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Canada’s Energy Future 2019: Focus on setting up a clean network [free access]

January 10, 2020

Canada is experiencing declining per capita energy consumption as it transitions towards a low carbon energy mix and attains higher energy efficiency. The country witnessed a year-on-year reduction of 4.4 per cent in energy consumption during January 2016-August 2019, mainly due to technological advancements, reducing cost of wind and solar projects, higher efficiency of energy use, and increase in electricity production by setting up co-generation plants.


Ongoing developments in areas such as grid-scale electricity storage, carbon capture and storage, and electric and alternative fuel vehicles have the potential to further transform the energy system. Supporting this, Canada Energy Regulator (CER) has released Canada’s Energy Future 2019 (EF2019) and predicted a slower energy demand growth rate, changing energy mix, shift towards renewable energy resources to generate power, rising electricity exports, and rising natural gas production.


Key findings of the EF2019

Key macroeconomic uncertainties

 The economy is a key driver of the energy system. Economic growth, industrial output, inflation, exchange rates and population growth all influence energy supply and demand trends. Due to Canada’s aging population, slower economic growth is expected in the country during 2018–40. Under the reference case scenario of EF2019, economic growth averages about 1.7 per cent annually during the projection period of 2018–2040, lower than the 1990–2017 level of 2.7 per cent annually.


Energy use will grow slowly in the next 20 years and the mix of energy sources will continue to change

Over the next 20 years, Canadian energy use is expected to grow slowly due to a variety of factors including slower economic growth, improved energy efficiency, and various policies and programmes such as transportation emission standards and carbon pricing. During the period 2018–2040, energy use is predicted to increase by less than 5 per cent compared to population growth of 20 per cent and the size of economy [measured as gross domestic product (GDP)], which will increase by over 40 per cent, leading to reduction in energy use per person by 15 per cent and per Canadian dollar of economic activity by about 30 per cent.


The types of energy being used to meet energy demand are also changing in the country. Canadians have started using more natural gas and renewable energy, and less oil and coal. This trend is expected to continue in the future as well. During 2017–40, the share of natural gas in the total energy mix of the country will increase from 35 per cent to 40 per cent. Similarly, an increase of 1 per cent is predicted in the share of hydro energy and other renewable energy sources in the total energy mix of the country during 2017–40, reaching 11 per cent and 8 per cent respectively by 2040. The share of oil products is likely to reduce from 35 per cent in 2017 to 32 per cent in 2040, coal from 5 per cent to only 1 per cent, and nuclear energy from 8 per cent to 7 per cent. Canada’s EF2019 includes programmes and policies influencing fossil fuel consumption, leading to a reduction in the use of coal and higher demand for natural gas for electricity generation. These include:


Carbon pricing: EF2019 includes provincial and territorial carbon pricing systems, as well as the Federal Carbon Pricing Backstop (Backstop). Implementation of carbon pricing systems currently varies across the country. The carbon price in the country is expected to reach CAD50 per tonne by 2022 and stay at this level during the remaining period of the outlook.


Coal phase-out: As per federal regulations, coal is to be phased out of electricity generation by 2030. Remaining capacity is due to assumed equivalency agreements in certain provinces, or units equipped with carbon capture and storage (CCS).


Efficiency regulations: A variety of policies and regulations influence energy efficiency. Key regulations include current transportation vehicle emission standards for passenger vehicles and heavy-duty freight vehicles, appliance standards and building codes.


Support for electric vehicles: Many provinces have policies and initiatives to support low and zero-emission vehicles (ZEV). These include Quebec’s ZEV mandate, as well as British Columbia’s Zero-Emission Vehicles Act. Federal action includes subsidies for electric vehicles, as well as support for charging infrastructure through the zero-emission vehicle infrastructure programme.


Support for renewable energy: Several provinces and territories provide support for renewable energy in various ways. This includes broad energy strategies and targeted renewable energy goals carried out

by utilities. This has also been a dynamic area in the last couple of years. EF2019 incorporates the recent cancellation of the Renewable Electricity Program (REP) in Alberta, as well as renewable contract terminations in Ontario.


