Preface – June 2023

Since the publication of Build It – The state of the Canadian electricity industry 2023 at the end of February 2023, there have been some significant events in Canada’s electricity sector. While the issues raised in this report are still as relevant now as they were in February, such issues are now in active conversation.

The first of these events was the March 2023 Federal budget. The investments proposed in the clean electricity space occupied a chapter of the government’s clean energy mandate. This budget signals a massive transformation to the electricity sector. Almost $1 in every $8 of anticipated new spending going to clean electricity projects through a variety of means.

The budget reflects the recommendations Electricity Canada made in the original version of this report. Important initiatives include:

• A Clean Electricity Investment Tax credit for 15% of most clean generation and interprovincial transmission investments, available to non-tax paying entities.

• $3 billion to recapitalize key funding programs including Smart Renewables and Electrification Pathways, Smart Grids and offshore wind.

• An expanded role for the Canada Infrastructure Bank to provide $20 billion in investments to support clean electricity and clean growth infrastructure projects

• Beginning investments with the Canada Growth Fund, including carbon contracts for difference (CCFDs), to help provide certainty to major investments. The government will also consult on a broader approach to CCFDs to make the system more predictable.

• A commitment to create a concrete plan to improve efficiency of impact assessment and permitting process for major projects by the end of 2023.

Where this budget truly succeeds is in understanding that supporting investment in the electricity sector and a clean economy reflects the public good. These important investments will make sure that the financial burden of modernizing the electricity system, not be shouldered by electricity customers alone. More importantly, infrastructure work— that will ultimately help the future of Canadian economy—won’t be passed on to the monthly bill of customers, which will help keep electricity affordable for all.

Since the publication of this state of the industry, Electricity Canada has published two reports that look at the challenges to building the infrastructure necessary for bringing the electricity grid to net zero by 2035 and the Canadian economy to net zero by 2050. Both of these new reports investigate the problems from two different, but interconnected, perspectives: the perspective of the regulators, and the perspective of those who are doing the building.

The first of these reports, Back to Bonbright: Economic regulation fundamentals can enable net zero brings regulators back to first principles, literally. Namely, the principles enshrined in 1961 by James C. Bonbright’s book Principles of Public Utility Rates, a work that has informed public utility investment and building for the past 60 years. This new report states that Bonbright’s principles can indeed work in a world driven by concerns around climate change and net zero. It then explores different options and regulatory mechanisms to enable regulators to support technologies that can help the world of 2023— and into the future.

The second of these reports, Build Things Faster identifies the barriers to building infrastructure quickly in Canada, which range from the limited capacity of permitting and regulatory bodies to assess and approve applications, to problems with planning large-scale interprovincial projects. In it, Electricity Canada offered several recommendations that we feel are simple, practical and achievable.These include:

• Coordinating federal project permitting and approvals through a single central federal office.

• Building capacity for regulators to deliver on net zero goals in their decisions, promptly and effectively.

• Implementing the “One Project, One Assessment” framework described in Budget 2023.

Throughout Build It , we discuss the need for a Canadian Electricity Strategy to help make building, and building things faster, a reality. The recent budget advances the elements of such a strategy, which could coordinate new and existing programs, help provide regulatory clarity and offer a clear path for getting projects built faster. We are still advocating for this strategy and we remain confident the work the government has committed to doing will advance that.

Canada’s electricity grid was the marvel of the 20th century. It helped birth the 21st century we now live in. We want the grid to create the 22nd century – carbon-free, reliable and affordable. The challenges for doing this are considerable. But with this budget, they are not insurmountable.

It’s time to come together, roll up our sleeves and get to work. Let’s build it. And build it faster.

Francis Bradley President and CEO