Ontario’s Independent Electricity System Operator (IESO) has launched a major projects identification committee (MPIC) process for identifying large (10 megawatt or greater) projects.
The MPIC is designed to support the provincial government’s latest integrated energy plan, which forecasts significant growth in electricity demand up to 2050.
The MPIC webpage can be found here. The IESO will schedule a follow-up webinar in Q3 to provide relevant updates on the MPIC process and discuss progress to date.
Background
MPIC process participation is voluntary. The IESO will review major project proposals and consult on a confidential basis with the relevant provincial ministries, local transmitters and distributors, gas utilities, municipalities, and Indigenous communities, as applicable. If the project is determined to be viable, it will be included in the IESO’s public major projects list and incorporated into the IESO’s regional and bulk planning and forecasting.
The MPIC does not approve or prioritize specific projects, nor does it guarantee connection to the IESO-administered electricity grid. Rather, the MPIC process is focused on capturing early-stage site information to support more informed planning and to assess project readiness for grid connection purposes.
Opportunities for Data Centres
The MPIC process is primarily targeted toward identifying large load connections. This is a significant opportunity for large industrial and commercial loads, including data centres.
The provincial government’s integrated energy plan identifies data centres as a significant source of increased electricity demand, based on the rapid growth of generative artificial intelligence (AI).
Data centres are facilities that contain a large number of computer systems for the purpose of storing and allowing access to large quantities of data. Siting a data centre requires critical upfront considerations, including land access, applicable environmental regulations, physical proximity to the electricity grid, and access to sufficient water for necessary cooling systems.
The MPIC process can provide data centre proponents with this type of information on an expedited basis to help evaluate between, for instance, an enterprise model (where the computer servers, storage and network switches are located and controlled by the load customer) or a co-located model (where the information technology is located and controlled by a third-party service provider).
The MPIC can also help data centre developers determine the viability of including a behind-the-meter generation facility (where the power-generating facility can deliver power directly to the data centre without being connected to the IESO-administered electricity grid). This may be a particularly attractive approach for hyperscalers who are looking to avoid the time and cost associated with new or expanded transmission-level interconnections.
Project financing costs can vary significantly depending on which data centre model is pursued. For instance, applicable taxes for property, construction labour and employment, commodity sales and other costs may differ. An enterprise model versus a co-located model can also give rise to different data privacy risks. Undergoing the upfront due diligence inherent in the MPIC process can help identify these types of costs and risks early on in the project lifecycle.
Looking Ahead
It will be interesting to see how the MPIC process aligns with the provincial government’s pending regulations to be prescribed under the Protect Ontario by Securing Affordable Energy for Generations Act, 2025, intended to prioritize and approve connection requests for data center projects.
On the one hand, data centre development is conducive to the government’s mandate to support economic growth in Ontario. Data centre projects can create many jobs during the construction process and provide utilities with large, steady streams of load-customer revenue following connection to the electricity grid. On the other hand, data centres can also give rise to environmental concerns from local communities.
How will the pending regulations balance these and other competing considerations? Will they, for instance, introduce tax exemptions and/or rebates for data centre projects that include zero or low-emissions generation facilities (e.g., small nuclear modular reactors for larger data centres or renewables and energy storage for smaller facilities)?
Data centres with at least some self-supply resources may also be eligible for cost savings under Ontario’s latest framework for virtual power purchase agreements. While gas generation facilities can also help data centres meet firm and reliable electricity needs, it remains unclear whether they will be eligible under the pending regulations for the same incentives that may be offered to other generation supply resources providing electricity directly to data centres.
We are closely following data centre development throughout Canada. For more information, please contact the author or any other member of our Energy Regulatory or Power groups.
