solar panels in green field Solar energy is part of the net zero emissions

What are the barriers to net-zero for Canada’s energy and utilities companies?

What are the barriers to net-zero for Canada’s energy and utilities companies?

Synopsis
4 Minute Read

Canada has committed to achieving a net-zero electricity supply by 2035 to avert the worst impacts of climate change. The shift toward renewable electricity will have a considerable impact on the energy and utilities sector and will bring both challenges and new opportunities, including:

  • Focusing on solar and wind
  • Sharing resources
  • Utilizing new technology

As the transition toward net-zero electricity continues, leaders in the energy sector must work closely with the government to ensure that net-zero is not only achievable — but also reliable and affordable for all Canadians.

Consulting Leader, Energy and Utilities

Canada has committed to achieving a net-zero electricity supply by 2035 — and the shift toward eliminating or compensating for all greenhouse gas emissions (GHGs) will have a significant impact on the energy and utilities sector.

Industry leaders broadly agree that reaching net-zero emissions is essential to avert the worst impacts of climate change. However, they are also challenged to ensure electricity remains reliable, affordable, and available to all Canadians. This will require some difficult conversations and potentially unpopular decisions in the next dozen years.

Let’s review some of the opportunities and challenges associated with decarbonization, and the steps we need to take to make net-zero electricity achievable by 2035.

Most provinces are on the right track, but challenges remain

Provinces across Canada have already made significant strides toward achieving net-zero electricity. B.C., Manitoba, and Quebec rely mainly on hydroelectric power — and Ontario has completely phased out its coal power plants in favour of nuclear and hydroelectric energy.

Alberta is approximately seven years ahead of its coal retirement commitments and has made significant investments in gas, renewables, and carbon capture. However, it will still need to rely on natural gas to make up for its lack of renewable energy resources and bridge the net-zero transition period — as will Saskatchewan and possibly the Maritime provinces.

While many provinces and territories have started to plan and implement the changes in the power grid needed to reach net-zero emissions, challenges remain on the road ahead. Federal and provincial leaders must work together with the energy and utilities sector to overcome obstacles such as the high cost of replacing and/or upgrading legacy electrical distribution systems.

Cooperation between provinces, such as exploring the opportunity for grid interconnections, will also be essential while continuing to observe provincial regulatory authority mandates.

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What are the challenges of net-zero initiatives?

The journey toward net-zero electricity will require extensive collaboration between federal and provincial leaders as well as leaders in the energy sector. Each province and territory face unique challenges that will require careful strategic planning to overcome.

These are a few of the most pressing challenges that leaders may face on the journey toward net-zero electricity:

Different levels of renewable resource wealth

B.C., Manitoba, Quebec, and Ontario all have significant hydroelectric resources. Additionally, Ontario has invested the considerable amount of time and money required to build nuclear power facilities. These energy sources are both highly reliable and available — enabling each of these provinces to make significant progress in transitioning to net-zero electricity.

However, Saskatchewan, Alberta, and the lack the hydroelectric resources and nuclear facilities required to generate net-zero electricity. Alternate sources of firm, dispatchable power such as gas will be required to bridge the gap during Canada’s notoriously dark and cold winter season. These alternate sources of power will be essential when extreme cold restricts the availability of renewable resources on the grid — such as during this past winter in Alberta.

This diversity of electricity supply across the country will make the transition to net-zero electricity more challenging to achieve and will require significant investments over the next 12 years. The changes required, investments needed, and economic impacts will differ by province and must be carefully considered. Energy sector leaders must collaborate with members of provincial and federal governments to explore all potential solutions to these challenges. Giving equal consideration to all available technologies will help ensure electricity remains reliable and available as Canada works toward meeting its 2035 goal.

Legacy distribution system

Canada’s electrical distribution system was largely designed around centralized, carbon-emitting energy sources. In most cases, it’s not possible to merely change the source of power. Switching to renewable sources will require upgrading or replacing legacy systems to include distributed resources and a two-way flow of power. This process may compromise reliability over the short term and impact Canadians’ ability to access electricity when they need it.

