Alberta is in the running for a piece of North America’s rapid data center growth. Two Alberta cabinet ministers headed to Silicon Valley last week with the sole purpose of promoting the province as a “prime location” to build the physical structures that store and process our digital information.
Major technology companies are looking to the world for available power, and the province is not the only one trying to attract data center investment.
Compared to other provinces and U.S. states, Alberta also faces some challenges, such as how much pollution its natural gas-based power grid is causing now and in the future.
The opportunities are immense and the province has a unique offering. However, the overall impact of building the power-hungry centers required for the booming artificial intelligence sector is also questionable.
And while some cabinet ministers are excited about the huge investment opportunity, others are more cautious about the ultimate impact on the province.
“We already have problems with our power grid,” said Alberta Finance Minister Nate Horner, warning of possible unintended consequences that could affect electricity bills.
“You really have to understand what the return on investment would be for the province,” he said. “That’s why we’re getting to the bottom of it.”
Trying to become Canada’s top spot
Currently, most of Canada’s data centers are in Ontario and Quebec because those two provinces are so populous, experts say. Quebec’s low-cost renewable electricity, generated primarily from hydropower, has also helped attract investment.
There is a strong demand for more data centers in Canada, driven by two sides: cloud service providers and artificial intelligence companies. Data centers are filled with rows of computers and other machines that store pretty much everything on your phone or computer, like pictures, music, and more.
Cheap natural gas is a selling point, as is underground storage space to store carbon dioxide emissions, says Michael Belenkie, CEO of Entropy.
Alberta has set up a task force in its cabinet with the goal of becoming Canada’s leader in attracting lucrative technology locations. The province’s technology minister, Nate Glubish, was one of the politicians who travelled to Santa Clara, California. It is his second trip to Silicon Valley this summer.
“This is an excellent opportunity to promote Alberta as a premier location for AI data centers,” he said in a statement announcing the trip.
Some companies have already set their sights on the province.
The number of applications received by the Alberta Electric System Operator (AESO) has increased in recent months, the agency said, totaling about 5,000 MW of data centre projects in the early stages of development. It is uncertain how many projects will ultimately be built, but the province’s grid currently has a capacity of about 21,000 MW.
Higher demand for natural gas within the province
For Alberta, the financial opportunity is far greater than just the data center itself, considering the province relies largely on natural gas-fired power plants for its energy supply. All of those computing machines require a tremendous amount of electricity, requiring the construction of more power plants and increased natural gas production. The spin-offs could be increased employment, tax revenues and royalties that the provincial government collects on the natural gas pumped out of the ground.
“Electricity demand is currently increasing rapidly around the world as we electrify everything, and it is being exacerbated by the development of data centers and artificial intelligence,” said Michael Belenkie, CEO of Entropy, a Calgary-based carbon capture company.
“There’s an arms race going on for growth,” says Belenkie, whose company recently signed a deal with a company to power a new data center with a natural gas-fired power plant and a carbon capture facility, meaning the emissions are captured and stored underground.
For privacy and competition reasons, Belenkie cannot disclose the name of the company or the location of the project.
Natural gas power plants can be built much faster compared to hydroelectric or nuclear plants, Belenkie said. Alberta has many advantages, including plenty of underground space to store carbon emissions, relatively cool Canadian weather and cheap natural gas.
A few carbon capture facilities are already in operation in Alberta. The technology can help reduce emissions, but its effectiveness can vary by industry and add costs when developing a project.
This summer, natural gas prices were around $10 in Europe, $2.50 in the U.S. and around 75 cents per million British thermal units (MMBtu) in Alberta, Belenkie said, as export pipelines from the province were full.
“Importing demand to use the captured energy is a really elegant solution for us in Alberta,” he said.
The province’s challenges include uncertainty over electricity policy as the provincial government restructures its deregulated system, as well as taxes paid by businesses, including the carbon tax on natural gas.
Abundant electricity at low cost is a key selling point for data center developers, says David Cervantes of CBRE.
The search for megawatts
In recent years, Alberta has dramatically reduced pollution from its power grid by shutting down all of its coal-fired power plants while building additional natural gas plants and dozens of large-scale wind and solar power plants.
Still, the power grid is largely dependent on fossil fuels, which could hamper investment by global technology companies. As more natural gas-fired power plants are built, overall emissions from Alberta’s electricity sector could also rise.
“Alberta is working very hard to improve its energy profile, not only through various applications of natural gas to accelerate market adoption, but also through the deployment of significant amounts of renewable energy, both wind and solar. The outcome and impact on the overall energy profile is yet to be determined,” said David Cervantes, a Montreal-based senior vice president at real estate firm CBRE and head of the national data center practice group.
The availability of electricity is a top priority for data center developers, Cervantes said.
“If a data center operator has access to hundreds of megawatts, they will use it regardless of the power profile and greening initiatives,” he said.
Although Alberta’s financial opportunities to attract high-tech and expensive facilities are great, there is also caution within the government.
Rising electricity bills are one reason why the provincial government is upgrading many parts of its power grid. Affordability is a major issue for many residents and the frequent grid alerts are no longer a distant memory.
Alberta has experienced several grid disruptions in recent years as demand typically spikes during extreme cold or heat and some power plants unexpectedly go offline.
The problem could be alleviated by building new natural gas power plants, which could increase the province’s electricity supply by about 25 percent this year.
