Government pitches ‘digital refining’ to a divided electorate

Big Tech’s sprinkling of data centres and generators across the communities of Alberta heralds a bold new era of value-added resource development, Premier Danielle Smith has repeatedly told the citizenry over recent weeks.

Smith says projects that even temporarily draw from the grid will make the user pie bigger and drive bills downward because of the transmission charges their proponents pay.

At the same time, Albertans will reap the benefits of a new revenue stream and its contribution to government coffers.

But whether folks in the heartland are ready to accept cabinet’s pro-data assurances remained unknown last week, in the wake of separate rounds of government and Opposition NDP consultations stretching into early September.

The premier and her technology and innovation minister, Nate Glubish, call AI data centres “digital refineries.” The term plays off a reliance on power plants fired by natural gas to keep server racks humming and coolant systems churning.

“For so many years we’ve been told, why don’t we upgrade more of our natural resources here so we can get more value?” Smith said in her opening address to about 12,500 participants who took in a government-hosted virtual town hall last month.

“And this is the newest way to do it: to turn natural gas into power, which turns into zeros and ones, which turns into intelligence, which becomes a product that we can export. And so that’s the approach that we’re taking.”

Public sentiment about the idea, however, was divided before late-summer town halls began.

About 40 per cent of Leger poll respondents in July said the province should move forward with its efforts to meet the server demands inherent in society’s ballooning adoption of artificial intelligence.

But 42 per cent of respondents favoured an approvals pause to allow for a review of impacts on electricity prices and water use.

About four in five Albertans polled cited concerns about electricity costs and environmental impacts.

Leger surveyed 1,000 Alberta adults online July 17-19. Panels like the one the pollster used cannot be assigned a margin of error because they don’t randomly sample the population.

A comparable probability sample, however, would have a margin of error of plus or minus 3.1 percentage points, 19 times out of 20.

‘Build For — Not On — Albertans’

The public’s lack of a strong endorsement so far is understandable, given the scope and complexity of the boom. Attendee comments throughout the consultations reflected as much.

“The question isn’t data or no data centre,” a participant told the NDP virtual event on Aug. 19.

“It’s what type of Alberta do we want on the other side of this boom: an Alberta where the power, profits and decisions are external, or an Alberta where we shape the rules, we get the gains and we protect our communities?”

Read aloud to about 150 attendees by the session’s moderator, the submission continued: “This has to be done right, where data centres are built for Albertans and not on Albertans.”

Nathan Ip, the NDP’s technology and innovation critic, told the same town hall: “What Albertans are asking for are clear, binding rules to protect our water, our grid and our communities.

“But what they’re getting from this government is a sales pitch that treats massive power plants and multi-gigawatt facilities like they’re just ordinary warehouses.”

Warehouses and Beyond

Indeed, complexities lie within phrasings like “bring your own power,” “closed-loop cooling” and “warehouses filled with servers.”

Head-turning in itself is the potential connection queue with the Alberta Electric System Operator, the power grid’s gatekeeper. Proponents so far seek about 20 gigawatts of transmission via AESO.

That represents roughly 90 per cent of the estimated draw from all proposed data centres in Canada, or roughly twice the province’s existing average daily load.

What it doesn’t represent is on-site generation that never hits the grid, which is a choice open to proponents.

But AI data centres and the power generators connected to them aren’t necessarily on the same site or even within the same application.

Regardless, all new power plants are subject to approval from the Alberta Utilities Commission, a process that effectively killed the Synapse proposal in Olds.

The AUC found that the power plant and its backup generator would be far too large to sit within 800 metres of more than 700 residences in the town midway between Red Deer and Calgary.

No “bring your own power” means no data centre under the Alberta framework, so Synapse withdrew completely.

A power provider and the owner of a data centre aren’t necessarily identical proponents, because Big Tech isn’t in the business of building generators.

A tethered data centre gets its electricity from the grid like any other user. The grid gets fed — not necessarily immediately when the data centre starts operating — an equal amount of electricity from an associated offsite plant.

A behind-the-fence system features a dedicated, on-site power plant that meets needs of a data centre.

Sites like Meta’s project in Sturgeon county near Edmonton need bridging from the grid until they’re fully operational.

