The Decibel - Alberta’s AI push could come with a big energy price tag

Episode Date: May 21, 2025

Generative AI has been taking the world by storm, and Alberta wants in on the action. The province currently has plans to break ground on at least six AI data centres this year. But, more data centres means more electricity usage, and in Alberta, that means more natural gas.Joe Castaldo is a business reporter for The Globe and Mail. He’s on the show to explain why Alberta is trying to become the next big data centre hub and what that means for the province’s electricity needs and emissions.Questions? Comments? Ideas? Email us at [e-mail]

When you ask chat GPT a question, it gives you a quick response that might feel like magic. But behind every generative AI request is the processing power of a lot of physical infrastructure. It's a large, bland building that might resemble a warehouse. That's Joe Castaldo, a business reporter for The Globe. He focuses on artificial intelligence. But inside is lots of expensive computing equipment used for all kinds of things and

increasingly for generative AI, not just chat GPT, but if you use any Microsoft products or Gmail or LinkedIn, I'm sure you've noticed all kinds of features offering to write stuff for you or summarize stuff for you. All of that is generative AI and powered by a data center somewhere in the world. Those data centers are big buildings that house huge amounts of computing equipment. They use a lot of electricity. And how that electricity is generated can vary depending on where the data center is. Take Alberta.

Alberta's electricity is mostly powered by natural gas. And as the province is working to entice more companies to set up data centers there, it's going to mean a lot more carbon emissions. So today, Joe's on the show to explain why Alberta is trying to become the next big data center hub, and what that means for the province's electricity needs and its emissions. I'm Maynika Raman-Wilms and this is the Decibel from the Globe and Mail. Joe, thanks so much for being here. Thanks for having me.

So Joe, where do we currently have data centers in Canada? There are data centers across the country, but most of them today, there's more than 250 in Canada. It's not a firm number, but it's an estimate. Most of them are located in and around Montreal, Toronto, and Vancouver. There are a couple of reasons for that. Those provinces have cleaner energy grids, a lot of hydropower, and Ontario has nuclear power, so emissions are not as big of a concern. Also, those are dense population centers. There are lots of businesses and households in those areas, lots of fiber optic connectivity.

So basically, it's close to the end user. Okay, and you mentioned the energy grids. I imagine that's because these take up a lot of energy. Do we have a sense of what kind of draw they actually are? So today, data centers might not be as big of an energy hog as you might think. So this is like an older breed of data center. But looking ahead, yes, they can consume a lot of energy.

So one estimate from the International Energy Agency, looking at data centers across the world, by 2030, the amount of electricity they use is expected to double and slightly surpass the energy consumption of Japan. Wow. So it could be substantial. And a big reason is generative AI.

It is an energy intensive technology. And generative AI is driving a lot of demand for new data centers over the next decade or so. Okay, so this brings us this to Alberta, because there is this push now in Alberta to build data centers specifically looking at serving AI. Why is the province interested in doing this?

The government there sees it as a business opportunity. The technology minister, Nate Glubish, who really kicked this off, has said it's a generational opportunity. There are some economic benefits like there would be tax revenue from companies that operate there. There are construction jobs to get all this up and running. There are some operational jobs once a data center is done, maybe not many. The other thing

people talk about is just by building a data center specifically for AI, you will attract companies to that area, and you can form a tech hub around the data center. I'm a little skeptical about that. You don't need to be physically close to a data center to use these services. And there are all kinds of reasons why a company might choose to locate where it does.

I think it's more, from an economic point of view, a bit more indirect. To develop AI, to use AI, we need data centers. Like we need this infrastructure and there's a consensus we don't have enough of it. So by hosting this infrastructure, you help encourage development and adoption. And as companies start using AI,

they might see the promise benefit in terms of increased productivity and efficiency and developing new products and services, and that benefits the economy. So just by virtue of having this infrastructure, you encourage AI. And AI is supposed to be amazing. And so it's just helping from that perspective.

