A new report from Ontario’s Independent Electricity System Operator(IESO) suggests that electric vehicles and artificial intelligence facilities will drive a massive increase in demand for electricity in Ontario’s not-too-distant future.
The IESO estimates that overall electricity demand will grow by a projected 75% by 2050, which is higher than the 60% increase previously forecasted. The IESO attributes that growth in demand to a number of factors including industrial electric vehicle (EV) production and data centres (increasingly AI-driven).
In fact, the IESO reportedly forecasts at least 16 new data centres will be in service by 2035, driving 13% of the new electricity demand.
But where will all that electricity come from?
Under Canada’s current climate and energy policies, it won’t come from fossil fuels, which are to be essentially regulated out of use by 2050 per the Trudeau government’s “net zero” greenhouse gas (GHG) plan and proposed Clean Electricity Regulations expected to be enacted by the end of this year. Assuming those frameworks remain in place in coming years, the increased demand for electricity must be met with low- or zero-GHG emitting forms of generation, which include wind power, solar power, hydro power, nuclear power and biomass power generation.
But Ontario already faces a stiff challenge in replacing existing fossil fuel electricity generation with renewables, even before all this new EV/AI-driven demand. In 2021, IESO released a study assessing the impacts of phasing out natural gas generation by 2030. It found that natural gas generation “provides a level of flexibility to respond to changing system needs that would be impossible to replace in the span of just eight years [the province’s current goal].”
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The IESO also noted that natural gas power generation in Ontario provides almost three-quarters of the system’s ability to respond quickly to changes in demand. And that the proposed alternate energy technologies are not ready for widespread implementation: “Newer forms of supply, such as energy storage, are not ready to operate at the scale that would be needed to compensate; nor is there enough time or resources to build the necessary generation and transmission infrastructure to replace gas generation within an eight-year timeframe.”
In other words, meeting Ontario’s growing electricity demand by 2030 with low- and no-GHG emitting technologies—without raising electricity prices or destabilizing the grid—will be challenging to say the least.
In light of projected increased electricity demand from AI and EVs (not to mention newer technologies that AI might spawn), the Ontario government should demand relief from the Trudeau government’s forthcoming Clean Electricity Regulations.
Without such relief, Ontario might not be able to meet future electricity demand, which would stifle not only the future EV market and the AI revolution, but all other electricity-consuming industries, costing Ontario a great deal of potential economic growth and the prosperity that accompanies it.
Kenneth Green is a senior fellow at the Fraser Institute.