About Electricity

The electricity industry is involved in three main activities:

• generating electricity using various energy sources and technologies;
• transmitting electricity, usually through high-voltage power lines over long distances, to bring electricity from power plants to end-use markets; and,
• distributing electricity to end-users, usually through low-voltage local distribution power lines.

Generating, transmitting, and distributing electricity in Canada fall primarily under provincial and territorial jurisdiction. In most provinces and territories, electricity is provided by vertically-integrated electric utilities that are often Crown corporations (e.g., Manitoba Hydro). Some provinces have restructured their electricity sector, unbundling the generation, transmission and distribution functions and allowing private companies to provide these services.

Over the years, the number and role of independent power producers (non-utility organizations, such as private companies and Indigenous groups who can generate electricity and sell it to the grid) has grown in many provinces. Many large industrial electricity users, such as aluminum manufacturers, may also build power plants to meet their own electricity requirements.

The federal government has regulatory powers over interprovincial power lines, nuclear power, and electricity exports, as well as sharing jurisdiction with provinces and territories over environmental regulations. Additionally, the federal government makes significant strategic investments in the electricity sector, including funding research and development, supporting the commercialization of new technologies, incentivizing and financing clean electricity infrastructure, and providing targeted support for critical projects.

Generation

Historically, electricity demand tends to rise slightly every year and generation increases to meet it. In 2022, Canada generated a total of 639 terawatt hours of electricity. By comparison, electricity generation totalled 604.5 terawatt hours in 2005.

Electricity in Canada is generated from a diversified mix of sources, the most important of which is moving water. Canada is the third largest producer of hydroelectricity in the world, with capacity developed where favourable geography and hydrography exist: primarily in Quebec, but also in British Columbia, Ontario, Labrador, and Manitoba.

Fossil fuels are the second most important electricity source, particularly in Alberta and Saskatchewan, as well as in the Atlantic Provinces, Northwest Territories, and Nunavut. Unabated coal-fired generation must be phased out by 2030 under federal regulations, but many provinces are ahead of this target. As a result, only 3.8% of electricity in Canada was generated from coal in 2022, an almost two-thirds reduction in the amount of coal-fired generation in 2011.

Nuclear power is the third most important electricity source, with power plants in Ontario and New Brunswick using the Canadian-developed CANDU reactor. Canada is also exploring the development of Small Modular Reactors (SMRs), which are smaller in size than conventional nuclear reactors, with enhanced safety features.

Non-hydro renewable sources currently contribute 8 per cent of Canada’s electricity supply. Wind has become the predominant non-hydro renewable source, with generation more than tripling between 2011 and 2022. An emerging source, solar provides a still small but rapidly increasing amount of electricity.

Transmission & Trade

Since managing electricity grids lies with provincial and territorial governments, electricity systems have mostly been built with jurisdictional self-sufficiency in mind. As a result, a limited amount of electricity is traded between neighbouring provinces and with the United States. One major exception is Labrador’s Churchill Falls hydro facility, where approximately 90% of output flows to Quebec and neighbouring markets in Canada and the US.

Still, a certain amount of trading takes place as it provides opportunities for buyers to ensure adequate supplies when demand is high or if some power plants shut down, and opportunities for sellers to increase revenues by selling electricity that might otherwise go to waste.

Canada is consistently a net exporter of electricity to the United States, selling roughly 10% of its total annual generation. Quebec, Ontario, British Columbia, and Manitoba’s exports accounted for over 90% of Canadian electricity sold to the United States, which power significant portions of the grids in Vermont, New York, and Maine, and reached approximately 30 states overall in 2023. Canadian imports of electricity occurred primarily in British Columbia.

More details on Canada’s electricity trade can be found at CER – CER – Electricity Trade Summary (cer-rec.gc.ca)

Prices

Electricity prices that Canadians pay differ across the country for several reasons, including the type of technology being used for generation.

Although hydroelectric power plants are capital intensive, with high upfront costs to build the required infrastructure, they currently provide some of the lowest-cost electricity in Canada given their long lifespan and large capacity. Hydro and other renewable generation technologies also incur no fuel costs, leaving them less vulnerable to the price volatility of oil and natural gas markets.

In future, new generation projects may have higher costs for a variety of reasons, as the most economical projects are usually developed first. For example, if favourable generation sources are located further away from major cities where most electricity is used, longer transmission lines will be required to get the power where it is needed.

Reliability

Electric utilities, system operators and governments work to ensure that the grid is constantly balanced so that enough electricity is available to meet demand at any given time. In each province and territory, they adopt standards and operational procedures to avoid power outages and disruptions. Since Canada and the United States have a highly integrated electrical transmission network, they have worked together to harmonize the implementation of mandatory reliability standards. The North American Electric Reliability Corporation (NERC) standards—in some cases modified to reflect the jurisdictions' reliability regimes—are mandatory and enforceable in the 8 Canadian provinces connected to this continental grid (also known as the North American Bulk Electricity System). More details about reliability in each jurisdiction can be found here.

Longer-term planning also supports the reliability of the electricity grid, by ensuring that enough generating capacity is built to meet expected peak demand. This allows electric utilities to still meet demand when some facilities go offline because of routine maintenance or unexpected shutdowns.

Adequate transmission also supports reliability, by allowing areas with surplus electricity to send it to areas where electricity is needed. This can be either within the area of distribution of a given utility or by trading with neighbouring utilities, including those in the United States.

Being able to decrease demand is an emerging approach to ensuring reliability, which reduces the need to build more generation capacity. Electricity system operators can sign agreements with large customers to shift their usage to moments where overall demand is lower, or set incentives (e.g. through pricing) for users to manage the timing of their electricity use. Enhancing the efficiency of buildings and equipment also contributes to reducing overall demand on the system.

Future of the Electricity System

Based on studies and projections of the energy transition, electricity demand in could more than double by 2050, driven by the rapid electrification of new sectors of the economy (including transportation, heating, and industrial processes), as they seek to reduce their greenhouse gas emissions. Decarbonizing the economy means we will need to build more electricity infrastructure, while pursuing gains in efficiency to offset part of the forecasted growth in demand.

The sources of future generation will depend in part on the policy and business decisions made by provincial governments and power producers, influenced by the emergence of new technologies and changes in production costs..

In addition to supporting decarbonization, the architecture of the grid is also transforming to become more decentralized and digital. Distributed energy resources (DERs) are increasingly being installed and integrated to the grid. DERs are small-scale, localized assets that can react to demand and/or supply needs on the grid by optimizing usage, contributing generation, or storing surplus generation – such as smart thermostats, rooftop solar panels and batteries. By nature of being smaller and decentralized, they can be installed at the household or community level, allowing Canadians to take ownership over their electricity consumption or even become “prosumers” (i.e. both producers and consumers, for example households with rooftop solar PV panels that sell to the grid).

As the complexity of the grid increases with the integration of DERs, variable generation resources, and accommodating two-way flows of electricity from prosumers, digitalization and the introduction of ‘smart’ technologies are increasingly providing solution to support and optimize grid management, from production to consumption.

Endnotes

This document is based on information available in the fall of 2024. Statistics originate mostly from publications of Statistics Canada; data on prices are from StatsCan.

Electric power is usually measured in watts or multiples of it, such as kilowatts (thousands of watts) and megawatts (millions of watts); one watt is equivalent to one joule per second. Electrical energy — that is, the flow of electric power over time — is measured in watt hours (kilowatt hours, megawatt hours, etc.); one watt-hour is equivalent to 3,600 joules. As an example, a 60-watt light bulb that operates for two hours consumes 120 watt hours of electricity.