Electrification to net zero

Lisa Raitt: Thank you for tuning in to The Raitt Stuff. I’m your host Lisa Raitt, former cabinet minister in Stephen Harper’s government from 2008 to 2015. I’m here now at CIBC Capital Markets and in this podcast, I’m going to share insights on current hot topics in the areas of public policy, politics and business with some guests along the way. Well, welcome back again to the Raitt Stuff I have with me today, a guest from the electricity sector, Francis Bradley, who’s the president and CEO of Electricity Canada. Francis, I’ve known you for a while. You’ve been at Electricity Canada and its former incarnation of Canadian Electricity Association for thirty three years and twelve years ago, I was actually a minister that you guys would call on a lot to come out and and give out some safety awards that you used to give out as an organisation to employees.

Francis Bradley: Yeah, you were a minister that we called on in, I guess, two of your roles. Minister of Labour. You participated in some of the work that we did, but yeah, you were also our go to minister when you were at Natural Resources Canada.

Lisa Raitt: Yeah. And one of the awards one year went to a resident of Milton, who was one of my associates. I think he saved somebody from a from a truck or something like that. It was always fascinating to to hear the stories behind these heroic people who went above and beyond and were recognised by your association for doing good things. So I always like those awards. I thought they were meaningful, but now here we are today talking about a whole different world than the one that I would have worked in with you back in two thousand eight and two thousand ten regarding electricity.

Francis Bradley: Yeah, things have changed. We’re now in a world where we’re living the net zero world and the world of net zero commitments. We were certainly talking back in our work together about reducing carbon decarbonisation, but we didn’t have the hard targets that we had today. We had the soft targets of Rio and Kyoto. But yeah, we’re living in a very different world today because of those targets.

Lisa Raitt: And when we talk about East-West grid, I do remember a lot of discussions about whether or not we were going to be able to put an east west grid together, certainly not the focus on electricity as there is today, as the world looks to electrification, as the solve to get us to net zero in the future before we get into the nuts and bolts of getting to net zero and how electricity is going to help. Tell us a little bit about your association because a lot of the folks who listen aren’t necessarily familiar with the Ottawa world of associations and the important work that they do.

Francis Bradley: Sure thing. Yeah. So Electricity Canada, previously known as the Canadian Electricity Association or the Canadian Electrical Association, as it was known when I joined so many years ago, is the Association of the 40, basically the forty two largest electricity companies in the country. So the largest crown corporations, investor owned utilities, large distribution companies, independent power producers in all 10 provinces and all three territories. And I report to a board of directors that’s made up of the CEOs of those companies, including Ken Hartwick, who’s my chair, the board of directors, and was just recently a member of your podcast.

Lisa Raitt: That’s right, we had Kent on talking about small modular reactors and the plans OPG has for them going into the future. The interesting thing to me about Electricity Canada, though, is, I mean, it really matters what jurisdiction you’re in and how electricity is treated. So it must be interesting trying to keep a knowledge of of what’s happening across the country at any given time.

Francis Bradley: Interesting is a polite way of putting it. It can at times be very challenging. And I mentioned a couple of minutes ago that we’re living in a world of hard commitments with respect to greenhouse gas emissions reductions. Now those commitments are made by the federal government, but at least with respect to the electricity sector. Electricity is a provincial responsibility, so that further complicates things, and it certainly does make things interesting from a planning standpoint and also from a collaboration standpoint. We’re trying to manage national issues in a sector that is provincially regulated. We are looking at GHG emission reduction targets, including net zero by 20 50 that are commitments made by the federal government in international forums. But principally, if you look at models and projections that have been done about what is it, you know, a world of net zero, 20 50 look like, all of those projections essentially say it’s principally going to be through electrification. And so the federal government doesn’t directly regulate electricity companies. So the delivery of that net zero 20 50 future is going to depend upon the people that produce and distribute kilowatt hours all across this country.

Lisa Raitt: And President Biden in the United States has a further promise, he said. By twenty thirty five, they’re going to be net zero on their electrical grid, I think, or pretty close to it.

