Lean hard on wind and solar but keep natural gas in the mix, RBC report says
Wind and solar should make up the bulk of new electricity generation in the next decade as Canada strives to expand its transmission system and meet its goal of a net-zero grid by 2035, with natural gas “unavoidable in the energy mix in the short-to-medium term,” a new report from the Royal Bank of Canada says.
Why are wind and solar among the report’s leading short-term solutions? The cost of wind and solar power have fallen 70 and 90 per cent, respectively, making them “the cheapest sources of new electricity,” RBC economist Colin Guldimann, the report’s author, said.
Furthermore, construction times on these types of projects are fast, meaning they can be added to the grid at a faster pace than other types of generating sources.
“Provinces facing near-term challenges should lean hard into building renewables, cutting inefficiencies, and maintaining their current gas capacity. The harder choices are yet to come,” he said.
On the natural gas front, Guldimann said existing plants should continue to operate through 2035 to ensure the transition over to a net-zero grid goes smoothly.
Canada is already a clean electricity juggernaut due to hydroelectric resources, but it’s at a crossroads. Consumption is expected to increase by 50 per cent over the next decade and a major overhaul is needed if the power grid is to double by 2050.
As a result, provincial and federal governments will need to make a series of choices that account for decarbonization while ensuring the grid is both reliable and affordable.
“If they get it wrong, Canada could suffer Europe’s fate of a hobbled, energy-insecure grid that leaves consumers with soaring bills,” Guldimann said.
An energy crunch in Canada is looming nearer than many might expect.
The report, released on Wednesday, warned that Ontario — “Canada’s economic engine” — could be confronted with an energy shortage “as early as 2026, especially as current contracts for renewables and gas plants expire.” Among the reasons behind the potential shortfall are rising electricity demand for electric vehicles and electrified public transportation.
In the West, Alberta and Saskatchewan will also have to soon choose a path. Those provinces have abundant sources of solar and wind power, but coal has played a “significant role” in their grids and some of those plants are being converted to gas. Given the provinces’ abundant sources of natural gas, eliminating its role could prove politically complicated, Guldimann said.