thinkenergy shorts: the on and offs of trading electricity

Will U.S. tariffs disrupt Canada’s energy sector? What is the current state of cross-border electricity trade? How can we strengthen interprovincial connections to secure a sustainable energy future in our country? Host Trevor Freeman summarizes the on and offs of Canada’s electricity trade. Tune in to learn about the complexities and challenges of evolving energy policies, infrastructure, and regulatory landscapes governed by both federal and provincial authorities.

Related links

●     Canadian Energy Regulator: https://www.cer-rec.gc.ca/en/index.html

●     The Transition Accelerator: https://transitionaccelerator.ca/ 

●     Electrifying Canada: https://electrifyingcanada.ca/

●     Canada Electricity Advisory Council: https://natural-resources.canada.ca/energy-sources/canada-electricity-advisory-council

●     thinkenergy episode 143 with Quest Canada: https://thinkenergypodcast.com/episodes/electrifying-canadas-remote-communities-with-quest-canada/

●     Trevor Freeman on LinkedIn: https://www.linkedin.com/in/trevor-freeman-p-eng-cem-leed-ap-8b612114/

Hydro Ottawa: https://hydroottawa.com/en 

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Transcript:

Trevor Freeman  00:07

Welcome to a think energy short hosted by me, Trevor Freeman, this is a bite sized episode designed to be a quick summary of a specific topic or idea related to the world of energy. This is meant to round out our collective understanding of the energy sector, and we'll compliment our normal guest interview episodes. Thanks for joining and happy listening.  Hi everyone. Welcome back to another thinkenergy short. I'm your host, Trevor Freeman, today we're going to take a look at Canada's electricity trade. You may recall that in my first episode of 2025 we did a look ahead at the year in energy, and we did briefly touch on potential upcoming tariffs, and I highlighted that there is a fair amount of trade and electricity across the border. So, given that we are still on the potential cusp of these tariffs being implemented, I'm recording this on march 3, and March 4 is the date that new tariffs are set to be implemented by the US on Canada, we thought it was probably a good idea to take a look at trade through the lens of electricity, to give you a sense of how this might impact electricity and what the future might hold. So we'll look at the current landscape, the challenges posed by some of these recent policies, and the potential for strengthening interprovincial connections to ensure a resilient and sustainable energy future.  So, let's start by establishing the current state of Canada's electricity trade. In short, Canada's electricity grids were designed to serve local demand, rather than looking at a large scale, integrated national grid, for all. We'll get more into this shortly, but it's the main reason why you'll see the majority of Canada's electricity grids at the provincial level are kind of oriented north to south when it comes to interconnections, rather than east to west. They are a stronger trade relationship to meet the higher demand of the United States, rather than between provinces and territories. Canada's electricity trade has long been a cornerstone of the North American energy framework that's governed by both federal and provincial authorities. These cross-border interconnections have facilitated a robust exchange with Canada, exporting around $3.2 billion worth of electricity to the United States in 2023 alone. And yes, that was billion with a B. So, let's talk about cross border trade. The Canadian energy regulator, or CER, oversees electricity exports to the United States, ensuring compliance with market regulations, fair access and impact assessment on our domestic supply. It should be noted that the CER does not regulate electricity imports into Canada. That is the role of provincial Crown corporations or private market participants who decide on the volume of electricity being traded here in Ontario, as we've talked about many times on the show, the IESO, or Independent Electricity System Operator decides on the amount of electricity that is needed in coming in terms of infrastructure, the CER regulates 86 different international power lines that connect Canada's provinces to the US electricity grid in different locations. So, to help you visualize this, you know, imagine a map of North America, starting west to east. We've got British Columbia, which is linked to the US Pacific Northwest grid. Manitoba and parts of Ontario are both connected to the US midcontinent grid. The other part of Ontario and Quebec are connected to the US Eastern grids. And finally, New Brunswick is connected to the US New England grid. So, there are a lot of different connection points across the map. So that gives you a picture of our current trade relationship, so, now let's look at how some of the recent policy shifts may affect that.  Canadians will be well aware that the dynamics of international trade are being tested by the recent shift in the US approach to trade policies, and that includes the electricity trade. As I said at the beginning, I'm recording this on march 3, the day before broad, sweeping tariffs are set to be imposed by the United States on Canada, and that will impact electricity potentially, as well. The Trump administration's imposition of tariffs on Canadian imports has introduced a whole layer of uncertainty and tension. In response, Canadian officials have contemplated numerous different measures, including restricting electricity exports to the United States, states like Michigan and in New York or Minnesota who receive a lot of electricity from us. In Ontario, our recently reelected premier Doug Ford has highlighted the significance of these exports and has noted that Canada's electricity has powered 1.5 million American homes just last year, as recently as last month, Premier Ford raised the possibility of charging Americans more for electricity that Ontario sends to the US, and has also announced plans to cut off energy exports to the United States if the Trump administration moves ahead with tariff threats. These developments create a climate of uncertainty, and such trade disputes underscore the vulnerability inherent in our current trade dependent system. That vulnerability has raised calls for Canada to look and invest inward, which brings us to interprovincial connectivity. Let's examine the case for strengthening interprovincial connectivity in Canada, as I said at the top, we don't have a national grid. In fact, Canada's