The progress of electrification policy in Canada

Tom Heintzman: Welcome to The Sustainability Agenda, a podcast series focusing on the evolving complexities of the sustainability landscape. I’m your host, Tom Heintzman. Please join me as we explore today’s most pressing issues with special guests that will give you some new perspectives and help you make sense of what really matters.

Philippe Dunsky: And so you’ll see some recommendations around top priorities. One is inter-provincial transmission. That’s an area where the federal government really has an important role to play. And we’re proposing, beyond just money, an actual clear framework for that, that can hopefully break the log jam there.

Tom Heintzman: Welcome to our multi-part series on the energy transition and the role of electrification. In order to enable an increasingly electrified future, supportive policies are needed to guide the build-out of a clean, reliable and affordable electricity grid. On today’s episode, we’ll discuss the progress of electrification policy in Canada, the work of the Canada Electricity Advisory Council and its recommendations to federal government that could accelerate investment in sustainable electricity systems. I’m very delighted to welcome my special guest today, Philippe Dunsky, President of Dunsky Energy and Climate Advisors. Philippe brings over 30 years of business and policy experience, consulting on a full array of solutions across energy supply and demand. Most importantly for today’s conversation, he is the Chair of the Canada Electricity Advisory Council. He’s also the Chair of Efficiency Canada and a former member of the Electrifying Canada Task Force, among other positions. Philippe was recognized in 2021 as one of Canada’s Clean 50 leaders, and in 2022 as one of North America’s top 100 Impact CEOs. Good afternoon, Philippe. Welcome and thank you for joining us on today’s show.

Philippe Dunsky: Well, thanks so much for having me here. Good to be with you.

Tom Heintzman: Philippe, can you provide to our listeners some background on the work you do at Dunsky Energy and Climate Advisors, and how you view the energy transition and electrification opportunities for your clients?

Philippe Dunsky: Sure, so my day job of course is leading the firm that I founded about 20 years ago now. And I’ve been working myself on clean energy transition for over three decades. It’s been a bit of a long transition from my perspective. My firm itself advises, I’ll say some of the biggest players in North America on the clean energy transition. So that’s really all we do is clean energy. We advise our clients on how to navigate the transition and also how to accelerate it. Our clients are essentially governments and utilities of every single province in Canada, no exception, and the majority of US states. We also serve large corporates who are looking to decarbonize and investors who are looking to develop strategy to do deep dives into clean energy verticals and with due dil as well. My firm is, 60, six-zero professionals with really deep knowledge of all aspects of the transition, buildings, transportation, industry, and energy systems. My view on this transition is, I feel like we’re deep in the throes of it now. I think it is happening and I look forward to continuing to do what I can to both accelerate it and help us Canadians come out of it successfully on the other end.

Tom Heintzman: Philippe, you make the comment that we’re ‘deep in the throes of electrification now’. So more specifically, what is Canada doing to support the transformation of its electricity grid? And how does that compare with progress worldwide?

Philippe Dunsky: It’s a great question because when we talk about progress on electricity, there are really two things, right? It’s like a dual challenge that we have, and sometimes we can confuse them. One part of the challenge is decarbonizing electricity per se. That’s a big challenge in and of itself. On that one, Canada is way ahead. Of G7 countries, we are second in the lead there, 80% of our electricity is already emissions free. So we’re number two in the G7, we’re number three in the G20 actually. We’re definitely among the leaders. We’ve decarbonized electricity just in the past two decades, we’ve dropped our emissions by 60% more than any other sector in the country. Electricity in Canada is doing well in its path to decarbonize. That doesn’t mean that what remains ahead of us is easy. It’s not. It’s especially difficult for a few provinces or a few regions of the country, in particular for Alberta, Saskatchewan, Nova Scotia, and some parts of the North as well. They’ve got a tougher challenge ahead of decarbonizing electricity. But again, compared with the rest of the world, we’re really starting with a great head start in this race. That’s the first of the challenge. The second part of the challenge, much bigger, is growing electricity to meet all these new demands that it’s going to have to meet if we’re going to have a chance of achieving our carbon goals and commitments. On that, I’d say that Canada is slightly ahead of most other places, frankly, because we started earlier on the clean electricity front because we’re blessed with all this hydropower and made some big moves in nuclear as well. That gave us a bit of a head start in the electrification space, but we’re not dramatically different than the rest of the developed world. Our challenges fundamentally are we need to attract and deploy a lot more capital to this and we need to speed things up. If I just focus on those two challenges, they’re the same challenges that the US has, the same challenges that Europe has, China a bit less so, they’re able to go faster than we are. But you know in that sense, we’re in a very similar situation. And I will say that very much like our neighbor to the south, we’ve begun making some big important moves on this. Last year’s federal budget allocated about $70 billion in investment tax credits largely to clean electricity, not exclusively, but largely. We’ve made promises to speed things up, but none of this has really been unleashed yet. And that’s what we need to focus on now is really unleashing these promises and these commitments.