Meta, the massive social media company that owns Facebook, Instagram and WhatsApp, is paying a transmission tariff of an estimated $200 million a year.

That toll will apply even when Meta isn’t physically drawing from the grid, ensuring instant emergency access if it needs it.

But complicated electrical contracts and arrangements are just one part of the puzzle. Natural gas delivery is another.

Albertans are just learning about the magnitude of those pipeline infrastructure challenges, thanks to coverage last week of details within a leaked, behind-the-scenes report to cabinet.

The report even floats the idea of a $6-billion public investment in pipelines to serve less than a third of the possible increase in power production in the AESO queue.

That brings to at least three the number of provincewide bodies involved in data centre approvals, regulation and applications: the Alberta Utilities Commission for generators, the Alberta Electrical System Operator as the grid gatekeeper, and the Alberta Energy Regulator for new pipelines.

View From the Council Table

Challenges persist at the local governance level, too, where municipalities consider rezoning and development applications for industrial uses.

It’s happening in the form of incomplete proposals, a participant from Wheatland county said during the NDP’s online town hall.

Proponents sometimes arrive in rural Alberta and apply for data centres without information on the power plants envisioned to serve them, she said.

“By separating these things, they’re getting away with not giving a full, holistic picture of what is happening, and our municipalities are voting on things blindly or half-heartedly,” she said.

“We have no idea where the location of the power plant is, we have no idea how much water (the centre) is going to consume.”

Rural Municipalities of Alberta, which represents 69 of the province’s generally less urbanized municipalities, is taking a cautious stance so far.

“Data centres are a rapidly emerging sector in Alberta that present significant potential opportunities and risks for rural Alberta,” said Kara Westerlund, RMA president, in an emailed statement to The Macleod Gazette.

Westerlund’s statement pointed to the complexity of data centre regulation, with requirements for approvals at the local and provincial levels.

“It is crucial that moving forward, data centre development occurs in a manner that aligns with local land-use plans and considers local benefits and challenges,” her statement said.

Alberta Municipalities, the RMA’s counterpart for the province’s more urbanized municipalities, has “gratefully acknowledged” the federal government’s most recent entry into the data centre conversation, through the release of a guidance document called Canada’s Responsible Data Centre Development Principles.

The document says data centres must create lasting local benefits and not shift electricity costs to Canadians. They must minimize water use and environmental impact, while being transparent about all impacts.

And data centres must also “bring strategic value” to Canada.

ABmunis, which represents more than 260 municipalities in the province, “is closely following what’s happening throughout Alberta, especially the interest and concerns Albertans have expressed about AI data centres in the last few months,” its emailed statement continues.

“When it comes to AI data centres, we believe it’s essential for a local government voice to be incorporated into federal and provincial review processes to ensure municipalities’ concerns are heard and considered.”

Companies ‘Pay Their Own Way’

Premier Smith, meanwhile, says the province has been careful to come up with a well-researched approach to entertaining AI data centre proposals.

“We saw that there were big subsidies that went to some of these companies, and they’re some of the biggest companies in the world,” she told the government’s virtual town hall.

“We didn’t want that to be our model,” she said. “We wanted to be able to demonstrate that if these companies were coming here, they were going to not only pay their own way, but they would also provide a benefit to taxpayers.”

One of those taxpayers demonstrated that he’s a major data centre supporter.

“I’m an 80-year-old guy that worked for the oil patch here for 60 years, and very proud of being an Albertan and what has been provided for me and my family,” said the caller from Drayton Valley.

“And if it continues the way it is right now, and everybody does their thing, I’m sure that we’ll be the top of the rung,” he said. “Hopefully we’ll continue to thrive and continue to prosper in all different ways.”

It was a sentiment Premier Smith hailed as a “mic drop moment,” and the consultation wound to a close.

Opposition Leader Naheed Nenshi, however, is far less impressed than the caller from Drayton Valley.

“I cannot tell you the number of times we’ve asked (the UCP) questions about: do you have regulations on water? do you have regulations on electricity?” he told the NDP virtual town hall.

“And they kept saying, all under control. And it wasn’t. They were fighting and cheerleading instead of spending those two years actually developing sane policy,” Nenshi said.

By George Lee, Local Journalism Initiative Reporter