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Wind and solar should make up the bulk of new electricity generation in the next decade as Canada strives to expand its transmission system and meet its goal of a net-zero grid by 2035, with natural gas “unavoidable in the energy mix in the short- to-medium term,” a new report from the Royal Bank of Canada says.
Why are wind and solar among the report’s leading short-term solutions? The cost of wind and solar power have fallen 70 and 90 per cent, respectively, making them “the cheapest sources of new electricity,” RBC economist Colin Guldimann, the report’s author, said.
Furthermore, construction times on these types of projects are fast, meaning they can be added to the grid at a faster pace than other types of generating sources.
“Provinces facing near-term challenges should lean hard into building renewables, cutting inefficiencies, and maintaining their current gas capacity. The harder choices are yet to come,” he said.
On the natural gas front, Guldimann said existing plants should continue to operate through 2035 to ensure the transition over to a net-zero grid goes smoothly.
Canada is already a clean electricity juggernaut due to hydroelectric resources, but it’s at a crossroads. Consumption is expected to increase by 50 per cent over the next decade and a major overhaul is needed if the power grid is to double by 2050.
As a result, provincial and federal governments will need to make a series of choices that account for decarbonization while ensuring the grid is both reliable and affordable.
“If they get it wrong, Canada could suffer Europe’s fate of a hobbled, energy-insecure grid that leaves consumers with soaring bills,” Guldimann said.
An energy crunch in Canada is looming closer than many might expect.
The report, released on Wednesday, warned that Ontario — “Canada’s economic engine” — could be confronted with an energy shortage “as early as 2026, especially as current contracts for renewables and gas plants expire.” Among the reasons behind the potential shortfall are rising electricity demand for electric vehicles and electrified public transportation.
In the West, Alberta and Saskatchewan will also have to choose a path soon. Those provinces have abundant sources of solar and wind power, but coal has played a “significant role” in their grids and some of those plants are being converted to gas. Given the provinces’ abundant sources of natural gas, eliminating its role could prove politically complicated, Guldimann said.
Of course, wind and solar face challenges of their own, including “intermittency” — those times when the wind doesn’t blow and the sun doesn’t shine. Add to that the high cost of energy storage.
That’s where important longer-term choices come into play.
The RBC report examined four scenarios, a combination of which it believes can help plug the gaps in a grid that relies heavily on fluctuating power sources. Each option, though, carries its own risks.
They include power swapping between provinces although the transmission system would have to be expanded; fitting “gas plants with carbon capture, utilization and storage (CCUS) units” using a technology that remains “unproven” and expensive; creating a renewables storage grid, which could cost $7 billion more than the carbon capture option; and keeping hydro and nuclear “in the mix” by building smaller-scale reactors and tapping into Canada’s massive hydro potential.
“The green economy of the future demands green power, and as Canada’s population and economy grow towards 2050, a lot of it,” Guldimann said. “The time to start acting is now, if we’re to transition the sector and meet the reliability and affordability standards Canadians have come to expect.”
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ANOTHER SUPERSIZED RATE HIKE United States Federal Reserve chairman Jerome Powell stayed on the offensive against inflation raising the Fed’s benchmark interest rate 75 basis points for the third consecutive time. The rate now sits at three to 3.25 per cent — the highest since before the 2008 financial crisis, and up from near zero at the beginning of this year. Powell and his fellow Federal Open Market Committee members vowed to keep hiking rates until inflation is tamed. “We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to two percent,” he told a press conference in Washington following the rate announcement. Photo by Elizabeth Frantz/Reuters
- Bank of England releases interest rate decision
- Air Canada CFO Amos Kazzaz addresses CIBC conference
- Statistics Canada to release employment insurance data for July
- The Federal Court has a certification hearing for a class action from Black public service employees.
- The parliamentary budget officer will post two new legislative costing notes entitled “Additional Tax on Banks and Life Insurers” and “Canada Recovery Dividend”
- The standing committee on natural resources holds a meeting on creating a fair and equitable Canadian energy transformation
- Jean-Yves Duclos, minister of health, and Carolyn Bennett, minister of mental health and addictions, will announce the next steps on the review of Canada’s cannabis legislation
- The standing committee on industry and technology holds a meeting about Bill C-235, an Act respecting the building of a green economy in the prairies.
- Elevate Festival tech conference continues in Toronto
- BC Seniors Advocate, Isobel Mackenzie releases “BC Seniors: Falling Further Behind”, a report on the income and affordability challenges of BC seniors
- Jonathan Wilkinson, minister of natural resources, will hold a media callback while participating in the Global Clean Energy Action Forum from Sept. 21-23 in Pittsburgh, Pa., and will speak at a moderated talk titled “Supporting Communities and Workers through Clean Energy Investment
- Today’s data: US initial jobless claims
- Notable earnings: Cineworld Group PLC, Costco Wholesale Corp., FedEx Corp., Reitmans Canada Ltd.
Canada’s homeownership rate has declined to 66.5 per cent after peaking in 2011 at 69 per cent, according to a Statistics Canada release Wednesday, with the agency acknowledging that people are having a hard time getting off the sidelines.
“Trying to figure out the right time to buy is a difficult decision that can leave Canadians wondering how long they want to hold out on entering the real estate market — or whether they even want to,” the agency said in its report.
While the slowdown in home starts and sales continues, home prices had previously increased to such levels that even a major correction may not be enough for most Canadians to enter the market given current interest rates.
Adults under the age of 75, especially young millennials aged 25 to 29 years, were less likely to own their home in 2021 than a decade earlier, according to the Statistics Canada report, Portrait of Housing in Canada 2011-2021.
The Financial Post’s Shantaé Campbell has the full story.
Interest rates continue to climb, which means the home buying market has slowed down. People who would have bought are now staying in their rental apartments, and that means lower vacancy rates. Landlords, faced with higher mortgage payments and inflation, are increasing rents when they can. This all means that renters are squeezed more than ever, particularly in Canadian cities. Our content partner MoneyWise explores ways to find an affordable place to live.
Today’s Posthaste was written by Gigi Suhanic (@gsuhanic), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.
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