Transitioning to renewable electricity will require careful planning to maintain grid stability — which is a pressing concern that cannot be ignored as Canada works toward net-zero. Federal and provincial leaders must work together with leaders in the energy sector to approach this transition strategically and ensure Canadians continue to have safe and reliable access to power throughout the process.

Affordability

The cost of transitioning to a net-zero electrical distribution system will be high — with the brunt of that impact being felt by Canadian households and businesses. Canadian consumers and businesses will continue to rely more heavily on the grid as cars, tools, and appliances continue to shift to electric power. Neither they, nor the broader economy, will fare well if the price of power grows out of reach due to this transition.

Leaders in the public sector and energy and utilities sector, including regulators, must consider how to balance the investments in renewable energy with availability and affordability. Encouraging the domestic manufacturing of renewable energy technologies and implementing energy efficiency measures may help reduce costs.

Additionally, offering financial incentives to support renewable energy generation may help ensure that power remains affordable for all Canadians. Exploring these ideas, embracing transition resources, and supporting carbon reduction activities will all help to reduce the financial impact of reaching net-zero electricity by 2035.

What are the opportunities to achieve net-zero?

While there are many challenges on the path toward achieving net-zero electricity by 2035, there are also exciting new opportunities and developments in the sector, including:

Solar and wind

Provinces and territories that lack the natural resources required to produce hydroelectric electricity have started to explore alternative sources of power. Investments in solar and wind resources may be especially beneficial in Saskatchewan, Alberta, and the Maritime provinces. Alberta has been leading Canada in new renewable energy development, representing 75 percent of Canada’s growth last year alone.

The intermittence or weather dependence of these renewable energy resources has historically drawn skepticism of their large-scale viability. However, ongoing research and development of new energy storage technologies — along with the incorporation of redundancies (e.g., solar plus wind) have already started to spark exciting new innovations that will make these intermittent resources viable in the future.

Sharing resources

The Maritime provinces have discussed sharing resources to make net-zero electricity attainable by 2035. The will deliver hydroelectricity from Labrador and Quebec into provinces that have historically relied on fossil fuels for electricity — including Nova Scotia, Prince Edward Island, New Brunswick, and Newfoundland.

Exploring additional opportunities to share renewable resources between provinces — — has the potential to greatly accelerate the journey toward net-zero. This will require significant collaboration from provincial and federal leaders as well as leaders in the energy sector to create the infrastructure to transmit electricity between provinces. Additionally, issues of provincial regulation and the current prevalence of north/south interconnections, underscored by typically higher power prices in the United States, must be considered to successfully pursue this contribution to net-zero.

Utilize new technology

The journey toward net-zero has already brought exciting new innovations to the energy sector. Smart grid systems are incorporating real-time energy management and demand response systems to enhance efficiency and enable load balancing — helping to ensure reliable access to power for all Canadians.

Advances in artificial intelligence (AI) and machine learning may help forecast renewable energy generation and optimize the transmission and consumption of electricity. Small modular reactors (SMRs) also have the potential to make a considerable impact on the marketplace by generating reliable, flexible, and scalable nuclear power to enhance grid stability.

However, it may be 10 to 12 years before an approved SMR design becomes available in the Canadian market. Provincial, federal, and territorial leaders as well as power company leaders must continue to invest in the research and development of new technologies to accelerate innovation and achieve net-zero by 2035.

Get started on the path toward net-zero

Federal, provincial, and territorial leaders will need to work closely with leaders in the energy and utilities sector to achieve net-zero by 2035. Collaborating to share energy between provinces and increasing investments in the research and development of new technologies both have the potential to significantly accelerate the journey toward net-zero electricity.

However, it will also be necessary to support the transition to renewable power through exploring opportunities to implement energy efficiency measures, offer supportive financing mechanisms, and other incentives to ensure net-zero electricity is not only achievable — but also affordable for all Canadians.

For more information about how the transition to net-zero will impact the energy and utilities sector, contact a member of MNP’s Energy team. Our advisors understand the challenges facing the Canadian energy sector and can help you seize new opportunities along the path toward net-zero electricity.

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