I watched the recent leaders debate with some dismay. The format issues and usual rhetoric aside, one topic stood out for me – climate change and energy.
The leaders did the expected by saying why their plan was best and the others were inadequate or worse. The discussion seemed to focus on who had the most ambitious aggressive policies and targets, almost like cost no longer mattered… after all, it’s a climate emergency. The obvious questions were never asked: What will it cost? Is it affordable? Who ends up paying?
I very much doubt that the experts who validated the parties’ plans have done a full costing either. If they have, then let’s see their analysis, assumptions made, and in particular the details behind the electrical system expansion clearly needed. It shouldn’t be up to voters to try to figure it all out. Cost still matters.
I have written a few articles in the past on this important topic, including estimating just the capital cost needed to build out an expanded electrical system. Here is my updated high-level projection on what these costs may be to achieve a 45 per cent CO₂ emissions reduction by 2030. I picked this target as the mid-point between the Conservative Party’s 30 per cent and the Green Party’s 60 per cent targets.
For full disclosure, my estimate makes these key assumptions:
- Fossil fuels’ share of the energy mix is halved, with energy demand per person falling by a third, representing a four-fold improvement over the previous five-year result.
- Population and economic growth levels remain the same.
- The power system expands by 50 per cent, most of it coming from wind and solar power with battery backup for grid stability. Note that lead times involved for new big nuclear and hydro stations restricts their impact by 2030, and Small Modular Reactors (SMRs) are a decade or more out.
- Minimal carbon capture.
- New infrastructure costs fall 10 per cent (real costs, unsubsidised).
- CO₂ emission declines measured from 2019 levels, which are the same as they were in 2005 (i.e. 2020 emissions declines from the COVID recession will be mostly added back by year end).
My estimated cost comes to roughly $750 billion, which is about $60,000 per family. If end-user costs to switch to electric vehicles (EVs) plus home/business/government efficiency upgrades plus new equipment plus lost government revenues are included, add another $200 to $400 billion. Note that I have excluded addressing the existing very large infrastructure deficit in Canada’s current energy system and the certain job losses from the shuttering of roughly one-quarter of our fossil fuel industry. Those job losses are unlikely to be offset by new energy jobs created, despite claims to the contrary. Note that energy accounts for about 75 per cent of all emissions, so the costs to eliminate the other 25 per cent are not considered but are likely quite large as well.
This cost is consistent with other large-scale decarbonization estimates. One from Wood Mackenzie, a top global energy consulting firm, estimated the capital cost to transition the US power system to 100 per cent green renewables may reach roughly $4.5 trillion US (infrastructure scale being roughly eight times the Canadian scenario here). Even the International Energy Agency’s 2050 Net Zero global roadmap published recently (and highly criticized by many as being unrealistic) pegs global energy system capital costs at around $60 trillion US. I have not found one focused on Canada.
The bulk of the electrical system costs will be borne by the provinces/territories because, as in health care, energy is their responsibility. It is therefore important to understand what the large provincial power system operators are actually planning for. In Ontario, the IESO 10-year plan expects an eight to 13 per cent total electrical demand increase by 2030. In Quebec, Quebec Hydro is planning for growth of nine per cent, and BC has future capital spending planned likely to decline some. Clearly, they are not planning for massive electrical power demand increases stemming from large scale decarbonization that are needed to meet the 2030 targets. Even for EVs, power demand rises to no more than 1.4 per cent of total demand in any of the IESO’s scenarios.
The implications of this level of spending, which will be debt-financed, are unclear, but the risks are extremely high given current Global and Canadian debt levels . Total Canadian gross debt (all governments, business and consumer debt) has grown over 20 per cent since the pandemic began and is now approaching 450 per cent of GDP, one of the highest globally. With inflation already rising, another massive increase in spending would only accelerate it. Combined with other large spending priorities, including for underfunded health care and aging infrastructure, large interest rate hikes are likely around the corner. This could trigger a collapse of the equity, debt and real-estate bubbles. What would follow wouldn’t be pretty.
All the opposition leaders correctly pointed out that zero progress has been made in reducing emissions under the Trudeau Government in six years, despite the promises, leaving little time to hit any targets. However, only Conservative leader Erin O’Toole actually stated that a balance between reducing emissions and supporting the economy and the recovery is the responsible path forward. In my view, he is correct.
In an ironic twist of fate, if voters choose irrational targets over responsible balance, net zero could turn out to be what the average Canadian family is left with come month’s end.
Dave Wilkin is a Professional Engineer, with a master’s degree in Electrical Engineering from the University of Toronto. His career spans 45 years in IT, banking, energy and consulting. He lives in Huntsville, Ontario.