Tom Heintzman: Philippe, you talk about the twin challenges of cleaning our electricity supply and then growing it. And then I guess the associated challenges of capital and moving it forward really starting to get momentum. As part of this ambition and in order to meet those challenges, the federal government established the Canada Electricity Advisory Council in 2023 to provide it with recommendations that would enable the expansion of clean electricity and electricity grids. What can you tell me about the mandate of the Electricity Council and your areas of focus? I know you’re coming out with some reports shortly, and we’ll turn to that in a moment, but just to begin with the mandate and the areas of focus for the Electricity Advisory Council.

Philippe Dunsky: When I was asked to chair this council, I was given a 12-month mandate. So we all turn to pumpkins after 12 months and go back to our day jobs. So I was given a 12 -month mandate, and I was given 18 colleagues. And those colleagues, I think it’s really important to mention, they’re critical to this. The other members of council are to a large degree, current or former executives of utilities, power producers, system operators, and utility regulators across the country, as well as First Nations leaders and some stakeholders. So it’s a big group, a group with an extraordinary amount of experience and I’ll say, real world grounding in this.. One of the first things that we did was create working groups to focus in on some of the key issues. We created five working groups. We’ve got a working group that’s focused fundamentally on governance. Big governance changes that we may need to make to get this all to work well. We have one focused on affordability and capital attraction. We have a working group focused on projects, and by projects what I really mean is both speeding things up and involving Indigenous communities more than we have in the past. We have a working group focused on cooperation. So how do we get our provinces to be speaking with one another more and thinking together more? And then we have one focused on reliability and innovation. So that’s really how we broke out the work over the course of the past 12 months, because the 12 months is now essentially over. Council held 87 meetings throughout that year. We met with and heard from over 100 stakeholders, again leaders in the field across the country. And we’re now just wrapping things up. So our report is wrapped up and it’s just in production and should be out very, very shortly.

Tom Heintzman: Without wanting to do a spoiler alert here, I know you issued an interim report and imminently your final report is going to be released. What can you tell our listeners about the recommendations that will be coming in your report and are there any changes or deviations from your interim report?

Philippe Dunsky: The interim report, just to be clear, wasn’t really meant as a report on the whole slew of issues per se. There were a few topics that we felt were just extraordinarily timely to address back in November because decisions were being made. So we threw out some commentary on some very, very timely topics back then. This is going to be a very different report, much more expansive, much more substantive. You’re going to see a lot of detail, you’re going to see a few dozen recommendations, but behind them a lot more detail, a lot more meat on the bones. And ultimately those recommendations, we’ve grouped them into four broad categories. The first one is around aligning mandates, aligning what we’re doing. We have a situation in the country right now where we have a lot of institutions that are involved in this, whether they might be Crown Corp utilities, they might be utility regulators, they might be entities that are responsible for permitting projects or for approving projects. And they’ve all got different, and I will say not aligned, mandates. So it makes it extraordinarily difficult, let’s say for a utility that wants to invest what needs to be invested in this space. They may have a mandate to go out and electrify more, but then they have to go before the regulator and the regulator doesn’t have that mandate. And so the regulator is kind of caught. Maybe the regulator does, but someone else doesn’t. There are all these areas of misalignment in our system. So certainly aligning mandates of key institutions and getting our ducks, you know, in a row in a number of different ways is an area of focus that our report is focused on. That’s the first one. Second one is fundamentally around enabling our ability to build. So we’re going to need to build an awful lot more than we have in the past. We estimate that we’re going to need somewhere in the range of $1.4 trillion of CapEx pouring into this between now and 2050. That’s about twice as much as we’re investing today. And already today is twice as much as it was just a few years ago. We’re talking about a lot of growth and we can’t deploy the capital if the projects aren’t being approved and if indigenous communities are not a part of those projects. You’ll see a series of recommendations around what we need to do to be able to unleash project development and really speed things up. We just have far too much, I don’t want to say red tape because a lot of it was very deliberate and thoughtful and important from the perspective of protecting, let’s say, the local environment. But at some point, you end up with a fair bit of duplication and overreach. And the whole system is a little bit out of balance in terms of protecting the local versus the global. You’ll see a number of recommendations around speeding up project approvals and ensuring that indigenous communities can participate much more. That’s the second area. Third area is around the big ticket items that federal government can support financially. We did not want this to be all about money, but money is a part of it. And so recognizing that, we’re increasingly entering into an era of tighter and tighter budgets. We really wanted to focus in on what are the top priorities? How do we target the few dollars that we may have that we can put into this. And so you’ll see some recommendations around top priorities. One is inter-provincial transmission. That’s an area where the federal government really has an important role to play. And we’re proposing, beyond just money, an actual clear framework for that that can hopefully break the log jam there. Certainly supporting indigenous community participation in these projects is a big one. And then supporting Canadians in their ability to adopt the kind of technology that we need to actually save energy, become much more efficient in how we consume that electricity so that the build out that we’re talking about can be one that is actually realistic as opposed to pie in the sky, right? So we’re talking about bending that very steep upward curve a little bit down. So aligning, enabling, supporting, and then saving energy really are the four focus areas of the report. One other thing I’ll say is this report is not going to be a grand vision – here’s where we all need to go ‘kumbaya’ kind of thing. It’s really designed to be very pragmatic, very what can we do right now in the coming years, again to break the log jam, and speed things up and attract more capital and get everyone on board, but in a really pragmatic way. 

