Doug Ford leaves a meeting at the Council of the Federation in Charlottetown on July 21. On Thursday, the Premier outlined a framework for AI data-centre development in the province.Darren Calabrese/The Canadian Press
The Ontario government said it is developing a framework for new data centres to deal with an influx of proposals that are causing some municipalities to consider temporary bans on constructing these facilities.
Premier Doug Ford said on Thursday that the government will encourage developers to build their own power-generation facilities rather than rely on the grid, and is proposing to establish a separate electricity rate for large projects. New data centres that consume more than one megawatt would have to pay a higher electricity rate than other large industrial users. That threshold is low enough to capture essentially every new data centre equipped for artificial intelligence.
Mr. Ford also said that developments will have to benefit local economies and adhere to environmental standards related to water consumption and noise.
“The question is, what are the benefits you’re bringing to the community?” Mr. Ford said at a news conference in Guelph, Ont.
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Some parts of Canada have seen a wave of data-centre proposals in the past few years as demand soars for building and running AI models. Unlike data centres for cloud computing and file storage, AI facilities can consume enormous amounts of electricity, and Ontario does not have an abundance of spare capacity.
The Progressive Conservative government also ruled out providing financial incentives to encourage construction and said that developers will have to pay for any necessary infrastructure upgrades. These measures will ensure that no costs are passed to consumers, Mr. Ford said.
The province’s data-centre playbook is meant to provide guidance on how it will decide which projects go ahead, and it has launched a 30-day public consultation before releasing a final version.
Some of Mr. Ford’s comments reiterated what the government signalled when it introduced Bill 40 last year, which instituted changes for how data centres are connected to the grid.
The province previously ensured equal access to the grid, regardless of a project’s size or location. Bill 40, however, requires that some large projects such as data centres meet criteria related to local economic benefits, job creation and digital sovereignty.
The Ontario government says data centres in the province will need to cover all their energy costs and could pay more for electricity than other industrial users. The province released a data centre framework as it faces pressure to bring in guardrails around the facilities powering the artificial intelligence boom.
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There is still some uncertainty around what scale of data centre will fall under these provisions, said Ljuba Djurdjevic, a lawyer with McCarthy Tetrault. A previous government proposal said the rules would apply to facilities of 50 megawatts or more, but “there is no indication from the playbook as to what threshold is currently being considered.”
The data-centre market tends to be dominated by U.S. tech giants, and Mr. Ford leaned heavily into the importance of digital sovereignty on Thursday. “We want to have sovereign data. We don’t want to rely on President Trump getting his paws all over it,” he said.
The province will also favour projects that use closed-loop cooling systems to minimize water use, and technology that reduces noise and captures waste heat to warm nearby buildings.
David Pickup, director of the electricity program at the clean energy think-tank Pembina Institute, said the province’s approach is focused on the right priorities, such as environmental protection and community benefits. “Ontario’s success will ultimately be measured by whether it can prevent higher electricity rates and increased emissions as new power demand is brought onto the provincial grid,” he said in a statement.
Ontario Liberal energy critic Ted Hsu said in the statement that the government’s consultation cannot simply be a “box-checking” exercise. “If the government says data centres will pay their own way, protect ratepayers and deliver meaningful benefits to host communities, then it needs to show Ontarians how it will guarantee that,” he said.
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Marc Mondesir, managing director of data centre company Equinix Canada, said in an e-mail that the framework is an “important step forward” and that it emphasizes the elements that are important for these projects to succeed, such as sustainable development and energy use.
When the government introduced Bill 40 last year, hopeful data-centre operators were seeking to connect to 6,500 megawatts of electricity, close to 30 per cent of peak demand in the province. British Columbia and Quebec have also taken steps to more carefully allocate scarce electricity, whereas Alberta has said that developers need to bring their own power generation so as not to strain the grid or raise electricity prices.
AI data centres have become more controversial in the past year, with some municipalities in Ontario implementing or considering temporary bans on new construction to allow time to study the impacts. Residents in some communities have raised concerns about energy use, water consumption, noise and the true economic benefits.
Oakville, Ont., introduced a one-year moratorium this month, while council in Mississauga will vote on one in September. Meanwhile, Hamilton council voted against a moratorium.
Mr. Ford criticized municipalities that have moved for bans. “I find it, I guess, hypocritical,” he said. “You can’t say, ‘I don’t want it in my backyard, but by the way, we’re going to use all that power and all the information and the data centres to run my community.’ ”