The Alberta Electric System Operator (AESO) plans to temporarily more than double the power it had allocated to new, large data centres on the provincial electricity grid, even though it acknowledges the move will raise prices for consumers.

In a session posted publicly on June 29, AESO staff explained that under a new program, data centres planning to bring their own generation could apply for a share of a new 1.6 gigawatts (GW) of temporary grid power before their generation is up and running—but only if they’re planning on powering their operations with natural gas.

Data centres using renewable energy sources or energy storage would be excluded from the proposed grid program.

In response to a question, AESO’s program manager for large load connections, Chris Connoly, acknowledged that the new framework would increase costs for consumers. “Adding more load than is generally unsupported by the generation will encourage the existing fleet to operate more and that will drive prices upwards,” he said.

“It does create an ebb and flow in market prices, as far as prices going up when the load increases and then generation investing in the market, driving prices down and that attracts more load,” said Connoly. “That’s just naturally how the market works.”

When asked for clarification on whether to expect a cost increase, AESO confirmed in an email to The Energy Mix that “the bridging load is anticipated to increase pool prices while reducing transmission costs,” adding that this is “expected to attract new generation.”

However, there was debate amongst industry participants in the AESO engagement session about whether a transitory program would attract investment in new generation.

The Alberta government released its framework for powering new data centres and is in the late stages of consultation with industry on the plan to offer up more power to data centres. The plan is expected to be finalized in August.

The province announced its artificial intelligence (AI) data centre strategy in 2024, and almost immediately there was a waiting list of new data centre proponents wanting connections to the electricity grid. So far, the grid operator has only approved two projects, allocating 1.2GW in total.

CBC reports the two projects located just outside of Edmonton were selected late last year from a list of more than 35 data centres looking for connections to the grid. TransAlta’s Keephills gas power plant was given 230 MW to meet its ambitions for powering data centres, and Pembina Pipeline’s Greenlight Electricity Centre was allotted 970 MW.

Greenlight made no secret that its power would be destined for data centres, and the Globe and Mail reported last year that Meta (Facebook) would be the customer, but the “tethering” of the two projects wasn’t fully revealed until recently. Tethering is a mechanism where projects requiring electricity from the grid are linked to generators providing grid-scale power for the purpose of requesting system access.

Meta confirmed the rumours this week that it will build a 1-GW “AI-optimized” data centre in Sturgeon County. The announcement followed Alberta Utilities Commission (AUC) approval of a 1.8-GW gas generation facility, meeting Alberta’s request that large data centres bring their own power.

In its first phase, Pembina, along with partners Morgan Stanley and Kineticor, will invest about C$4.6 billion to build generation to power Meta’s first data centre in Canada, estimated at another $13 billion. Meta will also invest $60 million in “local infrastructure improvements that will benefit the local community, and provide grants and funding to local nonprofits.”

In contrast to the AESO’s statement, Premier Danielle Smith claimed in a news release that “Alberta ratepayers will see up to [a] six per cent decrease on their electrical bill’s transmission costs” from the Greenlight Electricity Project, even though all its power will be required to run Meta’s data centre.

David Pickup, the Pembina Institute’s director of electricity, told The Mix that while it makes sense for the system operator to rethink how it gets projects moving forward and data centres connected quickly, there are ways to do it better.

“It’s really important that we have honest, evidence-based conversations about the impacts of these megaprojects and if [they’re] going to increase bills or not,” said Pickup.

(The Pembina Institute and Pembina Pipeline Corp. are unrelated organizations.)

Pickup said Pembina has been pushing for rules in the AESO framework that allow data centres to quickly ramp up while making sure they’re good neighbours, both in a local sense, but also within the systems in which they operate.

Alberta’s Technology and Innovation Minister Nate Glubish has consistently tied the AI data centre strategy with increasing gas production. He told a gathering of the Petroleum Technology Alliance Canada in Calgary in March that AI data centres are a way to bypass building pipelines, getting billions of cubic feet of gas to global markets “through ones and zeros, through fibre.”

Pembina Pipeline President and CEO Scott Burrows said in a news release the power project “represents a promising new growth platform, through which we are also helping to catalyze new natural gas demand that will provide additional benefits throughout our business.”

“If you’re starting from a position of ‘gas is the solution,’ without considering what is the best solution, they’re already going to be starting on the back foot,” Pickup said, adding that line of thought will likely lead to rising household electricity costs for Albertans for years to come.

“Adding a new power plant of this size—generating enough electricity to power a city two-thirds the size of Calgary—will massively increase demand for gas in the province,” Pickup said in a statement. “This, combined with Prime Minister Carney’s announcement [last week] that Canada intends 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.”

In a release Thursday, Amnesty International Canada called Meta’s plan to power its data centre with gas “a disaster for future generations and the environment.”

“Burning fossil fuels to meet our existing energy needs spells devastation on its own,” said Ketty Nivyabandi, secretary general of Amnesty’s English-speaking section. “Expanding dirty gas production to meet the tech sector’s skyrocketing demands amounts to a catastrophic attack on the rights of young people and future generations to a healthy environment. This must not be allowed to pass.”

Instead of “bring your own generation,” the Pembina Institute’s Kari Hyde, director of customer energy solutions argued in an opinion piece for Canada’s National Observer that data centres should be asked to bring their own flexibility.

“Data centres are not typical electricity users,” wrote Hyde. “Many can shift computing tasks to different times of day, manage cooling systems more strategically, use onsite storage or backup systems to reduce demand from the grid and lower electricity use when the system is under strain.”

With the right structures in place, large electricity users could “take responsibility not only for how they power their operations, but for how they interact with the grid,” she wrote.

A pair of reports from the non-profit Energy Systems Integration Group (ESIG) looked at how data centres, cryptocurrency operations, and other large loads behave differently, and can have a negative impact on grid reliability.

ESIG Chief Engineer Julia Matevosyan said in a news release that the first report looked at the unique characteristics and behaviours of these new grid participants, while the second explained why their behavior matters for reliability.

“Both are important to grid planning and operations: understanding why an AI training cluster can drop hundreds of megawatts in an instant, and seeing how the grid is impacted by this as much as by a large generator loss,” said Matevosyan.