by David Aanye M.ISRM
Data centres are undoubtedly crucial to achieving a sovereign cloud. A sovereign cloud would comprise advanced computing infrastructure and data centres, housed within the country’s borders and hosting Canadian data, and governed by local laws only. While announcing the Major Project Office (MPO) inaugural priorities in Edmonton in September 2025, Prime Minister Carney articulated the national imperative of building a sovereign cloud by stating that investing in sovereign cloud “… would build compute capacity and data centres that we need to underpin Canada’s competitiveness, to protect our security, and to boost our independence and sovereignty”. However, the energy consumption needs of data centres, especially the modern ones, are witnessing an upward trajectory worldwide.
Data centre electricity demand
Globally, data centre electricity consumption has witnessed a growth rate of about 12% since 2017. In 2024, data centres accounted for 1.5% of the global electricity consumption (IEA, 2025). There is a marked difference in the energy consumption profile between traditional and modern data centres. Conventional data centres consume around 5-100 megawatts (MW) of power. There are over 239 such data centres operating across Canada. On the other hand, modern data centres, especially hyperscale and AI-driven ones, are more energy-intensive. Their electricity demand could typically exceed 100MW. According to IEA (2025), the largest under-construction data centre has a capacity of 2,000MW, while the capacity of the largest planned data centre is in the region of 5,000MW.
The increasingly robust level of reliance on digital and AI services within a sovereign cloud environment would push data centres’ electricity consumption needs outward. However, this increasing share of electricity demand for data centres presents several challenges for countries and their power producers.
- Pressure on existing local grids. For instance, data centres already consume over 10% of the electricity supply in six states in the US, with Virginia leading at 25%, while in Ireland, data centres account for about 20% of the metered electricity supply (IEA, 2025)
- The massive, steady power loads needed to run these modern data centres become difficult to integrate into local grids due to the capacity constraints characteristic of these grids. This is particularly more challenging when data centres are highly concentrated spatially.
- Meeting the rising power needs of data centres also raises decarbonisation concerns, especially for countries whose electricity generation companies rely largely on fossil fuels to produce the needed power for the data centres. In the case of Canada, however, 60% of electricity is generated from hydroelectric sources, and globally in 2023, Canada became the third-largest generator of hydroelectricity. However, Canada’s hydroelectricinfrastructure is aging and may be unable to meet any steady rise in electricity demand to run modern data centres.
- The increasing base loads required to power modern data centres threaten electricity reliability and affordability. This is because power utilities with legacy energy systems, e.g., aging hydro systems, require significant capital outlays to add new infrastructure to meet the potential upward surge in electricity demand. This could drive electricity prices upwards.
SMRs present an opportunity
Considering the challenges that countries and their electricity generation companies face with the rising demand for electricity by data centres, could SMRs power the data centres of Canada’s sovereign cloud? SMRs are a nascent technology with a capacity ranging from 5 to 300MW (IAEA, 2023). However, they are modular, and as a result, extra cores can always be added to increase their capacity. Also, the SMR technology is an environmentally benign and non-emitting energy source. SMRs, therefore, present an opportunity to balance the trade-offs of generating reliable electricity to power data centres while at the same time reducing carbon footprint. The technology’s cost per unit of production capacity is, however, estimated to be higher than that for traditional large reactor plants because of the comparably smaller size of the SMR design (Canadian Energy Regulator, 2025). Nevertheless, if history is any guide, as the technology matures and diffuses, the capital cost per unit of production capacity would likely witness a downward trend.
Another reason why SMRs could contribute to meeting the base load needs of data centres needed to drive Canada’s sovereign cloud is that the country has been at the forefront of SMR technology development. Canada is currently involved in developing at least seven different SMR technologies. The ongoing construction of the likely first operational commercial SMR power plant in North America and in the OECD in Darlington, Ontario, which is expected to be brought on stream by 2030, demonstrates the country’s leading role in SMR technology innovation (Canadian Energy Regulator, 2025). It is worth noting that a conducive policy/regulatory environment, coupled with financial support, has contributed to Canada’s leading role in SMR technology development. For example, in the 2024 Fall Economic Statement, the Government of Canada announced its intention to backstop up to $500 million in enriched nuclear fuel purchase contracts from allied countries, to reduce fuel supply risk for SMR operators (Canadian Energy Regulator, 2025). Additionally, grants and tax incentives from the government immensely contributed to the country’s strides in SMR technological innovation.
Further, Canada is the world’s second-largest producer and exporter of uranium, the fuel used in nuclear reactors (Canadian Energy Regulator, 2025). This demonstrates that the country possesses significant endowments of uranium, required to produce enriched uranium that fuels SMRs. Even though there are no uranium enrichment facilities in Canada, an enabling policy environment and the right financial support would guarantee that enriched uranium is readily available, including possibly setting up enrichment facilities locally to fuel SMRs as the technology scales within the country.
Admittedly, modern data centres are new entrants to the electricity demand curve; hence, some substantial uncertainty exists. This uncertainty limits the ability to accurately determine both the current and future electricity consumption needs of data centres. Moreover, innovations in energy efficiency measures may contribute to optimising future electricity needs of data centres, thereby making them less energy-intensive. At present, however, a sustained growth in demand for digital and AI services would require a corresponding increase in electricity supply to power the data centres. In this regard, SMRs could be relied upon to deliver the base load needs of modern data centres.
References
Canadian Energy Regulator (2025). Market Snapshot: Canada’s role in small modular reactors (SMR) technology – https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/market-snapshots/2025/market-snapshot-canadas-role-in-small-modular-reactor-smr-technology.html
Government of Canada (n,d). Small modular reactors (SMRS) for mining – https://natural-resources.canada.ca/energy-sources/nuclear-energy-uranium/small-modular-reactors-smrs-mining
IAEA (2023). What are Smaller Modular Reactors (SMRs)? – https://www.iaea.org/newscenter/news/what-are-small-modular-reactors-smrs
IEA (2025). Energy and AI. World energy special report – https://www.iea.org/reports/energy-and-ai
World Nuclear Association (2025). Small modular reactors – https://world-nuclear.org/information-library/nuclear-power-reactors/small-modular-reactors/small-modular-reactors
