A clean electricity grid will be the foundation for achieving economy-wide, net-zero greenhouse gas emissions by 2050.
As outlined in Powering Forward Canada: Building a Clean, Affordable and Reliable Electricity System for Every Region of Canada (published August 8, 2023), the Government of Canada is taking a comprehensive and collaborative approach to building a net-zero grid in a way that ensures continued access to affordable, reliable power by all Canadians.
Canadians are already switching from fossil fuels to electricity in order to power transportation, home heating, and industry. A growing population and economy, as well as the increased electrification of our economy, are expected to significantly increase the demand for electricity in the coming decades. We need to make sure that this expansion occurs in a clean, affordable, and reliable way.
Even absent these proposed regulations, all provinces and territories will have to make large investments in their electricity systems over the coming decades to undertake routine replacements of aging facilities and support demand growth based on current trends. The Government of Canada estimates that these investments will cost about $400 billion from now to 2050. The draft Clean Electricity Regulations will ensure investments in the grid will be directed toward clean sources.
Greenhouse gas pollution reductions
The draft regulations are expected to deliver nearly 342 megatonnes of cumulative greenhouse gas emissions reductions between 2024 and 2050 from the electricity generation sector. They would shift the mix of Canada's electricity system toward clean sources more quickly, and to a greater extent, than would be expected without the regulations. This will, in turn, lead to more investments in electricity storage and transmission capacity.
Reducing greenhouse gases also pays significant dividends for Canadians, who are already paying heavily for the costs of climate impacts from storms, wildfires, and extreme heat. Independent analysis shows climate damages increase the cost of living by $700 per household in Canada. Reducing GHGs will help fight against the increasingly frequency of severe weather events, and help Canadians avoid the worst impacts-and costs-of climate change.
Cleaner air in our communities
In addition to reducing greenhouse gases, the draft regulations will deliver health benefits to Canadians by reducing the air pollutants that result from the burning of natural gas, like nitrogen and sulfur oxides, particulate matter, and mercury. Air pollution is a major contributor to disease and premature death both in Canada and globally. Health Canada estimated that in 2015, air pollution from electricity-generating units contributed to about 150 premature deaths per year in Canada, as well as many non-fatal negative health outcomes, with a total cost of $1.2 billion per year (2015 constant dollars).
Renewable energy is cost competitive with fossil fuels
As provinces and territories decide on what electrical infrastructure to build to meet the growing demand in electricity, clean energy technologies are often already cost competitive with fossil fuel alternatives.
Wind and solar can now produce electricity at lower costs than natural gas-fired power in many cases, with even more cost reductions on the horizon.
Globally, there is a rapid transformation of energy systems toward clean and renewable sources. The International Renewable Energy Agency reported that in 2021 more renewable capacity was added to grids around the world than ever before-renewables are growing at an unprecedented rate. The improving cost competitiveness of renewable technologies, as well as expanding policy support and energy security concerns, are driving this historic growth.
Creating more good-paying jobs
Building and operating a net-zero electricity grid is expected to increase employment across Canada. Recent estimates suggest that in a net-zero economy by 2050 scenario, jobs in the clean energy sector will grow by 2.2 million in the decades ahead (at seven percent per year). Growth will be especially high in the clean energy supply sector, with jobs more than doubling to reach almost half a million by 2050.
The draft regulations
The draft regulations set a stringent pollution emissions standard without prescribing specific technologies. This technology-neutral approach enables provincial, territorial, and municipal decision-makers to determine the most suitable path for transitioning to a clean grid in their circumstances.
The draft regulations set a clear signal for transitioning toward a clean grid, while including flexibilities to avoid stranding large capital assets, and to enable electricity systems to continue to provide reliable, affordable power. One such flexibility allows for an ongoing, though limited, role for some fossil-fuel generation past 2035, to ensure it is used where it has the greatest value for maintaining affordability and reliability. The proposed regulations also exempt remote communities in recognition of the current lack of commercially available non- and low-emitting generation technology that could fully replace diesel generation in those communities.
