Remarks to the Canadian Standing Senate Committe on Energy, the Environment & Natural Resources

Impacts of Electrification
Calgary, Dec 15, 2016

The Canadian Energy Research Institute is a 40-year old organization that provides objective research dealing with the economic and environmental impacts of energy issues.  Due to our neutral status, we do not make recommendations or suggest policy options.  We do our best to give government and industry factual evidence from which to base their decisions.

There is a lot of debate in Canada right now about the transition to a lower carbon economy.  One solution is to use electricity for all end uses in the residential, commercial, Industrial and transportation sectors. CERI undertook an analysis to determine the impacts of electrifying the residential, commercial and passenger transportation sectors.  Industry and freight transportation are more complicated sectors to assess, so those were left out of our analysis for now. 

We wanted to know how effective these sectors could be in helping Canada meet its 2030 and 2050 carbon dioxide reduction targets. Our research sought the answer to three questions:

1.    What major transitions in energy systems are required to electrify the end-use energy services of residential, commercial, and passenger transportations sectors?

2.    What level of emissions reductions can be achieved through electrification of these energy services?

3.    What would it cost?

We compared our electrification scenario to business as usual.  Under this scenario electric equipment replaces natural gas equipment in the residential and commercial sectors through the normal retirement and replacement cycle.  The one exception is that the predominant fuel being replaced in Atlantic Canada is heating oil not natural gas.

We also replaced gasoline and diesel passenger vehicles with electric cars.  The timeline for this replacement started farther out in our review period due to the still developing nature of electric car technologies.

At the same time, the increased electricity demand which was provided by the grid, evolves into one with a high level of renewable and other non-emitting generation options, averaging over 60% in each province or region.  The remainder of the electricity was produced with natural gas, or with natural gas combined with carbon capture and storage.

Our first observation from the analysis is that a significant move of energy services away from natural gas, gasoline, diesel and heating oil would suggest a significant drop in emissions.  And there was, only not enough.

If we consider our 2030 target which is 30% below 2005 levels, we see that Atlantic Canada is 7% below, Quebec 9%, Ontario 14%, Manitoba 11%, Saskatchewan 8%, Alberta 6 % and BC 9%.  In 2050, the results are similar, additional reductions in emissions but only a fraction of what is needed to achieve the 80% reduction target.

So this first observation is that electrification of these three sectors is not enough. The industrial and freight transportation sectors are significant in terms of greenhouse gas emissions and would need to be included to achieve Canada’s emissions reduction goals.

The second observation is that average costs in 2050 are between 16% and 77% higher than the business as usual case.  That roughly means that in addition to the usual increases we see in electricity rates of 1 to 2%, we would see an additional 2 to 3% increase each year for 30 years.  Not large in an of themselves annually, but many electricity customers across the country are already concerned about affordability.

The third observation is that the increase in electricity demand is about 2 to 3 times what we use now.  That would mean an expansion of the grid in each province of about 2 to 3 times.  Given that renewable technologies represented lower energy density options, that land-use footprint would likely be larger. 

We know from simply reading the news that citizens are concerned about energy infrastructure being built anywhere near their communities.  This build out of the electricity system would be cause for concern.  One solution to this however, is the extensive use of distributed and self generation.  While this option can help reduce the overall footprint of the expanded electricity grid, siting issues will remain a challenge.

One other thing to keep in mind is there are taxes on fuels.  Total taxes collected federally and provincially on gasoline amounts to $11 B annually.  This tax revenue would disappear if we moved to our electrification scenario, with follow on consequences to government budgets.

In summary, a move to electrification of the residential, commercial and passenger transportation sectors is only one part of the solution if the federal and provincial governments want to achieve their emissions reduction goals.