Canadian power users should brace for higher electricity prices in the coming years as the country’s utilities are forced to spend billions of dollars just to keep the lights on.
The electricity sector is gearing up for an investment boom to replace its aging infrastructure and meet growing demand, but it faces a number of hurdles in getting much-needed projects built on time and on budget.
Among them is the potential for a crippling shortage of skilled workers, a problem that is growing more acute as the construction work force ages and the booming resource sector competes for labour.
In a report released Monday, the Conference Board of Canada said the industry expects to spend more than $347-billion in the next 20 years on generation, transmission and power distribution. That does not include potential investments in the digital “smart grid,” which uses remote control and automation to better accommodate renewable power and peak-time pricing.
Investment is expected to reach some $23-billion a year over the next five years, a level that rivals the oil sands as a generator of economic activity.
But one industry executive said regulators must be prepared to pass through the cost of new infrastructure to consumers, or the industry will be stymied in its investment plans.
Jim Burpee, president of the Canadian Electricity Association, said the country’s power system was built between the 1950s and 1980s in response to the increased demands of industrialization and growing population. Now, much of the investment is required to replace worn-out equipment, and existing customers will have to absorb the cost.
Booming provinces such as Alberta and Saskatchewan need new generation, and transmission lines, to meet rising demand spending and to replace aging infrastructure.
“Price has to go up,” Mr. Burpee said. “Or, you trade it off for something else. If investment is not made over time, you can’t expect the same level of performance out of the system [in terms of]reliability or even environmental performance.”
Regulators such as the Ontario Energy Board have been reluctant to approve aggressive investment plans by regulated companies that claim they need to spend the money – and earn a reasonable rate of return – to maintain the system.
Mr. Burpee said the industry is also keen to see the federal government proceed with regulatory reform that would reduce duplication with the provinces, and streamline Ottawa’s own system so various departments offer one-stop reviews.
In its report, the Conference Board – a non-profit research group – warned that the industry’s investment plans could be undermined by the skills shortage that is being flagged by business organizations across the country.
In a report earlier this month, the Canadian Chamber of Commerce forecast a “desperate labour shortage,” predicting a shortfall of 163,000 construction workers, 37,000 truckers, 22,000 hotel staff and 10,000 skilled steel tradespeople.
The direct and indirect impact of $23-billion per year in capital spending from the power sector would result in 247,000 additional jobs, the Conference Board said.
“The labour requirements to accommodate the investment in electricity infrastructure will undoubtedly exert pressure on an already tight labour market,” it said in the report.
“This suggests that the electric power generation industry in Canada may encounter supply constraints when adding to new generation capacity or when refurbishing existing facilities.”