Thank you, Chair and members of the committee, for inviting me to testify.
We often hear about the energy trilemma of the need to balance reliability, affordability and sustainability in our electricity systems. It's obvious to me that these characteristics are not three legs of an energy stool but components of a hierarchy, with affordability and reliability on top and sustainability at the bottom. This is not cynicism. This is Maslow's hierarchy of needs.
Canada is uniquely blessed to have an electricity grid that enjoys all three characteristics: 84% of our electricity grid is powered by non-emitting sources, thanks to Ontario's nuclear capacity and the country's ample hydroelectric resources. These are also cheap electricity and provide competitive industrial rates. In fact, Canada is the best performer in the G7 on both measures. On top of this, Canada's electricity industry boasts a 99.93% reliability of service rate. Our clean, affordable and reliable electricity grid provides a competitive advantage to Canadian industry and a high quality of life for Canadian citizens.
However, I fear that we have taken this for granted and are now putting it at risk. In the quest for the perfect—a net-zero grid by 2035—we will be sacrificing the good.
Due to policy choices including, but not limited to, the proposed clean electricity regulations, Canada is almost certain to have more expensive and less reliable electricity in the coming years. Perhaps the reward will be a slightly cleaner grid, but it will come at the expense of heavy industry relocating to cheaper jurisdictions with dirtier grids—a pyrrhic victory if ever there was one.
Here is what is at stake. As we have seen from our allies in Europe, high energy costs are very bad for the economy, and that makes them bad for society as well. Although that continent is adding solar and wind power at an impressive pace, it is not translating into cheaper electricity by any means. Rather, we are seeing deindustrialization in Europe. Their energy policies are a cautionary tale, not a model.
The task we set for ourselves—an emissions-free grid by 2035—is made all the more difficult by the fact that electricity demand is rising for the first time in decades. This is due to a combination of a growing population, electrification of energy use and new areas of demand such as data centres. Despite this rising demand, investment in the electricity sector in Canada is anemic. Based on Natural Resources Canada's most recent major projects inventory, the number of projects planned or under construction in the electricity sector declined, from 223 projects worth $156 billion in 2014 to 182 projects worth $98.9 billion in 2023, or equivalent to $78.9 billion in 2014 dollars. It's a 49% drop in value.
Adding even more barriers and costs through the clean electricity regulations and other policies will absolutely hamper Canada's ability to expand its generation capacity and compete for data centres and energy-intensive manufacturing. This is bad economically as well as strategically.
I will also address the risks to the way that we are planning to add clean electricity to the Canadian grid. Many environmental advocates, as well as some Crown corporations, are pushing for the majority of new electricity generation in Canada to come from solar and, especially, wind power. There are several risks to this. The first and most obvious is that they are intermittent sources, and across most of Canada the sun does not shine and the wind does not blow during winter load peaks.
To highlight the energy security costs and benefits of different electricity sources, Canada has abundant natural gas, uranium and water. Our supply chains are almost wholly domestic for nuclear, hydro and natural gas power generation. By contrast, the global supply chains for solar panels, wind turbines, batteries and electric vehicles depend, to a large extent, on China, a potential adversary on which we applied tariffs due to unfair trade practices.
Inasmuch as the federal government has jurisdiction to improve affordability, reliability and sustainability, it should be incentivizing those sources of generation that enhance rather than detract from energy security. An emissions-free grid is a commendable goal. With advanced nuclear, CCUS, hydrogen and pumped storage, we have several good options for clean electricity in the medium term.
I finish by suggesting that decisions on Canada's electricity grid should respect and defer to those charged with managing Canada's electricity grid, rather than environmental organizations. When the electricity industry says 2035 is too soon to achieve our emissions goals, I believe them. I also believe that they are acting in good faith to decarbonize as fast as is economically and logistically feasible. We'd all be better off if federal policies were directed at supporting their efforts rather than complicating them.