March 28, 2024

Making Decisions Now to Meet Future Demand

by By: Francis Bradley, Vice-President, Canadian Electricity Association, bradley@canelect.ca
Ensuring a strong, sustainable and secure electricity industry is at the heart of our prosperity and economic security. We need to invest in the sophisticated technologies that underpin today’s electricity industry in order to build on existing strengths and remain at the leading edge. Growing electricity demand and environmental expectations require that all generation technologies – traditional and new, large and small – be available in the marketplace. Substantial investment in modernizing and extending the transmission and distribution networks will also be needed to ensure the overall reliability and security of this complex, real time system.

Clear energy policies as well as a timely and efficient regulatory framework are critical to attracting investment in our sector’s full set of emerging and traditional technology options.

Rising Demand
The electricity sector will need to build infrastructure to meet future demand growth and upgrade or replace much of the generation, transmission and distribution capacity built over the last 50 years. Although the economy continues to demand less energy for every additional million dollars of Gross Domestic Product (GDP), the demand for electricity continues to grow on an absolute and per capita basis. For example, from 1990 to 2003, Canada’s total domestic electricity demand grew 19.5%. Despite gains in energy efficiency, national demand is projected to grow at an average annual rate of 1.0-1.5%. Based on such projected demand figures and relatively modest technological change, the National Energy Board (2003) projects Canadian electricity generation must increase still further to 870 TWh by 2025.

Although electricity prices have been stable relative to other energy components, the forecasted supply/demand balance threatens this stability. As electricity demand steadily increases and supply tightens, consumers will face increasing prices and our current competitive advantage, as underpinned by reasonably priced electricity, may be impacted.

Generation, transmission and distribution investment decisions must be made to meet this future challenge in a context where much of the existing infrastructure will be retired or renewed over the forecast period. Replacing or refitting old power plants, achieving the environmental approvals to build new facilities on new sites, making sure that the transmission and distribution infrastructure keeps pace with electricity generation, and developing new technologies to minimize environmental impacts and maximize efficiency all take time and significant capital investment. If we do not succeed today in attracting the necessary investment to finance tomorrow’s electricity infrastructure, our competitive economy and standard of living are at risk.

International Competitiveness
The electricity sector needs to compete in an international capital market where demands for electricity investment worldwide are growing. The International Energy Agency (IEA) estimates that over the next 30 years, the need for investment in the electricity sector worldwide will approach US$ 10 trillion with US$1.7 trillion required in the United States and Canada. Such investment in Canada is critical in delivering electricity for both domestic use and export. The Conference Board of Canada recently identified a number of impediments to investment in Canada’s transmission infrastructure, although these impediments apply to non-transmission assets as well. The impediments include: long planning horizons to obtain regulatory approval; low regulated rates of return for investors when compared to the United States; and regulatory uncertainty in the face of continuing market restructuring. Canada must maintain a strong domestic electricity system while strengthening its role within North American institutional arrangements for ensuring system reliability, critical infrastructure protection, and efficient large regional wholesale markets.

CEA is recommending a distribution utility-supplier-government partnership to accelerate innovation, investment and implementation for electricity distribution infrastructure automation, AMR technology, BPL communications services, distributed resources interconnections, as well as regulatory innovation in support of sustainable development, customer choice and economic opportunities.

Reducing Impacts on the Environment and Improving Efficiency
At the present time, there is no technology available to deliver electricity at the scale society requires without having some impact on land, water, air, habitat, and/or local communities. Due both to regional natural resource endowments and the economics which favour maintaining a diverse fuel portfolio, electric power production is a multi-fuel exercise.

In order to decrease the sector’s overall impact, there must be support for ongoing efforts to improve the performance of existing technologies, and also support for new technologies that have a smaller footprint. Accordingly, government and industry must move more aggressively to promote the development and deployment of energy efficiency and demand side management initiatives, as well as innovative technologies such as clean coal and CO2 sequestration.

Investing in a clear and efficient regulatory regime
The electricity sector operates in a complex regulatory environment, involving all levels of government on a number of issues, from financial to environmental. While the electricity sector accepts and supports regulation that addresses the environmental, economic, health and safety interests of consumers, needless complexities in regulatory processes create uncertainty and act as a barrier to investment. As a result, CEA continues to advocate efficient, effective, timely and coordinated approaches to electricity regulation. In addition, regulatory decisions should provide clear and certain long term direction for proponents. The system should also be accountable, with opportunities for meaningful stakeholder engagement with regulators providing regular business plans with stated performance objectives and targets. As the industry moves ahead with green-field development and projects in more remote locations, aggressive action to implement a more efficient regulatory regime will help address key environmental and socio-economic issues, including First Nations’ land matters.

Investing in our work force
In 2004, CEA conducted an assessment of Canada’s electricity industry labour force. Findings demonstrate that retirement in the electricity sector will have a substantial impact on the industry: 17% of the existing workforce is eligible to retire in the next 4 years and nearly 40% will be retirement-eligible by 2014. These results indicate a significant potential shortfall in labor supply for the Canadian electricity industry in the next nine years. The retirements will impact at the point when significant electricity infrastructure replacement and new capacity development is needed. Without remedial action, projects could be impacted by a lack of skilled labour. To support workforce development for the industry and to ensure an ongoing labour force supply, CEA is collaborating with the Electrofederation, the Canadian Nuclear Association, the Canadian Union of Public Employees, the International Brotherhood of Electrical Workers, the Society of Energy Professionals and other key stakeholders to create an Electricity Human Resources Sector Council. The Sector Council, an independent not-for-profit organization, will bring together key stakeholders to address HR issues such as recruiting and retaining workers, facilitating school-to-work transitions, and developing sector and career awareness strategies.

Advancing the Agenda
Implementing a comprehensive approach to ensuring a strong, sustainable and secure electricity industry requires urgent action on the part of governments and industry to foster an environment conducive to greater investment in conventional and emerging generation, transmission and distribution technologies. Aggressive action is also required to promote demand side management and energy efficiency initiatives, foster advanced technology development and deployment, introduce more efficient and clear regulatory regimes, improve reliability standards and address sector-wide human resource challenges.

Moving forward, governments and industry need to cooperate within the context of a comprehensive policy framework to develop and implement a common agenda that promotes policy certainty, predictability and investor confidence. CEA member companies are committed to working with the government on this agenda, and the Association has developed and is currently implementing a five point plan to meet these objectives:

1. Establish an investment climate to ensure future electricity supply:
2. Move government and industry towards smart and effective regulation
3. Work to ensure a sustainable future for the next generation
4. Foster innovation and accelerate skills development
5. Build on the strengths of the integrated North American system to maximize opportunities

In order to sustain our competitive electricity advantage into the future, governments and the electricity sector need to collaborate on a sound public policy agenda that will ensure adequate supply, encourage efficient use of our energy resources, and promote environmental sustainability. This will necessarily involve a renewed attention to the issues of investment in the electricity sector. Refurbishing existing infrastructure, building new facilities to meet future demand, supporting technological innovation, a sustained and long term commitment to energy efficiency and ensuring the viability of a skilled labour force are key issues on which industry and government must collaborate.