QScale | Customers, financing… but no electricity

With the rapid development of artificial intelligence, there is no shortage of customers and funding for QScale and its computer processing centers. But the company faces a major issue that is blocking its growth in Quebec: it cannot obtain the energy blocks necessary to build other centers.

QScale has just raised 320 million for the development of phases 3 and 4 of its Lévis center. The money comes from a syndicate of lenders including Desjardins Group, Scotiabank and Export Development Canada (EDC).

When it completed its first round of financing in 2021, the company bet on the explosion of artificial intelligence, and it was right.

“The demand is completely crazy. Our phases 1 and 2 are full, and phases 3 and 4, we are in very big negotiations. At this rate, the eight planned phases will be built sooner rather than later. Initially, we were talking about a five to eight year plan, whereas here we are cutting that in two in terms of speed and growth,” says the company’s president, Martin Bouchard.

Large companies in several sectors must use services of this type due to needs for advanced computing capabilities – we can in particular think of research activities in the fields of health, autonomous vehicles, financial services or even climate research.

The catch: energy blocks

Things are going well, then, for QScale. After the entry into operation of phases 3 and 4, scheduled for the beginning of 2026, the company plans to carry out the other four phases in Lévis that were included in the initial project. The total project represents an investment of between 1.2 and 1.3 billion.

Data centers like those at QScale require a lot of energy. The 142 megawatts granted to it during the genesis of the project will make it possible to carry out the eight phases in Lévis as planned.

But beyond that, it gets complicated. This is because since the adoption of Bill 2, in February 2023, companies that wish to have an energy block of more than five megawatts must obtain specific approval from the Ministry of Economy, Innovation and of Energy (MEIE).

QScale recently proposed a computer center project in Saint-Bruno, whose heat emissions could be recovered to heat a future housing complex. But it cannot obtain the 48 megawatts requested. Same thing for a future expansion of the Lévis center, which would have required 72 megawatts.

“In barely a year, we went from a logic of excess energy to being told that we are in a sector that is no longer privileged,” says Martin Bouchard.

The entrepreneur has difficulty explaining these refusals. However, his projects seem to him to “check several boxes”: they include energy recovery, they already have a good customer base, they do not require subsidies… and what’s more, the peak energy consumption of a data center is in summer, during the season when energy consumption is lower in Quebec.

Martin Bouchard affirms that the new Minister of Economy, Innovation and Energy, Christine Fréchette, seemed “receptive” to QScale’s requests.

The Press received a laconic response from the MEIE, in which the Ministry mentioned that, as the analyzes are confidential, we cannot know the reasons for the refusal.

“Each file is subject to rigorous analysis. The selection of projects is carried out according to the analysis criteria described on the website of the [MEIE]. The criteria are the same for all projects submitted and no sector of activity is excluded from the analysis process,” we can read in a response given by email.

QScale is not alone in this situation. Another data center operator, Vantage Canada, ran into the same problem in 2023.

Could QScale do business outside the province, or even in the United States? “We can’t say that we will never do it, but our vision was really to do that in Quebec, in a place where the climate is cold, where the energy is green and where we create value for our citizens », answers Martin Bouchard.

“The reality is that people don’t stop using the internet and artificial intelligence. So instead of the next artificial intelligence processing site being created in Quebec, it will be done in the United States in a coal-fired power plant and we find that very sad,” adds Martin Bouchard, also citing concerns about the storing sensitive data internationally.