Brazil approves law linking data center incentives to renewable energy use

On Tuesday, Brazil’s Federal Senate approved Bill 278/2026, establishing the Special Taxation Regime for Data Center Services (Redata). The text, approved without substantive changes to the version passed by the Chamber of Deputies, now goes to the president for sanction.

Among the conditions for accessing the tax benefits, data centers must meet their contracted electricity demand through supply agreements or self-generation using renewable or low-emission energy sources.

The Senate’s amendment was primarily a change in wording. The text replaced “clean or renewable sources” with “renewable or low-emission sources,” broadening the language of the original proposal and leaving the applicable criteria to be defined in subsequent regulations. The Senate cites solar and wind as examples of renewable sources, and hydropower, biomass and biogas as low-emission sources.

The requirement puts electricity procurement at the center of Brazil’s policy to attract investment in digital infrastructure and could add to demand already growing in the country’s free electricity market.

A survey by Clean Energy Latin America (CELA) identified 11 long-term contracts between renewable energy generators and data centers in Brazil from 2021 to 2024, totaling 330 MW and approximately BRL 7.7 billion ($1.4 billion) in transactions. Seven of the deals were structured under the self-generation model, while four were power purchase agreements (PPAs).

Solar and wind gain new demand potential

The combination of growing digital infrastructure and renewable energy procurement requirements could expand the market for generation projects developed to serve large loads.

For data center developers, long-term contracts with generators can link the expansion of computing capacity to a more predictable electricity procurement strategy. For generators, large, high-consumption loads can provide significant offtake opportunities for new projects.

The trend is already emerging in Brazil. According to CELA, the contracts identified through 2024 involved solar and wind generation and were structured primarily through self-generation arrangements and PPAs in Brazil’s Free Contracting Environment (ACL).

Self-generation and PPAs

Self-generation is likely to remain relevant for large-scale projects, particularly where consumers can establish partnerships with generation projects.

PPAs, meanwhile, allow data centers to contract electricity directly from generators over long periods, providing greater cost and supply predictability while supporting investment in new generation capacity.

CELA’s survey indicates the potential scale of the market. The 330 MWavg contracted by data centers from 2021 to 2024 represented approximately BRL 7.7 billion in transactions.

Incentives and obligations

Redata suspends federal taxes on equipment and components acquired domestically or imported for use in data centers. The suspension covers import duties, PIS/Cofins, PIS/Cofins-Import and the Tax on Industrialized Products (IPI), and will apply for five years.

In return, participating companies must allocate at least 10% of their installed data processing, storage and handling capacity to the Brazilian market; comply with sustainability criteria; meet contracted electricity demand through supply agreements or self-generation using renewable or low-emission sources; comply with water-efficiency limits for cooling systems; and invest in Brazil an amount equivalent to 2% of the value of products acquired under the tax incentive.

For the electricity sector, the most significant potential impact comes from the combination of growing digital loads and the requirement to procure electricity from renewable or low-emission sources.

If sanctioned, Redata could strengthen the role of data centers as a new class of large-scale electricity consumers in Brazil and increase demand for generation projects, long-term contracts and flexibility solutions as the country’s digital infrastructure expands.