Distributed Energy Systems and Increased Electrification to Power the Future Economy
- For electricity to play a role in a decarbonized future, Canada will need significant grid-connected resources and as much power as we can get from independent power producers.
- Distributed hybrid systems will be key in the push to electrify the country. These systems connect a patchwork of power plants and distributed energy resources, like renewable sources, to update our legacy systems. Two-way communication across the grid will also be key to empowering consumers.
- Regulations imposed by both the federal and provincial governments have impacted the ability of electricity companies to innovate and develop pilot projects. Unfortunately, the regulation regime that the sector operates within does not breed innovation and must be streamlined and clarified.
I would urge the federal government to ease the regulatory burden, enable investment in innovation through the tax system, and move forward on reconciliation efforts with Indigenous Canadians.
How would you describe the importance of the electricity sector to Canada’s future economy? Are Canadian provinces aligned on a collective approach on Canada’s electricity future?
Today, the electricity sector represents $30 billion worth of Canada’s GDP. Electricity is the engine for every other sector of the economy—Canada’s economy and all the infrastructure that supports it would not be able to operate without this reliable supply of power.
Electricity also underpins our pivot to a cleaner future. Electrification, coupled with decarbonization of the electricity system, is already taking place. Since 2005, the electricity sector has reduced its greenhouse gas (GHG) emissions and it continues to do so today. Presently, the electricity sector is over 80% GHG free.
“The electricity sector represents $30 billion worth of Canada’s GDP. Electricity is the engine for every other sector of the economy.”
However, there are differences in alignment depending on the region in question and which resources are available to it. Some regions of Canada have a great deal of hydropower – others don’t. So, over the short-to-medium term, there are diverging views on the sector’s future among the different regions.
Over the long-term, however, there are fewer divisions and even those will most likely disappear. Fortunately, when we are thinking long-term to an electrified and decarbonized future, everybody is on the same page. The speed with which we can get there depends on the resources present in different regions; there are different views in terms of approach from one region to the next, but everybody agrees on the destination. We are definitely moving towards a future that will see significant reductions in GHG emissions across the entire economy through massive electrification.
“The demand for electricity will have to double by 2050 for us to move closer to our GHG targets.”
Over the long-term, we are heading towards a future that will be decarbonized, and if electricity plays a central role in that decarbonisation, the demand for kilowatts will greatly increase. So, the future will require significant distributed energy resources. We will need significant grid-connected resources and just about everything that we can get from independent power producers. Looking at the report that CEA produced to achieve deep decarbonization in Canada, the prediction is that the demand for electricity will have to double by 2050 for us to move closer to our GHG targets.
What are Canada’s strengths in this industry, and what are our weaknesses? How can we mitigate the latter?
Often when people think of the Canadian electricity system, the first thing that comes to mind is hydroelectricity because it’s been historically foundational to the Canadian economy. But there are new technologies that are allowing us to harness other resources, such as tidal power, which presents a huge opportunity for Canada.
The push to electrify the country is providing inspiring examples of creative solutions to deploy infrastructure and systems in remote communities—such as distributed hybrid systems.These are systems made up of a patchwork of both large power plants and microgrids powered by distributed energy resources, such as solar and wind power, to update and improve our centralized legacy systems. Decentralized energy systems like these could be capable of delivering efficient, reliable and renewable energy.
Canada has many strengths. For example, several industry-backed initiatives are broadening opportunities for carbon capture and storage facilities. One has been developed by SaskPower in Estevan, Saskatchewan. Since its establishment, the facility has attracted energy experts from all over the world. Five years from now, we might see the same ground-breaking leadership in tidal power—another of Canada’s strengths.
“The regulation regime under which the electricity sector operates doesn’t encourage innovation, and this makes it difficult to move forward on the construction of Canada’s future electricity grid, systems and infrastructure.”
For some of these technologies, it’s more efficient to deploy them on a community scale rather than a grid scale. Solar energy is the perfect example: it costs about twice as much and is half as efficient to opt for rooftop solar as opposed to community solar. So, there will continue to be a significant mix of distributed energy resources and centralized resources, and then community scale resources somewhere in the middle. And although developing new renewable energy technologies is essential, it’s only part of the solution. To successfully harness renewable energy—solar, wind and tidal—these new technologies must be integrated into our existing energy systems and grids. This is a big focus in our sector.
One of Canada’s other strengths that increases our competitiveness is our prowess in terms of high voltage electricity transmission. This is a function of the geography of our country and is vital to our economy. Canada’s low electricity prices also attract specific types of industries—such as data operations and server farms—to set up shop here. Combined with our environmental profile, which offers cooler temperatures during the winter, low electricity prices make Canada attractive for these types of industries.
Naturally, significant barriers and challenges remain. Both the federal and provincial governments have established over 90 laws and regulations that impact the ability to develop electricity pilot projects and use cases. Common industry standards also need to be established. This delays convincing government-backed programs and regulators that there will not be multiple program delays and cost overruns if they agree to adopt new electricity systems. The regulation regime under which the electricity sector operates doesn’t encourage innovation, and this makes it difficult to move forward on the construction of Canada’s future electricity grid, systems and infrastructure.
What are the most important policy and regulatory matters the federal and provincial governments must address to increase our innovation and competitiveness in the North American and global power sector?
