When Alberta premier Danielle Smith unveiled the province’s plan to become a global hub for hyperscale data centres last month, she offered unequivocal advice to tech giants seeking quick sign-offs for their multi-billion-dollar projects.
“If you want to get fast approval, bring your own power,” she said at the launch of Alberta’s AI Data Centres Strategy, which aims to lure $100 billion of new investment to the prairie province, the heart of the country’s oil and gas industry.
The rapid rise of artificial intelligence (AI) and its insatiable appetite for computing power is driving Big Tech to build new supersized data centres housing the ultra-high-speed routers, switches, storage systems and servers that are the central nervous system of the global digital economy.
Globally, five hyperscalers alone – Amazon, Microsoft, Google, IBM, and Oracle – could by 2027 spend US$1 trillion on a new class of giant data centres to host cloud services and run AI models, according to S&P Global, a financial analytics firm.
Research by Goldman Sachs, an investment bank, estimated the overall increase in data center power consumption from AI will be in the order of 200 terawatt-hours per year between 2023 and 2030, a 160 per cent increase.
U.S. President Donald Trump weighed in on the next chapter of the generative AI market development this week with an announced US$500 billion joint venture to build American data centres in a bid to outpace rivals in Europe and China.
Forecasts of how much data centre investment could be attracted into Canada range widely, but two things are certain. The expansion of the AI market will be seismic, and it will also face a huge challenge: massive power demand.
Generative AI is ravenous for electricity. A ChatGPT query needs ten times more than a Google search due to the vast amount of data processed by algorithmic models.
Data centres in the U.S., China and European Union already account for two to four per cent of global electricity consumption, according to the International Energy Agency. And that percentage is set to rise exponentially.
The current concentration of data centres in close proximity to grids for economic and logistical reasons places enormous pressure on the management of electricity networks. Data facilities consume more than 10 per cent of electricity in at least five U.S. states, while in Ireland, an early mover in the AI boom, they devour over 20 per cent of the country’s electricity.
Canada has several natural advantages for developers — not least a colder climate that reduces the need for energy-intensive cooling systems to prevent processing hardware from overheating. While the country’s 239 existing data centres have relied on low-cost hydro and nuclear power for years, those days look to be nearing an end.
Water levels in hydroelectric reservoirs are falling due to droughts made worse by climate change. Power grids are straining and will soon be overstretched as electricity demand soars in the shift away from fossil-fired generation. And the need for green energy options will increasingly influence data centre investment decisions.
"AI’s impact on power demand will accelerate beyond anything we have seen to this point."
Deloitte head of infrastructure and capital projects, Duncan Rotherham
The bottom line is AI’s impact on power demand will “accelerate beyond anything we have seen to this point,” Duncan Rotherham, a partner within the infrastructure and capital projects division at Deloitte, a consultancy, told Canada’s National Observer.
“AI explosion”
Demand for power from Canada’s data centres will climb at a yearly growth rate of nine per cent to 1.16 gigawatts (GW) by the end of the decade, equal to the power capacity of the city of Hamilton, according to the Canada Energy Regulator (CER).
Most data centres today rely on 10-20 MW power plants. But generative AI for corporate and industrial data processing will need bigger, faster hyperscale centres that need five to ten times more installed power, enough to run 400,000 electric vehicles a year, according to the IEA.
CER spokesperson Karen Ryhorchuk acknowledged a far larger share of Canada’s total energy demand growth “is likely to come from generative AI training and applications,” noting that the regulator is reassessing the power needs for a nationwide fleet of hyperscale facilities.
CER’s next Canada Energy Futures report, due in spring, will for the first time delve into how electricity demand linked to data centres could impact power generation, she told Canada’s National Observer.
Canadian developers are already betting big and early in the race to build out AI data centre capacity.
Montreal-based eStruxture has announced plans to build a new $750 million data centre north of Calgary, Alberta’s biggest greenlighted project so far. The 90 MW CAL-3 project will come online in 2026 and join e-Structure’s 15 other data centres in Eastern Canada.
“The AI explosion in the data center business is leading to a lot more demand, but that leads to its own sort of challenges in trying to find additional capacity, where we are building that capacity and finding the additional power,” Strahan McCarten, eStruxture’s senior vice president of strategy and business operations, told a tech podcast last year.
Toronto-based AI start-up Cohere is moving fast too. The company, backed by chipmaking giant Nvidia, announced plans last month to build a multi-billion dollar data centre with $240 million in federal support, and aims to switch on in 2025.
Provincial utilities are facing hard choices in prioritizing new load requests from data centre developers, Rotherham said, noting that restricting computing power run off a grid could mean “losing out” on economic development.
Economic growth imperative
“They don’t want to say ‘no’ to new loads because it could neuter economic growth,” said Rotherham, who explored the data centre power dilemma in a recent Deloitte report.
“There is no greater short-term growth than is going to come from data centres - compared with heavy-emitting industry, corporations and homeowners. So utilities are working harder to figure out how to get to ‘yes’,” he said.
