Tech Expansion and Grid Pressure in Fueling an AI Economy

In Canada, the urgency for a modern energy system is escalating, driven by rising electricity demands from artificial intelligence (AI) and data centers. By 2050, electricity demand is projected to grow by 75%, with data centers contributing a significant 15% to this increase.

The notion of building an independent and sovereign Canada has prompted discussions about how to meet future energy demands without heavy reliance on neighboring resources. A recent dialogue by the Toronto Board of Trade outlined how Canada can enhance its GDP and sustainable economy using local resources and global partnerships.

Chuck Farmer, Chief Energy Transition Officer at the Independent Electricity System Operator (IESO), highlighted that the demand growth for electricity has shifted from an earlier estimate of 60% to 75% by 2050, primarily due to population growth, digital economy expansion, and decarbonization goals. The data center market is projected to grow at a compound annual growth rate (CAGR) of 16%, with AI-specific demands surging at 50% CAGR through 2030. In 2022, data centers consumed approximately 460 terawatt-hours (TWh) globally, equivalent to 71% of Canada's electricity production.

Farmer anticipates that Ontario will see the construction of 1,800 data centers over the next decade, necessitating improvements in generation and storage capacity by 2028. Key infrastructure developments include refurbishing existing nuclear power stations and possibly constructing new facilities to meet increased loads. Ontario's transmission projects will connect energy needs across various regions, including partnerships with Manitoba, Quebec, New York, and Niagara grids.

Data centers, especially "hyperscalers," are becoming major energy consumers, with one such center consuming over 100 megawatts of power—akin to a large metropolitan area’s demands. The Greater Toronto Area (GTA) is currently the largest consumer, utilizing 300 MW of power. To accommodate the anticipated influx of data centers, energy efficiency strategies and renewable energy sources will be crucial.

Industry leaders emphasize the need for reliable energy sources for data centers catering to diverse sectors such as cryptocurrency, battery storage, and electric vehicles. Heidi Bredenholler-Prasad from Enbridge Gas highlighted that the company ensures reliable, long-term energy solutions, while Andy Fenton from Telehouse Canada stressed the importance of strategic locations for efficient connectivity.

As the demand for energy remains unpredictable, the discussion shifts toward who will bear the costs. Both Farmer and Pat Dalzell from Bruce Power noted the importance of managing supply and demand to avoid unnecessary consumer costs. They acknowledged the necessity of regulatory collaboration to streamline processes and enhance infrastructure while remaining wary of the time required for effective implementation.

Sustainability remains a pressing concern as energy infrastructure evolves. The environmental impact posed by increased energy consumption must be balanced against the growing needs of AI and data centers. Strategies must address seasonal energy demands, particularly during peak usage periods.

While the importance of decarbonization is clear, achieving it will require a shift away from natural gas reliance, particularly in new developments. Dalzell suggested that collaboration with regulators could optimize processes and expedite nuclear refurbishments to support the anticipated energy demands.

In summary, the growing energy needs driven by AI and data centers present significant challenges for Canada. As the country strives to meet these demands, a focus on infrastructure development, sustainability, and economic partnerships will be critical in defining its energy landscape for the future.