Language selection

Search

What we heard: Request for information on Canadian electricity regulation and grid modernization

In support of net zero goals, the Innovation and Electricity Regulation Initiative (IERI) investigates the role of economic regulation and related programming for scaling successful innovations and accelerating grid modernization.

The results from this Request for Information (RFI) document the opportunities and challenges felt by electricity sector actors and Canadians when advancing decarbonization through electrification. This RFI also informs related Government of Canada action plans such as the Clean Technology Regulatory Review Roadmap.

What we heard

73 submissions were received from a variety of organizations across Canada. Responses were categorized into five themes focused on accelerating the pace of electrification, electric grid modernization, and innovation:

Theme 1: Utility innovation paired with regulatory innovation will more effectively address the challenges of the energy transition.

Respondents highlighted the challenges utilities often face in the current regulatory landscape, specifically with proposing innovative projects to their regulators. This landscape is challenged by evolving market conditions and ongoing revolutionary system changes in the energy sector. To address this, respondents identified the need for enhanced regulatory mandates. They also identified a need for regulators to consider a broader range of variables in their decision-making processes to better account for the full suite of benefits from innovative projects.

Respondents indicated several areas that could benefit from government support, including:

  • Creating regulatory sandboxes and other mechanisms and processes to enable and promote piloting and experimentation;
  • Promoting research and knowledge sharing activities on regulatory innovation; and,
  • Building capacity at the regulatory level to promote regulatory and procedural innovation as well as organizational change.

Theme 2: Federal leadership is needed to promote inter-jurisdictional policy alignment and certainty.

Respondents emphasized that inter-jurisdictional policy alignment and certainty is needed for enhanced investor confidence and long-term electricity system planning. Respondents also called for enhanced collaboration, information sharing, and knowledge development across jurisdictions.

Respondents indicated several areas that could benefit from government support, including:

  • Building capacity through the establishment of interjurisdictional working groups, system planning studies, and innovation roadmaps;
  • Aligning policy guidance and legislative mandates across different levels of government; and,
  • Supporting the creation of guidelines on electrification pathways that are adaptable for each jurisdiction (i.e., roadmaps to decarbonization that factor innovation into technology, market, cost and resource assumptions).

Theme 3: Government support can accelerate the pace of change while mitigating ratepayer risk.

Respondents highlighted that there is a potential risk of ratepayers bearing the cost risks in the early and mid-phases of the energy transition. They identified that existing market structures may not be best suited to promote a cost-effective and efficient energy system of the future. This challenge is further exacerbated by cost pressures resulting from supply chain and labour force constraints. Respondents noted that innovation is held back by existing market constructs and utility business models that are restricting the full range of capabilities and benefits from innovative solutions. More needs to be done to improve the value proposition of innovative investments so that ratepayers can start to reap the benefits.

Respondents were also concerned about Canada maintaining its competitiveness with the United States. They indicated a need for support with attracting and retaining talent to the sector as well as a need to promote customer participation and engagement through education and funding initiatives.

Respondents indicated several areas that could benefit from further government action and support. These include:

  • Promoting innovation and the deployment of technologies through program funding, investment tax credits, and low interest loans;
  • Expanding the scope of incentive measures to include expenditures beyond initial capital costs for assets (e.g., operations and maintenance expenditures), especially in smaller jurisdictions; and,
  • Addressing knowledge gaps in research and system planning activities by funding ongoing jurisdiction-specific studies and assessments as well as equity-focused research.

Theme 4: Gaps exist in research and development for integrating and enabling new technologies.

Respondents called attention to the persistent technical challenges with integrating and operating new technologies on the grid. They also pointed to a lack of auxiliary infrastructure needed to enable grid modernization (e.g., telecommunication infrastructure, high-speed internet), especially in remote and northern communities. Respondents indicated a need for increased data collection to optimize grid operation and enable enhanced planning.

Respondents indicated several areas that could benefit from government action and support, including:

  • Funding research, development and demonstration projects that target systems integration and operation;
  • Funding for enabling infrastructure and auxiliary infrastructure, especially in remote communities; and,
  • Increased standards for cybersecurity and interoperability.

Theme 5: Grid modernization presents risks of disproportionate impacts on low-income households and rural and remote communities.

Respondents said there is inequitable access to the benefits of grid modernization relating to system upgrades, new technologies, and job opportunities, exacerbated by regional cost pressures. Remote grids and energy poverty in some regions, including the North and parts of Atlantic Canada, also exacerbate the cost pressures of an energy transition on a rate base that struggles to support existing operations. Respondents also noted that there is an opportunity to improve Indigenous and community ownership of infrastructure to improve access to the benefits of grid modernization, thereby improving the return on investment and participation in grid modernization.

