Plugging Into the AI Boom: Alberta’s Race to Power the Future

Apr 30

The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.

Every search, AI prompt, and cloud transaction runs through a data centre. These massive computing facilities form the physical backbone of the digital economy, storing and processing the data that powers modern life. As artificial intelligence rapidly expands, demand for computing power is rising at an unprecedented rate, pushing countries to race toward building the next generation of high-performance data centers. In this global competition for AI infrastructure, Canada already possesses many of the resources needed to lead, if it is willing to fully leverage the advantages in its own backyard.

Wired for Growth: The Global Race for AI Infrastructure

As AI demand grows, spending on data centers has grown with it. In 2025, US construction spending on data centres reached $40 billion, reflecting the scale of the buildout. However, these centres also consume a significant amount of power. For the first time in twenty years, electricity demand in North America has risen as more data centres come online. PJM, the largest grid operator in the United States, is projecting a 32-gigawatt increase in electricity demand by 2030, driven almost entirely by data centre development. With this rise in demand, utility companies that service electricity to end users are scrambling to ensure they can provide reliable power that doesn't compromise grid stability.

Jenson Huang, CEO of NVIDIA, has described electricity as the bottleneck in the data centre surge. The need for affordable, high-volume energy is critical for the success of AI hyperscalers. While the United States has been the major player in the buildout today, it cannot serve this growth independently due to the growing electricity demand. This creates a unique opportunity for Canada. As the heartland of Canada’s oil and gas industry, Alberta is uniquely positioned as an attractive destination for artificial intelligence infrastructure.

An Energy Edge: Why Alberta Is Built for Data Centres

From an energy perspective, Alberta is incredibly well-suited to host data centres. Recent data suggests the province has 130 trillion cubic feet of natural reserves. This represents an abundance of energy that data centres can tap into. Furthermore, the existing provincial grid uses only 12.8 gigawatts at peak demand, despite having 23.1 gigawatts of total capacity, indicating excess capacity that hyperscalers can use without disrupting the local population. Alberta’s cold climate also significantly reduces cooling costs, making it an operationally efficient location.

Alberta’s regulatory framework also makes it easier to build in the province. It is the only province in Canada with a fully deregulated electricity market, meaning industrial users do not need to navigate government rate approvals to secure long-term power agreements. This enables greater customization in energy solutions and faster construction.

It seems that almost all the components are in place for Alberta to take the lead as a data center hub. Firms are ready to act on this opportunity, but a new question emerges: can Alberta deliver the power fast enough to fuel the AI boom?

Power Waiting In Line: The Transmission Constraint

The surging demand for AI data centers has created a “gold rush” for transmission capacity. In just two years, Alberta has seen a significant rise in data centers seeking connection to the provincial grid. In the second half of 2025, more than 30 data centre projects requested access to the Albtera grid, up from just two in 2024 in 2024. The combined capacity of these requests also exceeds the peak demand load. The excitement to build data centers greatly exceeds the existing capacity to manage these requests. Despite being structurally well-suited to support the data centre buildout, Alberta is constrained in its ability to greenlight new data centers by the limited power that can be connected to existing grids without compromising reliability for current users.

AESO

The Alberta Electric System Operator (AESO) is the independent organization that runs the province's electricity grid. It directs the grid’s safe and reliable operation, plans the transmission system, and operates the provincial wholesale energy market. In June 2025, the AESO announced its Large Load Integration program, aimed at efficiently connecting major projects such as data centers. Phase 1, which was completed in November 2025, allocated 1200 megawatts of power to just two out of the twenty-nine proposed projects. The Keephills Data Center, powered by TransAlta Corp, was allowed 230 megawatts, representing a small portion of their initial request. According to the AESO’s CEO, Aaron Engen, “Alberta has never seen this level and volume of load connection requests.” This unprecedented queue for data center projects has turned transmission capacity into a commodity, with some energy players even selling their allocation to data center customers.

Phase 1 prioritized projects that are more advanced in the AESO Connection Process, ready for near-term connection, and can be accommodated by the current grid. However, with only two approvals in the first phase, it is clear that Phase 2 requires a more substantial framework for the data centre buildout to succeed in Alberta.

Currently, Phase 2 is in the “Pre-Engagement” stage as the AESO consults with industry stakeholders and explores a “bring your own generation” (BYOG) approach for upcoming megawatt allocations. With the second phase largely undefined, AESO, as the sole authority over grid connections, has a critical opportunity to create a structure that makes Alberta the best place for hyperscalers to build in Canada.

