Disruptors

Power to Compute: How Alberta is powering the AI age

Daniel Smith: We wanna ensure that we can meet the electricity demands of emerging sectors like data centers, artificial intelligence, and other technologies that depend on secure power 24 7.

John Stackhouse: That’s Danielle Smith, premier of Alberta from a conversation we recorded recently in Edmonton. Part of Alberta’s ambition is to export more energy to the world, but part of the strategy is also to harness that energy at home, to bring in more investment, and particularly to drive the new AI economy.

We’re all using AI pretty much every day and in many parts of our lives, and those data centers require energy. In fact, a lot of energy, which is where Alberta may have a big advantage. It’s got heaps of pretty much everything from renewables, like solar and wind to natural gas to emerging ambitions for nuclear package, all that energy together with an [00:01:00] expanded grid, and you can see the case that Alberta’s making to be one of North America’s leading data center hubs.

And not just for the American hyperscalers as they’re known, but for Canadians trying to build our own tech stack right here so that we’re not as reliant on foreign tech companies or exposed to the risks that we’re all seeing with foreign interference when it comes to our data. This new data economy is where Alberta and Canada really can have game.

But to do that, we’re first going to have to up our game.

Daniel Smith: And our approach is if you build your own power, we’re gonna say yes. If you want to hook to the grid, we’ll very likely build the transmission line for you. And we want to create an environment where we’re incentivizing them to build their own ’cause.

I think the hyperscalers are experts at to supply chain and logistics.

John Stackhouse: Those logistics are considerable. A single medium sized AI data center can draw as much electricity. As a small city, that’s a huge load to suddenly pull from the grid. When it comes to data and this new AI economy, there really is no room for glitches.[00:02:00]

If a site like this goes dark, the economy it supports goes dark as well. So like Daniel Smith said, the expectation is that private players, especially the hyperscalers, step up, invest in generation, and even sell surplus power back into the system. Yes, it’s big and it’s bold, but if you know this province, it’s also a very Alberta model.

Daniel Smith: One of the things we’re hoping to do is bring on AI data centers with a model that they’ll be able to help us out if they can do some behind the grid or behind the meter investment and power build more than they need and then be able to sell us the rest. We think that might be a low cost way of adding new power, but also giving them the reliability that they need.

We’re pretty smart human beings and I think we can figure it out and I, I think it’s important that we do. Especially when we talk about the challenge that we’re facing at manufacturing intelligence, that’s the next really exciting frontier, and I just want North America

to win that [00:03:00] race.

John Stackhouse: I’m John Stackhouse. Welcome to Disruptors the Canada Project. This season, we’re crisscrossing the country to meet the builders using technology to tackle Canada’s toughest problems, and along the way, sketch a blueprint for a stronger, more competitive nation.

Today’s destination, the Key Hills and Sundance Power sites just west of Edmonton, near the South shore of Wman Lake. These power plants belong to a company every Canadian should know. TransAlta was formed in 1911 and really represents the story of Canadian energy. It was once a powerhouse of coal. In fact, these plants used to be among Canada’s biggest.

More recently, it’s invested heavily in hydro and renewables, especially wind power in Western Canada, Ontario, parts of the United States, and even Western Australia. TransAlta is now investing more in natural gas, in part to power this new [00:04:00] AI economy. To find out how we’re going to deliver on the promise of AI power, we’re joined by John cus Norris, president and CEO of TransAlta, which owns and operates Key Hills and Sundance.

And is betting that Brownfield Power plants like these can be Canada’s blueprint for AI power, balancing, reliability, speed, and emissions in a world that suddenly needs a lot more electricity and may need it fast. John, thanks for being on Disruptors.

Happy to be here. John. Thanks for inviting me. Well, I’ve been so excited for this conversation, not only because we’re going to look deeper into AI and data centers, but also talk about some of the energy transformation that appears to be underway in Canada, and you and TransAlta are very much a part of that.

But John, let’s start with the big picture around ai. I mean, you can’t turn the corner these days without seeing some sort of hype expression around ai. How are you and TransAlta thinking about [00:05:00] the opportunity?