OK, so it sounds like there's a few different reasons than why the government might want to do this. What is the government of Alberta then actually actively doing to attract companies to come to Alberta and build these data centers? First, I think it's important to note what they're not doing. They're not subsidizing any data center. That's different from what the federal government has done.

They, last year, announced a $2 billion program to encourage AI data centers. The Alberta government is not throwing money at this. They did announce in December when they rolled out this plan, what they call a concierge program, just to help speed the process, eliminate any unnecessary barriers and red tape and so on so that companies can get up and running fast. The other thing they're doing is just really selling their attributes hard.

So data centers get very hot. They require a lot of water for cooling. That's expensive. That could be resource intensive. Alberta has a cold climate, so they're saying you can just use air cooling in Alberta for your facility. Yeah, especially in the winter, right? You don't need to worry about that extra cost then.

Exactly. And a lot of data centers are being built in very hot climates, like Texas and Louisiana, where cooling is a much bigger issue. The big thing with Alberta comes down to electricity. AI data centers require a lot of electricity. It's not easy or fast to procure it. Alberta has a lot of natural gas, and the province wants companies to exploit that,

essentially. They want natural gas turbines. Use these resources. You can get up and running very fast with natural gas, and there's just so much of it that it's not the bottleneck that it is in other places and when you talk to any data center company about you know what's most important in determining where you're going to build a facility access to electricity is number one. Okay so electricity seems to be a big part of this then what kind of impact though would these big projects

have on Alberta's electricity usage as a whole? So it depends. What the province wants companies to do is use off-grid electricity, meaning they produce their own power, right? They set up their own natural gas turbine or work with a power producer in Alberta on a facility to generate power just for their own data center. They're not taking electricity from the provincial grid, which also goes to households and other businesses because data centers use so much electricity, right? There's a concern about how is that going to affect the stability of the grid?

Is it going to lead to blackouts and brownouts? Is it going to affect the stability of the grid? Is it going to lead to blackouts and brownouts? Like is it going to affect prices? And that's the other advantage of doing this in Alberta is it's a deregulated electricity system. So there are independent power producers that you can work with. You can't necessarily do that elsewhere in Canada. Oh, interesting. So this is actually a big draw then for the province specifically, the way that they can do this off-grid electricity. That's right that's unique to Alberta. The thing is right now companies are not really going that route. So you asked about you know impact on electricity. So basically how it works is a data center has to ask the province for electricity, specifically

what's called the Alberta Electric System operator, which plans and manages the grid. And right now there are about 25 project proposals, 25 data centers, and in total they're asking for 16,000 megawatts of electricity for their data centers. And to put that in perspective, that's more than the entire electricity consumption of Alberta today, plus a little more.

Okay, so if the current proposals are all built, that would essentially more than double what the province currently uses. Yeah, it's like another Alberta worth of data centers. If they all go ahead, and that's a huge if, to be clear. OK. Yeah, because you mentioned there's a lot of these seem to still be at the proposal stage.

You said there's currently 25 proposed projects here, Joe. So can we look at some of these companies? Like, who is actually looking to build a data center in Alberta? Yeah, there already are data centers in Alberta. So I mean, Amazon opened a data center in Alberta? Yeah, there already are data centers in Alberta. So I mean, Amazon opened a data center in 2023, for example. There's a big one under construction that predates sort of the government's plan by a company called East Structure. It's supposed to open in 2026, and it would be the biggest when it's completed. There are some newcomers here.

A company called Beacon AI has six projects in the works that it wants to break ground on this year. It's a new company. The people running it might have a track record. The company itself does not. And the big one, at least one that has generated some headlines, is called Wonder Valley, which

is backed by Kevin O'Leary. That again, to be clear, has a very, very, very long way to go. The scale of it is approaching absurd. It's a $70 billion project all in. More than 7,000 megawatts of electricity which is enough to power more than 6 million homes. Wow, okay. So as you say, still at the proposal stage, but just like this idea is massive then.

