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By Amanda Stephenson and David Ljunggren

OTTAWA, May 14 (Reuters) - Canada on Thursday unveiled a C$1 trillion ($729 billion) strategy to double the capacity of its electricity grid by 2050, citing rapidly increasing power demand and the need for energy security.

The announcement by Prime Minister Mark Carney comes as Canada's electricity systems are under increasing strain due to industrial growth, demand from AI data centers and greater electric vehicle use. The country's total electricity generation has fallen, however, due in part to droughts that have reduced hydroelectric capacity and the retirement of coal-fired power plants.

The plan comes as Canada looks to reduce its trade reliance on the United States due to President Donald Trump's tariffs. Canada's regional electricity grids trade more with the U.S. than they do with each other, and its U.S. electricity imports have increased every year since 2020, according to the Canada Energy Regulator.

The electricity strategy aims to use new investment tax credits to spur the construction of east-west electricity interties to connect regional power grids.

Canada also announced it will change its clean electricity regulations to allow greater use of credible offsets and also enable greater flexibility for existing natural-gas-powered units to maintain reliability. The move softens regulations introduced under former Prime Minister Justin Trudeau, which had been criticized by provinces such as Alberta that depend on natural gas to produce power.

Carney said natural gas can play a complementary role on Canada's grid, but will be dwarfed in scale by clean electricity investments the country will make in hydropower, nuclear and renewable electricity.

($1 = 1.3720 Canadian dollars)