John Kousinioris: From our perspective, it’s sort of a once in a generation kind of opportunity for a company like ours to see a significant increase in demand for our product, which is electricity.

And what we’re particularly excited about is the ability of the province of Alberta to be a leading location for data centers. Certainly in the Canadian context, given all the natural attributes that we have in our part of the world, I think it’s gonna be critically important for our economy in the future.

To be able to have a significant domestic AI slash data center capability, and I’m, and I’m concerned about us falling a little bit behind when you look at some of the major clusters in the world, you know, you don’t see very many Canadian locations there because I think as you look forward. Having that just compute capability located in your country is gonna be critically important and I think important to support the great AI work that our researchers and universities and, [00:06:00] you know, our commercial enterprises have.

So it’s about marrying that cutting edge capability that we have as a country with actual processing capability within the country going forward and conveniently for us. It also increases the demand for power and creates another pillar in the economy. So very, very important.

John Stackhouse: There aren’t many places better situated than Alberta, both for its energy supply and also access to major markets, including the us.

I’ve read that there are 33 projects, I think, that have submitted applications to Alberta, and in total they would pretty much consume all the electricity that is now generated in Alberta. So how are you? Thinking about doing this in a stepwise, thoughtful manner, when, as you said, there’s other jurisdictions that are racing forward, including with a full kind of array of power sources

John Kousinioris: As you look at the rest of the country, what many people don’t realize is that pretty much in every [00:07:00] jurisdiction, or either short power or on the cusp of being short.

Power and Alberta for a bunch of reasons happens to be relatively long power at the moment. So we actually do have an element of excess supply and, and, and in fact, I’d say we presently have a bit of a supply and demand imbalance when it comes to power. So I think the government realized that and went about in its first phase, considering how much.

Data center load, could it bring into the province while ensuring reliability? And our system operator went ahead with the government that did that work and came up with a 1.2 gigawatt number, and then they went through a process of allocating that act. So, you know, we used to think of a three legged stool for our sector that needed to be imbalanced in order to be successful.

And that was sort of reliability, affordability, and sustainability. There’s a fourth leg now, and that’s velocity. Like it’s just speed to [00:08:00] power. How quickly could you get it? And if any one of those legs breaks, the stool ticks over. And so we’re really grappling with the velocity part of the equation. And so our vision at the moment really sees kind of three phases, I would say, John, to data center powering in Canada.

The first one would be to utilizing existing underutilized generation. Probably more with a natural gas fired feel to it. Replacing that generation in the 2030s with more efficient generation would be the second phase. And then in my view, the greening of that generation would then follow shortly thereafter in kind of a third phase as we develop solutions for data centers in the country.

And our bet is that it is in fact, you know, hyperscalers, the tech companies, they’re gonna drive, I would say generation. Breakthroughs, sort of the technological evolution in our space that will see the eventual, you know, greening of the solutions that they [00:09:00] need to be able to provide, but with the ability to provide that reliability which they need, which is super hot to be able to see it through.

John Stackhouse: That’s a great point about velocity. I haven’t heard it added to the trilemma as it’s often, uh, referred to with energy. I guess someone will call that a quad lema or something, uh, like that. But give us a sense of how fast the velocity is. How, how fast is this coming at us?

John Kousinioris: So speed to power is important.

And when you look at the parts of the world that I think have done well, places like PJM, and you look at North Virginia and all the locations that have occurred, you know, all the data center locations that have occurred there. I mean, in part that’s because they have the ability to be able to power them.

I think a lot of the proponents of, of data centers wanna be able to see that if, is it a two year time horizon, two and a half year time horizon. Be able to see their project developed, built on the ground within our processing units installed and and being [00:10:00] up and running and being able to scale out.

That’s a good point To maybe pivot to the Key Hills Project, and I’m hoping you can tell us more about what your vision and ambition is there. For those who don’t know. Key Hills used to be a big coal plant, right? Coal plant. That’s right. And now you’re looking to develop it into a natural gas facility to power AI data centers.

That’s

John Kousinioris: exactly right. And so it is a facility which is about 60, 70 kilometers west of the city of Edmonton, and you are right, it used to be a series of three interconnected power plants. Each one of which just to, to keep it simple, is about 400 megawatts in generating capacity. So it’s, I tend to think of it as about 1.2 gigawatts of generation.

