In this article:
- Ontario expects significant growth in data centre electricity demand
- What the Sharing the Load report says about future electricity use
- Do new data centres increase Ontario hydro bills?
- Ontario’s new approval process for large electricity users under Bill 40
- How dedicated power generation could reduce pressure on the electricity grid
- Will residents experience an increase in hydro bills as data centre development continues?
According to the Sharing the Load report (completed by MaRS Discovery District and Mantle Climate), Ontario could see 1.5 gigawatts of new data centre demand by 2035, with a high-growth forecast of 3 gigawatts.
Note: The Sharing the Load report combines data from 35 participants across the digital and energy sectors.
Although industry experts say that Ontario’s electricity system can largely accommodate 1.5 gigawatts of new data centre demand, emissions from data centres are projected to more than triple by 2035 under the baseline scenario, accounting for 7.3% of the province’s total electricity generation emissions. Under a higher-growth scenario of 3 gigawatts, the additional demand would likely be met primarily through on-site natural gas generation. In that case, data centre emissions could rise to an estimated 56% of Ontario’s total electricity generation emissions. However, the environmental impact will ultimately depend on the energy and policy decisions made over the coming decade.
Speaking of those decisions, if Ontario plans its new data centres well, their growth could generate additional tax revenue, encourage low-carbon energy innovation, and accelerate investment in cleaner electricity systems that may ultimately benefit residents, businesses, and even help limit future pressure on hydro bills.
At the moment, however, many Ontario residents are concerned that the rapid growth of data centres could place additional pressure on residential hydro bills. Growing demand from existing and proposed facilities has increased the need for additional electricity generation and transmission planning, raising questions about who will pay for future infrastructure upgrades. In response, the province has moved away from a first-come, first-served approach to grid connections and now directly evaluates large electricity projects under Bill 40 (the Protect Ontario by Securing Affordable Energy for Generations Act).
Despite this shift, concerns remain over whether major technology companies will ultimately pay the full cost of the generation and transmission infrastructure needed to serve their facilities or whether some of those costs could be shared across the electricity system, potentially affecting residential hydro bills.
How could data centres affect hydro bills?
If Ontario’s existing electricity system cannot fully accommodate new data centre demand, additional investments may be needed in grid infrastructure such as power plants, transmission lines, and substations. Depending on how those projects are financed and how the Ontario Energy Board handles cost recovery, some of those costs could eventually be reflected in the electricity rates paid by households and businesses. However, higher hydro bills are not inevitable and will depend largely on future government policy, regulatory decisions, and how much of the required infrastructure is funded directly by data centre developers.
As we mentioned in How Much Energy do Data Centers Use? “Data centres are energy-intensive facilities that require large amounts of electricity not only to power servers but also to maintain cooling systems. As demand for cloud computing, artificial intelligence, and digital services continues to grow, these facilities are placing additional pressure on electricity systems and raising questions about who will pay for the new generation and grid infrastructure needed to support them.”
As data centres and power plants require large and continuous amounts of electricity, many residents are asking who will pay for the new generation, transmission, and grid infrastructure. If those costs are passed on to ratepayers, households and businesses could face higher hydro bills over time. While governments and utilities continue to assess how best to integrate large data centres into the grid, the long-term impact on electricity prices will depend on how future infrastructure is planned, financed, and regulated.
Generating Electricity for Direct Power Supply
One way data centres can reduce pressure on Ontario’s electricity grid is by generating some or all of their own electricity. Rather than relying entirely on the provincial grid, some companies are investing in dedicated power sources. In Ontario, companies can also develop on-site or dedicated power generation, although doing so requires regulatory approvals and compliance with Ontario Energy Board rules.
Data centres that remain connected to Ontario’s grid will pay for electricity under the province’s updated electricity market, which introduced more location- and demand-based pricing. These options are intended to encourage more efficient use of the grid and reduce the need for costly infrastructure upgrades, which in the long run might impact the residents. If developers generate more of their own electricity or finance a greater share of the infrastructure, the impact on residential hydro bills could be reduced. Nevertheless, the long-term effect on electricity costs will continue to depend on how those investments are funded and how much new infrastructure is needed.
As demand from data centres continues to grow, the Ontario government says it will prioritize connecting projects that create jobs, support domestic data storage, and strengthen the province’s digital economy. The new policy also allows the province to decide which projects will move forward based on their economic benefits. The government says this approach is intended to help maintain a reliable and affordable electricity system while managing growing demand.
Key takeaways:
- Ontario could add 1.5 gigawatts of new data centre demand by 2035, according to the Sharing the Load report.
- Ontario’s electricity system is expected to accommodate baseline growth, but higher-demand facilities could require significant new generation and transmission infrastructure.
- Whether data centres increase residential hydro bills will largely depend on who pays for new electricity infrastructure and future decisions by the Ontario government and the Ontario Energy Board.
- Some data centre operators may reduce pressure on the provincial grid by entering long-term electricity supply agreements or developing dedicated power generation.
- While data centres could contribute to economic growth, residents continue to raise concerns about electricity costs and environmental impacts.
