Thank you, Madam Chair and members of the committee.
My name is Moe Kabbara. I'm the CEO of The Transition Accelerator. We are an independent organization that is focused on positioning Canada competitively within the energy transition. We work with industry, provinces, utilities, the financial community and labour unions.
I want to start today by talking about the electricity strategy, the size of the challenges it presents and what can be done about it, specifically from the vantage point of the federal government and its jurisdiction.
For decades, Canada has invested about 0.7% of its GDP in the electricity system. For a decade, that was enough because demand was flat, but that era is over. To electrify how Canadians drive, how we heat buildings and how industry runs, we need to double that investment to about 1.7% of GDP. That is an incremental $30 billion a year, every year, for the next couple of decades.
This is a nation-building project. The major generation and transmission distributions are going to take the better part of a decade to plan, permit and build. We're going to take the next couple of decades to deliver on the ambition of that strategy.
I'm going to talk about three things today.
First, I'll talk about proportionality. The federal government's flagship tool right now for clean electricity is the clean electricity investment tax credit. Jason just mentioned it. It's committed about $25 billion through to 2034. As mentioned, the build-out of the grid is going to be over $1 trillion over the next couple of decades. We've analyzed that, and it's about $3 billion a year if we take the investment tax credit against the incremental need for $30 billion. The question we should be asking is whether we have the right level of support, given the cost, the gap and the ambition.
We can go back to the idea that this is in provincial jurisdiction: What's the role of the federal government? The reality is that every dollar that goes into the grid is ultimately paid by one of two people or entities. We have the taxpayer and the ratepayer. Historically, it's been the ratepayer. Utilities borrow money, build and recover the costs through the monthly bills of the ratepayers. The idea of loading a near doubling of investment entirely onto the rates means that bills are going to go up at exactly the moment we're asking households and businesses to spend money to electrify and buy electrical equipment—buying an EV or a heat pump—because it's going to save them money. The rising bills don't just strain affordability; they can actually kill the very adoption and market transformation we're trying to get to with the electricity strategy.
The question, then, is what federal levers can be used. Ottawa should not and cannot fund the whole build. Most of the grid sits on provincial balance sheets, so what can be done? One thing is sending a durable signal by extending the clean electricity ITC beyond 2034 and expanding it beyond the current amount so that utilities are actually able to take this into their planning processes to be able to meet the ambition of the electricity strategy.
A second thing goes straight to the affordability question. The Prime Minister mentioned leveraging our AAA credit rating as an asset to help fund this strategy in the build-out. We can look at provincial utilities. Their debt is not equal. New Brunswick currently sits at about a 97% debt-to-equity ratio, and that results in a high cost of capital, which results in higher bills. Ultimately, whether it's loan guarantees, concessional financing or the restructuring of legacy utility debt, this is one lever that can be within federal jurisdiction, and it is a clean way to basically help shift the burden off of the rate bearers—Canadians—and help bring bills down for them.
Lastly, I'm going to talk about end-use electrification. Ultimately, we're trying to make sure we have the electricity, but we're also trying to electrify our economy. There are things like the iZEV consumer rebate. We've seen what happens when it runs out of money abruptly and is then paused. When we're thinking about other types of end-use electrification incentives, I really encourage a dynamic similar to what was announced last year on the iZEV, whereby we have a bit more of a scheduled ramp-down. The ZEVIP—the zero emission vehicle infrastructure program for infrastructure—runs out of money next year. There's no clear signal on whether that's going to be recapitalized.
It's really about trying to send clear signals on the end-use electrification side in terms of the role the federal government is going to play fiscally in order to support the long-term build-out of infrastructure, eco-electrification, heat pump adoption and industrial electrification.
Thank you.