Tom Heintzman: Fascinating. I can’t wait to see the report. So let me ask you this, what do you hope comes of it? And in particular, what entities or what bodies will need to make concrete decisions or take actions in order to put the report into effect?

Philippe Dunsky: Yeah, good question. I should have actually started out by saying, we were we were appointed by the federal government and we want to be very mindful of the, I’ll say the tensions currently between provinces and federal government. Our mandate was given to us by the feds. And so we’re very careful to make recommendations to the feds. We’re not telling provinces what to do. We’re not telling utilities what to do. We’re making direct recommendations to the federal government. Part of that is, are things that the federal government can do to support and enable provinces and utilities to do their part. So that being said, our recommendations are really geared toward federal entities. Federal entities are pretty vast. It’s partly Enercan, partly environment, partly finance. And it goes beyond that too. It goes into agencies, for example, that are responsible for approving projects. Agencies like Department of Fisheries and Oceans and Environmental Assessment Agency. They all have a part to play in this. We often use this term in many different areas of policy, but if there’s an area that requires an all of government approach, it really is an economy-wide energy transition. So it’s pretty wide ranging. What I hope comes from this, I’ve just been 12 months of my time into this. I’m going to go back to my day job. My hope is really that the federal government will take these recommendations and give them serious consideration. I think they come with a credibility and I’d say a certain gravitas by way of the membership of council. I’m very hopeful that they’ll be given their due consideration by this federal government and whatever the next government is post-election as well. And then the other hope would be that within this report, we didn’t make recommendations to provinces, but certainly there are a lot of thoughts and ideas around what provinces can do. I’m a big believer that provinces in this country have really leadership role on electricity. They’re already doing a lot. There’s a lot in the report in terms of suggestions that can be picked up by each of the provinces across the country. So I’m very hopeful for that. And I’m spending a fair bit of time these days providing some briefings to federal departments and provinces and territories across the country.

Tom Heintzman: So, Philippe, last question and maybe to rise up 100,000 feet. This is a big challenge. We all know it’s big, but you add a layer of specificity to it. I mean, $1.4 trillion in spend between now and 2050, two times what we’re currently spending, changing our permitting constructs, including environmental assessments or at least modifying them, inter-provincial transmission and all of government approach. These are all very challenging and then add in to that the labor and supply chain shortages that we’ve been seeing over the last few years and just the inherent nature of the complexity of large change like this. As you stand back from it all, how do you feel about our ability to hit these 2050 targets? What makes you optimistic and what gives you some pause?

Philippe Dunsky: Well, there’s a lot to give me pause because you just laid out, right, the extraordinary nature of some of these challenges. What gives me hope is that we’ve done this before. We’ve done energy transitions before. When my grandfather was born, the only way to get from point A to point B was with horses. And within a single generation, everyone was driving motor vehicles. We’ve done it with whale oil. We’ve done it with town gas to manufactured gas. We’ve done this before. The extent of the change that we’re talking about is dramatic and at the same time not insanely dramatic. The 1.4 trillion that I was talking about earlier, it’s 2X our current pace of investment. Moving up 2X is not an end of the world thing. This is stuff that we’ve done many times in many industries and I have no doubt that we’ll be able to pull in the capital. There are big institutional challenges. I think those are the ones that are going to be tougher. I’m more worried about that than about, for example, the capital attraction part. But I guess the thing that gives me a bit of hope here is knowing that this transition is much bigger than us. So it is happening, it’s happening around the world. And the only question really is when we emerge from it and how we emerge from it. I think it’s just such a big transition, such a critical one for every aspect of our society, including our economy, that we can’t duck it. We can’t look at this and say, it’s too big. I’m just going to turn away. Go back to that old too big to fail from about a decade ago. I think this is too big to fail. Are we going to hit every bit of it exactly on point and optimize everything? No. But are we going to head in the right direction? I’m convinced that we will and I’m just hoping that we can do it at the pace that’s needed.

Tom Heintzman: Well, Philippe, thanks for taking time to join the show. And maybe more importantly, thanks for the work you do and thanks to our listeners for tuning in.

Philippe Dunsky: Well, thank you so much, Tom. Great talking with you.

Tom Heintzman: If you’d like to learn more about how electrification trends will impact your business, join us for CIBC’s Electrification Summit on June 11, 2024, in Toronto. The summit will bring together leaders in energy markets, companies in the midst of electrifying their operations, financial sponsors, lenders, and policy experts to discuss how electrification is core to achieving net zero. To register, please contact your CIBC Relationship Manager. Please join us next time as we tackle some of sustainability’s biggest questions, providing you different perspectives to help you move forward. I’m your host, Tom Heintzman, and this is The Sustainability Agenda.

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