We have. In that broader area and our Sundance facility is just west of there, about 40,000 acres of land that we own and, and these plants were built on top of a coal mine. So in many respects, it’s a reclamation operation where [00:11:00] all of the plants are off of coal. They’ve been converted to. Natural gas.

Gas or shut down or mothball over time. And so when we look at key hills, we see, um, reasonably efficient gas, fire generation. Our transmission interconnection is there, the workhorse is there. We have clinical natural gas supply, we have water rights and the ability to cool the data centers, which is critically important from all the existing infrastructure that we have there.

It’s a temperate. Climate. We have existing pooling ponds, for example. The land is there, we’ve re permitted the land. So it’s been zoned in an appropriate way for data center development. So we’re excited about all of the attributes that we have and the ability to actually permit our customers to locate and approximately to our, uh, generating facilities and be able to.

Meet their needs directly from those facilities there. Now, in the initial phase, they would be grid connected, so they’d be able [00:12:00] to get that reliability by being able to extract power from the grid. But it would be our facilities that would be powering the grid in that area to permit that to occur. And the other thing that we’re excited about the opportunity, excited about being able to repurpose existing.

Facilities to meet the need of a new industry and do it relatively quickly as we develop kind of new, more longer term generating solutions for the customers.

John Stackhouse: As I understand it, the electricity that you’ll produce out of your plants goes into the grid, and then the data centers draw from the grid. Pull from the grid, right?

Why then do they need to be located by the power facility?

John Kousinioris: Yeah, in this case. So I think what you’ll actually see in the future is they could, in theory, locate in Calgary as long as they procured power that was being provided to the grid to ensure that the grid maintained that level of reliability.

It’s just that where we are right now, you know, we were exploring potentially a behind [00:13:00] the fence solution we, where we would power them directly, for example. And it turned out that just having the land, because it can chew up quite a bit of land to be able to do the set at scale, potentially hundreds of acres of land, was good.

It’s proximate to the city of Edmonton, which is and, and U of A in particular is a bit of a hotbed for AI development. So locationally it is good, but to get the kind of reliability that they need, let’s say it’s a 99 point, you know, 9, 9, 9, 9, doing that behind the fence is challenging. I think.

Realistically, you need to be grid connected to get that level of reliability.

John Stackhouse: All of this is gonna require a lot of investment and confidence, uh, certainly in policy as well as in markets. And that was part of the thinking behind the memorandum of understanding between the federal government and province of Alberta that uh, we saw a Danielle Smith and Mark Carney sign.

A fair bit. In fact, pretty much all of the attention and debate around the [00:14:00] MOU has been around pipelines and having read the MOUA couple of times I was struck of how much other stuff is in there. Yeah. Including around electricity and specific mentions about. Ai. Yeah. You were involved in the conversations.

John, I wonder if you can give us a deeper sense of the strategic thinking behind that and how that matters to a company like TransAlta and also to the investors who you’re trying to draw more capital from For what we’ve been talking about.

John Kousinioris: I think to your point, John, a lot of kind of attention in the media has gone towards, you know, pipelines and just sort of more the up oil and gas flavor associated with it.

But, uh, certainly from our sector, the electricity sector in Alberta, the MOU is a monumental opportunity and shift for us in terms of our ability to be able to meet the needs of data centers. So what the MOU does is it recognizes the. The challenge [00:15:00] to being able to get reliable generation built in real time in a manner that is environmentally responsible, but also meets the needs of the AI data center opportunity.

And I think imperative that the country has, I think is critical. You can’t have one without the other. In our view. And I think the initial location for this industry pillar is, my expectation is the province of Alberta. And so it is a real enabler and then associated with that will be an appropriate pathway to net zero, which I think, as you would’ve seen in the MOU remains an element of the target that everybody is looking at a really robust carbon pricing regime and, and I think all of that is gonna result in a continual greening of the grid, certainly from an emissions intensity perspective, but it was so lucky in Canada, so blessed to have.

