The site of a potential AI data centre in the district of Greenview, Alta. Critics argue energy allotment could hinder the development of data centres in the province.Kelsey McMillan
Alberta’s grid operator is putting an interim limit on the amount of electricity it will provide to new data centres after a massive surge in requests for power from developers. But the approach could thwart the provincial government’s ambition to become a home for the energy-hungry infrastructure that is necessary to run artificial-intelligence models and applications.
The Alberta Electric System Operator said on Wednesday it is allotting 1,200 megawatts of electricity for large-load projects, such as data centres, through to 2028.
But around 29 data-centre projects are requesting to be connected to more than 16,000 megawatts of electricity – which is more than the province’s peak consumption.
“Alberta cannot possibly connect all that,” said AESO chief executive officer Aaron Engen during a media briefing. The electricity cap is necessary to ensure the grid, which transmits power to homes and businesses, remains stable and reliable, he said. The allotment, which is less than 10 per cent of overall demand, still allows projects to come online soon, he added.
AESO has identified 15 projects for consideration to connect to the grid in the near-term, and developers are required to show proof of financial security and letters of support from the municipalities in which they intend to operate. Qualifying developers will receive a pro rata share of the 1,200 megawatts.
The United Conservative government in Alberta announced a strategy in December to attract data-centre operators in response to the global boom in AI. Building and running AI models requires large amounts of electricity, and the province has an abundance of untapped natural gas for generation.
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Technology and Innovation Minister Nate Glubish has also spoken of attracting hyperscale customers, the term for large tech companies such as Google Inc. and Meta Platforms Inc. that are the biggest developers and users of AI.
“We heard clearly from data centre proponents that they needed clarity from [AESO] on how this capacity would be distributed,” Mr. Glubish said in an e-mailed statement Wednesday. “Today’s announcement delivers that clarity.”
But Edmonton-based Capital Power LP, which operates generation facilities in Canada and the United States, said AESO’s approach will undermine the goal of turning Alberta into an AI data-centre hub. “We’ve got a bit of a bust here,” said Pauline McLean, the company’s chief legal officer. “I don’t think it’s actually going to meet the government’s policy objectives.”
Capital Power has a proposed data-centre campus in Alberta for up to 1,500 megawatts that is geared toward hyperscale customers, who require hundreds of megawatts of power.
But under AESO’s methodology, the project could be allotted less than 250 megawatts. “We simply will not attract those customers,” Ms. McLean said.
AESO’s criteria should be more stringent, she said, and consider how data-centre proposals align with the provincial government’s goals, whether First Nations communities are involved, and what upgrades to transmission infrastructure are needed.
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That could allow for power to be spread out among a smaller number of data centres, but each one having more capacity.
The provincial government has said that its preference is for data-centre operators to generate their own power, rather than rely heavily on the grid.
AESO’s Mr. Engen said that concept makes “perfect sense,” but added the industry is competitive and the goal is to have new data centres operating as soon as possible.
Ms. McLean, too, said building new generation capacity would take years.
“This puts Alberta in a less competitive position. Tech firms are looking for power and looking for power now,” said Shaz Merwat, energy lead at the Climate Action Institute at RBC. “But it’s hard to push back on prudence,” he added, referring to AESO.
Longer term, the province remains attractive for development, partly because of the government’s support for data centres, he said.
TD Cowen analyst John Mould said in a note Thursday that AESO’s allocation approach and the lack of clarity beyond 2028 could limit the potential for large data centres. “A lack of runway could dissuade initial investment,” he wrote.
Beacon AI Centers, which plans to develop six large data-centre campuses in Alberta, said AESO’s process has not changed its views of the province’s potential. “We remain extremely bullish on Alberta,” said CEO Josh Schertzer in a statement.
Alberta isn’t the only province dealing with electricity constraints. Ontario’s provincial government introduced legislation this week to better handle dozens of data-centre proposals that would require up to 6,500 megawatts of electricity, or close to 30 per cent of peak demand.
Utilities are currently required to connect data centres to the grid regardless of the economic benefits or energy requirements, the government said.
With the proposed bill, unveiled by Minister of Energy and Mines Stephen Lecce, the province wants to instead prioritize projects “that maximize benefit to the Ontario economy and work force,” according to a government news release.