An optimal location for a next-gen data centre “on paper” does not always translate into a truly viable option on the ground. There is now a tool designed to provide certainty, bringing benefits to investors, grid operators and end users alike. The technology has already been validated and aims to help anchor more reliable, lower-carbon AI and cloud services.
The year 2025 ended with the news that Microsoft would make a major investment in a data centre in Portugal. The technology company plans to install more than 12,500 processors in a mega data centre in the south of the country, in an investment worth around USD 10 billion. In recent years, announcements of investment in this type of infrastructure have multiplied in the country and across Southern Europe.
Why this region? The “strength” of renewables – Portugal, Spain and Greece are among the 10 countries worldwide where solar photovoltaic energy is expected to account for at least 1/3 of electricity generation by 2030 – and strategic location are key factors. However, potential investors continue to face a known obstacle: the capacity and reliability of the power grid often remain unclear until the final stages of project development.
To address this challenge, researchers from the Institute for Systems and Computer Engineering, Technology and Science (INESC TEC), a Portuguese research centre, have developed and validated a tool that identifies where Portugal’s national transmission grid can safely connect new large-scale data centre clusters, ranging from 500 MW to 1 GW.
“Finding the right location for a 500 MW data centre does not depend solely on the size of a transformer; it depends on grid behaviour during critical hours and even under fault conditions. Our methodology tests these realities and translates them into a viable list of connection options,” explained Ricardo Bessa, a researcher at INESC TEC, and head of the power & energy systems domain.
The goal is to turn a technical problem into an opportunity by enabling the estimation of connection capacity for energy-intensive consumers at each node of the power grid. This approach moves beyond generic or theoretical capacity estimates and systematically analyses the entire national transmission network, ranking substations according to their real ability to host large electrical loads.
“Portugal has a real window to host the next wave of hyperscale and AI data centres in Europe, but grid capacity is the gatekeeper. With our validated hosting-capacity tool, we can clearly identify where the transmission network can support hundreds of megawatts today and where it will be ready by 2030”, stated João Peças Lopes, director and researcher at INESC TEC and one of Europe’s leading experts in renewable energy.
The solution makes it possible to quantify where large new “blocks” of energy demand can be connected to the transmission grid without compromising security of supply. It goes beyond studies based on approximate headroom estimates and classifies substations according to their actual hosting capacity, using a rapid screening method combined with in-depth simulation aligned with the national company responsible for ensuring uninterrupted electricity supply, including fault scenarios.
Researchers complement this screening with a second key element capable of modelling a data centre’s annual demand through the generation of realistic annual load curves: the impact of a data centre on the grid depends not only on installed peak capacity, but also on how energy is consumed hour by hour.
The result? Fewer hidden technical risks, faster decision-making processes and a system protected against unsafe concentrations of new demand. “This combination is powerful”, explained Ignacio Hernando Gil, a researcher at INESC TEC and responsible for developing the tool: “it tells us where the grid can host large loads, and the load-curve tool tells us what those loads truly look like in time. We do not make assumptions, we present evidence.”
The solution ultimately benefits all stakeholders in the value chain. Hyperscale and AI infrastructure investors can base their decisions on concrete data and certainty about where to build. The company responsible for electricity supply and distribution system operators (DSOs) gain clarity on where grid reinforcements should be prioritised, while renewable energy stakeholders benefit from more credible siting of future demand clusters.
Concerning Portugal, at a time when Southern Europe is highly appealing for hosting data centres, this approach strengthens the country’s ability to attract investment, create jobs and establish a more robust digital infrastructure, while the energy system benefits from the safe and optimised integration of significant new demand into the grid. Finally, users benefit indirectly from more reliable, lower-carbon AI and cloud services hosted in Europe.
INESC TEC’s methodology has already been applied in real consultancy projects involving the Portuguese power grid – e.g., to identify connection capacity for large green hydrogen electrolysers – and is now being adapted and further developed to respond specifically to the needs of large-scale data centres, in collaboration with several industrial partners.
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