The natural resources that we have where you see a relatively [00:16:00] decarbonized grid, like 80, 84% of our electricity generation in Canada is emissions free. Whether it’s, you know, the nuclear that you see in Ontario to the hydro blessings that the province of British Columbia, Manitoba, Quebec have, I think that the country has really great green publicity generation credentials.

We’re talking about other jurisdictions that don’t have those resources like Alberta, Saskatchewan, and maybe some of the Atlantic provinces to be able to use natural gas to be able to, to meet the opportunity. So I, it, it was a really, um, I think, important piece of cooperation and candidly shows a lot, at least from our perspective, great vision and cooperation on the part of the province of, and the government of Canada.

Very impressed with what they’re doing to get our country going. It’s gonna be very important.

John Stackhouse: Tell us a bit more about how the extra natural gas production fits in with a pathway to net zero by 2050.

John Kousinioris: That’s a [00:17:00] great question. And look, in our company in many respects has been in the vanguard of decarbonization in Canada, if you go back 15 years or so, you know, TransAlta would’ve emitted probably in the range of 40 megatons of CO2 a year.

So think of that as 5% of Canada CO2 emissions. We’ve gone from 40 down to about eight. So just our company alone has contributed about 10% of Canada’s Paris commitment. From a decarbonization perspective, what we are focused on now, given you know, how much we’ve lowered emissions over overall the country in our sector, I think there’s other sectors that that still have work to do from a decarbonization perspective.

We think that feathering in. A responsible way, natural gas fire generation that is hyper efficient, like the new plants that we would be looking to build would replace or less efficient, more highly emitting plants. So I think that trajectory of emissions intensity would [00:18:00] continue to go down with time, and it would be our expectation that we would add renewables as well.

But we would need that natural gas fire generation from an affordability perspective today to provide that level of reliability that we need. Our team studies carbon capture, our team study storage. We continue to look at kind of all the technological work that is being done and do expect with time. As I said earlier in, in our discussion, we do expect the tech sector itself to continue to drive kind of innovation and decarbonization over time.

So we, we see the gas as having a role to enable the build out of the sector. We don’t think. Overall, it’ll end up changing the emissions profile of the credit overall that much. And over time we’ll continue to work on partner. Well,

John Stackhouse: you call the MOU monumental. What do we need to do now to not only ensure it’s affected, but to take advantage of this moment?

Bearing in mind the velocity challenge that you [00:19:00] keep mentioning.

John Kousinioris: I think what it’s gonna require is, um, the MOU kind of sets forth a vision. And it requires a bit of work to be done around carbon policy in the province of Alberta, which which has a short time frame. It’ll be sort of in q2, uh, 2026 kinda landing the existing carbon pricing and tier regime that we have in a way that would be acceptable to move things forward.

I mean, making sure that we’re clear about phase two of data center development in the province of Alberta, which we think will have a similar, if not quicker timeframe, to see how that will be played out will also be something. I think that will be important to see through and then it’s all go gonna be about execution.

Like it’s making sure that companies like ours begin riving with our customers, the kind of investment decisions that are necessary. Because I, you know, sometimes I think in Canada we tend to point fingers at the government, why don’t they do this? Or why don’t they fix this? I think this is rightly, I think, a [00:20:00] call by most levels of government to now look at industry and say, look, we will do our part.

Well, you kind of talks about directionally what we need to do from a regulatory perspective. We need you guys to step up too, and I think that’s something that we take pretty seriously in our company and will be a focus for us going forward.

John Stackhouse: TransAlta has been around for more than a century and has lived and succeeded through multiple generations of energy development in this country. John, as we move to close, I’m not gonna ask you to look out a hundred years, but maybe look out 10 years and give us a sense of what success looks like for TransAlta, for Alberta and for Canada.

John Kousinioris: You know, it’s funny you say that ’cause I, I almost sort of, you know, to surface swept and people ask me to kind of make that forecast and I’m, I’m reminded, I joined the company here in 2012 and in 2011 we commissioned our last coal plant, which was a billion and a half dollar investment people three.

