Canada’s electricity sector is predominantly low-carbon, but includes coal, natural gas, and diesel fuelled power plants. We use a new linear programming optimization model to identify least-cost pathways to decarbonize Canada’s electricity sector. We co-optimize investments in new generation, storage and transmission capacity, and the hourly dispatch of available assets over the course of a year. Our model includes hourly wind speed data for 2281 locations in Canada, hourly solar irradiation data from 199 Canadian meteorological stations, hourly demand data for each province, and inter- and intra-provincial transmission line data. We model the capacity of hydropower plants to store potential energy and respond to variations in renewable energy output and demand. We find that new transmission connections between provinces and a substantial expansion of wind power in high wind locations such as southern Saskatchewan and Alberta could allow Canada to reduce electricity sector emissions at the lowest cost. We find that hydropower plants and inter-provincial trade can provide important balancing services that allow for greater integration of variable wind power. We test the impact of carbon pricing on Canada’s optimal electricity system and find that prices of $80/tonne render Canada’s coal-fired plants uneconomic.

The Cost of Decarbonizing the Canadian Electricity System

Numerous strategies for sourcing renewable energy are available for development and expansion, yet for many countries the idea of eventually transitioning to a completely renewable energy supply using domestic resources currently appears unfeasible. As a large country with low population density, Canada may be expected to face fewer obstacles in this regard. However, not only are Canada’s population centres clustered largely in its south, but energy policy is significantly devolved to the level of provinces, making a match between energy demand and renewable supply more challenging. In this paper, in order to address this challenge, we present a scenario of renewable portfolios at the provincial level. We explicitly estimate the optimal sites, based on straightforward criteria, for development of each resource. In order to keep the analysis transparent, we focus on physical feasibility rather than economic details and, by lumping together all energy demand, we assume substitutability of demand between electrically-provided and fuel-based energy delivery. Our assessments include wind, solar, hydro, tidal, wave, and geothermal energy, with a limited discussion of bioenergy. For comparison, we also break down current energy demand in each province according to categories intended to be meaningful to households. We find that overall with current technology Canada could more than provide for its energy needs using renewables, two-thirds of which would come from onshore and offshore wind, with much of the remainder coming from hydro. We find each province individually to be easily capable of renewable energy self-sufficiency at current levels of demand, with the exception of Ontario and Alberta. We believe this is the first combined, geographically-resolved inventory of renewable energy sources in Canada.

The Renewable Energy Landscape in Canada: A Spatial Analysis

The push towards renewable energy sources has prompted major investments in mega-projects to generate hydroelectricity. However, government decisions to make such large investments in generating capacity must be scrutinized for economic soundness – particularly relative to the costs of alternatives for producing this power. Canada has several large hydroelectricity projects presently under construction including three that are the subject of this paper: Site C on the Peace River in northern British Columbia, Keeyask on the Nelson River in Manitoba, and Muskrat Falls on the Churchill River in Labrador. Each of these projects represents a multi-billion dollar upfront investment by public entities in long-lived generation capacity. This study examines the cost-effectiveness of these hydro projects by comparing the costs of equivalent generation from carbon cost adjusted combined cycle natural gas turbines (CCGT). The analysis demonstrates that the levelized costs from the Site C and Keeyask projects may exceed the costs of alternative CCGT generation. The study notes that risks of building large generation capacity in anticipation of uncertain future demand for electricity and contends that, relative to large hydro projects, the roll-out of CCGT generation can be more flexibly timed (and paired with environmental initiatives) to meet demand as it materializes. Even building-in the likely costs of cancellation, the author concludes that present economics would favour cancelling Site C and Keeyask and replacing the respective capacity with equivalent dispatchable CCGT generation capacity. The study shows that replacing Site C or Keeyask with equivalent CCGT capacity is cost effective even when applying a lower discount rate. While an emphasis on renewables generation has motivated these major hydroelectric projects, the analysis shows that Site C exceeds the levelized cost of a CCGT alternative that faces a $50/tonne carbon price. Moreover, drawing from results in recent renewable energy procurement, the study observes that wind generation can provide a much lower levelized cost of zero-emission electricity than such large-scale hydro projects. This study concludes by recommending that provinces re-examine the economics of these projects and consider cancelling projects which have more cost effective alternatives. To avoid uneconomic projects in the future, the report also recommends strengthening institutional independence – in particular, by ensuring independent regulatory review for mega-projects and leveraging greater private-sector discipline for the design and delivery of major electricity projects.

Dammed If You Do: How Sunk Costs Are Dragging Canadian Electricity Ratepayers Underwater

Impacts of export diversification on energy intensity, renewable energy, and waste energy in 121 countries: Do environmental regulations matter?

Do oil price shocks drive unemployment? Evidence from Russia and Canada

Insights for Canadian electricity generation planning from an integrated assessment model: Should we be more cautious about hydropower cost overruns?

Technology, technology, technology: An integrated assessment of deep decarbonization pathways for the Canadian oil sands

As Canadian crude bitumen production from oil sands has increased in recent decades, the nation’s oil and gas industry has become a significant contributor to national greenhouse gas emissions. Canada has developed carbon emission reduction targets to meet its Nationally Determined Contributions and Mid-Century Strategy goals. A detailed profile of energy consumption pathways in the oil sands industry is necessary to identify potential areas of improvement and to monitor progress toward meeting emissions reduction targets. Much of the existing literature for oil sands modeling provides input assumptions with different technological boundaries. For a set of oil sands extraction and upgrading technologies, this study first reviews the literature and then quantifies energy input requirements, CO2 emissions, and operating costs for a set of consistent technological boundaries and energy units. Summary results refer to requirements and costs at the production facility, excluding transportation and blending costs. An energy system diagram of oil sands production that matches these boundaries is provided, which can be used by integrated assessment models, oil sands companies, and government ministries to evaluate the present and future energy consumption and emissions pathways of the oil sands industry.

Diego V. Chiappori

Papers

Insights for Canadian electricity generation planning from an integrated assessment model: Should we be more cautious about hydropower cost overruns?

Technology, technology, technology: An integrated assessment of deep decarbonization pathways for the Canadian oil sands

Canadian Oil Sands Extraction and Upgrading: A Synthesis of the Data on Energy Consumption, CO2 Emissions, and Supply Costs