Respondents indicated several areas that could benefit from government action and support, including:

  • Offsetting electrification costs for low-income, rural, and Indigenous communities;
  • Facilitating opportunities for collaboration and sharing knowledge across regional borders; and,
  • Funding capacity building for Indigenous communities from the Federal government to provide input to grid modernization activities and to participate in the energy transition.

Conclusions

The five themes highlighted in the RFI responses can also be mapped across the phases of the energy transition. Themes 1 and 2 describe the challenges of overcoming the inertia of the status quo within the early phases of the transition. Themes 3 and 4 can apply to the mid-transition phases where the benefits from widespread adoption of new technologies and market solutions have not yet been fully realized, and where momentum can be difficult to maintain. Theme 5 describes unintended consequences that could be realized in the later phases of the transition if equity and affordability concerns are not addressed early in system planning efforts. The findings suggest that an innovation-focused approach can assist through each phase of the transition, tackling problems not just related to technology, policy, and regulatory uncertainty.

Background

An opportunity exists for federal programming to better serve economic regulators, innovators, and utilities through the promotion of regulatory innovation, electrification, and grid modernization given existing regulatory, policy, and market frameworks. The federal government can also assist electricity sector actors in innovating to change these frameworks to better suit the needs of the electricity system of the future. To further understand opportunities for federal government support, Natural Resources Canada (NRCan) developed this Request for Information (RFI) in 2023.

In this RFI, NRCan sought stakeholder input regarding the opportunities and barriers to accelerating the pace of electrification and electricity grid modernization. This work is part of NRCan’s Innovation and Electricity Regulation Initiative, which enhances federal government programming to address stakeholder needs for grid modernization and electrification in the context of Canada’s economic regulatory environment.

Responses

73 responses were received, with most responses from energy utilities (21%), private companies (19%), industry associations (18%), interest groups (15%), and individuals (14%). By region, responses primarily came from national organizations (27), Ontario (13), Alberta (6), New Brunswick (5), and British Columbia (2). NRCan received four responses from Canada’s North and four responses from outside of Canada.

Demonstrating the breakdown of responses to the Request for Information (RFI) by organization type and by geography
Text version

A graphic demonstrating the breakdown of responses to the Request for Information (RFI) by organization type and by geography. At the top, it states that the RFI received 73 responses. To the right, it indicates that the RFI heard from 7 provinces and territories. Below this, it indicates the following: “Most responses came from national organizations (27), Ontario (13), Alberta (6), and New Brunswick (5)”. Below this, a list of respondents by organization type is provided alongside corresponding icons. The following distribution of responses by organization type is listed: Regulator (1), Government (3), Company (11), Interest Group (11), Industry Association (13), Utility and System Operator (15), and Individuals (16). Below this, there is an image of a map of Canada with provincial and territorial boundaries drawn in. Indicated by grey circles with white text within each province or territory, the map presents the number of responses received from various regions: British Columbia (2), Yukon (2), Alberta (6), Nunavut (2), Ontario (13), New Brunswick (5), Nova Scotia (2). Next to the map, there are two more grey circles with white text to illustrate responses received from outside specific provinces or territories: National (27), International (2).

RFI timeline

Initial engagement and question design took place from November 2022 to December 2022. The RFI was posted and accepted responses from January 2023 to early April 2023. Response analysis took place from May to July 2023.

The questions posed were:

  1. Operating within Canada’s current energy regulatory constructs, how might the pace of electrification and grid modernization be accelerated?
    1. What specific tools, services, guidance and/or resources are required? Do these apply to particular jurisdictions, or can they be applied more broadly?
    2. Is there a role for the federal government to support through programming, and what are the specific needs?
  2. In consideration of the previous question, if the regulatory constructs require change, what is needed to enable that change?
    1. What specific tools, services, and/or resources are required to facilitate this change? Do these pertain to particular jurisdictions, or can they be applied more broadly?
    2. What can the federal government do to facilitate this change? Is there a role for the federal government to support through programming?
  3. How could federal funding stimulate those changes? In general, what are the regulatory, market, policy barriers and opportunities for innovations in electric grid modernization, distributed energy resources, and behind-the-meter resources? Do you have examples of barriers and opportunities faced in your jurisdiction?
  4. To what extent might the existing regulatory, markets, and policy environment result in potential disproportionate impacts to specific customer segments from electrification and grid modernization? What regulatory, market, and policy innovations could be implemented to mitigate these impacts?

Contact

If you have any questions pertaining to this RFI, or wish to be added to our mailing list, please email us at ieri-iire@nrcan-rncan.gc.ca

More details on the Innovation and Electricity Regulation Initiative can be found on the NRCan website under Forward Regulatory Plan.

Report a problem on this page
Please select all that apply:

Thank you for your help!

You will not receive a reply. For enquiries, contact us.

Date modified: