What once seemed like an overly optimistic vision is now gradually moving toward reality: Across Portugal large-scale data centers are planned, promising thousands of jobs and substantial investment.

Crucially, this development is not limited to its coastal economic centers but is expanding into long-neglected inland regions. Once characterized by outward migration, these areas are now seeing mayors announce multimillion and even multibillion euro projects aimed at generating new employment and boosting local economies.

In Fundao, a small town in central Portugal near the Spanish border, the mayor is promoting a €4 billion ($4.63 billion) data center initiative.

Around 100 kilometers (60 miles) further south in Abrantes, a new data center is projected to cost €7 billion. By 2030, officials expect this center alone will create 450 direct jobs and several hundred indirect positions.

Abrantes’ mayor Manuel Jorge Valamatos told DW that the municipality has more data centers “in the pipeline,” and highlights the advantage of a gas-fired power plant with grid access nearby that is capable of supplying extra electricity to meet demand.

Flagship project in Sines

Portugal’s largest such facility — described as the flagship of the country’s data center strategy — is being built in Sines on the southern coast.

Backed by €8.5 billion in investment, it includes a connection to a transatlantic fiber-optic cable from the United States. Current plans also include an artificial intelligence (AI) “gigafactory” estimated to cost €4 billion. The first of six buildings in the project has already been completed.

But the project has sparked political fallout, contributing to the resignations of a government minister and former Prime Minister Antonio Costa both of whom are being investigated for alleged corruption.

Energy consumption a key problem

Developers of all planned facilities have registered an energy demand of 26.5 gigawatts (GW) — an amount exceeding Portugal’s current production capacity of roughly 23.4 GW. In all of the projects renewable and low-cost power is supposed to be the main source of energy.

But electricity and grid expert Joao Pecas Lopes of the University of Porto sees no problem concerning future energy supply.

“Portugal has abundant renewable energy resources. We benefit from strong solar, wind, and hydropower capacity,” he told DW, noting that companies often declare energy needs “well above actual requirements,” sometimes for multiple locations despite ultimately choosing only one.

Still, he notes that even if the declared demand were halved, “energy consumption remains extremely high.”

Expanding renewables and storage capacity

Data centers consume substantial amounts of electricity, both for daily operations and for cooling in summer or heating in winter.

According to Pecas Lopes, meeting this demand will require expanded solar capacity and new offshore wind facilities, as onshore locations are largely exhausted.

Offshore construction, however, is more costly, he said, particularly as floating wind farms are the only feasible solution off Portugal’s coast. Additionally, high-voltage transmission lines and storage infrastructure will also be needed.

“To store solar power generated during the day for use overnight, there are two primary options: large-scale batteries or reversible hydroelectric systems,” Pecas Lopes said.

The latter involves pumping water uphill during peak production and releasing it at night to power turbines.

The grid expert from the University of Porto expects three such hydropower plants to be built in the coming years after Portugal’s government announced a plan to invest around €13 billion in electrical infrastructure over the next five years.

Environmental pushback

Environmental groups are increasingly concerned about these developments. Protests are growing against large-scale wind and solar installations, many of which were approved with limited environmental oversight, including in protected natural areas.

That is now likely to change, according to Francisco Ferreira of environmental group Zero, who told DW that the activists would support the development of data centers “in principle.”

“But new wind or solar projects must be built with minimum ecological impact,” he added.

While data centers present economic opportunities, he warned that they should not come at nature’s expense. Some regions are already saturated with solar parks, he said, and new power lines must be built as sustainably as possible.

Alternative grid solutions and consumer costs

Pecas Lopes believes that innovative solutions remain viable. “I’ve conducted a study showing electricity could be transmitted via underwater cables to where it’s needed. It’s feasible and not significantly more expensive,” he said.

He argues that ultimately, politicians must make a decision and tell taxpayers that they will have to shoulder most of the grid upgrade costs.

As in other countries, expenses for power infrastructure are part of Portuguese consumers’ electricity bills. However, adding even more costs on top is bound to stir controversy as retail electricity prices in the country are already twice as high as those of industrial users.

This article was originally written in German.