Canadian utilities are not doing enough to prepare for soaring electricity demand, warns one policy expert who sees a "massive disconnect" between spending plans and forecasts for energy use.
"It's a big, big problem," Bruce Lourie, president of the net-zero-focused Ivey Foundation, told Yahoo Finance Canada on Tuesday. "Public utilities are afraid to own the risk of making wrong decisions."
Canada's federal government has committed to achieving a net-zero grid by 2035. Speaking at an event in Toronto hosted by the Canadian subsidiary of French cable and optical fibre-maker Nexans, Lourie says utilities also face the challenge of rapidly expanding the grid while replacing aging power generation infrastructure. His comments follow multiple reports calling for both rising electricity demand in Canada, and the need for more generation capacity.
According to the Canadian Climate Institute, electricity demand will be 1.6 to 2.1 times larger in 2050 compared to today. Researchers say that means installed capacity may need to more than triple from today's level. Last week, RBC called for electricity consumption to surge by 50 per cent in the next decade, risking power shortages in Ontario as early as 2026.
"Utilities are actually not doing a great job of forecasting the increase in building electrification, and the increase in vehicle electrification," Lourie said in an interview. "There is a massive disconnect right now."
A spokesperson for the Ontario Energy Board, regulator of electrical and natural gas utilities in Canada's most populous province, declined to comment on Lourie's assessment. Alectra, a municipally-owned electric utility serving about a million homes in Ontario, did not provide a comment in time for publication.
"After a decade of investment, we're still not spending enough on clean electricity, which needs $200 billion in investment by 2035 to meet current green grid goals, and more thereafter to accommodate rapid growth in electricity demand," RBC economist Colin Guldimann said in new research released on Wednesday.
Brady Yauch is markets and regulatory manager at the Ontario-based electricity price forecasting firm Power Advisory. He agrees there is a disconnect between utility spending plans and where demand is headed.
"Demand growth is expected to be much higher than what has occurred in the past decade. Electrification is likely to require significant investment from utilities, both in terms of wires and generation," he said in an email. "Utilities are starting to grasp it, but have not fully included it in their spending plans, and will likely face a pushback when they do."
With the exception of those in Quebec, Lourie says public utilities rarely think beyond the immediate needs of customers in their region. He adds that many are wary of major spending, and are sensitive to the risk of making costly missteps in navigating the energy transition, especially as more essential services like heat rely on electricity.
"If we get to the point where a majority of residences are also heated with electricity, and there is a power failure, that could be catastrophic," Lourie said. "I think there is a reluctance on the political side of the electricity industry, because they're afraid to own that risk."
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.