October 10, 2011 / By Pierre Guimond

The Canadian Electricity Infrastructure Deficit

It’s time for Canadians to focus on the urgency of making multi-billion-dollar investments to upgrade, repair and expand the electricity infrastructure across Canada.

Capital investment in electricity infrastructure declined dramatically in the 1990s. After reaching a peak of $15 billion in 1991, investment fell rapidly to just $5.3 billion in 1997 as a result of overcapacity, poor economic conditions and electricity prices that had outpaced inflation as the new facilities built in the prior ten years caused rates to rise.

Because of the recent lack of investment, the average age of Canada’s electricity generating units is about 32 years. Transmission lines are also getting older, with only about 400 kilometers of new transmission added annually between 1990 and 2007 across a vast country. Distribution assets also need significant updating and investment, both because of their age and to capture the benefits of smart grid technology.

Canada’s population and economy have grown over the past two decades. A system that was designed to meet the needs of 20 million people is now struggling to keep pace with the demands of 32 million Canadians.

The International Energy Agency estimates that Canada needs to invest $240 billion in its electricity infrastructure between now and 2030, both to meet growing electricity demand and to replace a large number of generating stations reaching end of life. The Conference Board of Canada forecasts an even larger expenditure by that date – some $294 billion, or about $15 billion per year.

While the investment will be costly and will impact prices, the cost to the economy of letting the system deteriorate would be much greater.

Reinvesting in the electric grid would guarantee future supply reliability. It would also make an already clean system (75 per cent emission-free now) even cleaner – the Canadian grid is likely to be 90 per cent emission free by 2030, with large amounts of renewable generation added and most coal plants retired or sequestering their greenhouse gas emissions.

It would also be an opportunity to invest in new technologies, such as the smart grid. Smart grids will bring our distribution systems into the digital age: making it easier to incorporate local generation of renewable sources of power; increasing system automation and supply security; protecting power quality for sensitive electronics; and providing much more information to customers so they have more control over their usage. New products such as smart appliances, home monitoring controls and electric vehicles will become commonplace, benefiting consumers.

Canada also has an unprecedented opportunity to stimulate the economy and create high paying jobs for Canadians, not through short-term stimulus spending, but by supporting economic infrastructure investment that creates wealth. A recent CIBC Economics Report, “Energizing Infrastructure”, makes the case for moving forward with electricity investments. According to CIBC Vice-Chairman Jim Prentice (a former federal Minister of both Industry and Environment): “For every $1 billion investment in the electricity sector, CIBC economists estimate close to 1,100 jobs will be created, for a grand total of more than 320,000 jobs building electricity infrastructure over the next two decades.”

Canada must start a dialogue about its electricity infrastructure to ensure that the need for investment is understood, that investments are made in the most efficient and effective manner, and that the Canadian public supports this important national priority. A cleaner, more reliable and more customer friendly system is achievable if Canadians are willing to make the necessary investments.

The importance of electricity to our economy is too great to delay investing any longer.