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Business Commentary ‘Greening’ our power grid could boost competitiveness while cutting carbon emissions

Darwin Smith is a partner and managing director with the Boston Consulting Group and is a core member of BCG's energy practice; Thomas Baker is a principal with the Boston Consulting Group and is the firm's North American lead on clean energy and environment topics.

The importance of unlocking a new wave of transformational infrastructure investment in Canada is critical across nearly every facet of our economy.

Nowhere is this truer than within the energy sector where the debate has been dominated by headlines related to prominent pipeline projects. But let's look at a different part of the energy industry – electricity.

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Canada has one of the highest relative carbon intensities in the world, ranking 33 out of 35 OECD countries in greenhouse gas emissions per capita.

In a world of increased scrutiny, and costs, associated with carbon emissions, this puts us at a comparative disadvantage. Not to mention the impact of other pollutants often correlated with carbon emissions.

Of Canada's carbon emissions, fully 11 per cent comes from power generation, especially coal generation, which accounts for 8.5 per cent of emissions on its own. "Greening" this generation could significantly improve our competitiveness.

However, this is not a straightforward task. Electricity demand and supply has a tendency to be mismatched. Renewable electricity sources, such as wind and solar, are intermittent; our demand is not. Hydro sources tend to be located far from major cities and other demand centres.

Great strides are being made in addressing historical technical and economic constraints to this challenge. Wind and solar costs have been cut by approximately two-thirds over the past eight years as industry benefits from increased scale and experience. Storage is becoming increasingly prevalent as well; recent projects from the likes of Elon Musk in Australia and Puerto Rico being among the most highly publicized.

Canada has more opportunity than most to tackle this challenge.

Greening our grid is largely a regional challenge.

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Nearly all of the coal-emitting generation capacity in Canada comes from just three provinces: Alberta, Saskatchewan and Nova Scotia.

Meanwhile, other provinces have grids powered more than 80 per cent with hydro resources (Quebec, B.C., Manitoba and Newfoundland and Labrador).

Imagine a scenario where we could economically and technically transmit power across the country to exploit the abundance we have in some regions and relative scarcity in others. In fact, systems like this are either built or proposed in such places as China, Brazil, India and the Nordics.

Indeed, China's State Grid is in the middle of an enormous program investing around $100-billion in more than 20 major high-voltage direct-current lines to tie the country's energy markets together. And past generations in Canada have been pioneers in long-distance electricity transmission. However, a study a few years ago by the Canadian Academy of Engineering found that Canada had more electrical interconnections with the United States than between its provinces.

Despite the clear benefits and ability to improve our country's competitiveness, an initiative would still struggle to address many of the typical questions we trip up on when trying to build transformational infrastructure.

How can we work together to move projects in the national interest more quickly through environmental and other approval processes, while still meeting important obligations such as First Nations rights? How can we encourage co-operation across provinces in a sector that has traditionally been the domain of the provinces? How can we resolve competing land-use priorities? Who would pay for such an asset and who ultimately owns it, especially when government and public-utility budgets are tight? How are those owners compensated for their investment?

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We have countrywide networks in most areas of our national economy. If cars, trains, airplanes, oil, natural gas and data packets can move easily across Canada, why not electrons?

Too often we are saying "no" to highly valuable opportunities for our country because we are not able to answer the questions above.

But we must; Canada is too big to think small.

The authors are organizers of the CanInfra Challenge Ideas Contest. The CanInfra Challenge is a six-month public contest developed by the Boston Consulting Group to seek out innovative ideas for transformational infrastructure in Canada, in partnership with other private-sector sponsors including Brookfield Asset Management. The Globe and Mail is the media sponsor. Throughout the contest period, The Globe and Mail and BCG will share a series of discussion pieces to advance the infrastructure conversation in Canada by talking with senior leaders in the infrastructure community and sharing insights from around the world. For more details on the initiative, please visit caninfra.ca.

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