This is in sharp contrast to five years ago when data centres were hardly a factor in provincial utilities’ demand forecasts, he said.
“Now, this significant new demand has manifested very quickly and changed the conversation from ‘Can I handle a few gigawatts-hours of loads from EVs plugging into the grid in the next ten years?’ to ‘Can I handle the hundreds of gigawatt-hours that these giant data centres will need?’”
Few are more aware of this looming reality than Rob Davidson, vice president of grid reliability projects and planning at the Alberta Energy System Operator (AESO), the province’s grid operator.
Alberta is Canada’s only fully deregulated power market, with capacity planning led by “market signals” to guide where more generation can be added to the grid.
“What our framework allows is for loads – data centres in this case – to pursue commercial contracts for power purchase. It’s a merchant risk,” Davidson told Canada’s National Observer.
This model is attracting interest from developers of many stripes. Data centre giants including U.S. firms Equinix, Cologix and Digital Realty, and domestic players such as eStruxture and Cohere, are all jockeying for position in the race to build projects in Canada.
“What our framework allows is for loads – data centres in this case – to pursue commercial contracts for power purchase. It’s a merchant risk."
AESO vice president of grid projects and planning Rob Davidson
Alberta launched its strategy in December, touting its abundant fossil gas, low taxes and northern climate to a dozen “household names” in the U.S. high-tech industry, according to Nate Glubish, the province’s technology and innovation minister.
Future projects could be fast-tracked if developers build off-grid and secure their own power to avoid straining Alberta’s 21 GW electricity network, he said, based on a strategy that would look to increase gas-fired generation using the province’s 200 trillion cubic feet of gas reserves.
“Surge” in demand in Alberta
However, AESO has already seen a “surge” in data centre applications to tap into the provincial grid since mid-2024, totalling more than six gigawatts (GW) of power from just 12 projects, Davidson said. The requests far exceed the capacity currently available.
In its 2021 long-term outlook, AESO foresaw a 1.2 per cent growth in power demand from oil sands production, electric transport, heating and industry. But this forecast did not include data centres, he noted.
One of the biggest potential hyperscale projects in Alberta — and indeed the world — is a $70 billion off-grid complex pitched by O’Leary Ventures, led by Dragon’s Den celebrity investor Kevin O’Leary.
Glubish cites the Wonder Valley project near Grande Prairie as evidence that Alberta’s efforts with developers and investors are “paying off”. However, there is skepticism over the viability of the project - which would run first off gas-fired power and, in later phases, geothermal – and more recently opposition from an Alberta First Nation.
Environmental lobbyists are asking why these off-grid projects are not opting for renewable energy sources in a province with nearly 10 GW of wind and solar power flowing onto the grid. But Davidson argues renewables are not a reliable 24/7 option for now.
“They will need long-duration storage for future data centres to meet their reliability needs,” he said, adding “natural gas is the source that provides that, as it stands.”
Nevertheless, outside Canada, data centres are increasingly powered directly by renewable energy plants. In the U.S. and Europe wind and solar power will supply 50 per cent and 20 per cent of announced projects respectively, according to research from S&P Global.
The shift to renewable power will gain traction in Canada too, as AI disrupts power markets across North America, Rotherham predicted.
“These large IT companies that are building data centres have demanding emissions reduction targets, and will be looking at non-emitting power sources – wind, solar, small nuclear,” he said.
Developers should be “more creative, more nimble,” in working out how to meet their power needs with reliable, clean power sources, he added. “It’s an energy and economic imperative.”
Small tech needs power too
Big Tech is not the only power buyer in the data-centre space.
Micro-power markets could emerge across the country for data startups and mid-size firms seeking to scale up operations, said the CEO of SolarBank, a Toronto-based clean energy developer.
“Expanding into the data center business aligns with our vision of creating a resilient and sustainable energy grid,” Richard Lu told Canada’s National Observer.
"Data centres, cryptomining, the internet of things, and so on, all need 24/7 reliable power."
SolarBank CEO Richard Lu
“Data centres, cryptomining, the internet of things and so on, all need 24/7 reliable power,” he said. “With [energy] storage now seeing costs come down dramatically, they will be able to have that from renewable energy sources now.”
Data centres with smaller “side-by-side” power generation could operate in major urban centres or remote communities without stressing existing grids, he said.
“I think we have to consider whether we want to build 500 MW data centres or more widely distributed 20-50 MW ones,” said Lu, whose company is in talks to build its first renewables-powered project for the data industry.
The Big Tech players have large-scale power demands, Lu said. But other mid-sized organizations such AI start-ups, universities, clean technology incubators and hospitals also have rapidly growing AI-driven electricity needs, he added.
About 80 per cent of Canadian firms are small- and medium-size enterprises and can’t dream of owning a hyperscale data centre, but still need to process data at AI-level speeds. Off-grid, renewables-powered data centres will be a key part of the solution, Lu said.
