While the artificial intelligence (AI) revolution is transforming industries worldwide, the rapid expansion of this technology comes with significant energy implications, as AI technologies require vast computational power to operate. Machine learning model training and real-time data processing require far more computational power than traditional digital tasks. For instance, creating a single AI-generated image can consume up to 10,000 times more energy than a simple Google search.¹

With their energy-intensive operations, data centres that power AI computations are emerging as a critical driver of electricity demand, reshaping the relationship between the tech sector and energy providers. As the demand for AI capabilities accelerates, this surge in energy usage will heighten pressures on electricity grids.

For Canada, this shift represents a significant economic opportunity. The country’s utilities sector, underpinned by abundant renewable energy resources and a stable energy infrastructure, is well-positioned to meet the rising demand for clean and reliable power. As global tech giants and AI developers seek sustainable energy solutions, Canada’s utilities stand to play a pivotal role in powering the next phase of AI growth while delivering long-term benefits to investors and the broader economy.

Projected Growth in AI-Driven Power Demand

Data centres are at the heart of electricity supply challenges, which form the backbone of AI development and deployment. These facilities—already responsible for an estimated 1.4% to 1.7% of global electricity consumption—are set to expand dramatically in size and number as AI adoption accelerates. According to the International Energy Agency (IEA), the energy consumption of data centres worldwide is expected to double by the end of 2026, driven largely by AI workloads.²

In North America, Wood Mackenzie forecasts a 50% increase in electricity demand across the continent by 2050, with data centres and electric vehicles being key drivers of growth.³ Within Canada, electricity consumption is also expected to rise significantly in response to the increasing energy needs of AI technologies. For example, Hydro Quebec anticipates a 4.1 terawatt-hour (TWh) increase in electricity demand from data centres between 2023 and 2032—equivalent to roughly 2% of the province’s total electricity production in 2022.⁴ This is a substantial rise, underscoring the growing role that AI and related technologies will play in shaping future energy requirements.

For Canadian utilities, the confluence of AI-driven power consumption and broader electrification trends presents opportunities as the industry adapts to meet this evolving energy landscape.

Canada’s Strategic Advantages for Meeting AI Energy Demands

Canada’s vast natural resources and our favourable geographic and policy environment, position the country as a key strategic player in meeting the growing energy demands of AI and data centres.

With AI adoption accelerating across sectors, the data centre footprint in Canada is already expanding to meet these needs. According to the Canada Energy Regulator, there are currently 239 operational data centres across the country, with more planned and under construction, a figure that underscores the increasing role of these facilities in the national energy landscape.⁵ As Canadian utilities look to accommodate the rising demand from data centres, this sector’s energy needs are becoming a key factor in shaping future electricity demand forecasts.

One of Canada’s most significant advantages lies in our abundance of renewable energy sources, particularly hydroelectric power. Canada is the world’s third-largest producer of hydroelectricity, with nearly 600 hydroelectric stations representing 82,232 megawatts of installed capacity (up from just over 75,000 megawatts in 2010). Each year, hydroelectric stations generate 393,789 gigawatt-hours across Canada, representing nearly 62% of total electricity generation in the country.⁶

Canada’s cooler climate significantly reduces the need for energy-intensive cooling systems in data centres, which can account for a substantial portion of operational costs in warmer regions.⁷ And we are well-positioned to support the infrastructure needs of expanding data centres, with an abundance of available land that provides ample space for large-scale facilities and hydroelectric stations positioned where the combination of flowing water and natural topography make electrical generation most advantageous, particularly in Quebec, Ontario, Newfoundland and Labrador, Manitoba, and British Columbia.⁸

Economic Implications for Canadian Utilities

The surge in demand for electricity driven by AI and data centres presents significant revenue growth potential for Canadian utilities as tech companies ramp up their data centre investments and put pressure on existing grid capacity. If the 20 to 30 data centre projects currently under regulatory review are approved, the energy needs of data centres across Canada would account for 14% of Canada’s total power needs by 2030.9

