Power Needs for Data Centers in Toronto

Toronto's data centres are growing rapidly, driven by AI and digital infrastructure demands. By 2035, they will account for 13% of Ontario's new electricity needs, with power consumption rising fivefold by 2050. This growth is straining the GTA's power grid, leading to challenges like grid constraints, long connection timelines, and rising energy costs.

Key points:

• Toronto leads Canada in data centre capacity, with 40% of the national total.
• Current capacity: 312 MW (2025), projected to exceed 370 MW by year-end.
• 236 MW under construction and 596 MW in planning to meet future demand.
• New legislation prioritizes data centres with economic and strategic benefits.
• Operators are adopting on-site power solutions (e.g., natural gas, diesel) and renewable energy agreements to address grid issues.

The future of Toronto's data centres depends on securing reliable power sources and navigating regulatory complexities to meet surging demand.

How Data Centers Are Powered (And Why They’re Straining the Grid)

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Current Power Capacity and Usage in Toronto Data Centres

Understanding how Toronto's data centres manage their power capacity and usage is key to evaluating the city's energy needs and planning for future grid strategies.

Operational Capacity and Vacancy Rates

Toronto's data centre market had an operational capacity of 312 MW by mid-2025, with projections to surpass 370 MW by the end of the year. This accounts for roughly 40% of Canada's total data centre capacity. The vacancy rate stood at just 7.6%, with 20 MW absorbed in the first half of 2025. Toronto also ranks 4th in North America for commissioned colocation power.

Historically, Toronto's data centres catered to smaller telecommunications-led colocation needs, typically under 250 kW. However, the arrival of major players like Digital Realty, Equinix, and Urbacon has driven a shift towards larger, purpose-built facilities. This transition to megawatt-scale operations is reshaping power consumption patterns. Hyperscale operators are now targeting suburban availability zones to secure both land and power, all while maintaining low-latency connectivity to the city's core.

Number of Facilities and Regional Position

Toronto's strong capacity usage underscores its prominence in Ontario's extensive data centre network. The province boasts over 80 operational data centres with a combined power capacity of 917 MW, far exceeding that of other provinces. Toronto currently ranks 14th in North America for commissioned colocation power and trailing twelve-month absorption.

Together, Toronto, Montreal, and Alberta account for 93% of Canada's national IT load. Thanks to high demand from the financial sector and a robust fibre network, Toronto has firmly established itself as the leader in Canadian data centre development.

Projected Power Demand Growth and Construction Plans

Toronto's strong energy capacity is being pushed further by the rapid growth of AI-driven technology, which is driving up power demand across Ontario. The Independent Electricity System Operator (IESO) has adjusted its provincial demand forecasts to reflect this surge, highlighting the increasing strain on Ontario's electricity supply.

Energy Demand Forecasts to 2035

According to IESO, data centres are projected to account for 13% of Ontario's new electricity demand and 4% of the province's total demand by 2035. This translates to an annual demand increase of 13 TWh, with a five-fold growth in load expected by 2050, driven by a compound annual growth rate (CAGR) of 7.1%.

"The accelerated pace of demand growth in this year's forecast is primarily attributed to the industrial sector... and energy-intensive data centres, a trend that is quickly emerging around the world to support the proliferation of artificial intelligence." – IESO

Over the next ten years, IESO anticipates 16 new data centres will connect to Ontario's grid. However, the organization notes that forecasting data centre growth remains challenging due to the sector's rapid evolution. These facilities are reshaping energy consumption patterns by increasing electricity usage during evening and overnight hours. This shift flattens the daily demand curve, necessitating more stable baseload power from sources like nuclear and hydroelectricity. These trends underline the need to address grid constraints and explore new power generation options.

Construction Pipeline Details

To meet the rising demand, Toronto's energy pipeline includes 236 MW currently under construction and an additional 596 MW in the planning stages, tailored to support the growing needs of AI-driven operations.

Since May 2023, IESO has added more than 3,600 MW to the grid. To further secure capacity through 2035, the LT2 RFP has been launched, targeting contributions from wind, solar, hydro, and biofuel energy sources. The Affordable Energy Act, 2024, also aims to ease costs for early adopters and improve grid infrastructure in areas poised for significant growth.

"With growing demand, our focus is on accelerating the pace of new electricity infrastructure development across the province so that we can support the province's continued growth into the 2030s." – Lesley Gallinger, President and CEO, IESO

These construction efforts are critical for alleviating grid limitations while ensuring Ontario's energy system can sustain future growth.

Grid Constraints in the Greater Toronto Area

As power demands continue to climb, the Greater Toronto Area (GTA) faces mounting challenges with grid constraints, particularly when it comes to supporting the rapid growth of data centres. Ontario's grid in the GTA is under pressure to keep up, creating both financial and operational hurdles for facilities with high energy needs.

Transmission Capacity Gaps

The GTA's power grid is struggling to match the pace of data centre expansion. Any project exceeding 10 MW must undergo a System Impact Assessment (SIA) by the Independent Electricity System Operator (IESO) to assess its impact on system reliability. Data centres are classified as "high-risk" and are evaluated based on a five-year economic outlook instead of the standard 25-year period. This shorter timeframe forces operators to invest heavily upfront to support grid expansion.