[00:21:00] Expecting it to run on coal. I think it was until 2063. That plant is now on natural gas. It’s amazing how disruptive that has been and is gonna probably, you know, I’m not sure it’ll be running in its current trajectory past 2040. So it’s amazing how quickly it ends. What I see our company, if I were to look forward sort of 20 years, I see a company that continues to have a mixture of generation.

Natural gas fire generation, including new natural gas fire generation in the province of Alberta, will be in a place where it is beginning to evaluate and bringing on more renewables to be able to reduce the emissions profile of that generation as we go forward. We often talk about our convictions as a company when we look sort of long term.

Maybe that’s the best way to answer the question. So it is our belief that the demand for renewables generation will continue and accelerate over time. [00:22:00] It is our belief that the technological progress being made around storage and renewables will continue and they will become increasingly affordable over time.

We’ve had a bit of a hiatus in that. Costs have gone up pretty significantly, and I hope they, they start to, to come down again. It is our belief that carbon will become more expensive over time, but it’s also our belief that natural gas fire generation will have a critical role to play in electricity generation, certainly in our part of the world for many, many years to come as well.

So it’s sort of directionally, I think that gives you a bit of a sense on how we see things developing and kind of the way we think about making long-term investments.

John Stackhouse: And for Alberta and for Canada, what, what does success look like 10 plus years out,

John Kousinioris: I think success would look like having our country be considered one of the, you know, continuing on our path to decarbonization over time.

But at the same time, having [00:23:00] a vibrant data center, AI industry that centered initially in the province of Alberta, but also migrates to other parts of the country. And Canada is considered a leader. In that entire industry space, which is kind of nascent. And although we’re doing great in terms of kind of some of the primary work, I worry that we’ve slipped behind in the actual locations of the excellent process.

But I’m optimistic. I think we’ll get there

John Stackhouse: and if anyone can get the quad lema, if we’re gonna call it that, right? Uh, it’s gotta be the people of Alberta and the people of Canada. John, thank you for being on disruptors. Thanks so much, John. Be well. Canada is in the midst again of an important even existential debate about the role of energy in our economy and in our country.

And much of the debate has been focused on what many have called the energy trimmer of reliability, affordability, and sustainability. But as John stressed, [00:24:00] there’s a fourth variable that we need to pay more attention to, and that’s velocity speed. We all know how fast AI is growing in our lives and in our work, and we have to ensure that we have energy systems that grow and adapt at the same speed.

Otherwise, we’ll see our data and all the opportunities that go with it move to other countries. That’s the bet TransAlta is making at Key Hills and Sundance, that it can be one of the engines of Canada’s AI ambitions. It’s about energy security and energy sovereignty, because without those, we’ll continue to struggle for true economic sovereignty.

Even more so in the transnational world of AI and data on so many counts, Alberta already has a headstart. It’s got the land, the transmission systems, the cooling water, and the people who know how to build and run sophisticated energy systems. Those assets and that talent is ready to be scaled for the next wave of demand.

The challenges won’t be [00:25:00] easy. There are huge supply chain constraints for anyone trying to build a new power plant, whether it’s to get in queue for a gas turbine or find the steel and copper and other materials to build out a grid. We’ll also have to continue to get better and better at producing all this energy more sustainably.

If we’re gonna use more natural gas to power, more data centers will want to continue to find ways to capture the methane and other greenhouse gases that come with all that production. Alberta has long been a global leader in that. And by harnessing all these potential new investments, it can continue to be a technology leader for sustainable energy production.

And then there’s the talent challenge. Alberta, like so many other parts of Canada, is going to need more people and more skills to be a global leader in the data center economy. So the next time you use chat, GPT or perplexity, think about where all your data’s going. Where all the energy is coming from for the massive compute that is enabling this new information age.[00:26:00]

We can build most of that right here in Canada if we make the smart investments. Now

you’ve been listening to Disruptors, the Canada Project. Thanks for joining us on this journey across the country. And there’s more ahead. If you enjoyed this episode, please follow rate and leave us a review. It helps others discover the show. And if you wanna gain deeper insights into the ideas shaping Canadian business and the economy, visit rbc.com/thought leadership.

Join us next time as we meet more of the innovators and leaders helping Canada meet this moment boldly and on our terms. I’m John Stackhouse. Thanks for listening.