Maintaining affordability for homeowners and businesses
The modelling for the draft Clean Electricity Regulations projects close to $29 billion in net benefits between 2024 and 2050 from reduced greenhouse gas and air pollution emissions and operational savings from reduced fossil fuel use.
Electricity is significantly cheaper than fossil fuels, and as families as businesses make the switch they will save on energy costs. Independent analysis has shown that, despite the investments needed to clean the grid, household expenditures on total energy costs (to heat and cool homes, power vehicles, prepare food, etc.) will decrease by 12 per cent by 2050. Today, an average homeowner who switches from oil to heat pumps would save between $1,500 and $4,700 per year on home energy bills.
The modelling also projects relatively small impacts on electricity rates. These proposed regulations would result in small incremental impacts on electricity rates, increasing national average residential electricity rates (undiscounted 2022 constant dollars) by 0.4 percent by 2035, 1.9 percent by 2040, and 0.9 percent by 2050. This is equivalent to an increase of less than one cent per kilowatt-hour (kWh) in each case, in comparison to the current average residential electricity rate of 17 cents per kWh. These estimates do not fully take into account the support announced in Budget 2023 to help provinces, territories, and utilities transition to clean electricity. If provinces and territories choose to take advantage of these measures, it will reduce the costs of complying with the regulations, further reducing impacts on ratepayers.
Supporting provinces and territories
While the CER is a central component of the federal government's approach to achieving clean electricity, it is not the only policy supporting a net-zero electricity grid by 2035.
Following the historic investments made in Budget 2023, the Government of Canada has now committed over $40 billion to support the transition to a net-zero grid reliably and affordably across all regions. These include:
- The $3.5 billion Smart Renewables and Electrification Pathways Program.
- $10 billion in low-cost financing from the Canada Infrastructure Bank for clean electricity projects.
- A 15 percent refundable Clean Electricity Investment Tax Credit for investments in technologies for the generation and storage of clean electricity and its transmission between provinces and territories, which is available to taxable and tax-exempt entities.
- An investment tax credit of up to 30 percent for clean technologies, with a focus on net-zero technologies, battery storage solutions, and clean hydrogen.
- $520 million for the Clean Energy for Indigenous, Rural and Remote Communities programs for renewable energy and capacity-building projects and related energy efficiency measures across Canada. This includes the complementary Indigenous Off-Diesel Initiative provides clean energy training and funding for Indigenous-led climate solutions in remote Indigenous communities.
The Government of Canada also has many programs to support homeowners in their switch away from fossil fuels toward electricity. These include the Canada Greener Homes Grants and Loan program, which helps homeowners make the switch from more expensive home heating oil and natural gas to energy-saving heat pumps and solar panels. In addition, the Government of Canada offers incentives of up to $5,000 for light-duty zero-emission vehicles, and $200,000 for medium- and heavy-duty zero-emission vehicles.
Alongside the Clean Electricity Regulations, these investments will help drive significant economic opportunities in the province and territory through the construction of new power sources and retrofitting of existing plants.
Already significant progress toward a cleaner grid
Canada has already made significant progress transforming its electricity sector. Since the 1980s, Canada's total electricity capacity has nearly doubled, while greenhouse gas emissions have been cut in half.
Several electric utilities and power producers in Canada have adopted net-zero emission targets and significant procurements of renewable generation are underway in many provinces. Stationary energy storage is being deployed across Canada, and we are a global leader in the development of small modular reactors.
Canada has worked with Nova Scotia and Newfoundland and Labrador to expand the mandates of the offshore boards to include the regulation of offshore renewable energy, while the Impact Assessment Agency has recently undertaken a regional assessment to facilitate new offshore wind projects. The Government of Canada is also working with Atlantic provinces to advance the Atlantic Loop-a series of interprovincial transmission lines that will provide clean, affordable, and reliable electricity in the region.