Francis Bradley: And our government. Soon they. Thereafter came forward with precisely the same commitment. So the government here in Canada has committed us to a net zero electricity grid by twenty thirty five, and that is a significant challenge. More so in some jurisdictions than others. But it is indeed a challenge because we were working towards a net zero economy wide by twenty fifty a twenty thirty five is an aspiration that the government has, but it’s not yet a policy, right? So we’re waiting on a discussion paper from the government of Canada that is going to talk to, we hope what the specific policy instruments are going to be to be able to achieve that. Twenty thirty five net zero grid aspiration because as you know, from from your time as minister, the time that’s required for a project planning, siting approvals, engineering, construction, commissioning, this is not insignificant. Now you couple that with a more challenging regulatory environment. The need in some cases to get community buy in for projects, in some cases to building partnerships with indigenous communities. So building projects is ever more complex, not less so. And that clock to twenty thirty five is ticking. And so it is probably the biggest issue for the sector right now to get clarity in terms of what exactly that policy environment is going to be for us to be able to get to twenty thirty five.

Lisa Raitt: When I first became minister in 08, which is 14 years ago, 14 years ago, I used to give the statistic in the House of Commons that seventy eight percent of Canada’s electricity was not emitting. It was carbon free. The most recent statistic says it’s eighty one percent. It’s moved three percent in 14 years, which is a good thing. But it shows you how slow, how long it takes to get things

Francis Bradley: Done because these yeah, these are assets that are long during, but also while the percentage that is not emitting has only gone from seventy eight into eighty one percent, the actual size of the electricity sector in those years has grown quite significantly, and we’ve also reduced the GHG emissions from the sector by 50 percent. So the reduction in coal in Ontario has had the lion’s share of the impact on that, but not exclusively. And now we’re moving forward with eliminating coal elsewhere by 20 30. So a 50 percent reduction already and a couple that with some additional reductions as we head out to 20 30. Certainly moves us closer to a 100 percent non emitting grid, but it certainly doesn’t get us there. And in some jurisdictions it is definitely a challenge. And we’re also waiting to see if are we talking about the electricity grid connected grid or are we talking about electricity generally and including remote communities? Because if that’s the case, even though it’s a small amount of electricity in remote communities, decarbonising remote communities that are off grid is incredibly difficult.

Lisa Raitt: Well, let’s explain to our listeners why it’s incredibly different. What are they using to generate their electricity? I know the answer. You tell the answer.

Francis Bradley: Well, in most cases, it’s diesel. We’re seeing a move to greater use of renewables to offset some of that. And so we’ve seen some pretty interesting projects crop up. But to eliminate all of it is very, very difficult because we don’t have storage capabilities, and that’s one of the things that we’re hoping we’re going to see develop between now and twenty thirty five, you know a more longer term duration storage. And so, you know, again, looking at twenty thirty five looking at twenty fifty, what is that future going to require? It’s going to require all of the above of every kind of solution that is non emitting. And so that means we’re going to need nuclear small modular reactors. We’re going to need grid connected electricity, wind, solar,

Lisa Raitt: Biofuels, everything,

Francis Bradley: Absolutely. But all of them are going to be required because the projections are we’re going to need perhaps as much as twice as much clean electricity by 20 50 to decarbonise the entire Canadian economy. And so that means all of the above of non emitting is actually going to have to be on the table. But we still have to figure out also how to achieve decarbonisation in those remote settings.

Lisa Raitt: Yeah, that’s true. You know, I’ve never really had that conversation before, and it’s extremely true. I know that in some universities across Canada and in some places in Nova Scotia, quite frankly, they’re using Bunker C oil in order to power and heat their facilities, which is mind blowing in a sense and should be low hanging fruit in terms of decarbonisation, but still difficult to do. I had Flavio Volpe on when I was doing some podcasts on critical minerals and metals. One question I asked him as we talked about EVs and the push to EVs was, Is the grid ready? If everybody came home at night and plugged in their EVs and through public policy, we’re being encouraged to buy EVs for sure. But is the system ready? He said absolutely not. So it’s not just about. Decarbonising the system we have now in place, just to your point about growth before there’s going to be a growth in the great as well too, isn’t there?

