Canada needs more electricity — fast. In part, this is due to the projected growth of data centers that can power artificial intelligence and the increasing demands of our digital services. Both the federal and Alberta governments see data centre development as a compelling opportunity to attract investment and position Canada to benefit from the growing role of AI in areas ranging from health and research, to productivity and innovation. At the same time, policymakers are increasingly focused on building Canadian data sovereignty and ensuring appropriate protections are in place as the technology continues to evolve.
Yet, at the heart of the increasing integration of AI into our lives is an important question: how can we power data centers without driving up energy bills, driving up harmful emissions or putting too much pressure on the grid?
This blog explores what the challenge looks like in Alberta’s natural-gas reliant grid and what the expansion of data centers could mean for affordability in the years to come.
What impact will data centers have on Alberta’s electricity system?
It's now widely understood that data centers require enormous amounts of electricity to power their operations.
Consider the recently announced Meta data centre. Once completed, it is expected to require 1800 MW of electricity — that is almost 15% of Alberta’s average electricity demand in one fell swoop or more than the entire city of Calgary. Numbers like this underscore the sheer magnitude of power required to run these types of facilities.
Given this reality, it is no surprise that governments — both provincial and federal — are turning their attention to expanding electricity supply and accelerating investments in grid infrastructure.
But, especially in Alberta’s case, the decision on how to expand supply to meet demand is just as important as why. A comprehensive and balanced approach to these questions starts with robust rules governing how data centers connect and operate on the grid. That means looking at supply, efficiency and flexibility together.
Where does the energy for data centers come from?
Many factors go into determining where energy for data centers could come from but one of the most important is location. In Alberta, this means data centers would likely be powered by natural gas, because the province is heavily reliant on it for electricity (in 2025, natural gas accounted for 77% of Alberta’s electricity supply).
This makes it all the more important that policymakers carefully consider how they choose to expand electricity grids to accommodate higher demand and the new generation, transmission, and other infrastructure required to support it. Given the potential scale of data centre demand, governments across North America are carefully considering how to allocate costs because these decisions have long-term impacts on both affordability and emissions.
Can data centers use cheaper and cleaner forms of energy to power their operations?
Yes, but it depends on market and policy structure and the contracts they sign with government and utilities. In Alberta, the Alberta Electricity System Operator is developing its own “bring your own generation” (BYOG) framework. In short, these types of frameworks allow data centres to connect to the grid as long as they also put more generation on the grid so supply and demand grow at around the same pace.
As they’re drafted currently, however, these BYOG rules essentially exclude all options for generation other than gas-fired power. In practice, this means that even if a data centre operator wants to bring on clean electricity – because it’s cheaper, faster to build, and low-carbon – they are only allowed to build more gas plants.
The impact of this policy is already visible: Meta’s recently announced data centre in Sturgeon County, for example, will be powered by a large natural gas power plant. And while Meta has committed to “match” gas generation with renewables over time, Alberta’s policy landscape — which has seriously stifled renewables development for the past 3 years — will make it much harder to develop those projects within the province.
But it doesn’t have to be this way. In fact, these decisions stand in contrast to what we see in other places like Nevada, Texas and Minnesota, where utilities and tech companies are choosing to meet growing data centre demand with a mix of renewables and storage, in no small part because renewable energy is cheaper and can be built quicker to meet this new electricity demand. Altogether, these examples demonstrate that decisions about how to power data centres are shaped as much by policy choices as they are by technical capabilities.
How do Alberta’s Bring Your Own Generation rules impact household energy bills?
In recent years, we’ve seen how, when planned poorly, hyper-scale data centres can drive rates up for nearby consumers. These are issues that can be managed with robust public policies designed to protect ratepayers.
As part of its recent announcement of Canada’s first hyper-scale data centre, government officials acknowledged these risks announcing an up to 6 percent decrease on the transmission portion of consumer electricity bills, since they would help pay the costs for the grid we all share. For the average household, however, this would represent about $1.50/month in savings. Moreover, transmission charges are just one part of Albertans' electricity bills and the 6% decrease does little to address the larger affordability risks that emerge as gas-powered data centres continue to develop in the province.
If Alberta moves forward with its draft BYOG rules, then Albertans – more than any other consumers in Canada — could face more volatile monthly electricity rates. Combined with the federal government’s ambition to “triple LNG exports over the next decade”, this approach would increase exposure to fluctuations in natural gas prices, since gas is a globally traded commodity. Even in a gas-producing province, electricity prices are affected by gas costs, because gas plants very often set the market price for electricity.
To this end, Australia offers a clear warning. After expanding LNG exports, wholesale natural gas prices tripled from about $4 AUD to $12 AUD per gigajoule in just a few years, then spiked to as high as $50 AUD during the 2022 energy crisis, demonstrating how quickly global gas market volatility can affect domestic energy costs.
What else should be part of the solution?
How data centres are powered matter. But it is not the only question that policymakers should be asking.
Decision-makers also need to ask how much electricity a facility will use, whether that electricity will be used efficiently and whether the grid can accommodate that demand without creating unnecessary costs or strain — also known as electricity flexibility.
Flexibility means reducing or shifting electricity use when the grid is under strain. This matters because electricity systems are often built to meet periods of peak demand. If large facilities are designed to operate more flexibly, they could reduce the need for new power plants and other grid infrastructure. While flexibility will not eliminate the need for new investments, it can influence how much is needed, when it is needed, and who pays for it.
This is why flexibility should be considered before major infrastructure decisions are made. Alberta’s approach to data centres should look beyond new generation to include efficiency, energy storage, load management, and clear rules that support flexible electricity use.
Where do we go from here?
Canada is in the middle of a meaningful review of our economic and energy priorities. From data centers and critical minerals to EV charging and power lines, we know that rising demand and significant grid expansion is unavoidable. How we meet this demand, particularly if Alberta chooses to become increasingly dependent on natural gas, will determine whether costs and emissions rise alongside it.
Luckily, we have the expertise and proven, cost-effective solutions – like wind, solar, and storage – to guide the way without locking in higher costs and significant emissions.
But getting this right will require strategic and well-designed policy. If done well, the decisions governments make today could support a cleaner, more resilient grid. Done poorly, they risk locking in higher costs and higher emissions.
