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Kenya's flagship plan to host a gigawatt-scale AI data centre has stalled because the national grid cannot supply it, and developers are now testing coastal, self-powered alternatives that bring a different set of regulatory questions.
The $1 billion (KSh129 billion) geothermal-powered campus planned by Microsoft and Abu Dhabi's G42 at Olkaria, near Naivasha, was announced in May 2024 during President William Ruto's state visit to Washington. It was meant to anchor a new East Africa cloud region. By May 2026, reports said Treasury approval had stalled and the completion target had been missed. Officials describe the project as paused for restructuring rather than cancelled, and the sequence of events since then shows that electricity, more than data law, now decides where large-scale computing can be built in Kenya.
The grid arithmetic behind the stall
The numbers explain most of the problem. The full design called for 1 gigawatt (1,000 MW) of capacity, with a first phase of 100 MW. Data Center Dynamics put Kenya's total supply at about 3 GW, which would make the final build roughly a third of national capacity. Other figures are lower. Ruto himself cited about 2,300 MW of available capacity, and reporting on peak demand put the national high at 2,444 MW in January 2025.
On any of those measures, a 1 GW load is not a marginal addition. Ruto told an audience in Nairobi that switching on the facility would mean cutting power to roughly half the country. The comment, reported widely in early May 2026, was the first public admission that the project's scale had outrun the system built to serve it.
Capacity is only part of the constraint. Reports on the stalled deal point to missing transmission infrastructure: a gigawatt-class load near Naivasha would need dedicated high-voltage lines that were not in place on the timeline the original announcement assumed. Geothermal output at Olkaria, operated by KenGen, is also already committed to the national grid, so dedicating steam to a single customer would have to be matched by new generation elsewhere.
A commercial dispute alongside the technical one
Power supply was not the only point of friction. Bloomberg and Reuters reporting, summarised by several Kenyan and international outlets, said talks stalled over Microsoft's request for guaranteed payments from the government for a fixed level of capacity, along with disagreements over how the power would be structured. The government declined to underwrite annual payments at that scale. A scaled-back version was reported to be under discussion.
Officials have pushed back on the "stalled" label. John Tanui, principal secretary in the Ministry of Information, told Bloomberg that the project had not been withdrawn and that the size of the facility "still requires some structuring." Philip Thigo, Kenya's Special Technology Envoy, said the president's remarks were meant to underline the need for more generation, and that the government remains committed to reaching at least 10,000 MW by 2030. DCD reported that Ruto is seeking $38 billion in funding for energy and infrastructure expansion toward that goal.
Smaller projects are still moving. EcoCloud broke ground on its Project Eagle geothermal data centre at the KenGen Green Energy Park in Olkaria in 2023, and a 60 MW project involving the local developer was reported to be under active discussion as a smaller alternative to the original plan.
Water at Naivasha: a concern raised, not a documented cause
Environmental questions around the Olkaria site have been raised, though they are not cited in official accounts as the reason for the stall. An Al Jazeera investigation published in August 2026 reported that Microsoft and G42 had not disclosed a project-specific water consumption figure or cooling design in their 2024 announcement, and that residents and conservation groups wanted that information made public before any construction.
Existing figures show how tight the basin already is. A KenGen environmental and social impact assessment cited by Al Jazeera records 195,165 cubic metres of water abstracted from Lake Naivasha in July 2023 for domestic and commercial uses at Olkaria and Eburru, of which 153,918 cubic metres went to commercial operations at Olkaria. The assessment says abstraction was within limits permitted by the Water Resources Authority. Those figures describe current KenGen operations, not a data centre.
Silas Wanjala of the Lake Naivasha Riparian Association told Al Jazeera that the lake nearly dried up in 2010 because of over-abstraction and warned that heavy demand from new industrial users could repeat that. The Olkaria EcoCloud website states that its cooling will use water from Lake Naivasha together with harvested rainwater. Campaigners have asked for waterless or low-water cooling, wastewater recycling and community involvement in monitoring.
