Inside the race to fire up Africa's power-hungry data centres

In Africa, as throughout the world, the relentless rise in digital connectivity means that demand for data centre capacity is growing rapidly. And, as the artificial intelligence revolution gathers pace, demand for data centres is set to accelerate even further.

Consulting group McKinsey projects that data centre capacity in the five largest African markets will increase from around 400 megawatts today, to between 1.5 and 2.2 gigawatts (GW) by 2030. Luca Bennici, a partner at McKinsey, tells African Business that data centre demand is also expanding significantly beyond the continent's traditional leading market, South Africa. He lists Kenya, Nigeria, Morocco and Egypt as key emerging players.

"We would expect these to become tier one markets or hubs that could potentially serve demand locally and in the regions around them."

One of the key challenges in expanding data centres is that they require a huge amount of power - a challenge that is becoming ever more acute as the graphics processing units (GPUs) needed to run AI applications are highly electricity-intensive. Globally, the International Energy Agency says data centre power usage will double by 2030.

Reliability

One of the companies on the front line of Africa's data storage challenge is Raxio Group. The company operates data centres in Uganda, Ethiopia, Mozambique, Côte d'Ivoire, DR Congo and Angola, and expects to soon launch a new facility in Tanzania.

The issue of securing power supplues is a major preoccupation for the company, says Rob Saunders, its chief technology officer.

"It sits at the very forefront of our decision-making whenever we go into new markets."

Raxio's typical approach is to connect its facilities to the local electricity grid, via investment in new power lines from a substation.

"What we haven't done in any of our markets is rely on legacy utility grid infrastructure in the local network. We actually invest in MV power lines direct from the substation, direct to our facility," says Saunders.

For a data centre, a total loss of power can be disastrous. Operators promise their clients 'five nines' reliability - meaning a facility must be operational 99.999% of the time.

Saunders says that Raxio always uses two power lines, each capable of independently supplying sufficient power. On top of these connections, Raxio also maintains diesel generators capable of fully powering its facilities.

This results in a "big operational cost", says Saunders. Even a small 1.5 MW data centre with four back-up diesel generators requires the company to store around 90,000 litres of diesel on-site.

Green dilemmas

Around the world, the rapid rise in power requirements for AI data centres is posing a major challenge for the energy transition. Particularly in the United States, tech giants are engaged in a frantic scramble to develop AI capacity - and are prepared to consider almost any solution that will deliver the required level of power. Some data centres are running on converted jet engines, while the level of demand for new gas turbines is such that customers face a delay of around five years in receiving orders.

Although renewable energy and nuclear power offer low carbon alternatives, the risk is that AI will end up driving an upsurge in emissions.

Adam Kendall, who leads McKinsey's sustainability practice in Africa, draws a distinction between 'hyperscalers' - tech giants such as Google, Microsoft or Amazon - and smaller local players in the Africa data centre landscape in terms of their level of commitment to green power.

Hyperscalers tend to have net zero targets and are under pressure from customers and investors to minimise their carbon footprint. As well as searching for renewable power sources, these companies have invested heavily in carbon offsetting. Yet the same pressures do not necessarily apply to smaller operators, Kendall believes.

"The local players, I don't think it features in their consideration hardly at all," he says. "Reliability is going to be most important. Second, they'll look at cost, and then third they'll look at whether or not it's green. And the reality is the local players don't have the large-scale capabilities to be signing new power purchase agreements with [commercial and industrial] players to bring in solar capacity."

Going off-grid

Power purchase agreements between large industrial businesses and independent solar developers have become increasingly popular in parts of Africa. These arrangements generally provide cost savings for companies, while also helping to lower their carbon footprint.

Yet South Africa is far ahead of the rest of the continent in allowing the IPP market to really take off. This is because South Africa remains unique in allowing customers to procure electricity from a solar project in one part of the country, then 'wheel' the electricity through the grid to supply their facility.

"South Africa is, in my mind, a great example of what you can do if you drive liberalisation of the power sector," says Kendall.

He highlights the Springbok Solar Power Project, which was recently brought into operation by SOLA Group, an independent power producer. The 195-megawatt facility is the first multi-buyer project in the country - US giant Amazon Web Services is the anchor client, alongside several other corporate customers.

Saunders is among those who would like to see similar possibilities elsewhere in Africa.

"Solar PPAs with wheeling are largely undeveloped in our markets today, but they are something we are actively monitoring and would welcome as regulations mature," he says.

In the current absence of wheeling opportunities, Raxio is considering procuring power from solar developers that build generation capacity adjacent to its data centres.

"In Mozambique, we have recently acquired adjacent land next to our existing data centre, effectively doubling the site footprint and creating the option to develop a dedicated on-site solar project."

Governments and utilities are, however, often nervous about major power users like data centres purchasing electricity from IPPs, even from on-site facilities.

"From a political point of view, it is difficult for a state to accept that one of their key clients will actually not purchase energy from the national utility, but from a private company," says Simon Cudennec, a partner at law firm Bracewell.

While several countries, such as DR Congo and Senegal, are beginning to liberalise their power markets, Cudennec warns that in practice it can still be difficult to secure the necessary permissions to procure power from an IPP, while also maintaining a grid connection as an alternative power source.

"It takes time," he says. "And even though these countries are moving towards this kind of direction, in my experience, there are only a few projects, if any, that benefit from the relevant authorisations."

East Africa's opportunity

While South Africa is currently the continent's leading data centre market, many observers believe East Africa is well-positioned to catch-up.

Ethiopia and Kenya already produce almost all their electricity from renewable sources. Ethiopia's electricity mix is dominated by hydropower, while Kenya draws from geothermal, solar, wind and hydropower.

The region has an "all round advantage", says Seema Dhanani, East Africa regional director at British International Investment, the UK's development finance institution. While she concedes that countries like Kenya still need to make progress in grid reliability, Dhanani believes that investing in both renewable energy and digital infrastructure in the country can offer a "win-win combination".

Kenya, indeed, is home to the most ambitious data centre project in the continent. Microsoft, in partnership with UAE-based tech firm G42, announced in May 2024 that it is seeking to develop a data centre campus powered entirely by geothermal energy from the country's Olkaria field. The site would have an initial capacity of 100 megawatts, potentially rising to 1 GW - which would dwarf all other data centre developments on the continent.

Yet when (or whether) this project will get off the ground remains an open question. Local media reports suggest little progress has been made in the 18 months since the announcement. Questions still abound about the feasibility of sourcing such huge volumes of power, given that Kenya's total installed electricity generation capacity is less than 4 GW at present.

Around the world, data centres are increasingly criticised for absorbing such a significant share of available power, particularly given that they create very few direct jobs. In a country like Kenya, where more than 20% of the population continues to lack electricity, sceptics have plenty of ammunition to question whether data centres are really the best way to use scarce power supplies.

Dhanani insists, however, that data centres are vital to "support productivity and growth and opportunities for business". She points to a survey of business clients of Liquid Intelligence Technologies, a company that BII has invested $220m into, which shows that 59% reported improvements in service reliability since a new data centre opened in Sout Africa in 2020.

Meanwhile, there is also a possibility that data centres could themselves stimulate energy investments that ultimately deliver wider benefits. With a data centre as an anchor off-taker, new investments in renewable power sources that also supply other businesses and households could become more viable.

What is certain is that, with digital and AI services in ever greater demand, data centres will become key players in Africa's energy landscape in the coming years.