Microsoft (MS)'s large data centre project in Kenya has effectively been put on hold after running into limits in local power infrastructure. The Kenyan government said that if the project proceeds as currently planned, it could create a serious burden on national grid operations.

On May 17 (local time), IT outlet TechRadar reported that the Olkaria data centre project in Kenya being pursued by Microsoft and Abu Dhabi-based artificial intelligence (AI) company G42 has entered talks on recalibration because of power supply problems.

In May 2024, the two companies announced plans to build a geothermal-based cloud region in Kenya's Olkaria area during Kenyan President William Ruto's visit to Washington, D.C.

The key issue is heavy power demand. The data centre was initially said to be as large as 1 gigawatt (GW). Ruto recently said at an event in Nairobi that "to supply power to the data centre, we would have to switch off half the country's electricity". It amounted to a public acknowledgement that Kenya's current grid cannot easily handle the project.

The figures support those concerns. Kenya's total installed generation capacity is about 3,000 to 3,200 megawatts (MW). Peak demand had risen to about 2,444 MW as of January 2025. If a 1 GW-class data centre is built under those conditions, a single facility would use about one-third of the country's total power supply.

Even the early phase would be a substantial burden. The first-phase project, planned at 100 MW, is also said to require a significant share of output from the Olkaria geothermal complex.

The Olkaria geothermal complex currently produces about 950 MW when its power plants are combined. The Kenyan government judges there is no spare capacity anywhere on the grid to absorb such a huge new source of demand.

The Kenyan government said the project has not been formally withdrawn. John Tanui (존 타누이), a Kenyan deputy minister of information and communications, said the project is still under discussion and has not been removed from review. He said the initially planned scale of the data centre requires additional restructuring.

Talks are now shifting toward a smaller alternative rather than the original large project. The Kenyan government and project-related parties are reportedly in discussions with local developer EcoCloud on a separate 60 MW data centre project. The original Olkaria project, discussed at $1 billion, is effectively at a standstill because of limits in power capacity and a lack of transmission and distribution infrastructure.

The Kenyan government's stance is relatively clear. It is maintaining that it cannot sacrifice the stability of the national power supply for a single private facility.

Microsoft, by contrast, is reportedly not accepting power supply terms that are significantly scaled back from the initial plan. That difference is cited as a key factor behind the delay.

The project is also linked to Microsoft's strategy to expand digital infrastructure in Africa. Microsoft invested $1.5 billion in G42 in 2024 after G42 announced plans to remove Huawei equipment in response to pressure from the U.S. government. At the time, Microsoft President Brad Smith described the Kenya project as "the biggest advancement in the history of Kenya's digital technology".

An analysis says the actual push to execute the project is exposing a problem in which the pace of AI and cloud infrastructure expansion is outstripping the pace of grid construction.

The market also says the case shows that attracting large AI data centres cannot be achieved through investment announcements alone, and that expansion of generation and transmission and distribution networks must happen together. Attention is expected to focus on whether the 1 GW-class Olkaria project will be redesigned or whether the 60 MW alternative will move into an actual execution stage.