Figure 1: Energy use per person and per GDP in CAD

Source: EF2019, CER


Figure 2: The economy grows faster than energy use, and energy intensity declines 


Source: EF2019, CER


Technologies enabling Canada’s transition to a low-carbon economy make inroads across the energy system

New technologies are a key factor behind the slow growth in energy use and the rising share of renewable energy. In recent years, costs for wind and solar have reduced significantly around the world. In 2005, wind and solar comprised up to 0.2 per cent of Canada’s total generation, which increased to 5 per cent by 2017 and is likely to reach 10 per cent by 2040. Over the outlook period of 2018–2040, installed wind capacity will nearly double, while solar will more than double, depending upon various factors, including costs of wind and solar power. EF2019 assumes that the cost of wind power will fall by 20 per cent and of solar by 40 per cent during 2018–2040.


Increasing use of renewables makes Canada’s energy mix even more diverse. The wind and solar additions also help increase the already high share of non-emitting electricity generation. By 2040, the share of renewable and nuclear generation will increase to 83 per cent.


Figure 3: Electricity generation by fuel, and installed capacity of wind and solar

Source: EF2019, CER


Canada is making progress in transitioning to a low carbon future

EF2019 takes into account existing programmes and policies that will influence Canada’s fossil fuel use. Compared to previous projections of higher consumption of fossil fuels, in the EF2019 reference case, fossil fuel demand growth is limited. It is also led by higher production and demand of natural gas, which has the lowest greenhouse gas (GHG) emission intensity. Coal use, which has higher GHG emissions, will decline over the outlook period.


In order to meet Canada’s climate commitments, policy measures are being developed beyond those included in the reference case. These include those planned as part of the Pan-Canadian Framework on Clean Growth and Climate Change, and various emerging provincial and territorial initiatives. As new and in-development measures become law, they will further impact trends in Canada’s energy system.


Changing electricity mix

Canada’s diverse electricity generation mix varies significantly among provinces and territories, reflecting the type of energy available and its economic viability, and policy choices of the regulators. Over the past decade, there have been significant changes in Canada’s electricity mix, which continues to evolve in the EF2019 projection. From 2017 to 2040, electric capacity will grow by 16 per cent, mainly driven by increases in renewables and natural gas to meet new demand growth by replacing retiring units, mainly coal. Total electricity demand in the country will increase by nearly 1 per cent annually over the projection period. Nuclear power is a key part of Ontario and New Brunswick’s electricity systems, and over the projection period, nuclear units in Ontario will be refurbished, according to provincial plans.


Canada has a relatively low-emitting electricity grid. In 2017, 81 per cent of its generation was from non-emitting sources. This is primarily due to Canada’s large base of hydropower, which makes up the majority of electricity produced in British Columbia, Manitoba, Quebec, and Newfoundland and Labrador. There has also been a significant increase in non-hydro renewables over the past years.


This growth is supported by policy development as well as improved economics. However, despite recent shift towards market mechanisms by Alberta and Ontario regulators leading to fewer policy incentives, EF2019 predicts significant growth in wind and solar capacity with the continued reduction in their costs.


Table 1: Electricity cost assumptions for natural gas, wind and solar up to 2040


Capital cost (2018 USD/kW)

Fixed operating and maintenance costs (2018 USD/kW)

Variable operating and maintenance costs (2018 USD/MWh)

Capacity factor (%)

Gas (combined cycle)





Gas peaking





Wind 2020





Wind 2030





Wind 2040





Solar 2020





Solar 2030





Solar 2040





Note: Table shows assumptions for natural gas, solar and wind costs, including their capacity factors. The timing and magnitude of other forms of generation added over the projection period (such as hydroelectric and nuclear refurbishments) are based on current schedules and plans from utilities, companies and system operators.

Source: EF2019, CER


Figure 4: Wind and solar capital costs and levelised cost assumptions up to 2040

Source: EF2019, CER


The figure above shows additional detail on average wind and solar capital costs, as well as average levelised costs. The levelised cost includes all project costs over its lifetime (operating, fuel, financing, capital costs etc.) along with assumptions about capacity factor and project life. The ranges around the wind and solar figures highlight the variability and importance of these other factors in determining the ultimate cost of the resources.


In the reference case scenario of EF2019, total electricity generation increases by over 90 TWh from 2017 to 2040, an increase of about 14 per cent. Hydro, other renewables and natural gas will lead this growth, while coal and nuclear generation will decline. Additional renewables and decline of coal reduces the overall emission intensity of Canada’s electricity mix. In 2017, Canada averaged 130 grams of CO2 equivalent per kilowatt hour (g CO2e/kWh); this will fall to less than 80 g CO2e/kWh in 2040, a decrease of about 40 per cent.


