Alberta Faces a Surge in AI Data Centre Power Demand: AESO Responds with Phased Connection Plan

Introduction

The prevalence of cloud-based services, computer and mobile applications, artificial intelligence (AI), machine learning technology, and other data-driven industries is driving exponential demand for data storage infrastructure. In Alberta, the government is encouraging investments through its AI Data Centres Strategy, with the goal of attracting $100 billion in investments over five years and establishing the province as a leader in AI-driven data centres.

Over the past 12 to 18 months, transmission service requests of large load projects rose to over 16 gigawatts (GW). For context, Alberta’s current peak load is only approximately 12 GW.

On June 4, 2025, the Alberta Electric System Operator (AESO) held the Phase I: Large Load Integration Information Session  and announced a two-phased connection strategy aimed at balancing this opportunity for industry, investment and growth with grid safety and reliability:

• Phase 1: Interim Measures (2027/2028 horizon). Connecting large loads (i.e., data centres) using the current framework and available grid capacity.
• Phase 2: Long-term Sustainable Framework. Connecting future large loads based on a to-be-developed large load framework.

In Phase 1, the AESO established a one-time, interim limit of 1,200 MW, which represents the maximum additional large load capacity  the grid can serve without negatively impacting grid reliability.

The interim approach applies to load projects equal to or greater than 75 MW that do not require new transmission system reinforcements or upgrades. Project qualification will require financial security and municipal/county support by June 30, 2025. The interim limit of 1,200 MW will then be allocated proportionally across qualified projects, with demand transmission service (DTS) contracts executed by July 21, 2025.

Phase 1: Interim Measures (2027/2028 Horizon) – Key Features

As not all projects requesting energization by 2027/2028 can be connected within that timeline, the AESO has established a method to assign the one-time, interim limit to large load project developers (PDs).

• Applicability: Eligible projects must:
  • Have a requested aggregate load of at least 75 MW; and
  • Be currently in the “studies” stage of the connection process:
    • Stage 1 for projects in the Cluster Process
    • Stage 2 for projects in the Independent Process
• Qualification Requirements (due by June 30, 2025):
  • Financial Security, including two months of DTS and full Payment in Lieu of Notice (PILON) for the estimated assigned MW (estimated to be ~$14 million/100 MWs).
  • Letter of Support from the applicable municipality or county and zoning and permitting are approved or on track.
  • Power Flow Results confirming that the requested size of the project does not require system reinforcement.

PDs will be provided with a letter from the AESO outlining the qualification requirements for their project(s).

• Pro-Rata Assignment (July 7, 2025): The 1,200 MW limit will be allocated by the AESO on a pro rata basis.
  • PDs with qualifying projects will be allocated an initial assignment of the 1200 MW limit based on their proportion of the total qualified MWs. PDs who accept the initial assignment will then receive a prorated split of any MWs declined by other PDs, based on their proportion of the remaining qualified MWs.

The allocation is demonstrated in the following illustration provided by the AESO:

• PDs may distribute their assigned MW across multiple eligible projects. This is demonstrated in the following illustration provided by the AESO.

• Assignment Decision (July 14, 2025): PDs’ acceptance of assigned MWs of qualified project(s) due.
• Finalization Requirements (July 21 to August 4, 2025):
  • DTS Security: Security will be adjusted based on final DTS or returned if a PD declines their assignment.
  • DTS Contract: A contract for the assigned DTS will be issued on July 21, 2025, and executed not later than August 4, 2025.
  • Proposal to Proceed: Each project will receive confirmation of its selected connection, assigned MW, and target in-service date.

The above timelines following the June 30^th qualification requirement deadline may be fast-tracked depending on the response from qualified PDs. While PDs with qualified projects will be permitted to transfer their DTS contracts to another PD, the DTS contracts are location specific and cannot be transferred between points of connection.

Phase 2: Long-Term Sustainable Framework – Key Features

Looking ahead, the AESO communicated that in the second half of 2025, it will commence the  development of a scalable framework to support continued data centre growth. Key areas of focus may include:

• New Reliability Standards: Implementation of forthcoming North American Electric Reliability Corporation (NERC) Large Load standards (expected by Q2 2026).
• ISO Tariff Redesign: Continued engagement regarding ISO rules, including considerations for new interruptible rate classes, terms and conditions for load shedding, demand response, and backup generation.
• Cost Allocation Reviews: Evaluating who bears the cost of ancillary services and transmission upgrades tied to large loads.
• Improved Forecasting and Planning: Enhancing transmission planning to reflect anticipated large load growth.

Next Steps

The connection of additional large loads in Phase 2 will require new generation, tariff and market tools. The AESO will be actively engaging industry and government stakeholders, with consultations anticipated to begin in the second half of 2025.

Our team at McCarthy Tétrault continues to monitor the AESO’s evolving approach to large load integration. Our team is well-positioned to assist clients in understanding and responding to these developments. For further information, please contact your McCarthy Tétrault representative or reach out to one of the authors directly.