Canada Promotes Investment In Sovereign, Large‑scale AI Data Centres Through A New MOU‑based Proposal Process

On January 15, 2026, the federal government announced a call for proposals to help develop sovereign, large-scale artificial intelligence (AI) data centres exceeding 100 megawatts (MW). Proponents that submit project proposals may be considered for entry into a Memorandum of Understanding (MOU) with the Government of Canada to explore mechanisms for government-supported project development. The announcement provides limited details as to how an MOU would translate into project support, suggesting the government may be open to a variety of projects and structures. Potential investors should carefully assess the proposal process and evaluation criteria but should also note the aggressive timeline, as the deadline for submissions is February 15.

What you need to know

• Alignment with Budget 2025: The call builds on Budget 2025 commitments to expand public AI compute infrastructure and for the Minister of AI and Digital Innovation (the Minister) to engage with industry to support AI infrastructure projects by signing MOUs with project proponents.
• Broad evaluation criteria: Data centre proposals will be evaluated across a spectrum of criteria, including economic and ecosystem benefits, Indigenous participation, sovereignty factors (including ownership, control, data residency and use of Canadian vendors), energy and utilities, technical capabilities, project readiness and capital structure. In describing their project, proponents should consider alignment with key federal policies, such as the Canadian Sovereign AI Compute Strategy.
• Timeline and alternative federal routes: Proponents have until February 15 to submit a proposal. Projects outside the scope of this call may be redirected to other federal programs, including Innovation, Science and Economic Development Canada's (ISED) AI Compute Challenge or potential investment through the Canada Infrastructure Bank (CIB).
• Developing provincial laws and regulations remain a material consideration: Evolving provincial laws—particularly in Ontario and Alberta—will affect grid connectivity, cost allocation and approval pathways. Proponents should assess provincial regulatory risk alongside the federal intake process.

The strategic importance and challenges of data centre development and "AI compute"

As discussed in our past thought leadership, data centres form the backbone of modern digital infrastructure and are critical to Canada's competitiveness across sectors, including health care and manufacturing¹. Expanding domestic compute capacity is expected to support the development of made‑in‑Canada AI solutions and align with the federal government's increasing emphasis on technological sovereignty, supply‑chain resilience and data protection.

Developing a large-scale domestic AI ecosystem requires the massive deployment of computational resources (often referred to as "AI compute"). As a result, data centres are capital‑ and energy‑intensive. Brookfield's 2026 Infrastructure Outlook estimates that constructing a hyperscale data centre can require approximately $10 million per MW, with the associated compute infrastructure exceeding $30 million per MW². These costs underscore the importance of access to capital and securing long‑term power arrangements and regulatory certainty, particularly as governments seek to balance economic development objectives with grid reliability, affordability and sustainability considerations.

Program overview

Budget 2025 and the MOU

Canada's call for proposals builds on commitments announced in Budget 2025, including the allocation of roughly $926 million over five years to support large-scale public AI infrastructure to boost available AI compute and support access for research purposes, as well as the government's intention to enable the CIB to invest in AI infrastructure projects. In particular, the call aligns with Budget 2025's announcement that the Minister would engage "with industry to identify new promising AI infrastructure projects and enter into Memoranda of Understanding with those projects"³. This January call outlines the process by which the Minister will consider projects for, and enter into, such MOUs.

Details regarding any non-binding MOU with the Government of Canada are limited. The intake form states that any MOU would be intended "to explore mechanisms to enable the establishment of a large-scale sovereign AI data centre in Canada"⁴. The intake form also suggests flexibility in the nature of federal involvement, inviting proponents to identify both the support they are seeking from the government and the role it could play in making the project viable or facilitating its completion.

Proposal criteria

The government is seeking proposals for projects developing "sovereign large-scale AI data centres" with total planned capacities exceeding 100 megawatts (MW). Canadian firms and consortia are encouraged to submit an intake form. However, the form appears open as to the types of organizations that can apply as project lead. Preference will be given to projects with a clear path to completion, and which maximize Canadian partners and supply chains, include Indigenous participation and minimize environmental impact.

