esg

Decarbonizing Canada's electricity grid is a priority in the fight against climate change and will require significant investments. Despite positive trends in renewable energy costs over the past decade, decarbonization is likely to lead to higher electricity costs for consumers.

Energy storage and a robust grid infrastructure are part of a net-zero grid, needing further investments. Greening the grid by 2035 could increase the cost of generation by ~20% in Ontario and ~60% in Alberta by 2035, on top of a ~15-20% rise that would occur without the target.

Measures introduced by the federal government such as tax credits for clean tech and financing support for grid infrastructure could help moderate cost growth. Non-financial measures such as streamlining the permitting process for infrastructure projects could also be beneficial.

Curtailment and associated costs could rise if the growth of variable resources outpaces the development of grid infrastructure and storage assets. Curtailed renewable energy also represents a missed opportunity to reduce emissions through displacing fossil fuel generation.

This chart shows average net worth growth of households with major income earners born 1955-64 by homeownership for the years 2005 and 2019. The net worth of homeowners grows by 2.6 times (about C$ 1.4 million in 2019) while that of non-homeowners grows by 4.9 times (about C$ 0.2 million in 2019). This makes the 2019 average net worth of homeowners 6.3 times that of non-homeowners.

This chart shows Canadian average after tax income, in 2019 C$, of 25-34 aged homeowners and that of all homeowners in the bottom 30 net worth percentile for the years 2005, 2012, 2016 and 2019. Average income is consistently higher for 25-34 aged homeowners with an income of C$ 71,643 compared to C$ 59,837 for all homeowners in 2019.

This chart shows Canadian average mortgage debt, in 2019 C$, of 25-34 aged homeowners and that of all homeowners in the bottom 30 net worth percentile for the years 2005, 2012, 2016 and 2019. Average mortgage debt is consistently higher for 25-34 aged homeowners with a mortgage debt of C$ 203,914 compared to C$ 154,625 for all homeowners in 2019.

Costs of renewable energy technologies have made great competitive strides, specifically for solar PV and wind generation. This means these technologies can compete with fossil fuel generators without the need for costly incentives.

Electricity demand could increase by 85% by 2050 driven by electrification of end-use sectors like transportation. In addition to decarbonizing existing generation, low-carbon electricity supply must increase to support this expected growth in demand.

Governments can also offset costs for low-income households by strengthening programs that provide electric bill subsidies and promote the adoption of electric and energy efficient equipment. With time, electric costs will be offset by a reduction in spending on fossil fuels.

Other actions that can help keep costs under control include better planning and modernizing grid infrastructure, as well as procuring new generation and storage technologies through competitive auctions. These measures could keep overall system costs lower in the long-term.

The costs of decarbonization should not be a deterrence for ambitious action to reduce greenhouse gas emissions. The alternative is worse as the lack of meaningful global mitigation efforts is projected to result in runaway climate change with devastating socioeconomic effects.

The Thread

Examples of measures to manage electricity costs during the decarbonization of the grid. Illustration of hand with money floating above - tax credits and subsidies, illustration of gavel - competitive auctions, illustration of a cog wheel and four arrows around - modernizing grid infrastructure, illustration of light bulb with the leaves inside beside a house with a lightning strike above - energy efficiency