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Paul Whillans says
The premise of this opinion is pretty ingenuous. The commentary begins with the concern that the political parties have not costed out their promises (although each party claims to have). Then with lightening speed, the author tosses out a figure of $750 billion to expand the electrical system. It is noted that this figure is entirely uncosted. It takes no consideration of the fact that infrastructure spending grows the the economy $1.43 for every $1 spent and creates 9.4 jobs are created for every $1 million spent and 44 cents for of additional tax revenues are generated for every dollar spent. Nor does it address the fact that according to Canada’s Insurers, extreme weather events cost Canada $2.4 billion last year, up from $900 million in 2011.
I suppose that the point of this article was to “shock” the reader with a “large” price tag. But I find $750 billion not at all shocking. It would be comparable to a household earning $75,000 (and growing at 1 to 3% per year taking on a fixed debt of $25,000 at an interest cost of $550 a year with cost offsets due to the spending.
While clearly for the country, for a province, for an individual household, the use of debt should be used judiciously. But tossing out an uncosted figure without addressing cost offsets, economic and social value added does very little to move the discussion forward.
Ray Vowels says
I’m not sure I understand all this talk about carbon from burning fossil fuel. Do not the trees and grasses and most living things need carbon to survive. From what I have read we still have enough trees in this country to clean any amount of carbon out of the air. I think we are going to need our gas and oil industry for quite a few years yet. I just can;t see electric cars replacing gas powered ones any time in the near future. This country is just to big and distances to great.
Oliver Klimek says
Dear Mr. Wilkin,
I understand you are concerned about the costs associated with a transition from fossil fuels to renewable energy, but I must respectfully point out three problems with your argument.
1. You estimate the cost of a 45% reduction of CO2 by 2030 to be about $750B-$1T, but you do not provide any detail regarding the costs you consider. You provided your assumptions (good) but there are so many additional factors involved that it is impossible to assess your estimate.
2. You claim the emission targets are “irrational”. The UN IPCC is the international body responsible for assessing the scientific evidence and policy alternatives available to the global community. The IPCC has set the target of 50% reduction of GHGs by 2030 as the only way to keep global warming to below 2C and ideally to 1.5C. This target is not irrational; it is absolutely necessary.
3. While there is clearly a cost to a transition from fossil fuels to renewable electricity, the costs associated with an insufficient response to global warming are catastrophic for life on earth. These costs far outweigh any other consideration.
I understand and share your concern regarding employment, debt and affordability, but if we want our grandchildren to inherit a liveable planet, we must eliminate the use of fossil fuels and we must transition to renewable, non-emitting sources of electricity. We can do it, but we must cooperate and we must act now.
Jennifer Nathan says
The cost of not bringing emissions plummeting down is breath taking, both monetarily and ecologically. This analysis would be easily dismissed by anyone with even a beginning understanding of collapsing ecosystems, rising sea levels and increased extreme weather events all inevitable in an increasingly warming world. Canada must deal with winding down oil and gas, not expanding it as the Canada Energy Regulator models (ignoring the IEA, the IPCC and the recent Nature Journal article that calls for 84% of the oil sands 49 billion barrels proven reserves to be left in the ground). We must move beyond cost to GDP to understanding the real threat to everybody’s well being if we ignore the science. This is a terrible failure of the imagination.
Dave Wilkin says
To be clear, I am not saying do nothing, to the contrary, we need to act. I am saying that people need to understand what the real costs likely are. Because so little has been published about what it’s actually going to take to reach aggressive targets, the discussion on costs and implications are absent. I wrote this piece to start a conversation. Hoping an energy transition will happen without big time infrastructure investment hasn’t worked. Canada’s emissions have only gone up since 2015 and time is running short. Carbon taxes and strict regulations are nowhere near sufficient, as is evident in Europe, where after many years of leading with them, they still have an energy system that is 80% fossil fuel based, and energy demand has remained mostly flat.
We need realistic targets and plans that are actually achievable and the people fully onboard. A rush to shut down fossil fuels as many now want before affordable alternatives are in place, at scale, would be a disaster. If you want a peak at what could happen, look no further than to what is playing out in much of Europe right now. The cost of energy is soaring to record heights, and the coming winter could well bring on power brown/blackouts on top of skyrocketing natural gas prices. This following recent more aggressive EU emissions targets and measures set a few months ago. Canada is lucky to have the energy resources we have, allowing for a rational and affordable transition to cleaner energy that won’t wreck the country. I don’t want us to blow this transition.
Paul, what you don’t know is that I have built an energy transition excel data model that sits behind the scenario included in this article. Yes, the assumptions affect the final numbers in a big way, thus why I stated some of the more important ones. It is impossible to describe the entire model and all the numbers and details in a short column like this. That would require a very detailed whitepaper. I have that detail, and I am prepared publish my findings on the energy transition. If you have cost estimates on what it’s going to take to reach Canadian emission targets, I would love to see them. If you don’t, please point me to a publicly available source that has. Then let’s have an informed discussion.
