Data centres are hungry for power, and Alberta is pitching itself as the place to build

Alberta is putting itself in the race for a slice of the soaring growth of data centres in North America.A pair of Alberta cabinet ministers set off for Silicon Valley last week with the sole focus ofpromotingthe province as a "prime location" to build the physical structures that store and process our digital information.

Major tech companies are scouring the world for available electricity, and the province isn't alone in trying to lure data centre investment.

Alberta also has some challenges compared to other provinces and U.S. states, including questions about how much pollution its natural gas-dominated electricity grid produces now and into the future.

The opportunity is immense and the province has a unique offering, but there are also questions about what the overall impact will be of constructing the electricity-hungry centres required for the booming artificial intelligence sector.

Andwhilesome cabinet ministers are enthusiastic about the massive investment opportunity,others are more cautious over what the ultimate impact will be on the province.

"We already have challenges with our electrical system," said Alberta Finance Minister Nate Horner, expressing caution about any unintended consequences that couldimpact utility bills.

"You really need to get an understanding of what the return on investment would be for the province," he said. "That'swhy we're digging into it."

Trying to be Canada's top spot

Currently, the majority of data centres in Canada are located in Ontario and Quebec because of the large population of the two provinces, experts say. Quebec'slow-cost renewable electricity, primarily from hydropower, has also helped attract investment.

There is strong demand in Canada for more data centres driven from two sources: cloud service providers and artificial intelligence companies. Data centres are filled with rows of computers and other machines used to store pretty much anything on your phone or computer such as pictures, music and more.

WATCH|Alberta's strengths and weaknesses to attract data centre investment:

Why data centre developers are looking to Alberta for growth

16 days ago

Duration 2:57

Cheap natural gas is a selling point, along with underground space to store carbon emissions, says Michael Belenkie, CEO of Entropy.

Alberta has set up a cabinet working group with aspirations to be Canada's top spot to attract the lucrative tech facilities. The province's Technology Minister Nate Glubish was one of the politicians who made the trip to Santa Clara, Calif. It's his second trip to Silicon Valley this summer.

"This is an excellent opportunity to promote Alberta as a prime location for AI data centres," he said, in a statement announcing the trip.

Already, some companies are eyeing up the province.

The number of applications received by the Alberta Electric System Operator (AESO) has increased over the past few months, the agency said, representing about 5,000 MW of data centre projects at the preliminary stages of development. It's uncertain how many projects will ultimately be built, butthe province's grid currently has a capacity of about 21,000 MW.

More in-province demand for natural gas

For Alberta, the financial opportunity is much larger than just the data centre itself, considering the province relies on natural gas power plants for the majority of its power.All those computing machines require a vast amount of electricity, which requires building more power plants and more natural gas production.The spin-offs could include higher employment, tax revenues androyalties collected by the provincial government on all the natural gas pumped out of the ground.

"The electricity demands right now in the world are increasing rapidly as we electrify everything. But at the same time it's been compounded by this evolution of data centres and artificial intelligence," said Michael Belenkie, the CEO of Entropy, a Calgary-based carbon capture company.

"There's an arms race of growth," said Belenkie, whose company recently signed a deal with a company to power a new data centre with a natural gas power plant and a carbon capture facility, which means the emissions would be collected and stored underground.

Due to privacy and competition concerns, Belenkie can't name the company or even the location of the project.

Natural gas power plants can be built much faster compared to hydro or nuclear facilities, Belenkie said.Alberta has many advantages including plenty of underground space to storecarbon emissions, relatively cool Canadian weather, and cheap natural gas.

Alberta has a a small handful of carbon capture facilities already operating. The technology can help reduce emissions, although it's effectiveness can vary depending on the type of industry and add costs when developing a project.

This summer, natural gas prices have hovered around $10 in Europe, $2.50 in the U.S., and about 75 cents in Alberta per million British thermal units, or MMBtu, said Belenkie, since export pipelines out of the province are full.

"Importing the demand to make use of the trapped energy is a really elegant solution for us in Alberta," he said.

The province's challenges include uncertainty about electricity policy as the provincial government revamps its deregulated system and the taxes companies have to pay, including the carbon tax on natural gas.

WATCH|How Alberta compares to Ontario, Quebec and B.C. as a landing spot for data centres:

What tech companies are looking for when choosing a location for a data centre

16 days ago

Duration 2:26

Abundant electricity at a low cost is a major selling point to data centre developers, says David Cervantes with CBRE.

The search for megawatts

In recent years, Alberta has dramatically reduced the pollution from its electricity grid by completely shutting down all of its coal-fired power plants, while building more natural gas facilities and dozens of utility-scale wind and solar projects.

Still, the grid is largely fossil fuel dependent, which could hamper investment from global tech companies. As more natural gas power plantsare built, total emissions from Alberta's electricity sector could increase too.

"Alberta is working very hard to improve its power profile not just with different applications of natural gas for speed to market, but also deploying significant amounts of renewables, both wind and solar. The result of which and the impact on their general power profile, is yet to be determined," said David Cervantes, a Montreal-based senior vice-president with real estate firm CBRE and head of its national data centre practice group.

The availability of electricity is the biggest priority for data centre developers, said Cervantes.

"If a data centre operator can have access to hundreds of megawatts, they're going to explore that regardless of the power profile and greening initiatives," he said.

As large as the financial opportunity is for Alberta in attracting the high-tech and big-ticket facilities, there is caution within the government too.

Soaring power bills is one reason why the provincial government is revamping many parts of its electrical system. Affordability is a major concern for many residents and the frequent grid alerts are far from a distant memory.

Alberta has faced several grid alerts over the past few years as demand soared typically during extreme cold or hot weather, while some power plants were unexpectedly offline.

The problem has been alleviated with new natural gaspower plants being built, which could boost the supply of electricity in the province by about 25 per cent this year.