Canada and Brazil AI data centres 2026: power rules and tax breaks

Canada and Brazil have both decided that AI data centres need special rules, but they chose opposite tools. Canadian provinces are making grid access conditional and more expensive. Brazil signed a tax relief law, called Redata, in September 2026 to attract builders. Both are policy in motion, and several details are still being decided.

Key numbers at a glance

• Canada, federal sovereign AI compute strategy: up to 2 billion Canadian dollars, launched 5 December 2024 (Government of Canada).
• Canada, strategy split: up to 700 million for new or expanded data centres, up to 1 billion for sovereign supercomputing, up to 300 million for small business access (Government of Canada, December 2024).
• Canada, AI Compute Challenge: up to 700 million Canadian dollars, rolling intake with no deadline, no awards listed on the programme page (ISED, page last modified 23 October 2025, checked 19 October 2026).
• Canada, hydro share of national generation: 60 percent of 625.7 TWh in 2021 (Canada Energy Regulator, page last modified 26 March 2026).
• Alberta, large data centre threshold: 75 MW or more of transmission demand (Data Centre Regulation, Alta Reg 117/2026, filed 9 June 2026, per Osler and Bennett Jones).
• Alberta, proposed bridging cap: 1,600 MW system wide, three years per contract (Bennett Jones, July 2026).
• Alberta, proposed commitment fee: 15,000 Canadian dollars per MW of requested service (same source, proposed).
• Quebec, data centre peak demand now: about 190 MW, possibly 1,000 MW by 2035 (Hydro-Québec figures, reported 1 October 2026).
• Quebec, proposed rate for data centres above 5 MW: about 13 cents per kWh versus 6.82 cents average paid by large industry now (Hydro-Québec, reported 1 October 2026).
• Ontario, consultation on large data centres: open until 12 September 2026, indicative rate class threshold above 1 MW (Gowling WLG, 2026).
• Brazil, Redata signed: 15 September 2026 (Brazilian government page via ABES).
• Brazil, tax suspension period: five years (W.Media, 18 September 2026).
• Brazil, operating data centres: 87, with 56 more in the pipeline adding over 4.5 GW of IT capacity (Arizton, as of June 2026, via W.Media).
• Brazil, share of IT capacity in São Paulo: about 70 percent (same source).

Terms first

A megawatt (MW) measures electrical power. A gigawatt (GW) is 1,000 MW. A kilowatt hour (kWh) is the unit that electricity bills are priced in.

A transmission connected load is a customer plugged into the high voltage grid rather than the local distribution network. Very large data centres usually connect this way.

A tariff or rate class is the price schedule a utility charges a group of customers. Creating a new class for data centres lets a regulator price them differently from factories or homes.

Bring your own generation (BYOG) means a data centre must arrange new power supply to match its demand before or soon after it connects. Tethering means formally linking the data centre to that supply.

A tax suspension means a tax is not collected up front and may be converted to a permanent exemption once the buyer meets conditions.

Canada: from subsidy to rationing

The federal money

In December 2024 the federal government launched the Canadian Sovereign AI Compute Strategy with up to 2 billion Canadian dollars from Budget 2024. The government page splits it three ways: up to 700 million to the AI Compute Challenge for new or expanded domestic AI data centres, up to 1 billion for large sovereign supercomputing infrastructure and a smaller secure facility, and up to 300 million for an access fund to cut compute costs for small and medium businesses. More than 1,000 stakeholders gave input during consultation.

The strategy page, last modified on 4 June 2026, adds detail on the public pillar. It covers a new Canadian owned and Canadian located AI supercomputer under the AI Sovereign Compute Infrastructure Program, which the page says is open for applications; a smaller secure computing facility led by Shared Services Canada and the National Research Council for government and industry research, including national security work; and up to 200 million Canadian dollars of near term capacity added to existing public resources such as the National Research Council, the national AI institutes and the Digital Research Alliance of Canada. The access fund helps businesses buy compute rather than build it, and names sectors with heavy computing needs such as life sciences, energy and advanced manufacturing.

The page states funding ceilings only. It sets no megawatt target, chip count or completion date for individual programmes, so Canada's public document is a funding frame rather than a capacity plan. That matters when comparing it with countries that announce gigawatt goals.