The entire sector is struggling with this. We are studying successful use cases in Australia, the United States and the United Kingdom. Some jurisdictions have struck upon a policy model that enables streamlined innovation and implementation.
It’s not a case of the electricity industry wanting free reign and no regulation. Instead, it’s a matter of balancing effective and appropriate regulations that protect the environment, health and safety, and ensure reliable services to consumers. New energy systems require constant reviews and analysis. So, streamlining and clarifying regulations continues to be a major issue because it is a very complex matter and there are no simple fixes. For example, the right tools and solutions exist but they are not as cost-effective for the residential sector yet, because of new technology costs and regulatory issues. So, before distributed energy systems can make a greater impact, we need thoughtful allocation of capital, grants and incentives – and securing these depends on having the appropriate regulations in place.
“The future of Canada’s electricity industry will be characterized by both distributed energy generation and a stronger, more integrated grid, which will require major investment.”
The biggest hurdle, however, is the overall political environment within which Canada operates, which affects every segment of the Canadian economy.Policy directions and orientations can shift significantly with elections that run every four years. This is a real challenge for the electricity sector because the infrastructure our sector looks to build is significant and requires long term projections, planning and stability.
A case in point is that the future of Canada’s electricity industry will be characterized by both distributed energy generation and a stronger, more integrated grid, which will require major investment.The Conference Board of Canada has estimated that, to achieve this, the investment required between now and 2050 will be about $1.7 trillion. A regime that changes the policies and regulations these estimations are based on may make it challenging for the electricity industry to operate underneath it.So, I would encourage the federal government to ease the regulatory burden, enable investment in innovation through the tax system, and move forward on reconciliation efforts with Indigenous Canadians.
“The electricity industry works in partnership with First Nations communities and wants the federal government to define and implement Free, Prior and Informed Consent; articulate what reconciliation will look like; and implement the United Nations’ Declaration of the Rights of Indigenous People.”
I bring forward the issue of Indigenous reconciliation because it is key to our sector’s future and is squarely within the federal government’s remit. The electricity industry works in partnership with First Nations communities and wants the federal government to define and implement Free, Prior and Informed Consent (FPIC); articulate what reconciliation will look like; and implement the United Nations’ Declaration of the Rights of Indigenous People (UNDRIP).This will impact our ability to partner with First Nations and to develop their electricity system alongside their communities.
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Consumers’ relationship to energy is changing, and distributed energy is increasingly becoming a global force. What is the role of distributed energy and independent power producers in Canada’s future economy?
The introduction of distributed energy systems will fundamentally alter electricity users’ relationship with power.Consumers will have the ability to sell and trade energy to one another as it enables two-way communication between utilities and customers. This would make the current electricity grid much more efficient, will potentially save customers money, and will have a terrific environmental impact.
The traditional relationship and the traditional flow of electrons in this industry starts at a central power plant, goes through transmission lines and is then distributed to the customer. It’s a one-way flow, and it’s a “take it or leave it” model in terms of where the power comes from—this makes utilities natural monopolies. But two-way communication across the grid will put the responsibility on consumers to manage how they use electricity to make sure they don’t end up paying more than they are used to.The franchise of a utility company will also change to become a distribution system operator, which will impact those relationships as well.And the rising demand for clean energy to transform transportation, heating, ventilation, air conditioning, and industrial processes, means we will need every single kilowatt of clean energy that we can find.
“The potential impacts of these two forces—distributed systems and increased consumption—on individual companies are something that every energy corporation is thinking about.”
The potential impacts of these two forces—distributed systems and increased consumption—on individual companies are something that every energy corporation is thinking about, and they are developing their plans in terms of how they will fit into this model and how they will move forward.Based on conversations I’ve had with energy experts on my podcast, FluxCapacitor, CEOs, member companies, regulators, thought-leaders and customers are increasingly looking for distributed energy resources. But when I ask integrated utility companies that work in either generation, transmission or distribution, if they are cannibalizing their generation business, the response is always “no”. That’s because the sentiment of the industry is that the pie will be so big and the demand so large that we won’t have a choice to transition to a more distributed energy system, and to make sure we are building as much as we can at the grid level.
What benefits will the move towards distributed and more sustainable energy bring to Canadians? What challenges does it create?
The consumers will stand to benefit from the reduction in GHG emissions. We have already seen some positive effects of this with the move away from coal in Ontario, such as better air quality. And, a future where transport is electrified will bring significant improvements in air quality to Canadian cities. These are just the environmental benefits, but from these will stem significant health benefits that will improve the lives of individual Canadians.
For remote communities, there are also huge opportunities. There is a movement to integrate hybrid systems that incorporate renewable energy to power communities and help them transition away from diesel. For instance, Small Modular Reactors (SMRs), which use nuclear power to generate electricity, have the potential to provide energy from non-emitting sources for a wide range of applications, such as grid-scale electricity generation and for use in heavy industries and remote communities. A lot of research on this technology is taking place in the United States and also here in Canada—in Chalk River, Ontario. They are designed to be built at a smaller scale than traditional nuclear reactors with lower up-front capital costs and enhanced safety features. Some SMR designs are small enough to fit in a gymnasium. We see this as key to powering remote communities, many of which are First Nations communities.