Ottawa's National Electricity Strategy (NES) asks Canadians to believe that electricity demand is about to soar and that government-owned utilities can successfully build the infrastructure to meet it. Both assumptions deserve far more scrutiny than they have received, according to a new analysis.
Doubling Grid Capacity by 2050
The federal government announced the NES, a plan to double the capacity of Canada's electrical grid by 2050. While this sounds dramatic, the compound annual growth rate to double capacity in 25 years is just 2.9%. However, that is more than the average real growth rate in gross domestic product (GDP) over the past five, 10 or 15 years.
Indeed, electricity consumption only grew by 1.6% in 2024 over 2023 and was only slightly higher in 2024, by 0.3%, than it was in 2011 and 1% higher than it was in 2007, according to statbase.org. That is far less than population growth, which averaged over 1% per year this century until last year's drop.
Assumptions Behind the Strategy
Despite such low growth in the recent past, the NES implies greater intensification of electricity use than heretofore. This appears to rest in part on the assumption that expanded supply will stimulate demand as grid expansion and more interconnections between provinces should enable the transfer of cheaper power when available.
A February International Energy Agency forecast assumes rocketing American artificial intelligence data centre demand and substantially higher electrified transportation demand. Dividing the estimated 203 terawatt-hours over that period by the total number of hours gives an average increase of just 4.6 GW of required AI data centre power capacity. In the huge U.S. economy, this is manageable — the equivalent of three million households at 1.6 kW each.
Challenges for Canada
The power industry and the U.S. grid should be able to keep up. AI data centres are thus far not blossoming in Canada (only two major announcements in the past year). While Ottawa has launched the streamlining of the Major Projects Office, the Canada Strong Fund and various trade missions, these and other endeavours are not guaranteed to substantially boost forecasted real annual economic growth of 1% to 2%. Economic growth depends on capital investment — sadly weak in Canada for several years.
One reason is an unattractive environment for foreign and domestic investors. The Prime Minister's Office's NES announcement gave a clue: Repeated references to clean energy. One such reference is the endorsement of heat pumps, which are still more expensive to run than natural gas, even in mild coastal climates, as a Frontier Centre analysis showed.
Government-Owned Utilities' Track Record
Electric vehicle sales are stalled as motorists balk at their low value for money. But even if those optimistic demand forecasts prove correct, another problem remains. Most Canadian provinces rely on government-owned utilities to generate, transmit and distribute electricity. Many have bad records of capital projects: B.C. Hydro's Site C dam, about $7 billion over budget; Manitoba Hydro's Keeyask and Bipole, about $4 billion over budget; Nalcor's (Newfoundland and Labrador) Muskrat Falls, about $6 billion over budget.
Trusting staid, inflexible, monopolistic Crown firms to expand the grid and make it more robust, resilient and versatile seems imprudent. There are increasing dangers, from natural disasters to cyber and physical sabotage, making more decentralization and competition desirable.
Potential for Innovation
On March 24 this year, a truck with a specialized cryogenic storage unit transported the first cargo of its kind in history — 92 anti-protons. Formerly just science fiction, antimatter may not be a harbinger of imminent power utility disruption, but it does indicate the potential for innovative turmoil. Neither antimatter nor hydrogen fusion, geothermal power nor biogas may become practical, economic or pervasive forms of energy. As Crown utilities are inherently traditionalist and preservationist in policy, all four would struggle for acceptance.
Canada's top-down, centralized, monopolistic, regulated utility model is not conducive to nimble, rapid expansion of the electrical grid or the power supply, even were Canada truly on the brink of rapid, electricity-hungry growth. That leaves both of the NES's central assumptions open to serious question.
— Madsen is a senior policy analyst at the Frontier Centre for Public Policy.