Fraser Horn says
Good perspective on the costs and I also thought it would cost more.
For more perspective, Andrew Leach, a prominent energy and environmental economist in Alberta has reviewed the party platforms and policies and says: “If climate change is your issue, you should vote for the party that understands both the challenge of climate change and the path to a solution. In this election, that’s the Liberals.“ He knows his stuff.
http://andrewleach.ca/uncategorized/theres-only-one-climate-vote-in-this-election-and-its-for-the-liberals/
Allen Markle says
Since the beginning of the Industrial Revolution in the 1700’s, man has found ways to exponentially, befoul this planet we live on. We have transformed the whole environment and some scientists agree we cannot expect a natural rebalance. Unless the cosmos has a meteor with earth’s name on it, to bring back an ice age and make us as the dinosaurs, it seems we will be responsible for the clean-up.
It will be a whole earth project: we will have to work with Russia, China, Bezos, N. Korea, Musk and the United States and it may cost us everything, one way or the other; but how much is life worth?
Among others, Benjamin Bratton, an American sociologist, suggests that we will need to terraform our earth, an as yet untried process for good, though there are myriad ways we do it for ill: clear cutting, oils sands and open pit mining being a limited few. We now need to modify our environment for good, to make it livable again. Reforestation is a simple step, nanotech (the manipulating of matter at the atomic and molecular level) to increase their performance is a further reach and learning to manage solar radiation is another proposed step.
But first we need to reach 0 emissions from oil, gas and coal, then we need to catch and store what carbon is already out there. This proposed ‘carbon credit’ scheme is one proposed by profiteering hucksters.
And after we have accomplished all this, it should take only about a hundred years for the oceans to cool, stop expanding, return to just being oceans again and not continue along this path of increasing violence.
This might all sound futuristic and I suppose it is, but is that not what we are trying to achieve?
So, ‘Mankind; your mission if you choose to accept it, is to save yourself!”
There is nobody here to help, so who’s in?
Hugh Holland says
Dave, Sorry but your estimates are way off the mark. They do not comprehend that electric vehicles use 70% less energy than internal combustion engines, and that most of them will be charged at night when electricity demand is down, which means many jurisdictions already have enough capacity to charge them, You do not recognize that that there are many ways to reduce the energy required for building heat, some of which have been used in Europe for years. You do not comprehend that every car on the road today will be replaced over the next 15 years and the incremental cost of replacing them with zero-emission vehicles will be negligable. You do not comprehend that every industry routinely budgets for replacement and moderniztion of capital equipment and again the incremental cost of replacing the old with zero-emision processes and equipment will be affordable. And apparently you do not comprehend that we may have to trade some luxuries for a loveable planet. Some things are more important than money.
Dave Wilkin says
Hugh, I understand power systems very well, and my scenario presented here is consistent with energy consulting companies modeling like from Wood Mackenzie. I simply don’t understand why you make such critical statements lacking solid backup.
I have a masters degree in electrical engineering, so I understand the realities & challenges facing our power sector, including aging infrastructure. I recently asked a few highly qualified power system engineers what it will likely take to replace all fossil fuel energy in Canada, growth included. A rough consensus ranged between a 2X to 3X expansion of today’s power grid, consistent with my own modeling and findings from consultancies like Wood Mackenzie. Suggesting clean electric power replaces all fossil fuel energy within a few decades is pure fantasy.
Regarding Battery EV’s (BEV) shifting the bulk of the charging load into evenings yields gains from load balancing, but nowhere near enough to offset the peak load demand mass EV charging will generate. It’s peak power demand, not just the KWhr averages that power systems must manage, otherwise they crash. That’s power systems 101 (yes, I did work for Ontario Hydro in my past too).
How large is the BEV demand? In 2020 BEV sales were 3.5 % of new vehicle sales, up about 10% from 2019. Roughly 80% were in just 2 provinces, hydropower rich BC and Quebec. Today about 115K BEV’s are registered in Canada, under 1/2 of one percent of all light vehicles registered. In Ontario it’s half that again. Tesla owns about 2/3rds of the market in N.A., and it’s the well-off driving their growth. Electricity prices are on the rise, and they will accelerate in the decades ahead, making future BEV affordability for the masses an even bigger challenge. Hitting 30% penetration by 2035 in Canada would be a significant accomplishment, and by then the number of vehicles on the road will have grown to over 30 million.
Investing in a cleaner and greener future is very important, we just need to be realistic about what is actually achievable and what it’s going to take to get there.