This shift could foster new partnerships between Canadian utilities and Big Tech companies. Major players like Amazon, Google, and Meta have long been at the forefront of renewable energy investments, and their need for a reliable, clean energy supply to power their AI workloads makes Canada an attractive partner. Between 2020 and 2022 alone, the power demands from Microsoft, Google, Amazon, and Meta grew by 58%, driven heavily by the demands from data centres. And such demand shows no sign of slowing. Microsoft on its own is adding the equivalent of a new data centre to its arsenal every three days.10

As already-established buyers of significant quantities of renewable energy, these companies could drive increased collaboration with Canadian utilities to feed their growing electricity demands, particularly those with strong renewable portfolios such as Hydro Quebec. Such partnerships may involve power purchase agreements (PPAs) or direct investments in new energy infrastructure, creating long-term contracts that can provide utilities with predictable, stable revenues.11

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ENDNOTES

  1. Stephenson, A., “AI boom could spur large-scale investments in clean energy: experts,” The Canadian Press, October 2, 2024; https://www.thecanadianpressnews.ca/business/ai-boom-could-spur-large-scale-investments-in-clean-energy-experts/article_02a4fd5a-e75f-5a9a-916d-1de8a0b53170.html
  2. “Market Snapshot: Energy demand from data centers is steadily increasing, and AI development is a significant factor,” Canada Energy Regulator, October 2, 2024; https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/market-snapshots/2024/market-snapshot-energy-demand-from-data-centers-is-steadily-increasing-and-ai-development-is-a-significant-factor.html
  3. Stephenson, A., “AI boom could spur large-scale investments in clean energy: experts,” The Canadian Press, October 2, 2024; https://www.thecanadianpressnews.ca/business/ai-boom-could-spur-large-scale-investments-in-clean-energy-experts/article_02a4fd5a-e75f-5a9a-916d-1de8a0b53170.html
  4. “Market Snapshot: Energy demand from data centers is steadily increasing, and AI development is a significant factor,” Canada Energy Regulator, October 2, 2024; https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/market-snapshots/2024/market-snapshot-energy-demand-from-data-centers-is-steadily-increasing-and-ai-development-is-a-significant-factor.html
  5. Stephenson, A., “AI boom could spur large-scale investments in clean energy: experts,” The Canadian Press, October 2, 2024; https://www.thecanadianpressnews.ca/business/ai-boom-could-spur-large-scale-investments-in-clean-energy-experts/article_02a4fd5a-e75f-5a9a-916d-1de8a0b53170.html
  6. “Hydroelectric energy,” Natural Resources Canada, April 29, 2024; https://natural-resources.canada.ca/our-natural-resources/energy-sources-distribution/renewable-energy/hydroelectric-energy/25792
  7. “Market Snapshot: Energy demand from data centers is steadily increasing, and AI development is a significant factor,” Canada Energy Regulator, October 2, 2024; https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/market-snapshots/2024/market-snapshot-energy-demand-from-data-centers-is-steadily-increasing-and-ai-development-is-a-significant-factor.html
  8. “Hydroelectric energy,” Natural Resources Canada, April 29, 2024; https://natural-resources.canada.ca/our-natural-resources/energy-sources-distribution/renewable-energy/hydroelectric-energy/25792
  9. Merwat, S., “Power Struggle: How AI is challenging Canada’s electricity grid,” Royal Bank of Canada, December 4, 2024; https://thoughtleadership.rbc.com/power-struggle-how-ai-is-challenging-canadas-electricity-grid/
  10. “AI and Electricity Demand: Will the Power-Hungry Machines be Satiated?,” TD Asset Management, August 28, 2024; https://www.td.com/content/dam/tdcom/canada/tdam/en/investor/pdf/news-insight/ai-and-electricity-demand-en.pdf
  11. “Power Purchase Agreements (PPAs) and Energy Purchase Agreements (EPAs),” The World Bank, December 11, 2024; https://ppp.worldbank.org/public-private-partnership/sector/energy/energy-power-agreements/power-purchase-agreements

 

Source: Getty Images Credit: Galeanu Mihai

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