In areas with severe transmission limitations, utilities have adopted measures like "flexible hosting" or "curtailed connection offers". These arrangements require data centres to adjust their energy consumption in real time, which can compromise service reliability. Adding to the complexity, the IESO's Market Renewal Program, set to take effect in May 2025, introduces Local Marginal Pricing (LMP). This pricing model reflects cost differences caused by grid congestion, leading to location-based variations in electricity prices. For data centres in areas with limited capacity, this means higher power costs during peak demand periods - further complicating operations and highlighting the need for additional capacity.

Planned Capacity Additions

To tackle these constraints, Ontario has launched several infrastructure initiatives. One of the most ambitious is the Toronto Third Line Project, Ontario's first underwater high-voltage transmission network. This High Voltage Direct Current (HVDC) system will link downtown Toronto with Bowmanville and is expected to meet regional power needs well beyond 2044. The project is slated to be operational by 2037 or earlier.

"The Toronto Third Line project would be Ontario's first underwater high voltage transmission network line and its first major domestic High Voltage Direct Current (HVDC) project." – Ministry of Energy and Mines

The IESO plans to select a transmitter for the Third Line within 18 months of receiving a formal directive, with a decision anticipated by 2026. In addition, new legislation like Bill 40, also known as the Protect Ontario by Securing Affordable Energy for Generations Act, 2025, introduces stricter rules for electricity connection requests. This bill creates exceptions to the principle of non-discriminatory grid access specifically for data centres. Facilities will now need to demonstrate "real local, strategic and economic benefits" instead of relying solely on their high power consumption.

Power Supply Options and Solutions

With the grid challenges already outlined, alternative power supply strategies are becoming increasingly important for Toronto data centres. These facilities rely on a mix of the provincial grid's low-carbon hydro-nuclear energy and other sources, each with its own balance of cost, reliability, and environmental impact. The provincial grid, powered largely by nuclear energy, is a major draw for data centres. In fact, nuclear generation accounts for over 50% of Ontario's electricity, offering a clear advantage in reducing emissions compared to regions like Alberta, which rely more on fossil fuels. This makes Ontario particularly appealing for hyperscale operators with demanding ESG (environmental, social, and governance) goals.

Energy Sources for Data Centres

Beyond grid connections, many operators are turning to behind-the-meter (BTM) solutions, which involve on-site or nearby power generation. These systems, often powered by natural gas, diesel, or batteries, bypass public utilities and are especially useful for peak shedding under the Industrial Conservation Initiative (ICI). By doing so, operators can earn credits and lower their energy costs. Marc Mondesir, Managing Director at Equinix Canada, highlighted the importance of redundancy in these setups:

"All of our equipment is redundant to a factor of two. So for every generator required to support our customers, there is an equal generator that exists just to play the role of redundancy".

While BTM solutions enhance reliability and help manage costs, they often rely on less environmentally friendly energy sources compared to Ontario's grid. To address this, some operators are exploring options like carbon capture technologies or renewable energy credits to align with climate goals. Another innovative approach is flexible hosting, where data centres agree to scale back operations during grid capacity shortages. This arrangement allows them to connect to constrained parts of the grid while maintaining operational flexibility.

Direct Power Options and Comparisons

In addition to BTM systems, some operators are exploring direct power procurement methods. One popular option is Power Purchase Agreements (PPAs) with renewable energy producers. These agreements not only secure clean energy but also protect operators from fluctuating energy prices. Kate Harland from the Canadian Climate Institute explained:

"By entering into direct PPAs, data centres reduce their carbon footprint and hedge against price volatility, while renewable projects gain the financial security to invest in new capacity".

However, direct power arrangements come with challenges. For instance, operators must navigate Ontario Energy Board (OEB) licensing requirements, which often mandate that the power generation and delivery infrastructure be located on the same or adjacent land parcels.

Looking further ahead, Small Modular Reactors (SMRs) are being considered as a potential direct power source for hyperscale data campuses. Ontario Power Generation’s Darlington SMR project, aimed for completion in the late 2020s or early 2030s, represents a promising development. That said, privately operated off-grid nuclear facilities are unlikely to emerge in Ontario anytime soon due to stringent licensing by the Canadian Nuclear Safety Commission and the dominance of provincial utilities. For now, most operators continue to rely on grid connections supplemented by BTM systems, striking a balance between sustainability, reliability, and regulatory constraints.

Data Centre Site Selection Considerations

Site Selection Factors

Finding the right spot for a data centre in Toronto and the GTA is about much more than just finding available industrial space. Today, power availability and fast infrastructure delivery are the two key drivers influencing site selection, leasing trends, and pricing in this competitive market. With primary market vacancy rates hitting a historic low of 1.6% in the first half of 2025 - compared to the broader Toronto market's 7.6% vacancy rate - demand for power-ready sites has surged. This heightened competition has made these factors critical to decision-making in Toronto's data centre landscape.

