Energy Transition: Leveraging Canada’s strengths to realize its aspirations
Energy Council of Canada
The Energy Council of Canada is a not-for-profit association whose membership is made up of private sector energy corporations, energy industry associations, Canadian federal and provincial government departments and agencies, and Crown corporations. It holds public policy forums, various members’ activities and hosts the Canadian Energy Person of the Year Award. The Energy Council of Canada is a founding member of the World Energy Council (1923).
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1- Canada is rich in energy resources and our renewable energy sources represent large, untapped growth potential. Canada’s challenge is to manage an abundance of riches. We are net exporters of every form of energy. Each form of energy is important and must be managed carefully and responsibly.
2- Our significant greenfield hydropower potential provides an opportunity to export clean electricity and to increase Canada’s upstream storage capacity, which would support the deployment of more solar and wind energy.
3- Canada’s energy transition will be gradual and incremental, but we are generally trending towards making our energy systems cleaner and more responsive to our needs.
While energy trade between the Canada and the US has been strong, the US is now a competitor, not just an importer. So, Canada must be vigilant about this during the NAFTA renegotiations. This is why Canada must find new markets for our energy products.
What growth potential does Canada’s renewable energy industry offer?
Over 60% of our current electricity generation comes from hydropower. We are the second largest hydropower generator in the world, which is pretty impressive considering that China, with a population that is significantly greater than ours, is the only country above us. Perhaps even more interesting is that you can more than double Canada’s current significant hydropower capacity. We have about 73,000 megawatts of installed capacity and about 160,000 megawatts of technical potential across the country.
We are one of the last OECD countries in the world with significant untapped greenfield hydropower potential. That is a great opportunity for exporting our hydroelectric power to our number one electricity trading partner, the US, which has a generating system that is not as clean as ours. We have the seventh largest installed wind generating capacity in the world. Right now, wind does not occupy as great a share of Canada’s overall generating capacity as hydro does, but it has been growing exponentially over time. So has solar, and we have incredible untapped potential in those resources. Looking beyond renewables, Canada is a leader in nuclear power as well. Nuclear power is the number one source of electricity generation in Ontario, and we have the second largest uranium production in the world. We represent 22% of the global uranium supply, and we know that nuclear is being considered more and more seriously around the world and potentially here within Canada.
How will the NAFTA renegotiations affect Canada’s energy system and trade?
The free and fair flow of energy trade across Canada and the US has a pretty strong past. Even before the Canadian Free Trade Agreement (CFTA), there had been robust interconnections between the two countries both in electricity and in fossil fuels. The Canada-US Free Trade Agreement (CUSFTA) helped codify that a little bit more and then NAFTA further bound our economies together. So, the trade of energy between the two countries has become more and more based on the laws of physics than anything else for both electricity and petroleum. It has its own critical mass to weather some of the politics that might come up from trading agreements. Our electricity is traded with the United States second by second, in real time, and the pathways for our hydrocarbon products are very strong and well developed. You never know what happens when politics starts mixing with trade; it is something we will have to be vigilant on. But we are confident that trade in energy between Canada and the US is well established and could still grow if a strong foundation is maintained.
On another note, the United States, especially with the advent of new natural gas supply and oil shale supply, is becoming an exporter of energy as opposed to being a more reliant importer. So the United States will become a competitor just as much as it is a customer, perhaps even more so in the future.
Is Canada’s renewable energy industry competitive on a global scale?
One big difference between Canada and most other developed countries around the world will be in hydropower. Significant new greenfield hydropower can be built across Canada and could provide large-scale electricity storage in the form of reservoirs. That is a significant advantage in a world where we will be bringing on more wind and solar, which require storage in order to smooth out their variability on the grid.
The United States is also aiming to increase its hydropower production but that would mostly entail extracting more energy out of its existing hydropower fleet. There is a lot of coal-fired generation that could – and should – be displaced by cleaner options in the US. The alternative could be a combination of Canadian hydro and US solar, wind and hydro. So there will be healthy and vigorous competition between Canada and the United States when it comes to wind and solar both in terms of who will produce it and the extent to which it will be deployed. Canada and the US will be in competition in the downstream storage of electricity too, that is, behind-the-meter storage of electricity like next generation battery technology. But Canada has a natural advantage in the upstream storage of electricity, which is the storage of electricity before it hits the meter in your house. This will come from both new greenfield hydropower development and potential pumped storage hydropower development as well.
Has there been a paradigm shift in Canada’s energy industry?
Any sort of larger paradigm shifts may be attitudinal or political. But Canada maintains a fairly cautious and gradual approach towards decision making in the energy system itself despite some of the political turmoil we see. Making too many big decisions too quickly could lead to stranded assets, bad bets or squandered opportunities. Moreover, people aspirationally speak about what they want from their energy system but, when asked if they are willing to pay more to get there, the answers tend to come back differently. Former Energy Council of Canada Energy Person of the Year award winner, Michael Cleland puts it in terms of the energy voter versus the energy consumer. All of us are both energy voters and energy consumers, and our inner-conflict on this is going to continue to provide uncertainty over the near to medium term as politicians continue to seize on this back and forth. It is difficult for industry to make fully confident decisions when it sees energy being treated like a political football provincially, nationally and internationally. My forecast is that Canada will continue to manage more uncertainty over time but we will generally trend toward making our energy systems cleaner and more responsive to our needs.
What role do you think oil and gas will play in Canada’s future economy?
The oil and gas industry is keeping an eye on the future in two different directions. Firstly, our estimate is that there will be an increase in demand for traditional oil and gas. Not every country in the world is blessed with the multitude of energy resources that Canada has. Some of them are very reliant on oil and gas so Canada should keep working on meeting that demand. At the same time, industry is going to need to keep an eye on clean and renewable energy and start investing in that side of the business more and more, as it already has.
I can see Canadian energy companies turning more of their attention to diversified forms of energy so that they remain fully flexible throughout time. But I also think that we need to view more and more export markets for our oil and gas products. There is the opportunity for Canada to develop more clean electricity within its borders to meet more of its own demand, much of which will be needed to help us meet our Paris Agreement emissions reduction targets. Around the world, Canadian oil and gas products can help lighten carbon emissions in other countries. If our oil and gas find their way to markets where coal or even firewood for example, are primary fuels, they can help drastically reduce emissions in other countries. Our oil and gas companies are therefore going to need to remain healthy, strong and diversified.