Yeah, and that project, like it has support from the province. Like the government announced their data center plan in December. The very next day, the announcement about Wonder Valley came out with quotes from the premier there. I think that project is more emblematic of the enthusiasm or hype around AI. We'll be right back. OK, so Joe, we talked about how much electricity these data centers would use in Alberta. And you mentioned how Alberta's electricity grid is largely powered by natural gas. This is something I want to ask you about now, because if we looked at these proposed

data center projects, what kind of impact would this actually have on emissions in Alberta? Because natural gas would obviously increase that. Yeah, emissions will go up. There's no question about that. Nobody's denying it or trying to sugarcoat it. It's interesting in Alberta. So the province has made a lot of progress in terms of reducing emissions. So I think since 2015, emissions have gone down more than 7%. And that's largely because the province has been phasing out coal. They used to run coal-fired power plants. Last year, they were phased out entirely.

So depending on how many data centers are built and whether they're powered by natural gas, that could basically undo the progress the province has made reducing emissions. OK, so if we know it's going to have such a big impact then on the province's emissions, what is the justification for doing this? Yeah, I ask that question a lot.

And I heard the same thing over and over again. And it's sort of this pragmatic, fatalistic answer in a way. People say data centers are going to get built somewhere. There's demand for them. So if not in Alberta, they will be built somewhere else and emissions are going up either way. So if that's going to happen, then why not have it occur in Alberta where the province can gain some economic benefits. And the other component to that is

people are just very firm believers in AI and that it's really going to benefit the economy. And so it's worth it from that perspective too. OK, so even if the province wants to do it, why not maybe invest in more renewable energy instead? The province was putting a focus on that for a while. Is that an option here? Yeah. So both the province and companies themselves make reference to renewable energy and perhaps incorporating solar and wind and geothermal in Alberta as well. The thing is they all

say it's not reliable enough to power one of these very large facilities that has to be on 24-7. So it it might be a component but the focus is still on natural gas. Is there a way to do this more sustainably though? Because I guess I wonder if we do want to build up this industry is there a way to do it with less of an impact on the environment? Yeah there are potentially plenty of ways. And so there is talk even in Alberta about mitigation with natural gas. So carbon capture and storage is presented as a solution

to this technology. So capturing the emissions from the gas turbines and shoving them underground. Still kind of a work in progress, though, right? This is not exactly working perfectly at the moment. Very much so. So there's only one data center company that I know of that is doing carbon capture right

off the bat. Other companies will say it's something they are looking at for down the road, potentially, because right now it's just not economical. They're going to lose money if they do that. So the technology has to become more efficient. Even then, there's questions about like, why would they do it? Even if it doesn't affect the economics as much as it does today, it still adds cost, it still adds complexity. So unless there's an incentive or a mandate to do it, there's a question about whether or not

they would even implement it down the road. The other thing people talk about is nuclear. Natural gas might be a stopgap until more nuclear power is built, particularly small modular reactors, which are more portable. Ontario is invested in that. And you'll hear talk about it in the prairies, too. But again, it's a technology that is in development, it's very expensive, so it remains to be

seen. That's why you know everybody is focused on natural gas. It's here now, you can exploit it quickly even though it comes with an environmental cost. Would it not make sense then to kind of build out these data centers across the country? Like obviously Alberta is putting a big focus on this, but I wonder, you know, to spread it out across the electricity grids of various provinces, might that be more efficient for the country? Yeah, I talked to Sasha Lucioni, who's with an AI company called Hugging Face, and all of her research is about AI and the environment.

And she was making the case that, you know, industry is focused on these huge monolithic data centers, right? There's a mentality that bigger is better. And her argument is maybe you can build a greater number of smaller data centers and distribute them over a larger geographic area. So there isn't much concern about needing huge quantities of electricity in a particular province. It's easier to incorporate renewable energy in that case, even from a latency point of view, which is like, how long it takes you to get an answer from Chachi BT, for example.