“They could have access to computing power in the same ways the big guys can, and they can do it with non-emitting sources,” he said.
Back in Alberta, AESO faces a major transformation as coal-fired electricity generation is phased out after more than a century in the province.
The next chapter in Alberta’s grid history will be heavily influenced by data centres. Many will be connected to the main power network, but future off-grid generation will also be needed to meet the much higher electricity demand coming with the expansion of AI.
Projects that come complete with their own power supplies will help provinces lower grid costs in the long-term and free up budgets that would otherwise have to be spent on new generation projects, said Davidson.
“This is where the big wins will be,” he added. “But we need to be proactive if we are going to integrate future data centres in a reliable way.”
Comments
It sounds like it should have its own self-contained isolated power plant to power the entire datacentre and with some to spare. With the USA determined to build their own to rival the rest of the world, Alberta better make sure it has the customers locked in where it will pay for itself, or become another boondoggle.
This entire project has the smell of the documentary "2073", where AI will eventually do all the work, at the expense of those who are not part of the elites and left to die.
“Alberta is Canada’s only fully deregulated power market,“ really? It is regulated - no wind turbines or solar power allowed.
https://www.nationalobserver.com/2025/01/23/analysis/canada-data-centre…
People and gov’ts really need to rethink the “data centre economy” strategy; e.g. I can’t understand why any gov’t would provide financial incentives to build what is, ultimately, a massive electricity sink. How many person-hours of work are needed to maintain a data centre, once built? Is it truly sufficient to rationalize “$240 million in federal support” that “…will enable Cohere to secure enough private capital to incentivize its strategic partners to build a new cutting-edge, multi-billion dollar AI data centre in Canada.”? (from the linked GoC page)
A huge data centre can be thought of, abstractly, as a single computer. That single computer can be placed anywhere in the world, providing sufficient electricity, an internet connection and maintenance staff are available, and need not be collocated with the people that prepare the workloads to run on the computer. An AI ecosystem in Canada does not require a datacentre to be installed across the street. One of the few reasons for actually having a datacentre in Canada is security of the physical plant and security of the data stored within. There may be rare instances where network latency (i.e. the time is takes a byte of data to get from A to B) must be minimized to the microsecond; what is the difference in time for light-travel between, say, Toronto and Sudbury vs, say, Toronto and Yellowknife or Toronto and Reykjavik (though it may be dubious logic that results in a green-lighted data center in Volcanoland)?
At a time when we must reduce GHGs, there is a great deal of sanguinity present when tossing around the idea of another several (hundred) GWs of electricity generation capacity, even if fueled by fossils (have a glance at the referenced Goldman Sachs report). To read the following paragraph, hardly reassuring that we are taking the climate crisis with anything more than a wink and a nudge.
“Future projects could be fast-tracked if developers build off-grid and secure their own power to avoid straining Alberta’s 21 GW electricity network, he said, based on a strategy that would look to increase gas-fired generation using the province’s 200 trillion cubic feet of gas reserves. “
It is also long past time to start adding opportunity costs to this debate: if we are strapped for electricity, are there other, more productive** uses of electricity that is being added to the grid – particularly renewables, which data centre developers are only happy to highlight -- ostensibly to power data centres? A similar question must also be asked regarding cryptocurrency mining.
The notion of “losing out” on economic opportunities requires additional fleshing out in terms of what, exactly, is the benefit of accessing a datacentre close by vs one a few thousand kms away. I realize there are some tax benefits to municipalities for having datacentres situated therein (e.g. Virginia***), but what is there beyond that?
From this article: “There is no greater short-term growth than is going to come from data centres”. Could it be that Deloitte, the source of that quote, is merely trying to expand its consulting revenues?****
** productive in the sense of person-hours of work, financial gain, meeting strategic society goals, etc. per MWh consumed.
*** https://www.governing.com/infrastructure/the-data-center-capital-of-the…
**** https://www.deloitte.com/global/en/about/recognition/analyst-relations/…
I'm hugely skeptical of the value (so far) of AI and the actual need for data centres.
But, if they must be built, build them up on the Arctic ocean for even cheaper cooling; and our Mackenzie river is the one hydro resource left that's basically not exploited so far, because it's not near anybody that needs the power.
Hurrah!!! Yet one more way to guarantee Alberta's 'advantage' by cutting the costs of educating the many perfectly working brains of our children, while ramping up industries that are gluttons for the clean electricity and water we DO NOT HAVE in any abundance.
Fossil gas plants will have to ramp up, even if the unthinkable happens, and the climate sceptical UCP, bite the bullet and let clean energy grow again in the province....
Surely its a win-win-win for oil and gas, climate denialists, and the techy nerds who think they can invent a better brain than the one the Great Mother allowed to flourish in homo sapiens.
Best to remember: Not everything that calculates is also thinking. There's a bit of a mystery to thinking....which might save us yet.