The AI Compute Challenge

The Challenge is the pillar aimed at private data centre builders. Its programme page at Innovation, Science and Economic Development Canada (ISED), last modified on 23 October 2025, says the call is expected to lead to up to 700 million Canadian dollars of federal investment. Its stated priorities are:

• Net new AI compute capacity in Canada, such as AI data centres, high performance clusters and testbeds, while keeping sensitive data in the country.
• Affordable compute for Canadian companies and researchers.
• Anchoring or growing Canadian AI companies by meeting their compute needs.
• Sustainable compute, including clean energy and Canadian made hardware or software.

Fully integrated data centre solutions that are ready for commercial deployment get preference, and work on energy efficient components can also be considered. Eligible applicants are commercial entities, industry consortia and partnerships between industry and universities. Proposals are expected to combine private and public money, including "significant provincial or territorial involvement", and to bring meaningful Canadian industry participation. The page states no fixed cost share ratio.

The process is rolling. An applicant first submits a consultation request through the Strategic Response Fund, ISED's general programme for large strategic projects. Proposals that advance to a full application go through a due diligence review in which the department validates cost estimates before any funding decision is announced. There is no deadline, and projects that can add capacity quickly get priority. The page lists no awarded projects as of 19 October 2026, so this post names none.

The request for provincial involvement is the link to everything that follows. Federal money can attract a project, but the power has to come from a provincial grid, and provinces own or regulate the utilities, decide who connects and set the rates.

Why the power mix draws builders

Canada's federal energy regulator, the Canada Energy Regulator, reports that the country generated 625.7 TWh of electricity in 2021, with hydroelectricity supplying 60 percent. Wind and solar together rose from 1.5 percent of generation in 2010 to 7 percent in 2021. The same profile says British Columbia, Manitoba, Quebec, and Newfoundland and Labrador typically generate more than 85 percent of their electricity from hydro, while Alberta relies mainly on fossil fuels and Ontario uses a mix that includes nuclear.

A large AI data centre draws close to its maximum power around the clock. Hydro with reservoirs can supply that steady load with low emissions, which is why Quebec and British Columbia attract interest. The caveat is that a clean grid only helps if there is spare capacity and transmission to deliver it, and the Quebec hearing below shows that spare capacity is the part running out.

That is the money and the resource. The harder problem in 2026 turned out to be access: who gets connected to that electricity and at what price, which each province decides for itself.

Alberta: bring your own power

Alberta filed its Data Centre Regulation on 9 June 2026, according to Osler and Bennett Jones. A "large data centre" is one asking for 75 MW or more of demand transmission service. The grid operator, the Alberta Electric System Operator (AESO), can lower that threshold if reliability or affordability is at risk. Co-located sites under 75 MW that are affiliated can be treated as one.

The important design choice is tethering. A tethered data centre commits to bring matching new generation or storage onto the grid, and the AESO must prioritise tethered projects over untethered ones. Under the draft first phase of the process, eligible generation is limited to gas fired plants, though the regulation itself allows any generating unit and storage, so that limit is provisional (Bennett Jones).

Bridging lets a tethered data centre connect before its paired generation is running, for up to three years. The AESO proposed a system wide bridging cap of 1,600 MW. Bridged data centres must cut demand before other participants if supply is short, and in severe cases all large data centres, including those with their own supply, must cut before other users.

Other details from the same sources:

• A proposed commitment fee of 15,000 Canadian dollars per MW, invoiced at intake close and possibly refundable.
• Mandatory readiness items such as site control and a municipal or county letter confirming zoning.
• Intakes about every nine months, each with a six week window and then three to six months of connection studies.
• Osler reports data centre construction takes about 18 months while gas turbine procurement can take up to about five years, which is why the timing mismatch is a central issue.
• The AESO noted a significant rise in applications between 25 and 75 MW, including at 74.9 MW, which it views as circumventing the threshold.

Dates matter. The AESO's connection requirements guide was published on 12 June 2026. Feedback on the proposed process closed on 13 July 2026 and rollout was expected in August 2026. A final version of the process had not been published in the sources cited here as of 19 October 2026, so check the AESO for the current version.

