Canadians are in the enviable position of living in a country richly endowed with raw resources for generating electricity, at a time when the world is struggling with the challenges of meeting energy needs in ways that are both economically and environmentally sustainable. Most countries, including the United States and most of Europe and Asia, import much of their generating fuel or electricity, Canada is self-sufficient and a net exporter of both energy resources and electricity. But though most countries tackle electricity on a national basis, Canada does not and we suffer as a result.
Because energy is a provincial matter under the Canadian Constitution and, like the country at large, most provinces can be self-sufficient in electricity, our electricity supply has grown up as a collection of provincial systems, each independently designed and operated. Typically a province has developed generation based on its own sources of raw energy, with the result that nationally we have an electricity supply that does not take full advantage of the country's resources.
Provincial compartmentalization constrains the diversity of the generation technologies that we use. Wind and solar power are emission-free but are available only at nature's whim. In contrast, nuclear and gas-fired generators are available on demand; nuclear provides steady output that is emission-free, while gas can respond more nimbly to changes in customers' requirements. Hydroelectric generators with dams and reservoirs can store energy but cause flooding, whereas run-of-river hydroelectric plants have no storage and a smaller environmental footprint. These various generating technologies work more effectively together than alone.
If we all thought outside our provincial boxes, we would probably be doing things such as developing the massive hydroelectric sources in Labrador to offset the reductions in coal-fired generation planned for Ontario and the Maritimes. Alberta's electricity system is an ideal dance partner for B.C.'s hydroelectric storage reservoirs, because Alberta relies more heavily on intermittent wind generation than any other province. In fact, Alberta has taken a leadership role in the North American electricity industry in integrating wind into electricity supplies and also leads in new coal technologies, including carbon capture and storage. B.C.'s recently announced drive for electricity self-sufficiency would probably make more sense if it were planned in concert with the many innovative new investments being made in its neighbouring province.
Canadian provinces could achieve the benefits of greater electricity integration through interprovincial trade. This approach would avoid twin bogeymen: on the one hand, a federal electricity policy, anathema in the wake of the massive political and economic disruptions of the 1980 national energy program; and on the other, selling, merging or disbanding provincial utilities. There is certainly room to grow, because discretionary interprovincial electricity trade is at present less than a quarter the size of international trade with the U.S. In 2008, the Canadian electricity industry sold $26-billion worth of electricity, of which 10 per cent was net sales to the U.S. but only 2 per cent was interprovincial sales.
All other things being equal, the relative ease of interprovincial co-ordination compared with international co-ordination should result in east-west trade being more attractive than north-south trade. The fact that the north-south trade is much larger indicates that other things are not equal. U.S. prices for electricity are generally higher than in Canada, but even if factors such as this are encouraging trade across the international border, they do not detract from the economic advantages that could be simultaneously available from increased interprovincial trade. The fundamental east-west synergies are waiting to be more fully exploited; doing so need not mean diminished north-south trade.
Canada is a big country with large distances and obstacles such as the Great Lakes and the Rocky Mountains, which drive up the cost of transmission facilities. But each province has at least one next-door neighbour, and many provincial pairings, such as B.C. and Alberta, Ontario and Quebec, and New Brunswick and Nova Scotia, offer electricity synergies sufficient to support investment in the necessary transmission lines. Interprovincial electricity trade would most logically develop as a series of regional initiatives among neighbouring provinces; there is no imperative to move electricity between St. John's and Victoria, and the economics of such a national grid would not be good.
The cause of the meagre levels of interprovincial electricity trade lies in the fundamental differences among the various commercial structures the provinces have adopted. When neighbours have different business philosophies, they will have difficulty realizing mutual benefits from trading with each other. Both Ontario and Alberta and, to a lesser extent, New Brunswick and Nova Scotia have disbanded their century-old generation-transmission-distribution monopoly utilities in favour of more open systems, in which customers are free to choose their electricity suppliers, who must then compete for their business. The other provinces have stayed with the monopoly structure, and most have retained public ownership of their utilities. The result is that we have an almost perfect checkerboard pattern across the country of monopolies beside competitive systems.