Issues summary of soon-to-be released discussion paper on the future cost of electricity

In order to reach net-zero emissions by 2050, Atlantic Canada will rely more and more on electricity to power the everyday lives of residents, businesses and large industry. This is an important strategy to help reduce emissions with the transition to a cleaner electricity grid as the federal government has mandated removing coal by 2030 and achieving net-zero electricity generation by 2035. At the same time, electrification is permeating with increasing electric vehicles sales, and incentives for residents to switch from home heating oil to electricity.

What will the transition to net zero cost?

For Atlantic Canadians, several modelling forecasts show the real cost of electricity (in 2021 dollars) will increase quite significantly on the path to net-zero emissions in 2050. By how much and what will be the impact are more complicated questions to answer.

The Atlantica Centre for Energy is working on the third paper of its Atlantic Canada’s Electricity Future – Discussion Series to investigate how the price of electricity may change across the region. The upcoming discussion paper will help visualize publicly available data through the Canada Energy Regulator and will illustrate the implications of federal and provincial policies on the future cost of electricity in Atlantic Canada.

The Centre’s two previous discussion papers in the series focused on forecasting electricity supply and demand. It is clear the existing supply of electricity in Atlantic Canada, especially in Nova Scotia and New Brunswick, would decrease by 2035 without significant additional infrastructure investments. Similarly, the demand for electricity will increase across the region over the next 25 years.

For context, RBC Thought Leadership’s report: The $2 Trillion Transition, outlines that Canada’s electricity sector requires an average annual investment of $5.4 billion to reach net zero by 2050. The report predicts annual clean electricity investments need to be 2.6 times those made in 2021.

These numbers aren’t surprising when you look closely at the transition taking place in the Atlantic region. There are at least six important considerations to help understand the future cost of electricity:

  1. Which generation assets need to be replaced or renewed to clean the electricity grids by 2035?
  2. How much new infrastructure must be built to meet increasing demand, including adding more interprovincial electricity trade?
  3. Which new technologies might best fit within each provinces’ electricity grids such as wind, hydropower, nuclear or natural gas with carbon capture and storage?
  4. How might tight timelines put pressure or add new cost burdens on utilities?
  5. How might electricity demand be managed to lessen the need for additional infrastructure investments?
  6. What investments will help generation assets become more resilient to deal with climate change?

Data from the Canada’s Energy Futures 2021 Report forecasts the real price for electricity per kWh will increase by roughly 40 per cent for New Brunswick and Nova Scotia residents between 2020 and 2050. This would equate to 2050 electricity rates of 23.7¢ and 24.3¢ per kWh in New Brunswick and Nova Scotia respectively (in 2021 dollars). The residential price in Newfoundland and Labrador is estimated to increase by roughly 18 per cent, and 4 per cent on Prince Edward Island.

However, there are concerns with forecast accuracy from the latest Energy Future Report (Evolving Policies Scenario). For example, NB Power’s average delivered price in 2021 was 13.0¢ per kWh after tax, not 17.44¢ as the forecast shows. However, NB Power’s price in 2023, like many other electricity utilities, will increase by a greater rate than forecasted given current high inflation and fossil fuel prices.

Furthermore, these Evolving Policies Scenario forecasts do not consider the impacts of many federal or provincial regulatory requirements already in development, which could influence electricity decarbonization timelines and demand.

A net-zero future must be affordable

Affordability must be a priority in the transition to net-zero emissions, especially in Atlantic Canada. Residents in the four Atlantic provinces already spend more of their household income on energy costs than in any other province or territory in Canada. While some residents will be able to pay more for electricity and quickly invest in electric vehicles or home retrofits to reduce their energy consumption, not everyone can. Likely, those who can least afford cost increases will also have the least ability to invest in areas that reduce emissions.

Similarly, the net-zero transition must ensure businesses can continue to operate competitively, especially those which are energy intensive and trade-exposed. The last thing the region needs is to force businesses to leave Atlantic Canada in search of more affordable energy, or worse yet, cease operations altogether.

Making a plan for the transition

While consumers and businesses are doing what they can to plan for the transition and manage their consumption, the federal government has an important role to play. It is incumbent upon government leaders to ensure the transition to clean electricity is fair and equitable for every province.

The Atlantica Centre for Energy has called on federal funding to target those provinces and utilities facing the greatest challenges in a clean energy transition, especially to help ensure all Canadians have access to affordable electricity.

To learn more about electricity supply and demand in the Atlantic region, read:

To learn more about how you can reduce your household emissions, read: the Atlantica Centre for Energy’s Energy Transition Resource Catalogue.