Ontario Launches Data Centre Playbook: Proposed Framework for Grid Access, Electricity Costs and Project Approval

On August 13, 2026, the Ontario government released a draft framework for its Data Centre Playbook (Playbook), proposing an evidence-based approach to evaluating regulated data centre projects seeking connection to Ontario’s electricity grid. If implemented, access to grid capacity for regulated data centre projects may depend not only on technical feasibility, but also on a project’s contribution to economic development, data sovereignty, and local communities.

The Playbook is particularly relevant for data centre developers, investors, hyperscale operators, AI infrastructure providers, and other large electricity users considering projects in Ontario. The draft framework also signals potential changes to electricity pricing and reinforces the government's expectation that data centres bear the full cost of their electricity consumption and necessary generation and transmission upgrades associated with their operations.

The Playbook builds on authorities established through the Protect Ontario by Securing Affordable Energy for Generations Act (Bill 40), which gave the provincial government new authority to determine which prescribed large-load facilities, including data centres, can connect to Ontario's electricity grid.

Ontario is accepting comments through the Environmental Registry of Ontario and the Ontario Regulatory Registry during a 30-day public consultation period beginning August 13, 2026. A final Data Centre Playbook is expected later this fall, alongside the Province's forthcoming AI Industrial Strategy.

Key Takeaways

• Ontario proposes to assess certain large data centre projects based on strategic policy objectives, in addition to technical grid connection requirements.
• Data centres would be expected to pay the full costs associated with their electricity use and connection-related infrastructure upgrades.
• Ontario is proposing a dedicated electricity rate class for certain data centres, which could affect electricity cost management strategies.
• The government is encouraging "bring your own generation" (BYOG) solutions.

How Ontario Proposes to Evaluate Data Centre Projects

The Playbook sets out three core principles to guide the Province in deciding whether to approve data centre connections to the grid 

• Data centres must invest substantially, both financially and non-financially, in Ontario and local communities.  
• Data centres pay their full cost of electricity and invest in necessary generation and transmission upgrades for their operations to maintain the reliability of the grid and prevent other ratepayers from bearing the cost of data centres operating in their area.  
• Ontario will only offer non-financial support to attract data centre investments. 

Assessment Process

The aim of the Playbook is to help assess whether particular regulated data centre projects would align with the core principles outlined above. The assessment process consists of two key components:  

• Strategic priority assessment: assessment of how well the data centre proposal can support three strategic pillars, and whether Ontario should provide non-financial support for certain approved projects. 
• System impact assessment: assessment of connection feasibility, grid system impacts, and full cost recovery, including plans regarding on-site generation, potential reinforcements, and cost recovery commitments. 

The Playbook does not indicate what scale of data centre would be treated as a regulated data centre project, subject to government assessment, approval, and possibly other regulation. In an earlier proposal, in September 2025, the government floated 50 MW as a possible threshold, but there is no indication from the Playbook as to what threshold is currently being considered to define a “large data centre.” 

However, the Playbook does provide guidance as to the criteria that must be met by new large data centre proposals in order to be approved for connection to the electricity grid. Only proposals that meet the Strategic Priority Assessment Pillars will be approved:

1. Advance Economic Development: does the project create durable high-value benefits for Ontario’s economy by creating jobs, bringing in investment, and/or generating tax revenue? 
2. Protect Data Security and Digital Sovereignty: does the project advance Ontario or Canada’s control over highly sensitive data and critical data infrastructure? Under this pillar, there is a preference for Canadian-owned and operated data centres. Data centres should also align with federal planning on digital sovereignty and residency. 
3. Invest in Communities and Earn Public Confidence: does the project deliver significant and meaningful investment and benefits to local communities by ensuring local labour participation, minimizing impacts on the technical and fiscal capacity of host communities, and minimizing environmental impacts? 

Environmental and Community Impact Expectations

Other guidance from the Playbook indicates that Ontario will only advance data centre projects that use technology to reduce environmental and community impact through mechanisms such as:  

• closed-loop and waterless cooling to reduce freshwater consumption;
• direct-to-chip liquid cooling to carry heat away from processing chips;
• noise-reduction engineering to reduce noise pollution in surrounding communities; and
• waste-heat recovery to capture excess heat generated by the data centre and use it to heat nearby buildings, reducing emissions and increasing efficiency. 

Proposed New Electricity Rate Class for Data Centres

The government also proposes to establish a specific electricity rate (e.g., “Class C”) for data centres over 1 MW which would be a higher rate than for other industrial customers in Class A or Class B. A separate, higher rate class for data centres is consistent with the approach taken in many other jurisdictions, although most other jurisdictions have a higher MW threshold than what is being proposed in Ontario. By comparison, for example, Quebec applies a higher electricity rate only to data centres over 5 MW.  

A separate rate class for new data centres above 1 MW may also have implications for how this customer class manages the Global Adjustment (GA) component of their electricity costs as they would not be able to participate in the Industrial Conservation Initiative (ICI), unlike existing data centre customers that are “Class A” customers. ICI is a demand response program that allows large industrial customers to lower their costs of electricity by reducing consumption during peak demand times.  

Another aspect of the Playbook that provides useful guidance to the sector is the encouragement for data centre projects to build their own generation, what is known in the sector as “bring your own generation” (BYOG). Most data centre developers would view BYOG favourably because it typically allows them to access electricity sooner than a grid connection and can supplement grid-supplied electricity.

What’s Next?

The government is seeking public input through the Environmental Registry of Ontario and the Ontario Regulatory Registry for a 30-day public comment period beginning August 13, 2026. A final Data Centre Playbook is expected this fall, alongside the government’s forthcoming AI Industrial Strategy. 

While some important implementation details of the proposal remain to be determined, the Playbook framework announced last week signals that access to Ontario's electricity system for large data centres will increasingly depend not only on whether a project can technically connect, but also on the economic, strategic, and community value it provides.

The National Energy & Resources Group at McCarthy Tétrault is actively monitoring the consultation process and potential changes to the data centre regulatory framework. Please do not hesitate to reach out to your advisors for further information.