Alberta is trying to get in on the race for a share of North America’s fast-growing data center market, with two of its cabinet ministers traveling to Silicon Valley last week in a push to promote the province as a “premium location” for building physical facilities that store and process digital information.
Big tech companies have been scouring the globe for available power, and the state is not alone in trying to attract data center investment.
Alberta faces several challenges compared to other provinces and U.S. states, including questions about how much pollution its natural gas-dominated power grid will emit now and in the future.
While the opportunity is great and the state has unique advantages, there are questions about the overall impact of building a power-hungry center needed for the burgeoning field of artificial intelligence.
Some cabinet members are enthusiastic about this major investment opportunity, but others are cautious about how it will ultimately affect the state.
“We already have challenges in our electricity system,” Alberta Finance Minister Nate Horner said, warning of unintended consequences that could affect utility bills.
“We really need to understand what the return on investment is for the state,” he said. “That’s why we’re looking at it.”
Aiming for the top spot in Canada
Currently, most of Canada’s data centers are concentrated in Ontario and Quebec, due to their large populations, and Quebec’s renewable electricity, mostly from hydroelectric power, is low-cost, which also helps attract investment, experts say.
Canada is seeing strong demand for more data centers, the rows of computers and other machinery used to store nearly all the data on our phones and computers, including photos and music, driven by two factors: cloud service providers and artificial intelligence companies.
Entropy’s chief executive, Michael Belenky, says cheap natural gas and underground space to store carbon dioxide emissions are its selling points.
Alberta has formed a ministerial working group to position itself as Canada’s top destination for lucrative high-tech facilities, and the province’s Technology Minister, Nate Grabish, was among the politicians who visited Santa Clara, Calif., marking his second visit to Silicon Valley this summer.
“This is a great opportunity to promote Alberta as a leading location for AI data centres,” he said in a statement announcing the visit.
Several companies are already eyeing the state.
The number of applications the Alberta Electricity System Operator (AESO) has received has increased in the past few months, with about 5,000 MW of data center projects in the early stages of development, the agency said. It’s unclear how many projects will ultimately be built, but the province’s grid currently has about 21,000 MW of capacity.
Increasing demand for natural gas in the state
For Alberta, the financial opportunity is much bigger than the data centers themselves, given that the province relies on natural gas-fired power plants for much of its electricity. All those computer machines require huge amounts of power, which necessitates building more power plants and increasing natural gas production. Side effects include more jobs, increased tax revenues, and royalties that the provincial government collects on all the natural gas it pumps out of the ground.
“Today, global demand for electricity is growing rapidly as everything becomes electrified, but at the same time, that demand is being driven even more by advances in data centers and artificial intelligence,” said Michael Belenky, CEO of Entropy, a Calgary-based carbon capture company.
“There’s an arms race for growth,” said Belenky, whose company recently signed a deal with a company to power a new data center with a natural gas plant and carbon capture facilities, which would capture emissions and store them underground.
Due to privacy and competition concerns, Belenky cannot reveal the name of the company or even the location of the project.
Belenky said natural gas plants can be built much faster than hydroelectric or nuclear plants, and Alberta has many advantages, including plenty of underground space to store carbon dioxide emissions, Canada’s relatively cool climate and cheap natural gas.
There are already a handful of carbon capture facilities operating in Alberta. The technology can help reduce emissions, but its effectiveness varies by industry and can add costs when developing a project.
Belenky said natural gas prices have been hovering around $10 per million British thermal units (MMBtu) in Europe, $2.50 in the United States and about 75 cents in Alberta this summer as export pipelines to other parts of the province are full.
“Importing trapped energy demand is a really good solution for Alberta,” he said.
Among the state’s challenges is a lack of transparency in electricity policy as the state government reviews a deregulated system and revises taxes that companies must pay, such as a carbon tax on natural gas.
Low cost and abundant electricity is a big selling point for data center developers, says CBRE’s David Cervantes.
Quest for the Megawatt
In recent years, Alberta has significantly reduced pollution from its power grid by permanently closing all of its coal-fired power plants and building more natural gas facilities and dozens of large-scale wind and solar projects.
Still, the grid is heavily reliant on fossil fuels, which could discourage investment from global tech companies. As more natural gas plants are built, total emissions from Alberta’s electricity sector could rise.
“Alberta is working hard to improve its power profile through various uses of natural gas to improve time to market, as well as the adoption of significant amounts of renewable energy, both wind and solar. The results and their impact on the province’s overall power profile remain to be seen,” said David Cervantes, senior vice president at Montreal-based real estate firm CBRE and head of the firm’s national data center practice group.
Cervantes said power availability is a top priority for data center developers.
“If a data center operator has access to hundreds of megawatts of power, they’re going to consider it, regardless of their power profile or green initiatives,” he said.
Attracting high-tech, expensive facilities represents a major economic opportunity for Alberta, but there is some caution within the government.
Rising electricity prices are one of the reasons the state is overhauling much of its power system, with affordability a major concern for many residents and frequent power grid warnings not a distant memory.
Alberta has seen several power grid alerts in recent years as demand surges during extreme cold or heat waves caused some power plants to go offline unexpectedly.
The problem is being alleviated by the construction of new natural gas power plants, which could increase the state’s electricity supply by about 25 percent this year.
