Powering the future: the evolving intersection of data centres and energy law in Portugal

Tiago Corrêa do Amaral

Abreu Advogados, Lisbon

tiago.c.amaral@abreuadvogados.com

Margarida de Oliveira Pedro

Abreu Advogados, Lisbon

margarida.o.pedro@abreuadvogados.com

Artificial intelligence (AI) is rapidly transforming how businesses and individuals operate, offering tools that enhance efficiency, innovation, and decision-making. From personalised customer experiences to predictive analytics, AI has become indispensable across industries. However, its rapid expansion brings with it a growing demand for computational power, which in turn fuels the need for robust data centre infrastructure.

As AI adoption grows, so does the global race to develop advanced data centres, as these facilities serve as the backbone of the AI revolution, supporting everything from machine learning models to real-time applications.

Yet, data centres are highly energy-intensive, requiring vast amounts of power both to run their infrastructure and to manage the heat generated by thousands of servers and storage devices. Europe’s data centre power consumption is expected to almost triple by the end of the 2020s, reaching over 150 TWh.[1]

As such, while AI-driven demand increases, so does the need to align data centre operations with energy transition goals, balancing sustainability with their strategic importance. The Portuguese Investment and Foreign Trade Agency (AICEP) predicts that Portugal could attract €10bn in data centre investments, with €5.8bn already underway or in the pipeline. The country will be served by 15 submarine telecoms cables over the next few years, solidifying its position as a key global connectivity hub.[2]

Despite the growing critical role that data centres are expected to play in its economy, Portugal currently lacks a dedicated, comprehensive regulatory framework for their development. Instead, developers must navigate a complex legal landscape, primarily governed, in the context of energy law, by Decree-Law No 15/2022, of 14 January 2022, along with Regulations issued by the Energy Services Regulatory Authority (ERSE), namely those establishing the procedures concerning grid access and governing the underlying commercial relationship with the relevant grid operator. Other regimes that are linked to key energy legislation also play an important role, such as environmental impact assessments, use of water resources and construction works licensing.

Although this patchwork framework can pose challenges, Portuguese legislation on energy does provide interesting mechanisms to address the substantial energy demands of data centres.

Notably, Decree-Law No 80/2023, of 6 September 2023, foresees an exceptional procedure for allocating grid connection capacity to new electricity consumption facilities in areas of high demand.[3] This is particularly relevant in the context of overcoming possible grid connection capacity constraints as, under one the procedures foreseen in this regime, unused connection capacity previously allocated to consumer facilities may, provided the legal requirements are met, be made available again in order to meet the demand of new consumer facilities. Furthermore, Projects of National Interest (commonly known as ‘PIN’ in Portugal) must be environmentally sustainable and frequently involve the production of tradable goods and services of an innovative nature or innovative technological processes. Such advanced data centre projects are granted precedence over the remaining interested parties in the transfer of unused allocated capacity.

This mechanism has already eased the implementation of key projects, including one of Portugal’s most ambitious hyperscale data centres, located in the high-demand area of Sines, which has recently doubled its secured IT capacity to an impressive 1.2 GW.

Exceptional regimes such as the one introduced by Decree-Law No 80/2023, of 6 September 2023 are no panacea for insufficient investment in grid infrastructure and lengthy administrative procedures, including those concerning licensing and construction of connection infrastructure. Nevertheless, they represent a flexible mechanism for optimising existing grid capacity and ensuring a more dynamic allocation of resources in response to growing demand, mitigating some of the bottlenecks faced by data centre developers when securing energy supply.

Beyond ensuring grid access, another key regulatory and practical challenge for data centres lies in their environmental footprint. In line with EU and national carbon neutrality targets, the Portuguese legislator has taken its first steps to introduce requirements and incentives to encourage renewable energy adoption in data centre operations.

To that end, Decree-Law No 84/2024, of 4 November 2024 (which partially transposes Directive (EU) 2023/1791 and enforces Commission Delegated Regulation (EU) 2024/1364), introduces new reporting obligations for data centres exceeding 500 kW in installed IT power. Under this legal framework, data facility owners or managers must publicly disclose data on its performance according to key performance indicators relating, in particular, to the total consumption of renewable energy, the total consumption of renewable energy resulting from power purchase agreements (PPAs) and the total renewable energy consumption resulting from on-site renewable sources.

For larger facilities with an installed power demand ≥1 MW, Decree-Law No 84/2024, of 4 November 2024 foresees incentives (to be defined in an upcoming Ordinance) to adopt best practices outlined in the European Code of Conduct on Energy Efficiency in Data Centres. A parallel can be drawn with Article 195(4) of Decree-Law No. 15/2022, of 14 January 2022, which establishes a mechanism for increasing the reduction of charges related to costs of general economic interest for certain energy-intensive installations. Under this regime, the reduction can reach 85 per cent, provided that at least 50 per cent of the facility’s electricity consumption comes from renewable sources. Additionally, of that renewable share, at least ten per cent must be secured through a forward contracting instrument or bilateral contract; or alternatively, at least five per cent must be covered by self-consumption from renewable sources. Similar criteria could be adapted to ensure that data centres integrate renewables into their operations, reinforcing national and EU-wide carbon neutrality objectives.

These legal provisions may pave the way for new policies and legislation ensuring sustainable data centres, as they keep policymakers, regulatory agencies and the public informed on this pressing matter; but, irrespective of considerations de iure condendo, the national legislator has, albeit in a ‘soft’ manner, already began to emphasise the importance of integrating energy efficiency and renewable energy into data centre operations.

This incentive to develop data centres based on renewable energy aligns perfectly with existing legal solutions that developers can adapt to their projects, such as Battery Energy Storage Systems (BESS). However, a recent legislative amendment deserves special attention.

PPAs are becoming increasingly vital for data centres aiming to secure a stable supply of renewable energy, especially hyperscale data centres. By entering into long-term agreements with renewable energy providers, operators can hedge against energy price volatility, meet sustainability targets, and support the expansion of new renewable energy projects. This approach not only reinforces corporate environmental commitments but also plays a crucial role in broader decarbonisation efforts.

Within this context, Decree-Law No 99/2024, of 3 December 2024, amending Decree-Law No 15/2022, of 14 January 2022, established a framework for the registration and bilateral contracting of energy, in line with Regulation (EU) 2024/1747. Ordinance No 367/2024/1, of 31 December 2024, enhances this framework by requiring the registration of PPAs and allowing sellers and buyers to disclose contractual terms on an electronic platform, thereby enhancing transparency and accessibility.

A well-defined regulatory framework for PPAs – currently rooted in the main legal framework of the energy legislation – has the potential to eliminate disproportionate regulatory and administrative barriers to bilateral energy contracting. This could also unlock the full potential of co-located and near-site renewable energy projects, fostering a more dynamic and resilient energy market for data centre operators – an opportunity that neither practice nor regulation have fully leveraged.

In brief, although the intersection of data centres and energy law in Portugal remains largely implicit (ie, embedded within broader regulatory instruments), the latest legal developments suggest a regulatory environment for data centres that encourages operational efficiency with long-term sustainability concerns. The growing strategic importance of data centres, both as critical digital infrastructure and as major energy consumer, suggests more precise regulatory developments are likely in the future.