Rising electricity exports

Canada is a net exporter of electricity to the US, and large amounts of electricity are also traded between provinces, mainly in eastern Canada. By connecting the electricity grids of different regions, grid operators can take advantage of regional differences in periods of peak electricity demand.


One of the reasons for increased interprovincial trade is the recently commissioned Maritime Link, which is a new energy loop for Atlantic Canada. Constructed by NSP Maritime Link Incorporated (NSPML)—a subsidiary of Emera Incorporated and an affiliate of Nova Scotia Power (NSPI)—in February 2018, the project involved the construction of a 500 MW, ±200 kV high voltage direct current (HVDC) line and a 230 kV alternating current (AC) transmission line. Under this, two 170-km subsea HVDC cables across the Cabot Strait were constructed from Cape Ray on Newfoundland to an area west of the NSPI’s Point Aconi generating station in Cape Breton. The project was constructed in three distinct geographical regions, namely, the island of Newfoundland, Cabot Strait and Nova Scotia. This new transmission corridor will create stability and reduce reliance on fossil fuel generation in the region. The project will allow Nova Scotia to import more power from Newfoundland and Labrador, reducing the province’s coal generation. This link could also facilitate more renewable energy development in the region.


Other future lines with the US include the 320 kV direct current (DC) Lake Erie interconnector between Ontario and Pennsylvania; the Manitoba–Minnesota Transmission Project (MMTP); and the 320 kV DC Quebec–New Hampshire interconnection. These projects aim to deliver clean, emission-free electricity from Canada to the US.


The country is investing in other initiatives, programmes and policies related to the power transmission segment to further improve energy efficiency and energy exports or exchange. Further details are available in Table 2.


Oil and natural gas production grows steadily over the projection period (assumptions on short-term infrastructure developments and long-term energy prices underlie this growth)

Production of crude oil and natural gas increases in the outlook period. During 2018 to 2040, crude oil production will grow by nearly 50 per cent, to around 7 million barrels per day. Natural gas production increases by over 30 per cent to over 20 billion cubic feet per day. Almost all of this growth comes from sources that were a small portion of production just a decade ago—in situ oil sands production leads crude oil growth. Natural gas production is led by growth from tight and shale resources.



Despite the slow growth in energy demand, the country is investing in its power sector to expand its clean energy base and achieve its CO2 reduction target. Supporting this, various power generation and transmission projects are at various stages of development in the country.



Table 2: Key projects and programmes to improve power exchange and improve energy efficiency in Canada




Cost (CAD million)

Expected completion

Alberta–British Columbia Intertie Restoration


Increase energy exchange capacity between Alberta and British Columbia from 800 MW to 1,200 MW.



Central East Transfer Out

AltaLink and ATCO

The project will enable the connection of approximately 1,000 MW of future renewable generation capability, depending on the replacement capacity of existing coal-fired generation in the area.


2023 (Stage 1); 2027-29 (Stage 2)

735 kV Micoua–Saguenay line

Hydro Quebec

Support the existing Manic–Québec corridor to manage increased power flow with the shutting down of several thermal and nuclear generating plants in southern Québec, which has diverted other power plants’ generation load to the former corridor.



Appalaches–Maine project

Hydro Quebec

The new 320 kV DC line will be connected to the upcoming New England Clean Energy Connect (NECEC) project in the US to export clean energy to Massachusetts through Maine.




microgrid project

Hydro Quebec

The project will cover 30 buildings, involve the installation of around 1,000 solar panels and have the ability to store 300 kWh of energy.



Energy Smart NB

NB Power

A long-term plan to fulfil the strategic objective of reducing and shifting in-province demand for electricity and therefore ultimately deferring the next significant generation investment. It comprises three components: Smart Grid, Smart Habits and Smart Solutions. Under this, the company will deploy smart grid technologies and create an advanced metering infrastructure (AMI) and a digital communications network.



Smart Grid Atlantic project

NB Power and NSPI

Development and demonstration of smart grid technology to better manage Atlantic Canada’s electricity grid and reduce GHG emissions. Siemens has been selected as the technology partner for this project.



Source: Global Transmission Research