BYOG: Bring Your Own Generation

In the second phase of their large load strategy, the AESO should prioritize BYOG projects. Bring Your Own Generation, also referred to as Bring Your Own Power (BYOP), is an increasingly popular model used by major technology firms to avoid existing grid constraints. Google, Microsoft, and other industry leaders are increasingly procuring power generation sources for their data centers. While it can take many forms, the core idea involves building or contracting on-site power generation. BYOG uses distributed energy resources (DERs) to create an “always-on microgrid,” which can then be connected to larger grids to minimize the risk of utility outages.

BYOG allows for hyperscalers to deploy electricity faster. They would not require AESO to upgrade the grid in order to use the power for their data centre projects, which allows them to get online faster. Given the speed of AI development, this is a relevant selling point to data centre companies.

Alberta stands to benefit in particular from a BYOG approach. As hyperscalers bring their own electricity, the burden of higher utility prices is not passed onto consumers. Furthermore, as technology leaders procure electricity, demand for local natural gas increases. This causes the price to increase, which local industry benefits from. Traditionally, Alberta’s natural gas has often struggled to be cheaper than other major hubs because the surrounding pipelines lack the capacity to transport it to high-demand areas. By encouraging hyperscalers to bring their own power, Alberta brings the demand directly to its producers and will not need to depend on a limited pipeline system. Greater local demand raises revenues of local producers while strengthening the surrounding services. Overall, BYOG allows Alberta to grow its natural gas industry without compromising the affordability of electricity for the population.

Despite the clear advantages of Bring Your Own Generation for project approval, the lack of a clear structure in Phase 2 of AESO’s plan means that data centers are still requesting connections without proposing their own power methods.

Recently, however, new provincial rules are pushing for a BYOG path. In a September 2025 mandate letter, Premier Danielle Smith tasked the Minister of Affordability and Utilities with fast-tracking the regulatory process for data center proponents with self-generation plans. This encouragement is built upon recent policy shifts. The Utilities Statutes Amendment Act, formerly known as Bill 8, prioritizes data center projects with self-supplied power and requires proponents to fund the necessary transmission upgrades for their grid connection, instead of Alberta ratepayers handling this cost. With provincial government backing, AESO is well-positioned to make BYOG the cornerstone of its data centre policy.

Policy in Action: Illinois, USA

States across America have begun adopting policies that tackle the financial and environmental implications of surging data center demand. Recent legislation in Illinois could act as a key model for how to align solutions for grid constraints with state objectives. The Protecting Our Water, Energy, and Ratepayers (POWER) Act establishes guardrails on data center connections to the Illinois’ grid, aiming to fuel a "competitive race to the top” for responsible investments in data centers. Through an overarching mission of environmental justice, the POWER Act prioritizes sustainability and protections for ratepayers.

The bill explicitly supports a “bring your own new clean capacity and energy” approach by expediting large users with a clean energy supply plan. Those who do not build sufficient clean energy also face reduced electricity by the utilities during peak demand periods. These compelling incentives challenge large data centers to meet Illinois goals by giving them what they are looking for: a fast connection to the power grid.

In order to align data center requests with Alberta’s provincial mandate, AESO should prioritize the approval of projects that incorporate self-generation. This incentive is the final push needed to attract hyperscalers while preserving grid reliability and supporting long-term energy planning.

Alberta’s Next Steps

While the POWER Act focuses on clean energy rather than the natural gas Alberta would use, its core principles for managing data centre demand should be adopted by AESO in Phase 2.

“Bring Your Own Generation”

Alberta should clearly establish a standard for BYOG by making self-generation a condition for large-load queue priority. Given Alberta’s leadership in natural gas, BYOG is practical because gas-fired cogeneration can be permitted and built quickly. The conditions for self-generation already exist in the province, and encouraging hyperscalers to tap into them positions Alberta at the head of the competition.

Faster Grid Connection

Connection speed is a decisive factor for hyperscalers evaluating potential site locations. Alberta should establish a tiered pathway that rewards BYOG applications with an expedited connection timeline. This can be operationalized by developing standardized criteria for self-generation agreements. Projects that do not meet the AESO’s BYOG thresholds would remain in the standard queue.

Ratepayer Protections

Phase 2 should build on the foundation established by Bill 8, where proponents must bear their own transmission upgrade costs. Following Illinois’ model, utilities should have the authority to curtail large loads during peak demand and stress events, if needed. As an incentive, BYOG projects can be partially shielded from curtailment due to their self-supply.

Powering What Comes Next

Alberta has a narrow window to turn its energy advantage into leadership in AI infrastructure. By prioritizing self-generation, the province can attract hyperscalers, protect grid reliability, and capture long-term economic growth. Alberta’s success in hosting data centers could establish Canada as a strong leader in the AI industry. With global investment decisions being made now, the jurisdictions that can deliver power fastest will shape the future of AI. Alberta has the resources to be one of them, and Canada has every reason to ensure it succeeds.

Editor(s): Danae Pepelassis

Researcher(s): Warren Zhang