18, which gathered judiciary officials, regulators, executives and investors to address legal and operational challenges in energy infrastructure.

Grid operator ONS reported receiving connection requests approaching 20 GW from data center projects between 2025 and 2026, representing approximately 30% of Brazil’s total electricity supply. Director-General Marcio Rea attributed the surge to artificial intelligence expansion driving structural growth in data center demand. The Northeast region alone accounts for 30 projects totaling 8.3 GW of planned capacity through 2038, according to research agency EPE, attracted by abundant wind and solar generation. However, transmission capacity remains insufficient to deliver available renewable power to consumption points.

Industry representatives identified regulatory instability as the primary investment barrier rather than technical constraints. Asdrubal Júnior, director of the International Observatory of Justice and Arbitration, noted investors accept commercial risk but require contractual and regulatory predictability. Federal Judge Antônio Cláudio Macedo da Silva characterized institutional risk as exceeding technological risk for energy storage systems, emphasizing that regulatory architecture determines economic viability beyond battery costs.

The newly enacted Redata program suspends federal taxes on data center equipment imports for five years, with eligibility contingent on using renewable or low-emission power sources. Government estimates project the measure will cost R$5.2 billion in 2026, declining to approximately R$1 billion annually in subsequent years. Energy Minister Alexandre Silveira publicly advocated including natural gas under the low-emission definition, though final regulations remain pending.

EPE studies recommend R$1.6 billion in transmission reinforcements for São Paulo capable of unlocking nearly 4 GW of connection capacity, with additional works potentially enabling 5 GW more. Wagner Ferreira, member of the Bar Association’s Energy Commission, stated the sector’s transformation from unidirectional generation-to-consumption flows to multiple distributed sources increased regulatory complexity and demands faster institutional response.