FEATURE: Blackout: Canada’s Impending Electricity Crisis and How to Fix It – Heather Exner-Pirot

Canadians must push their politicians for change before the current supply conditions get even worse.

By Heather Exner-Pirot

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Original: macdonaldlaurier.ca/blackout-canadas-impending-electricity-crisis-and-how-to-fix-it/

Executive Summary

Electricity is not a regular commodity or service. It is the foundation of economic growth and material well-being, underpinning productivity, income, health, and quality of life.

Canadians have long enjoyed abundant electricity, with higher generation levels, lower prices, and a cleaner grid than their OECD peers. Affordable and reliable electricity has been crucial to the competitiveness of energy-intensive sectors such as steel, aluminum, pulp and paper, chemicals, and fertilizer. In Canada, electricity hasn’t just correlated with growth – it has driven it.

Yet this long-standing surplus is now at risk. Demand is rising due to AI data centres, natural resource development, electrification, and population growth, while generation has fallen both in absolute and per capita terms.

The most obvious manifestation of this trend is that Canada recently became a net importer of electricity from the United States.

Investment in this critical input is flat. Burdensome regulations, market shifts, and climate policy uncertainty have hindered the development of new electricity supply. Over the past two decades, governments in Canada prioritized grid sustainability, even at the expense of reliability and affordability. Our electricity surplus has diminished because we became complacent. The sector now demands our attention – and we must respond intelligently.

Canada must act now to prevent a looming electricity shortage. This will require pragmatic climate policies, stable and predictable policy frameworks, and measures that attract private investment.

The decades of electricity abundance and affordability are coming to an end. Generation is down, exports have become imports, and investment is flat. At a time when electricity is increasingly scarce and its availability is a key competitive advantage, Canada’s impending shortage is not just an affordability issue – it is also an economic and security crisis.

Canadians must push their politicians for change before the current supply conditions get even worse.

Key recommendations include:

• Stability and certainty: As energy becomes increasingly politicized, stability in Canadian electricity policy has eroded. Frequent changes to policies, strategies, mandates, and regulations – often annually – have prevented consensus on long-term goals and imposed real economic costs. Investors and project proponents need confidence that policy trajectories will persist beyond the next election. Achieving this requires durable policies developed in coordination with utilities and industry stakeholders, supported by strong provincial–federal collaboration.
• Pragmatic climate policy: Climate policy has shaped most electricity decisions in Canada over the past two decades. While electricity systems aim to balance reliability, affordability, and sustainability, federal policy has prioritized sustainability at the expense of the other two – despite most ratepayers placing reliability and affordability first. Canada’s grid is already largely clean; making the final 20 per cent non-emitting will be far more expensive than the first 80 per cent, and beyond what many ratepayers can or will fund. The Clean Electricity Regulations (CER) are therefore incompatible with reliability and affordability goals and risk creating scarcity. Although the Alberta–Canada MOU allows a potential CER carve-out, it depends on renegotiating industrial carbon pricing. A stable and competitive industrial carbon price – ideally $80–90 per tonne through established provincial systems – is a more effective way to drive efficiency and technology adoption without overburdening customers or harming sector competitiveness.
• Private sector attraction: The scale of Canada’s electricity needs and challenges means that public sector spending cannot fill the gaps. For the country to achieve its electricity and economic goals, the private sector must have confidence that it can allocate capital in Canada in a reasonable amount of time, for a reasonable return on investment. It is not enough for Canada to decide that it is ready to grow; it must also compete. As such, policymakers should adopt policies that foster a competitive investment climate, including clear and predictable tax rules and incentives. The indicators of success for Canada’s electricity policy should be clear: growing private sector investment, absolute and per capita generation and transmission growth, and competitive, stable pricing compared with peer jurisdictions.

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