Kenya has shelved its flagship $1 billion data centre project backed by Microsoft and Abu Dhabi-based G42, after the country’s electricity system proved unable to support the facility at its intended scale.
The decision closes out one of East Africa’s most closely watched technology investments and exposes a gap that sits beneath almost every major AI infrastructure announcement on the continent.
A Deal That Began at the White House
President William Ruto announced the project during a state visit to Washington in May 2024, witnessed under the Biden administration as a signal of deepening technology ties between the United States and East Africa. Microsoft and G42, the UAE’s leading artificial intelligence firm, committed to building a $1 billion facility at KenGen’s Green Energy Park near the Olkaria geothermal fields in Naivasha.
The first phase carried a planned capacity of 100 megawatts, with a long-term vision to scale to 1,000 megawatts. It would run entirely on geothermal energy and house Microsoft’s Azure cloud platform, creating what the companies called an East Africa Cloud Region to deliver cloud and AI services to businesses, governments, and institutions across the region.
According to EPRA’s Bi-Annual Energy and Petroleum Statistics Report for Financial Year 2023/2024, geothermal contributed 44.6% of Kenya’s total energy generation in the second half of 2023, the single largest source in the national mix, generating 3,032 GWh across the period. Renewable energy as a whole accounted for 84.93% of total generation. Kenya genuinely had a credible argument for attracting data centre investment on clean energy grounds.
The Numbers Did Not Add Up
The reality proved more complicated. Kenya’s interconnected installed capacity stood at 3,199.9 MW as of December 2023, according to EPRA data, a figure that had actually declined by 73.5 MW from the previous period, primarily because the power purchase agreement for the Kipevu 1 power plant expired and no new grid-connected power plants were commissioned during that review period.
A facility eventually scaling to 1,000 megawatts would consume close to a third of that total, a demand profile the national grid cannot currently absorb without serious disruption. Ruto acknowledged the constraint publicly, telling an audience: “To switch on that one data centre, we would need to shut off power for half the country.” Analysts subsequently noted that the first phase at 100 megawatts was the more immediate planning concern, and that Ruto appeared to reference the project’s full eventual scale rather than its opening capacity. Either way, the infrastructure gap was real.
The reliability data makes the grid’s fragility concrete. EPRA recorded that customers experienced outages lasting an average of 8.836 hours per month across July to December 2023 — well above the 5.0-hour monthly benchmark the Authority sets for acceptable performance. Interruption frequency also exceeded targets: customers experienced an average of 3.865 interruptions per month against an EPRA target of 2.15. A hyperscale data centre demands near-continuous uptime. Kenya’s current grid performance sits far from that threshold.
Behind the scenes, Kenya’s technology ministry prepared a concept proposal linked to the development and submitted it to the National Treasury for funding approval. The Treasury did not clear it. By August 2025, discussions between Kenyan officials and Microsoft had confirmed the project would miss its original May 2026 completion target. Neither Microsoft nor G42 issued comment on the latest developments.
More Than an Electricity Problem
Power supply was the most visible constraint. It was not the only one.
People familiar with the discussions said financing arrangements and long-term commercial assumptions remained unresolved well after the project announcement. The government’s eCitizen platform — which processes millions of digital public service transactions — was expected to form part of the initial demand base alongside private-sector customers across East Africa. But government usage alone would not sustain a billion-dollar facility.
The EPRA data reveals who actually drives electricity consumption in Kenya. Large commercial and industrial customers consumed 2,706.62 GWh in the second half of 2023, accounting for 51.99% of total energy consumption. Domestic customers consumed 1,599.33 GWh. Nairobi alone consumed 2,293.95 GWh — 44.07% of the country’s total — reflecting the dense concentration of industry and commerce that defines the capital. A hyperscale facility drawing on the same grid as this industrial base would compete directly with existing consumers, not supplement them.
Analysts noted that enterprise demand for advanced cloud and AI services in Kenya, while growing, remains considerably smaller than in South Africa. Sustaining infrastructure at this scale requires firm commitments from banks, telecom operators, fintech companies, and multinationals — not political momentum at an overseas summit.