electricity infrastructure, which we've talked about many times, consists of multiple provincial or territorial grids, each governed and regulated by its respective province or territory. They also vary in systems and resources for producing electricity, with some regions having ample access to water resources, hydroelectricity, for example, others relying heavily on nuclear energy, and still, others looking more to fossil fuels, like oil or gas for electricity generation, a more cohesive pan Canadian electricity grid has long been a topic of conversation, even before this current threat of tariffs from the United States. A few years ago, there was renewed interest in the idea of interprovincial connectivity to achieve a 100% net zero electricity system by 2035 and eliminate harmful emissions countrywide by 2050. Basically, utilizing the electricity grid to support decarbonization at the individual customer level. Of course, the federal government has recently relaxed its goal for a net zero electricity system by 2035 mostly due to feasibility concerns, but the goal is still there to achieve Net Zero electricity generation across the entire country, and work has already been done towards that. So, working closely with Natural Resources Canada, the transition accelerator, which is a nonprofit organization dedicated to accelerating the transition to low carbon economy and advancing Canada's 2050 climate target, created an initiative called Electrifying Canada, which was focused on widespread electrification throughout the economy. That initiative brought together a diverse group of stakeholders, including government, indigenous peoples, industry, labor and civil society, to develop a roadmap for the electrification of Canada. This roadmap runs in parallel with the federal government's Electricity Advisory Council, and outlines recommendations to create a pan Canadian electricity grid, including identifying the infrastructure needed, the regulatory and policy changes that are required and the necessary investments needed to make it happen. Given the challenges presented by the United States and the growing discourse around bolstering interprovincial electricity connections, enhancing our domestic grid could offer several different benefits. These could include energy security. So, by reducing reliance on external markets, we can ensure a more stable and self-sufficient energy supply. There's also economic resilience, strengthened interprovincial trade can mitigate the economic impacts of international trade disputes and tariffs. And finally, there are environmental goals, so a cohesive national grid can facilitate the integration of renewable energy sources, aiding in the achievement of our net zero emissions targets. The CERs Canada's energy future 2023 report projects a 27% increase in interprovincial transmission capacity by 2035 under a global net zero scenario. So, we need this interprovincial connectivity in order to meet our net zero targets. It's something that kind of has to happen anyway, or is one of the key strategies in order to make that happen. This expansion would enable more efficient electricity transfers between provinces, allowing us to optimize resource utilization and enhance grid reliability. All the things that we talk about on this show about how to make our grid more efficient and more effective can be enhanced by looking not just at our provincial grids, but at more of a pan Canadian grid. While a National Grid offers many benefits, there are significant challenges to overcome, surprise. Surprise. We talk about this all the time on the show, so let's explore some of these challenges and considerations in order to make interprovincial connections a reality. To start with, the existing infrastructure was primarily designed for localized needs and aligning the diverse regulatory frameworks of each province or territory presents a complex challenge. Additionally, significant investment would be required to develop the necessary transmission lines and related infrastructure. So, it's both a regulatory challenge as well as a physical infrastructure challenge. We just don't have all the transmission lines and interconnections that are required. Here, according to the CER Market Snapshot webpage, electricity transmission lines in the Yukon and Northwest Territories do not actually connect to the larger North American grids or even to each other. And Nunavut doesn't have any transmission lines connecting its communities at all, but rather, each community independently generates and distributes its own electricity. I'll draw your attention back to an episode that I did last October with Gemma Pinchin from Quest Canada. And in that conversation, she highlighted that almost 200,000 Canadians in more than 280 remote communities don't connect to their local electricity grid or natural gas system, and it's not feasible at the moment for them to do so, given how remote they are. So, that presents some challenges as well. At a more macro level, looking at interprovincial framework, in August 2023 Ontario and Quebec announced a 600-megawatt electricity trade agreement, exemplifying the potential for greater interprovincial collaboration. Such initiatives could serve as blueprints for broader efforts to enhance our national grid. Despite these challenges, there is progress being made by investing in our domestic infrastructure and fostering provincial collaborations, Canada can build a resilient, sustainable and self-reliant energy system poised to meet future challenges. The energy transition, as we've talked about before is all encompassing and includes many different strategies. So, while we sometimes talk about the end result that EV or that heat pump that needs to be installed on the show, we also need to look at the more macro level, as how do we actually arrange our energy systems and our provincial grids, and what is the best option for that.  So, that wraps up our look at Canada's electricity trade and how the current trade landscape might impact that moving forward. Hopefully you found that interesting. Thanks for tuning in for another think energy short, as always, we'd love to hear from you, and we'll talk to you next time.  Thanks for tuning in to another episode of The thinkenergy podcast. Don't forget to subscribe wherever you listen to podcasts, and it would be great if you could leave us a review. It really helps to spread the word. As always, we would love to hear from you, whether it's feedback comments or an idea for a show or a guest. You can always reach us at thinkenergy@hydroottawa.com