Quebec is gaining ground in its push to become one of the world's biggest jurisdictions for data warehousing, tapping its hydro-power surpluses to lure a growing list of companies including Amazon Web Services and Microsoft.
Utility Hydro-Québec is leading an effort to speed up development of data hosting in the province, especially in Montreal, after years of slow growth. It says it's building capacity equalling 350 megawatts of electricity to meet demand from existing warehousing clients in Montreal by 2020, as the city tries to steal business from other Canadian and international markets.
"I think people are starting to realize how good the price of electricity is in Quebec," David Murray, president of Hydro-Québec's distribution arm, said ahead of a major data-centre summit starting Tuesday in Montreal. "Price is really making a difference. [When] you're like three times cheaper than everybody else, word gets around fast."
Data hosting is growing quickly. Some 2,000 data centres started operation worldwide between 2012 and 2015, according to DCD Intelligence. Annual investments are expected to top $20-billion (U.S.) by 2020 in the Americas, a separate forecast from London, Britain-based research company Technavio shows.
Quebec's renewed push on data centres is part of a broader plan released last summer by Eric Martel, Hydro-Québec's chief executive, to double revenue to $27-billion by 2030 and lift profits 65 per cent to $5.2-billion to contribute more to the provincial treasury. The 350 megawatts of added capacity for data clients equals a roughly $100-million revenue opportunity per year for Hydro-Québec, the utility said.
Hydro-Québec is coming under increasing pressure to maintain its profits amid weaker prices for its electricity exports into the United States and it is actively shopping for international energy assets to help bolster returns. Other provinces and states remain interested in Quebec's power but new transmission infrastructure is needed to boost sales.
Interest in the Montreal area has grown since Sweden's Ericsson AB and France's OVH in Montreal announced early investments to locate data operations there in 2013. Cloud services providers Amazon and Microsoft have now taken up residence in the city with other deals in the works.
In all, Hydro says the province has about 40 data centres operating, including new facilities from COLO-D, Hypertec and Metro Optic.
Cloud providers, which make resources like storage and software available to users on demand through the Internet from their own servers, are creating "vast opportunities" for cloud growth in Montreal, JLL said in its data-centre outlook for 2017. This is largely the result of the power pricing spread between Quebec and Ontario, the firm said.
Hydro offers a 20-per-cent discount on the applicable power rate to companies seeking to establish energy-intensive data centres in the province under special economic-development tariffs. The utility currently has a request before the Régie de l'énergie, Quebec's energy oversight body, to prolong that discount until 2027.
Quebec's cold weather compared to other jurisdictions brings down those costs further. Mr. Murray said he recently visited a data centre in the province where the operator had simply opened the roof to cool the equipment inside. Although cooling technology has improved over the years, top global data-hosting hubs like California and Singapore are disadvantaged compared to Canada on that score.
Though power pricing is a significant factor in site selection for data-warehousing companies, it isn't the only one.
The source of the electricity is also key, with major tech firms like Apple and Google making commitments to source their power from all-renewable energy. Hydro officials note that every time you do an Internet search or store photos, it's not a carbon-neutral exercise. Servers in many U.S. states are fuelled by fossil fuels like coal, which are dirtier and far less efficient than the hydro power Quebec has available, officials said.
"There's an environmental impact to every individual's data usage," said François Vallières, head of development for Hydro's big-power clients. "Tech companies are jostling for brand positioning in this new world."
One of the biggest wild cards is the shifting political landscape.
The election of Donald Trump as U.S. President has raised concerns about the privacy of data in the United States and the Washington Post detailed efforts by scientists in December to copy reams of government climate data onto independent servers in hopes of safeguarding it from any political interference. That could trigger a movement of data warehousing to Canada as a kind of safe haven, JLL said in its outlook.
Roger Lanoue, a former Hydro-Québec vice-president who steered a government-mandated review of Quebec's energy situation in 2014, said attracting data-centre business is positive in that it establishes customers for electricity that might otherwise go to waste because the utility its already exporting as much power as it can with current transmission lines.
"It's better than nothing," Mr. Lanoue said. "If the alternative is letting water out through the reservoir spillways because there's no market for the power, then it at least provides some revenue. But it doesn't create many jobs. The economic impact is minimal."