The project also ran into geopolitical complications. G42’s ties to China drew scrutiny from US officials earlier in the project’s life cycle, creating delays in security clearances for high-end AI chips. The facility had been framed partly as a counterweight to Huawei’s deep presence across African telecom and cloud markets. That strategic logic did not resolve the underlying infrastructure challenges.
What Hyperscale Infrastructure Actually Requires
The stalled project makes a point that renewable energy advocates rarely foreground. Geothermal power provides stable baseload electricity — a genuine advantage over solar or wind. But a large data centre demands more than clean generation.
The EPRA report captures the full complexity of Kenya’s supply chain. Peak demand during July to December 2023 averaged around 2,156–2,171 MW, while the grid simultaneously curtailed 236,212 MWh of energy — mostly geothermal — because the transmission system could not absorb and distribute it. Curtailment of geothermal energy alone constituted 71.86% of all energy curtailed during the period, with December recording the highest single-month curtailment at 117,100 MWh.
That figure carries a pointed implication. Kenya is not simply short of geothermal generation. It lacks the transmission capacity to move what it already produces. A 100 MW data centre at Olkaria would need dedicated, high-capacity transmission infrastructure before a single server could run — and the EPRA data shows that infrastructure gap is real and current.
The Olkaria site was promoted as a renewable energy hub capable of supporting energy-intensive industries. Electricity generation was never the full picture.
What Captive Power Growth Reveals
One of the EPRA report’s quieter signals speaks directly to the data centre question. Captive power capacity — electricity generated by commercial and industrial consumers for their own use, bypassing the national grid — reached 449.5 MW by December 2023, constituting 12.18% of the country’s total installed capacity. Captive solar PV additions alone reached 196.2 MW during the review period.
Businesses are building their own generation because the grid is not reliable enough to depend on. That is precisely the infrastructure problem a hyperscale data centre would encounter at orders of magnitude greater scale.
Smaller Projects Are Moving Forward
Not every data centre investment in Kenya has stalled. Nxtra by Airtel, a subsidiary of Airtel Africa, broke ground on a 44 MW facility in Tatu City in September 2025. Once complete, it stands to become one of East Africa’s largest operational data centres. The project targets AI-driven solutions and cloud services for businesses, startups, and governments — and it ties to existing, demonstrable enterprise demand rather than speculative future scale.
That contrast reveals the divide now forming across African digital infrastructure markets. Smaller facilities with clear customer bases and manageable power requirements continue to advance. Hyperscale projects face harder questions about financing, energy availability, and whether the commercial base to fill them actually exists yet.
Kenya’s Energy Target and What Comes Next
Ruto has connected the data centre setback to his administration’s wider energy agenda. The government targets 10,000 megawatts of national generating capacity by 2030 through a combination of public investment and private-sector participation. Kenya already accounts for more than three-quarters of fresh data centre capacity expected across East African markets by 2030, according to an African Union report — a pipeline that depends heavily on that generation target being met.
Meanwhile, Microsoft continues to build its African footprint through more commercially grounded routes. In April 2026, the company announced a $329 million investment programme in South Africa, focused on data centre expansion, energy readiness, and AI services.
The Broader Lesson for Africa’s AI Race
Kenya’s experience points to a pattern that extends well beyond one stalled project. Investment appetite for AI infrastructure across Africa remains genuine and substantial. But large-scale deployments require surplus electricity, reliable connectivity, and a commercially sustainable customer base.
The EPRA data from the second half of 2023 puts a precise number on the distance between ambition and readiness: a grid generating 6,805 GWh across six months, curtailing 236,212 MWh it could not distribute, delivering power with an average outage duration nearly double its own target. That is the infrastructure reality behind the announcement. Announcements made during diplomatic visits do not always survive contact with grid engineers and treasury officials.
The continent’s digital infrastructure ambitions are real. So are the constraints. Closing that gap — in generation, transmission, connectivity, and enterprise demand — will determine whether Africa participates in the AI era as a host or merely as a market.