Developers look to the coast and to their own generators
With the grid-connected Naivasha route constrained, attention has shifted to projects that bring their own power. The clearest example is a proposal by Greek firm Amaco Energy Group for a $1.5 billion (KSh194 billion) AI data centre in Mombasa. Dubbed Project Hercules, it is designed to run on an independent, offshore liquefied natural gas power supply and its own cooling system, without drawing on the national grid.
Amaco later announced a partnership with GE Vernova to supply gas turbines for a power barge. The company has identified Dongo Kundu and Kilindini in Mombasa as possible sites, citing the port and demand from firms at the nearby Special Economic Zone. Mombasa is also the landing point for undersea cables, with at least eight reported to be landing or planned along the coast which gives the location a connectivity advantage for latency-sensitive and international traffic.
The proposal remains early-stage. Kenya Engineer noted that the public record describes a proposal, not an approved or financed project, and that no technical fact sheet yet allows an independent engineer to test how the offshore plant would serve the onshore load. The publication also cautioned that "grid-free" does not mean infrastructure-free, since gas supply, marine works and cooling still have to be built and permitted. Amaco's CEO, Theodore Theodoropoulos, was reported to be in Kenya seeking government approval. Separately, China's Guodong Group has been reported to plan investment of up to KSh38.8 billion across data centres, fibre, cloud and smart city infrastructure, though the reports do not tie that plan to a power model.
Off-grid does not mean unlicensed
Developers who plan to avoid the grid still face the Energy and Petroleum Regulatory Authority (EPRA). Under the Energy Act, 2019, anyone generating electricity above 1 MW must hold an EPRA generation licence. The exemption covers generation for own use below 1 MW, and isolated mini-grids up to 1 MW, according to the Chambers Power Generation guide and EPRA's draft licensing regulations. Licence applicants must publish a 15-day public notice in at least two nationwide newspapers, giving the public a chance to object.
A hyperscale facility draws far more than 1 MW, so a self-powered campus is effectively applying for a power-plant licence as well as building a data centre. Law firm Wamae & Allen, in a guide on data centre readiness, argues that power is now the first legal question for investors and that the exemption promoters often cite does not cover projects of this size. The firm's reading is that Kenya's legal framework is largely in place and the grid is the binding constraint.
New rules may widen the options. EPRA has published a 2026 regulatory instrument on electricity market, bulk supply and open access. Under the access process described in the Chambers 2026 guide, a licensee or eligible consumer applies to the transmission licensee, which carries out a technical assessment within 30 days and passes its findings to the system operator for a no-objection. EPRA then has 60 days to approve the agreement. A solar-industry guide reads the framework as allowing large consumers such as data centres to sign long-term power purchase agreements without Kenya Power as the buyer, though that interpretation comes from a commercial source rather than EPRA.
The policy questions on the table
Three issues recur in the reporting and in stakeholder submissions, and none has been settled.
Sequencing power and approvals. Legal advisers say developers should secure power before land and buildings. For the state, the Olkaria case raised the question of whether capacity guarantees should be granted in stages. One account said the government offered a phased approach starting at 200 MW, though that claim comes from a single secondary outlet and was not confirmed by officials.
Competition with households and industry. Wamae & Allen notes that every megawatt promised to a data centre is a megawatt not available to a household or factory, which is why regulators are weighing grid reliability against investment inflows.
Ownership and control of self-contained sites. Dawan Africa's analysis argues that without clear rules on local ownership, skills, data protection and power, a gas-fired coastal campus could operate as an enclave that serves foreign investors first, with little connection to the national system.
The Ministry of Energy and Petroleum's national plans point to a larger system. The 10,000 MW target for 2030 would more than triple today's supply, and the $38 billion funding ask has not been reported as secured. Until new generation and transmission arrive, the options for hyperscale computing in Kenya are smaller phased builds on the grid, such as the reported 60 MW EcoCloud project, or private generation that must clear EPRA licensing, environmental review and, in Mombasa's case, marine engineering that has yet to be publicly detailed.
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