Quebec: a new price for cheap power

Quebec has abundant hydroelectric power, but Hydro-Québec says its era of surplus is over. At a public hearing in Montreal on 1 October 2026, cost and pricing chief Sarah Trabelsi said "the era of energy surpluses is now behind us," according to BNN Bloomberg. Hydro-Québec proposes a new rate for data centres drawing above 5 MW that would average about 13 cents per kWh, against a current 6.82 cents average for major industrial users. It says new supply costs about 12 cents per kWh, and that it wants to avoid other customers paying for discounts.

The utility's own figures put data centre peak demand at about 190 MW now, possibly reaching 1,000 MW by 2035. Le Soleil reported about 200 MW, a rounding difference.

The rate is contested. Google and other industry parties, along with environmental groups and the Canadian Federation of Independent Business, are taking part in the review. Le Soleil reported that Google said market comparisons were not valid and asked the regulator, the Régie de l'énergie, to reject the rate or let existing data centres keep current rates. A consultant, Dunsky, said reliable supply matters more than price and that the proposed rate would remain competitive with Ontario, New Brunswick and Nova Scotia, but he also acknowledged he did not systematically review how other jurisdictions set rates. The hearing's first part ran to 9 October and the second is planned for December 2026. Hydro-Québec proposed a 1 November effective date subject to the regulator's decision (Gowling WLG).

Ontario and British Columbia

Gowling WLG summarised two other provinces. Ontario ran a consultation open until 12 September 2026 on whether new large data centres should need government approval to connect, weighing strategic and economic value, reliability and cost responsibility. It also proposed a separate rate class for new data centres with an indicative threshold above 1 MW, excluded from the Industrial Conservation Initiative that lets eligible large users cut costs by reducing consumption at peak times. Results were expected in fall 2026. BC Hydro planned to send participants the results of its 2026 call for emerging industries, including AI and data centres, by mid September 2026.

No final outcome in Ontario or British Columbia had been reported in the sources cited here as of 19 October 2026, so treat both as proposals.

The common thread across provinces, as Gowling WLG puts it, is that access to grid power is becoming competitive and conditional.

Brazil: a tax regime, signed in September 2026

What Redata is

Redata is the Special Taxation Regime for Datacenter Services. Brazil's Senate approved Bill 278/2026 on 1 September 2026 and President Lula signed it on 15 September, according to a government page republished by ABES and to W.Media. It replaces a provisional measure from 2025 that expired. It covers data centres for cloud, high performance computing and AI training and inference.

The benefit is a five year suspension of federal taxes on purchases of electronic components and other information technology products, domestic or imported. The Ministry of Finance must authorise each company, and companies must be current on federal taxes.

What companies must do in return

According to the government page and W.Media:

• Cover contracted electricity demand through supply contracts or self production. The government announcement republished by ABES, the Brazilian Association of Software Companies, says clean or renewable sources; Cescon Barrieu says the Senate changed this to renewable or low emission sources (see below).
• Keep water use for cooling at or below 0.05 litres per kWh, measured annually.
• Offer at least 10 percent of effective capacity to the Brazilian market.
• Invest an amount equal to 2 percent of the value of benefited products in research in Brazil.

A law firm summary (Cescon Barrieu) adds that projects in the North, Northeast and Center-West get a 20 percent easing, with the domestic share dropping to 8 percent and the research share to 1.6 percent, and that at least 40 percent of research funds must go to those regions. It also says missing the capacity floor suspends benefits and, if not cured within 180 days, cancels authorisation for two years.

Where sources disagree or raise concerns

Energy wording. The Senate changed "clean or renewable" to "renewable or low emission," which a law firm says could admit gas fired generation, with the definition left to a decree. Critics cited by MLex say the environmental safeguards are vague, with concern for Indigenous, Quilombola and riverine communities.

Value of the relief. Global Data Center Hub reports government estimates of 5.2 billion reais in 2026, 1.0 billion in 2027 and 1.05 billion in 2028, and argues the drop comes from the way the law ends some tax waivers on 31 December 2026 while the import tax waiver lasts the full term. That is one analyst's reading, from a newsletter, so verify it against the final law and Finance Ministry guidance.

Date. W.Media dated its report 18 September and said Lula signed "this week." The government page says Tuesday 15 September, which is the date used here.

