New data centres will pay all energy costs, get no cash incentives under Ontario plan

Data centres in Ontario will need to cover all their energy costs and could pay more for electricity than other industrial users, the government said Thursday as it faces mounting pressure from local lawmakers to bring in guardrails around the facilities powering the artificial intelligence boom.

Premier Doug Ford lauded data centres as the “way of the future” at a press conference in Guelph, but ruled out using financial incentives to lure new projects to Ontario. 

“It’s going to drive the world economy, there’s trillions of dollars around the world being invested,” Ford said while outlining the province’s “playbook” to guide future data centre approvals.

“But if any data centre thinks they’re coming into Ontario and getting a freebie: not happening.” 

Competition among large tech companies has fuelled a surge in demand for energy-hungry data centres, facilities lined with powerful computer chips used to train and operate increasingly complex AI models. Ontario has seen a major spike in data centre requests to connect to the grid. 

The rush of new projects has led several Ontario municipalities, including Toronto, to press the province for clearer guidelines to assess the larger data centre projects. The framework unveiled Thursday is open to public consultations for 30 days. 

Oakville became the first municipality in the province to enact a one-year data centre moratorium this week, with Mississauga set to vote on its own pause next month. 

Residents who have backed the moratorium push raised concerns about the possible noise, water, heat and air pollution associated with large data centres, which they fear could strain the grid and raise utility bills. The projects have also become a proxy for large critiques of the rise of artificial intelligence, from the displaced jobs to proliferated misinformation. 

Ford likened the local moratoriums to “NIMBYism.”

“I find it, I guess, hypocritical. That’s the word. We’re going to use all the data, we’re going to use everything, but we aren’t going to put it in our backyard,” he said. 

The framework unveiled Thursday — what the government called a data centre “playbook” — offers a broad outline of how Ontario could regulate the industry. 

Data centres will have to recover all the costs linked to their power consumption. They may be subject to a new rate class, which could see them pay more for electricity than other large industrial users, the government said. 

Environmental impacts would have to be minimized, such as with closed-loop cooling systems that recycle water, and local communities must see benefits, such as investments in parks, roads or community centres. 

Data centres will also be encouraged to generate their own power, rather than drawing entirely from the grid, but the government has not said whether that will be paired with any new requirements. Some countries mandate new data centres to be paired with renewable energy while Alberta has encouraged those projects to build new gas plants, adding to electricity emissions. 

Energy expert George Vegh said Ontario’s framework amounted to “pretty open-ended ideas.” 

“It’s more like, you know, the start of a process than any real answers as to how it would work,” said Vegh, former chair of the Canada Energy Regulator and former general counsel of the Ontario Energy Board. 

The framework comes after Ontario passed a law last year that gave the energy minister power to prioritize or deny new large data centre projects. 

The government cast the move as a safeguard to ensure data centres do not dominate available electricity at the expense of other industries with greater job-creating potential. But some critics argue it could shift decisions previously made through transparent, independent regulatory processes into closed-door political negotiations.

“I do think the main concern is that these will be more political determinations,” said Vegh. 

There are now roughly 7,000 megawatts of data centre-related requests to connect to Ontario’s grid, double what was reported in March, the Independent Electricity System Operator said. That’s more than a quarter of the entire province’s peak demand of roughly 25,000 megawatts. 

Most of the projects are in early stages and figures can fluctuate as projects withdraw, pause or advance, the IESO has said. Data centres often apply to multiple grids as they scout for available capacity, experts say. 

Data centres are expected to represent about 13 per cent of new electricity demand in Ontario by 2035.

The president of Microsoft Canada, which has pledged $19 billion to its AI buildout across the country, said the company “was glad to see Ontario setting forth its vision for responsible data centre development.” 

“We believe communities should share in the benefits of AI infrastructure, and they should not bear the cost,” said Matt Milton. 

The head of a group representing Ontario municipalities said it welcomed a framework that delivers “real benefits for Ontarians and host communities. 

“Protecting ratepayers, safeguarding the environment, ensuring local infrastructure can support growth, and giving communities a fair share of the benefits are key to getting this right,” said Robin Jones, president of the Association of Municipalities of Ontario.

This report by The Canadian Press was first published Aug. 13, 2026.