Francis Bradley: It’s a really good question. No, the grid won’t be ready for the scenario that you’ve described, but that’s not what’s going to happen tomorrow. We’re not going to have everybody plugging in their electric vehicles. The Subaru that I’m driving today is going to last eight more years. The car that my wife is driving is going to last a year and a half, and we’re on the list to get an electric vehicle. We’re not going to have suddenly, you know, thirty five million Canadians plugging in electric vehicles tomorrow. It is actually going to be gradual over time. And so the question will be will we be able to keep up as it increases between now and twenty thirty five, presumably a target that the government has? Will we be able to keep up? And our conversations we’ve had within the sector is, yeah, we probably will be able to to achieve it because it is going to be a gradual growth for passenger vehicles. Now, we’re still not sure exactly how heavy transport is going to be electrified. Is it going to be in fact electrified or is it going to essentially use electricity to produce hydrogen to provide the mode of power? But yeah, if everybody plugged in an electric vehicle tomorrow, no, it wouldn’t work. But that’s not going to happen. It is actually going to be gradual.

Lisa Raitt: So having such experience as you do in the industry, what worries you? What worries you about this net transition?

Francis Bradley: My biggest concern at this stage is that we wait too long when I say we, I mean, decision makers wait too long and we don’t have clarity. And because of that, we miss our targets. I mean, the last thing I want is for our commitments around twenty thirty five and around 20, 30 and around 20 50 to start looking like Kyoto commitments. I don’t I don’t want to see us miss our commitments, and I’m really getting very concerned that we may be missing our commitments because of the time it’s going to take and the lack of clarity today.

Lisa Raitt: Yeah, so you need the investment is needed for sure, which will be there. If the conditions are correct, you need time because the projects take a long time. What kicks it all off? What gets this whole thing started?

Francis Bradley: We need a clear direction. For example, we want to see what that twenty thirty five discussion paper is going to look like from the federal government. We know by twenty fifty we’re going to have to bet on all of the above, but between now and twenty thirty five, are we going to be putting more emphasis on small modular reactors or carbon capture or on a greater regional transmission or on storage? I don’t think the commitment will be we’re going to do all of the above. We’re going to have to actually make some choices. But until we know which of those choices are going to be facilitated by whatever the policy environment is going to be from the federal government, those investment decisions can’t be made and the clock is ticking.

Lisa Raitt: Last question for you today, and I really appreciate this conversation. By the way, I know we could talk for a long time on the topic, which is of great interest, but also of great importance to our country. But describe to me the relationship between the United States and Canada when it comes to electricity and what our future goals look like. We talked about Biden’s goals. We talked about net zero. But practically speaking, how do we work together because we’ve got lots of interconnectivity between the two?

Francis Bradley: Absolutely. We’ve got thirty five transmission lines connecting Canada and the United States from a high voltage electricity interchange standpoint. We in fact exchange more electricity north and south than we do between the provinces. Now that is likely to change in the future as we see greater interconnection within Canada. But the integration between the Canadian system and the American system is is simply going to continue because of geography. You know, the reality is that Montreal is closer to markets in New England, for example, and in the same is true in Vancouver and the Pacific Northwest. And so those interconnections are going to continue. The importance of those connexions are huge because they ensure the stability and the reliability of our grid. And so we will always continue to be partners now the degree to which we are going to be able to continue to fulfil the electricity needs of people in the United States. Well, that remains to be seen, but we’re going to be needing our kilowatts here as well. So it will be an interesting balance that we will have to strike over time because at least up until now and for the last several decades, every kilowatt of electricity that’s been sold in the United States from Canada has improved our air quality because it’s offset, it’s offset thermal generation in the United States. What 20 50 looks like that really does remain to be seen.

Lisa Raitt: That’s very interesting. That’s very interesting. Ok, well, I’m going to leave it on that note, and I’m sure there’s a lot of people out there thinking on your last comments because it hasn’t really been put to me exactly that way before when it comes down to the United States. Francis, I really appreciate your time today. I know you do your own podcast, so I know you’re. With these things, and I appreciate you very much coming on and and helping our clients understand a lot more about the electricity sector here in Canada and the future challenges and quite frankly, the need to just get on with it, right?

Francis Bradley: Absolutely. Great to catch up. Thanks very much for the opportunity to chat.

Lisa Raitt: My great pleasure. Thanks. Cheers. Thanks so much for tuning in. Now, if you have any questions or comments or even requests on topics to discuss. Drop me a line at Lisa Raitt at CIBC’s. Your interactions actually will make this better. I’m your host, Lisa Raitt, and this has been the Raitt Stuff I’ll talk to you next week.

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