CALGARY — David Pickup, director of the Pembina Institute’s Electricity program, made the following statement in response to the government of Alberta’s announcement that Meta will build its first Canadian data centre in Alberta.
“Today’s announcement, that Alberta and Meta are moving ahead to build a 1800 MW data center in Sturgeon County serves as yet another example of how Alberta’s current policy and market framework is being designed to structurally lock in demand for natural gas above all other options – even if it means higher and more volatile costs for consumers.
The new data centre – requiring more electricity than the entire city of Calgary – will be powered by a combination of grid power and a new natural gas plant, on which a final investment decision was separately reached last week.
What is important to remember today, as Alberta moves ahead with the project, is that the choice to power data centres of this size will require new generation, but that generation shouldn’t have to come from natural gas. Today, Meta and the Alberta government could have announced cheaper, low-carbon solutions that wouldn’t expose consumers to higher and more volatile energy rates. Instead, the project will advance and lock in new gas generation – just as costs for developing these power plants have doubled.
It doesn’t have to be this way. Already, other jurisdictions and operators have chosen a different path: to power these operations with renewables first and foremost. Alberta and Meta have alternatively agreed to lock in gas and build renewables later. And while Meta has committed to match gas generation with future renewables, Alberta’s policy landscape – which has stifled renewables development for the past 3 years – will make it harder for them to do so locally. These are policy choices, not technical or economic inevitabilities – and are unlikely to be in the best interest of Albertan ratepayers.
Additionally, what wasn’t mentioned today is that under Alberta’s draft “Bring Your Own Generation” rules for data centres, developers like Meta are effectively forced to choose gas-fired generation, rather than allowing them to choose a combination of technologies to power their operations. In practice, this means that regardless of what proponents may prefer - including cheaper and faster to deploy options - they are only allowed to build more gas plants.
These announcements, combined with the federal government’s ambition to “triple LNG exports over the next decade” will expose Albertans to much more intense market competition for the gas they rely on heavily to heat their homes and power their grid, meaning Albertans will see rising energy costs in the years to come.”
Quick facts
- The 932 megawatt (MW) combined-cycle natural gas power plant is expected to cost $4 billion in capital costs alone. This is 2.6-times more expensive than the 900 MW Cascade power plant built only two years ago.
- Natural gas turbine costs — and therefore natural gas power plant costs — have more than doubled since 2021, driven primarily by a supply chain crunch caused by the recent AI data centre boom. Companies are having to wait upwards of four years to get their hands on turbines to be able to start building.
- At the same time, contract prices for wind and solar have been falling across Canada, decreasing by half over the past decade.
- Even when they bring their own power, data centres powered by natural gas generators can increase costs for ratepayers by driving up fuel prices.
- A data centre this size would use more electricity than the entire city of Calgary. The new natural gas power plant would emit 3 megatonnes of CO2, which by itself is equivalent to 10% of Alberta’s total electricity sector emissions.
- This development is unsurprising, given the Alberta Electric System Operators proposed “Bring your own Generation” process for data centres is limiting its intake to gas-fired power plants only.
- Meanwhile, data centre proponents in Texas and Minnesota are considering hybrid supply options, pairing data centres with wind, solar and energy storage, with natural gas and grid connections providing backup.
- In addition, other jurisdictions, like Nevada, have elected to add new renewables generation and storage capacity and have made deliberate efforts to shift costs to large energy users.
- In Australia, prior to 2015, the wholesale price of natural gas was under AU$4 a gigajoule. Within a few years of the country opening LNG terminals and starting up its export sector, wholesale prices tripled to AU$12 a gigajoule. These spiked even further during the 2022 global energy crisis following Russia’s invasion of Ukraine — when prices got as high as AU$50 a gigajoule. This demonstrates the overlapping risks of Canada increasing LNG exports, Alberta adding new huge sources of natural gas demand competition such as has been announced today, while doing nothing to reduce Albertans’ reliance on expensive, increasingly volatile natural gas-fired power prices.