If you have more facilities located closer to end users, that helps improve latency too. So there are other approaches. There's also a lot of work being done on making these facilities more efficient, so more processing for less electricity, which is great. The issue with that is whenever you make something more efficient or cheaper,

more people start using it. That's called the Jeevan's paradox. So yeah, a data center can be more efficient or cheaper, more people start using it. That's called the Jeevan's paradox. So yeah, a data center can be more efficient, but your overall electricity consumption can still go up as more people adopt the technology. Yeah. Well, since we've been talking about the massive draw of electricity that these centers take,

I guess I wonder, Joe, what is the state of our electricity grids in Canada right now? Do we have, I guess, enough energy spread out? Yeah, it's a challenge in a lot of places. So it's not just data centers that might contribute to demand, like electric vehicles get discussed a lot, just new industrial projects, population growth. That's all potentially taxing electricity grids and creating demand for new generation. electricity grids and creating demand for new generation. So one estimate is in the next 10 years, Canada is facing a 15% shortfall in terms of electricity.

So there could be a mismatch between supply and demand. The one thing to note is projecting electricity consumption is quite difficult. These estimates can change. But in provinces like Quebec and Ontario, new generation is a big issue to meet demand. I know you said earlier that there was kind of this general consensus that we don't have enough data centers. But I guess I wonder about that, though.

Is it possible that we could end up building too many data centers? We use these things for a lot, but are we really going to need so much more cloud storage and AI computing power? I ask that question a lot. And sometimes I got kind of like snickering. Like, no.

No way. There's just so much demand. We can't overbuild, right? It's this mentality, if you build it, they will come. Like, you'll get customers. So that view is out there. But it's premised on the idea that generative AI in particular becomes really useful and gets widely adopted and companies start seeing the benefits. And that we don't know,

right? We're only like two and a half years into generative AI really taking off. And the promised productivity gains, GDP growth, we haven't seen that yet. It's early again, but it's uncertain. And if you look back to, say, the 1990s when the World Wide Web was taking off, like the internet was this new thing, companies started building a lot of fiber optic cable, right, this connectivity to help support internet growth and adoption.

Well, they way overbuilt, like supply got way ahead of demand. There was a correction. Some of these companies went bankrupt. And yes, the internet was not a fad. It's changed our world, but there was some pain along the way. So it's not inconceivable that something similar could happen with AI. Even McKinsey, the consulting firm, which tends to be very boosterish about new technology, you know, had a report this month all about AI adoption and data centers and noting just how much uncertainty there is about demand and adoption and how that's going to affect

investment in data centers. So just lastly then here, Joe, with all of that being said, it sounds like there's some big plans in Alberta to build these centers. But how likely is it that all of these projects will actually get built? It's hard to say. I think certainly not all of them,

and maybe not to the scale that some companies are hoping for These projects they need financing. They need some customer commitment. Lots of things can go wrong before a facility actually comes online The thing to watch for is like I said a lot of companies are asking for electricity to watch for is, like I said, a lot of companies are asking for electricity from Alberta. The province can't meet all of it. Not everybody is going to get what they ask for. And it remains to be seen what they do in response.

Maybe some of these projects have to scale down. Maybe they'll be smaller. Or maybe it pushes them to secure off-grid power, which is what the province wanted in the first place. Joe, thank you so much for taking the time to be here. Thank you. That's it for today. I'm Maynika Ramon-Welms.

This episode was edited and mixed by Ali Graham. Our intern is Kelsey Howlett. Our associate producer is Aja Souter. Our producers are Madeline White, Michal Stein, and Ali Graham. David Crosby edits the show. Adrian Chung is our senior producer, and Matt Frainer is our managing editor. Thanks so much for listening, and I'll talk to you tomorrow.