Market Snapshot: New Canada's Energy Future net-zero analysis: the role of inter-provincial transmission expansion

Release date: 2024-09-18

Canada’s Energy Future 2023 (EF2023) is the Canada Energy Regulator (CER)’s latest long-term energy outlook where modeled scenarios explore what achieving net-zero greenhouse gas (GHG) emissions by 2050 could look like. In this Market Snapshot, we provide additional analysis, building on EF2023 to explore uncertainty related to inter-provincial electricity transmission. The analysis in EF2023 and this Market Snapshot are not predictions or recommendations but rather projections based on the outcomes from the CER’s suite of energy and economy models. Any long-term outlook is subject to uncertainty; the results in this analysis should not be consider definitive but rather an exploration of possible energy futures.

In EF2023’s Global Net-zero Scenario (GNZ)^Footnote 1 projections, inter-provincial transmission^Definition* capacity increases by about 27% by 2035. The projected inter-provincial transmission additions enable more electricity transfers, particularly across British Columbia (B.C.), Alberta, Saskatchewan, and Manitoba. Many provinces in Canada currently trade electricity between each other—helping to ensure that the supply of electricity generated meets consumer demand, or “balances the grid”.

Figure 1: Inter-provincial transmission line capacity in CER’s Global Net-zero Scenario

Inter-provincial transmission lines facilitate the transfer of electricity to neighboring provinces, particularly during periods of lower demand or excess production^Footnote 2, and help to balance electricity supply and demand in all provinces.^Footnote 3 With additional inter-provincial transmission lines in the GNZ scenario by 2035, net inter-provincial electricity trade is projected to rise by 33% by 2040, and 18% by 2050 compared to 2021 levels. These transmission lines would also potentially optimize placement of key decarbonization^Definition* resources, like hydro, wind, solar power, and natural gas with carbon capture utilization and storage (CCUS), by maximizing installation in areas with greater resource potential. In the GNZ scenario projections, electricity use more than doubles by 2050 compared to 2021 values, and Canada’s electricity sector grows to satisfy increasing demand, transforming to produce more than 99% of its electricity with zero or low-emission technologies.

What if no new transmission lines are built?

The GNZ scenario is based on modeling that focuses on the technical and economic decision making of participants in the electricity sector. But what happens if there are other factors that impact the modeling? To better understand the impacts of new transmission on Canada’s electricity system in the GNZ scenario, the CER recently analyzed what would happen if no new inter-provincial transmission is built as projected in the GNZ scenario. In this sensitivity analysis^Definition*, inter-provincial transmission capacity was fixed at current levels, assuming no expansions during the projection period, keeping all other parameters consistent with those of the GNZ scenario.

Comparing the GNZ scenario with the sensitivity case shows that the absence of inter-provincial transmission expansions has a relatively modest impact on Canada's electricity systems in a net-zero future. However, the implications are more significant in western provinces^Footnote 4 than in other provinces.^Footnote 5 With reduced transmission capacity in the sensitivity case, there is an approximately 25% decrease in inter-provincial electricity trade by 2050 compared to the projections in GNZ scenario, meaning Canadian provinces produce a greater share of electricity within their borders, particularly in western provinces, and the energy mix in each of these province’s changes. The total cost of electricity generation is slightly higher in the sensitivity case by 2050.

Figure 2: Electricity generation in Alberta, B.C., Manitoba, and Saskatchewan by technology, with and without new interprovincial transmission expansions, in GNZ in 2050

The sensitivity analysis shows that in a scenario with no new inter-provincial transmission, more generation types that can respond quickly might need to be built, including just under 2,000 MW of hydrogen-fueled generating units, predominantly in Alberta, and 680 MW of natural gas with CCUS, primarily in Saskatchewan. Alberta experiences a decline in total generation in the sensitivity case, mostly due to reduced wind generation. Conversely, wind generation in B.C. increases, showing how new inter-provincial transmission lines facilitate the development of stronger wind resources in Alberta in the GNZ Scenario.

The biggest increase in generation occurs in natural gas with CCUS, which is nearly 10% higher by 2050 in the sensitivity case compared to the GNZ Scenario. Although a relatively higher amount of hydrogen-fueled generating capacity is projected in the sensitivity case, due to its relatively high fuel cost compared to other options, it is only used when other sources are unavailable and operates infrequently.

In both the GNZ scenario and the sensitivity case the importance of inter-provincial expansion varies across regions and over the projection period. Both the GNZ scenario and the sensitivity analysis assume declining costs of low-carbon technologies over the projection period, making emissions-free electricity production within provincial borders more cost-effective in the later years. The analysis also projects increased accessibility of demand-side management^Definition* options, particularly through electrolysis hydrogen production^{Definition*Footnote 6}. Demand-side management options could lower peak demand^Definition* conditions, reducing reliance on electricity supply-side solutions like increasing generation or importing from other regions.

Date modified:

2024-09-17