In addition to standard project details (including location, total capital cost and proposed project timeline), proponents must address a set of evaluation criteria, including:

• Economic/ecosystem benefit: expected economic, innovation and employment impacts in Canada, including ecosystem development, IP retention and service to Canadian customers.
• Indigenous participation: proposed benefits to Indigenous communities, such as ownership, co‑development or economic opportunities, and steps taken or planned to consult affected Indigenous peoples and communities.
• Sovereignty factors: explanations of how proposed projects advance Canada's objective of developing sovereign AI infrastructure. This includes information on Canadian workforce presence, corporate headquarters location, ownership and control (including whether the project is Canadian‑controlled), data residency and the use of Canadian vendors across the technology stack. In describing their project, proponents should consider how their proposal aligns with the federal government's Canadian Sovereign AI Compute Strategy or its new Buy Canadian Policy.
• Energy considerations: electricity and water requirements, power sources (on‑grid or off‑grid) and steps taken to secure energy supply, including any power purchase arrangements.
• Performance capabilities: proposed IT workloads and capacity, including facility size, GPU specifications, network throughput and tier rating.
• Readiness level: zoning and permitting status, development stage, and anticipated construction and completion milestones.
• Project cost and structure: total and IT‑specific capital costs, anticipated need for federal support and details of any provincial, territorial, or federal funding engagement (including with the CIB).

While the intake form addresses some of these aspects objectively, other questions are more qualitative, asking the proponent for descriptions on the criteria (e.g., "please describe the economic and innovation benefits to Canada resultant from the realization of your project"). Proponents should assess the viability and competitiveness of their projects across each category and consider how best to frame their project.

The government will evaluate proposals against the above criteria, and projects found to be outside the scope of the call may be redirected to other federal pathways, including ISED's AI Compute Challenge⁵ or potential support through the CIB⁶.

Evolving provincial laws and regulations

This federal call forms part of a broader and evolving policy framework addressing the challenges associated with AI data centres and compute infrastructure, particularly with respect to energy demand and grid integration. Recent provincial legislation has focused on managing the significant electricity requirements of large data centres and clarifying the conditions under which such facilities may connect to the grid.

As discussed in a previous bulletin, Ontario's Protect Ontario by Securing Affordable Energy for Generations Act, 2025 creates an exception to the principle of "non-discrimination" in Ontario's electricity system, detailing new regulation-making authority to establish data centre connectivity requirements to which data centres must adhere before connecting to the grid. While Ontario has not yet released draft regulations under this new law, Ontario's 2025 Economic Statement stated that the government will "prioritize approvals for data centres that deliver measurable benefits to both local communities and to the province's long-term competitiveness"⁷.

Similarly, in Alberta, new legislative measures via the Financial Statutes Amendment Act (No. 2), 2025 and the Utilities Statutes Amendment Act, 2025 address cost-allocation issues associated with data centre connectivity, and seek to clarify the regulatory framework for the province's data centre development. Proponents submitting a proposal to the federal government's program should consider how evolving provincial laws and regulations may affect project siting, grid connectivity and long‑term power supply arrangements.

Timeline

The deadline to submit intake forms for the call is February 15, 2026. Investors interested in taking part in Canada's data centre landscape ought to consider this MOU proposal process and how federal government involvement could improve project viability.

Footnotes

1 RBC Climate Action Institute., Power Struggle: How AI is challenging Canada's electricity grid, December 4, 2024.

2 Brookfield, Infrastructure Outlook: Accelerating Growth, Embedded Resilience, December 2025.

3 Government of Canada, Canada Strong: Budget 2025 (Budget 2025), p. 92.

4 Innovation, Science and Economic Development Canada, Enabling large-scale sovereign AI data centres: Intake form.

5 Innovation, Science and Economic Development Canada, AI Compute Challenge.

6 Budget 2025, p. 92.

7 Ontario Minister of Finance, A Plan to Protect Ontario: 2025 Ontario Economic Outlook and Fiscal Review, p. 27.

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