In previous posts I addressed the technology shift, infrastructure investment and policy priorities. In my final recap of the Energy and Mines Ministers Conference I'll look at the environmental policies and their impact on the industry.

Interwoven throughout the policy drivers and priorities identified in my previous posts is the need to address climate change by reducing Canada’s GHG emissions. This is the underlying theme found throughout today’s federal energy and environmental agenda, and is a key driver of the need to transform Canada’s electricity sector.

Canada’s electricity industry is already 75 percent non-emitting, due to the widespread use of hydroelectric and nuclear technology to generate electricity. In the November 2008 Speech from the Throne, Prime Minister Harper asked that the industry set an objective of being 90 percent non-emitting by 2020. This would mean replacing approximately 110 terawatt-hours of emitting generation with non-emitting generation, in addition to the investments required to renew and replace ageing facilities and equipment.

The federal government has also indicated that it will come forward with a framework to regulate the GHG emissions of the electricity sector prior to the United Nations climate change meetings being held in Copenhagen at the end of this year. Federal Environment Minister Jim Prentice indicated in a speech to the Economic Club of Canada that the electricity sector can expect to see a proposed policy framework introduced in the fall of 2009, implementing regulations published in 2010, a test of those regulations during 2011, and regulations coming into full force in 2012.

An effective federal policy for addressing electricity sector GHG emissions should drive reductions without negatively affecting the economy and the reliability of Canada’s electricity supply. The best way to achieve this is to align emissions reductions targets with the natural capital stock turnover process which will occur as the sector renews and replaces ageing assets. In addition, the establishment of sufficient compliance mechanisms will allow the electricity sector to meet targets early on, thus avoiding stranding existing assets that still have economic value. Finally, a comparable effort between sectors and regions of the country will ensure that no single industry or province bears an inequitable share of reductions, while keeping US climate policies in mind will help safeguard Canada’s position as a net exporter of electricity.

Planning for Transformation

Although many of the policies affecting Canada’s electric sector (particularly in the realm of climate change) will originate from the federal government, implementation of these policies will more often fall to the provinces. Given that provinces have jurisdiction over the generation and production of electrical energy, the planning and execution of the transformation described above will largely be the responsibility of electricity utilities and provincial governments.

A Valuable and Necessary Investment

The challenges to investing in Canada’s electricity sector seem daunting. However, the benefits to investing in safe, reliable, and clean electricity far outweigh the risks. Investment in electricity infrastructure will ensure a stable supply of electricity to support Canada’s economic and demographic growth. Growing our electricity supply responsibly, and investing in lower-emitting electricity technologies, will mean a reduction in our environmental footprint as well as economic and social benefits to our communities.

Investment in the electricity sector not only supplies us with electricity – it also directly powers Canada’s economy by providing jobs, tax benefits and export revenues. The sector employs more than 94,000 Canadians from coast-to-coast, and in 2006 it contributed $1.2 billion to federal, provincial, and municipal budgets. The sector accounted for more than $26 billion of Canada’s gross domestic product in 2008, while net exports of electricity to the US resulted in net revenues of $2.5 billion in the same year.

Electricity infrastructure investment presents an opportunity to transform the industry to meet the needs of tomorrow. However, these investments are not free – electricity companies will need to increase rates to support the huge capital outlays required to reshape our electric system. The value of their investments must be reflected in the price of electricity – investments which will mean economic growth and a cleaner environment for current and future generations of Canadians.

Pierre Guimond

President and CEO

Canadian Electricity Association