Power and zoning are at the forefront of these challenges, highlighting the need for specialized expertise. Grid capacity is a top priority for developers, with sites near major transmission corridors being particularly valuable. These locations are better equipped to handle the significant power requirements of modern data centres, especially as AI workloads push rack densities from the traditional 5–15 kW to an impressive 40–60+ kW. While connecting a new facility can take up to three years, modifying an existing site often requires just a few months. This time difference explains why developers are willing to pay a premium for sites with existing power infrastructure.

Zoning certainty is just as critical as power access. The best locations are typically in industrial or employment zones, where heavy power use and backup generation are allowed without needing rezoning. Securing this zoning certainty during acquisition minimizes risks related to financing and property valuation. Ontario’s Bill 40 has further complicated the process by giving the Minister of Energy and Mines the authority to prioritize connection requests based on "real local, strategic and economic benefits", rather than just power consumption.

Under Ontario's regulatory framework, developers often need to make upfront capital contributions for high-risk connections. This has led to a significant cost increase for large-scale deployments (10 MW or more), with prices rising as much as 19% in 2025 due to the limited availability of contiguous power blocks. Additionally, any project exceeding 10 MW must undergo a System Impact Assessment (SIA), adding another layer of complexity to the planning process.

Lennard Commercial's Role in Data Centre Real Estate

Given the intricate challenges of site selection and power infrastructure, expert guidance is critical. Successfully navigating the complex interplay between land acquisition, zoning, and power access requires specialized knowledge. Michael Law of Lennard Commercial offers precisely this expertise, using proprietary market insights to help businesses secure the best data centre locations across Toronto and the GTA. Lennard Commercial's approach includes early collaboration with grid operators such as the IESO and local distributors, ensuring that clients secure sites with power access within an 18-to-36-month timeframe - an increasingly valuable asset in today’s market.

Lennard Commercial’s services go beyond just identifying potential sites. The firm also works to secure zoning certainty during the acquisition phase, evaluates proximity to transmission infrastructure, and determines whether existing grid capacity can meet the massive power needs of modern facilities while allowing room for future growth. With data centres projected to account for approximately 13% of Ontario’s new electricity demand by 2035 - and with 94 data centre sites already identified in Mississauga and the GTA - having an advisor who understands both industrial real estate and power infrastructure is no longer optional; it's essential.

Conclusion

Toronto and the Greater Toronto Area are at the heart of Canada's growing data centre industry, but power infrastructure remains a critical challenge. The demand for electricity from data centres is surging, with grid connection timelines stretching up to three years, underscoring the urgency of addressing scalability issues. The 94 identified data centre locations across Mississauga and the GTA highlight both the immense potential and the pressing challenge of meeting these energy needs.

The key to success lies in securing power-ready sites that can support rapid infrastructure development. While traditional factors like location and fibre access still matter, the availability of robust power infrastructure has become the defining factor. Developers who can secure such sites will gain a clear edge in this competitive landscape. These shifting priorities are also driving changes in regulations and fostering new approaches to working with grid operators.

Ontario's Bill 40 reflects this shift by prioritizing connection requests for data centres exceeding 50 MW, emphasizing their provincial economic and strategic importance. Early collaboration with the Independent Electricity System Operator (IESO) and local distributors, paired with zoning certainty during site acquisition, can significantly shorten connection timelines - from years to just months for existing sites.

"Canada's position as a global hotspot is reinforced by its climate, renewable energy, and policy support, but success depends on navigating intricate legal and regulatory pathways." – WeirFoulds LLP

Navigating these challenges requires a deep understanding of industrial real estate, power infrastructure, and the regulatory environment. Stakeholders with expertise across these areas will be well-positioned to drive Ontario's data centre sector forward, ensuring the region meets its energy demands while continuing to grow sustainably and efficiently.

FAQs

Why does it take up to three years to connect a new data centre to power in the GTA?

Connecting a new data centre to the power grid in the Greater Toronto Area (GTA) can take as long as three years. Why? Grid constraints. The demand for data centres is growing so quickly that the current electrical infrastructure just can't keep up. Meeting these energy needs involves:

• Careful planning and significant upgrades to the existing grid.
• Close collaboration with utility providers to maintain a dependable power supply.

These steps are essential to ensure the infrastructure can handle the increasing energy requirements.

How will Bill 40 change which Toronto data centres get grid connections first?

Bill 40 is designed to make it easier for data centres in Toronto to connect to the electrical grid by simplifying the regulatory process for energy infrastructure projects. This could mean faster grid access for these large facilities, helping them meet their substantial energy demands more quickly and efficiently.

What are the best alternatives if a site can’t get enough grid power (BTM, PPAs, flexible hosting)?

If a data centre site doesn't have enough grid power, there are a few ways to work around it:

• Behind-the-meter (BTM) systems: These involve generating or storing energy on-site, such as using solar panels or batteries. This approach can help improve energy availability and reliability.
• Power purchase agreements (PPAs): These agreements allow companies to buy renewable energy directly from providers, ensuring a steady energy supply while potentially lowering costs.
• Flexible hosting: This means leveraging scalable colocation or hyperscale data centres, which can adjust to power limitations and maintain operations without disruption.