Opinion: Don't panic: AESO data centre limits are a red herring
The Alberta Electric System Operator's new 1,200-megawatt cap on large electricity loads understandably has some people warning that Alberta might 'miss the AI economy.' That anxiety rests on an old assumption: that tomorrow's AI infrastructure will sit in ever-bigger, grid-tied campuses.
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It did — five years ago. But today, the industry is running the other way and taking its money with it.
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In March, Microsoft walked away from roughly two thousand megawatts of data-centre leases in the United States and Europe, telling analysts it now has 'oversupply' and needs a nimbler footprint. Yet, the company will still spend about US$80 billion on capacity this year — just not in hyperscale blocks wired to public grids, and certainly not at the end of long interconnection processes.
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Where is that money going? Increasingly to private, self-powered sites. Crusoe Energy, for instance, is building the first 200-megawatt phase of an off-grid watt-bit infrastructure campus near Abilene, Texas, to host OpenAI's 'Stargate' facility, fuelled by local natural gas rather than powered by the Texas grid. Such projects now exceed 10 thousand megawatts in global pipelines, and include some suppliers with roots here in Calgary's energy sector and capital market.
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The logic of it is simple. Cutting-edge AI chips can cost about $20 million per megawatt and age out in two years — roughly 100 times the capital intensity of a gas turbine that lasts decades. However, unlike a gas turbine, which might earn $50 to $75 per megawatt-hour in traditional power markets, a chipset like an NVIDIA H100 can turn that same megawatt-hour into nearly $4,000 — more than 65 times the commodity value of that same energy at Alberta's wholesale price.
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When hardware that expensive and short-lived can earn more than 65 times the value of the energy it burns, operators will do almost anything to keep it running — and the regulatory, political and queuing risks that come with a public grid look less and less tolerable. Proposals that would require data centres to operate for the benefit of power grids make no economic sense to operators who do not share a low-margin, multi-decade view of the present value of energy.
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Opinion: Don't panic: AESO data centre limits are a red herring
The Alberta Electric System Operator's new 1,200-megawatt cap on large electricity loads understandably has some people warning that Alberta might 'miss the AI economy.' That anxiety rests on an old assumption: that tomorrow's AI infrastructure will sit in ever-bigger, grid-tied campuses. Article content It did — five years ago. But today, the industry is running the other way and taking its money with it. Article content Article content Article content In March, Microsoft walked away from roughly two thousand megawatts of data-centre leases in the United States and Europe, telling analysts it now has 'oversupply' and needs a nimbler footprint. Yet, the company will still spend about US$80 billion on capacity this year — just not in hyperscale blocks wired to public grids, and certainly not at the end of long interconnection processes. Article content Article content Where is that money going? Increasingly to private, self-powered sites. Crusoe Energy, for instance, is building the first 200-megawatt phase of an off-grid watt-bit infrastructure campus near Abilene, Texas, to host OpenAI's 'Stargate' facility, fuelled by local natural gas rather than powered by the Texas grid. Such projects now exceed 10 thousand megawatts in global pipelines, and include some suppliers with roots here in Calgary's energy sector and capital market. Article content Article content The logic of it is simple. Cutting-edge AI chips can cost about $20 million per megawatt and age out in two years — roughly 100 times the capital intensity of a gas turbine that lasts decades. However, unlike a gas turbine, which might earn $50 to $75 per megawatt-hour in traditional power markets, a chipset like an NVIDIA H100 can turn that same megawatt-hour into nearly $4,000 — more than 65 times the commodity value of that same energy at Alberta's wholesale price. Article content When hardware that expensive and short-lived can earn more than 65 times the value of the energy it burns, operators will do almost anything to keep it running — and the regulatory, political and queuing risks that come with a public grid look less and less tolerable. Proposals that would require data centres to operate for the benefit of power grids make no economic sense to operators who do not share a low-margin, multi-decade view of the present value of energy.
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