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Doubling the grid: Canada's $2T energy challenge

Nuclear power, natural gas essential to decarbonization, according to experts attending Globe Forum in Vancouver
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Richard Horrobin, vice-president of business development for Bruce Power, speaks at the Globe Forum in Vancouver.

Replacing all internal combustion engine cars in Canda with electric or hydrogen vehicles, and all natural gas heating systems with electric heat pumps by 2050 sounds like a pretty tall order. It is.

But it pales in scale to the Herculean task of at least doubling Canada’s electrical grid with non-emitting power to supply electrons to all those EVs, electric heat pumps and energy intensive industries, like EV battery manufacturing plants in Ontario, or LNG and green hydrogen plants in British Columbia.

The task of replacing all coal power in Canada with non-emitting energy sources, and then doubling the grid to meet the increased demand from decarbonization, was the subject of two panel discussions Wednesday at the Globe Forum.

The experts who plan, design, build and operate power systems said Canada’s net zero decarbonization goals cannot be achieved without nuclear power and natural gas thermal power, which should give British Columbia something to think about, since it is putting all of its electrical eggs in one renewable energy basket of water and wind.

“From a provincial perspective, from a country perspective, or a world perspective, I think most experts would agree you can’t really achieve those decarbonization targets without a significant investment in nuclear,” said Richard Horrobin, vice-president of business development for Ontario’s Bruce Power, which operates eight nuclear reactors that provide 30 per cent of Ontario’s power.

That’s not to say that renewable power and energy storage (batteries, pumped hydro, etc.) aren’t also critical to decarbonization – just that they are not up to the task of providing sufficient baseload power.

Ontario’s electricity demand actually flatlined for about 20 years. But new industrial demand is now surging, driven largely by new battery manufacturing plants.

Three battery plants being built or planned in Ontario will draw the power equivalent to the City of London, Ontario, said Chuck Farmer, chief energy transition officer for Ontario’s Independent Electricity System Operator (IESO).

British Columbia likewise experienced declining industrial electricity demand, thanks in part to the closure of pulp mills. But the demand for power is now expected to surge again in the coming years, driven by the province’s CleanBC plan, which will require electrification of industries like natural gas, mining and hydrogen production.

B.C. will soon add roughly 5,000 gigawatt hours (GWh) of power when Site C dam turns on next year, and BC Hydro also plans to acquire an additional 3,000 GWh of clean power, most of it likely to come from wind power.

That’s small compared to what Ontario is planning to add to its grid, and less diverse.

When the added demand for things like EVs and electric heat pumps are added to the growing industrial demand, Ontario’s clean electricity generating capacity – now 42,000 megawatts (MW) – will need to at least double to 88,000 MW, Farmer said.

Nuclear power currently accounts for 10,000 MW in Ontario. To meet its Pathways to Decarbonization goals, another 18,000 MW of nuclear power will be needed, along with another 18,000 MW of wind power, 6,000 MW of solar and “a considerable amount of storage,” Farmer said.

“If you look at it from a country perspective, in the federal budget the government made reference to the potential to see a doubling of electricity demand, which equates to potentially two and a half times or three and a half times increase in capacity,” Harrobin said.

“RBC, in one of their reports, indicates that that represents a $2 trillion investment challenge for the country.”

To put that in perspective, Canada’s entire GDP is about $2.8 trillion.

Decarbonization poses huge opportunities for a wide range of energy developers, including natural gas power plant operators, like Alberta-based Capital Power, because provinces that don’t have large-scale hydro power or nuclear power plants will need natural gas power plants to backstop renewables with firm, dispatchable power. And at some point those plants will need to add carbon capture and storage to bring them to zero emissions.

Capital Power owns and operates wind and solar farms and natural gas plants in the U.S. and Western Canada, including the 142-MW Quality Wind farm in northeastern B.C. and the Island Generation natural gas plant on Vancouver Island. It is also developing carbon capture and storage projects.

Capital Power CEO Avik Dey said renewables – wind and solar – are “fundamentally a better technology” partly due to their low cost. Unfortunately, they’re not reliable, which is why jurisdictions that are investing heavily in renewables also need natural gas to backstop them.

“What we believe is that there cannot be a net zero world without natural gas in markets that currently use natural gas to deliver dispatchable generation,” Dey said.

“There are places that use nuclear, there are places that use hydro. The dispatchable is met by those clean sources. But in those areas today that rely on natural gas, we’ve got to find a way to decarbonize that natural gas, because renewables can’t replace it to deliver dispatchable generation.”

That’s where carbon capture and storage plants, and hydrogen power plants come in.

Alison Schneider, Canadian representative for the Ceres Investment Network – which works with 220 institutional investors that manage $46 trillion in assets – said there is reticence among some investors when it comes to things like CCS because they are seen as mechanisms that allow countries and companies to continue burning fossil fuels.

Even so, she said the reality is that natural gas to produce power is going to be a part of the energy mix for a long time.

“While solar and wind might be the lowest risk, I don’t think any of the projections show that as being a huge part or the only part of the equation,” she said. “We’re going to have natural gas for a very, very long time. So we do need to figure out how we do make this work.”

Philippe Dunsky, president of Dunsky Energy and Climate Advisers said there is no one-size fits all approach for low carbon power. The type of generation will vary from province to province and state to state.

“Are we going to need natural gas with carbon capture and storage? Surely,” he said. “In some places we can’t expect to just completely overhaul and take entire energy infrastructure and flip it on its head. We want to work with what we have.”

While all of the technologies needed to decarbonize the grid are available, there are still challenges in terms of financing them. Dey said one thing that is missing is commercialized carbon credits.

“We need to develop a carbon market that allows for capital at scale to come in,” Dey said.

He also suggested that Canada is at a disadvantage, compared to the U.S., in getting power projects financed, simply because it’s so much more complicated. Capital Power operates in both the U.S. and Canada.

“I can explain the U.S. system very easily,” he said. “There’s an IRA, there’s a 45-Q and I get an investment tax credit – period, full stop,” he said. “In Canada, it’s a six-part equation, where I need a data table to talk about all the acronyms. And that multi-lateral, multi-party deal isn’t conducive to investing at scale.”

nbennett@biv.com

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