The market behind it

Arizton Advisory, via W.Media, put Brazil at 87 operating data centres as of June 2026, with 56 more in the pipeline expected to add over 4.5 GW of IT capacity, around five times the current base. About 70 percent of IT capacity is in São Paulo. Cescon Barrieu cites that about 60 percent of Brazil's data and AI processing currently runs on infrastructure abroad, which is the sovereignty argument for Redata. The firm does not name the underlying study, so treat that percentage as unconfirmed.

ABES published a June 2025 list of announced projects. These are plans from before the law: Rio AI City near Rio de Janeiro starting at 1.5 GW and possibly reaching 3.2 GW, Scala AI City in Rio Grande do Sul with potential capacity of 4.7 GW, and a Casa dos Ventos investment in Ceará of 55 billion reais. Plans are not capacity, and the same article said that taxes are about 23 percent of capital costs and 27 percent of operating costs in Brazil, the highest in the region, citing 2021 data from the national industrial development agency.

A project with local tension: Ceará

A report from Times Brasil in October 2025 said ByteDance would invest more than 50 billion reais in TikTok's first data centre in Brazil in Caucaia, Ceará, near the Pecém port, with Casa dos Ventos managing it, and that construction was to start within six months. The same report said Caucaia has a history of water scarcity, was in an emergency situation in 16 of the previous 21 years, and that the Anacé indigenous community said it had not been consulted. No 2026 update on the project's progress appears in the sources cited here.

Why this matters to buyers

Both countries show that location is now a policy decision. In Canada, a team that wants capacity must ask which province will actually connect it and at what price. In Brazil, local capacity requirements and data sovereignty goals will shape where AI workloads run. For the general ideas see data residency vs sovereignty vs localisation, and for a comparison with other regions see our APAC overview.

This post does not cover Mexico or Chile.

What is firm and what is uncertain

Firm:

• Canada launched its 2 billion dollar compute strategy in December 2024, and the AI Compute Challenge takes applications on a rolling basis.
• Hydro supplied 60 percent of Canada's generation in 2021, per the Canada Energy Regulator.
• Alberta filed its regulation on 9 June 2026 with a 75 MW threshold.
• Hydro-Québec has proposed a data centre rate and a regulatory hearing is under way.
• Brazil enacted Redata in September 2026 with a five year tax suspension.

Uncertain:

• Which projects, if any, have received AI Compute Challenge funding, and for how many megawatts.
• The final form of Alberta's process, Ontario's rules and British Columbia's allocations.
• Whether the Quebec regulator approves 13 cents per kWh.
• Redata's real fiscal value, the meaning of "low emission," and the multipliers set later by regulation.
• Whether the Ceará project is proceeding on its announced schedule.

What to watch next

• Award announcements under the AI Compute Challenge and the supercomputer programme, and whether they name megawatts and provinces.
• The Régie de l'énergie decision after the December 2026 hearing.
• The AESO's final BYOG process and its next intake.
• Ontario's response to its consultation, due in fall 2026.
• The Brazilian decree defining low emission energy and the regulations that set the domestic capacity rules.
• Whether 31 December 2026 changes the value of Redata, as one analyst argues.

Quick check

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Sources

• Canada to drive billions in investments to build domestic AI compute capacity, Government of Canada, December 2024
• Canadian Sovereign AI Compute Strategy, ISED, page last modified 4 June 2026
• AI Compute Challenge, ISED, page last modified 23 October 2025
• Provincial and territorial energy profiles: Canada, Canada Energy Regulator, page last modified 26 March 2026
• Alberta's BYOG framework, Bennett Jones, July 2026
• Alberta's data centre regulations and guidance on power generation for large load facilities, Osler
• Hydro-Québec to face off against industry actors like Google in data centre hearing, BNN Bloomberg, 1 October 2026
• La hausse des tarifs d'électricité ne devrait pas dissuader les centres de données, Le Soleil, 10 October 2026
• Power shifts in the Canada data centre market, Gowling WLG, 2026
• Brazil signs Redata tax regime into law, W.Media, 18 September 2026
• Redata, ABES republication of government announcement
• Senate approves Redata, Cescon Barrieu
• Brazil Senate Redata data center tax regime, Global Data Center Hub
• MLex, Brazil Senate approves data centre tax incentives, 2 September 2026
• Driving the digital economy: data centers and Brazil's bets, ABES, 17 June 2025
• TikTok data center in Ceará, Times Brasil, 11 October 2025

Last reviewed: 19 October 2026.