A More Balanced Approach

Many of those concerned about climate change advance a tantalizing and simple sounding solution: electrify everything, and source that electricity from carbon neutral sources. While carbon-neutral electrification of everything is theoretically possible, this article makes the argument that this solution only sounds simple. In reality, electrifying everything will introduce major instability into the electricity system and society, and will increase pressures on an electricity system that is already struggling with multiple challenges. It is worth noting that in Canada today, only 20 per cent of our energy needs are met by electricity and of that 20 per cent, only six per cent is met by wind and solar meaning in total 1.2 per cent of Canada’s energy needs are currently met by wind and solar energy. As an alternative to the “electrify everything” approach, the following puts forward an alternative approach to reducing greenhouse gas (GHG) emissions that leverages gaseous fuels.

The push to electrification has everything to do with pursuing sustainability – in this case, reducing GHG emissions in line with Canada’s national targets and international commitments. The electricity sector however, has been built on a foundation consisting of three pillars: reliability, affordability and sustainability. Over a hundred years of experience with electricity shows us again and again that if we focus too much on one of these pillars at the expense of the others, the system risks toppling over.

“Electrifying everything will introduce major instability into the electricity system and society, and will increase pressures on an electricity system that is already struggling with multiple challenges.”

There are several ways in which this has played out in the past, and how it will almost certainly play out again:

  • Reliability at any cost: The electricity sector is very reliable but susceptible to extreme weather events. One of the concerns with climate change is that the frequency and intensity of these extreme weather events will increase, threatening the sector’s exemplary record on reliability. Shutdowns in California due to the threat of wildfires, outages due to severe snowstorms in Manitoba, and Hurricane Dorian in Nova Scotia are three very recent examples. If the electricity sector focuses on maintaining reliability in the face of these types of extreme weather events, for example by burying overhead distribution lines, then there will be significant cost increases that will have a serious impact on affordability.
  • Lower costs or else: as a fundamental input to the economy and a necessity for all customers, affordable electricity costs are a foundation of modern society. However, the extreme pursuit of affordability comes with consequences. Keeping customer costs as low as possible results in underinvestment in infrastructure that would threaten reliability, and selecting lowest generation costs would result in selecting in less capital intensive, inefficient equipment, with a consequent negative impact on sustainability objectives.
  • Sustainability imperative: Canada is blessed with some of the best hydropower resources in the world, and so our electricity systems are already starting from a relatively low-carbon starting point. Increasing the share of renewables comes with challenges however, largely due to the variability of solar and wind. While the operating costs of these plants are very low when they run, increasing their share of capacity results in threats to reliability without significant backup systems, and results in increased costs required for infrastructure, utility integration and standby/storage systems that can step in when needed.

“The electricity sector is very reliable but susceptible to extreme weather events.”

This is not to say that sustainability is not a worthwhile objective. On the contrary, sustainability is as necessary as any of the other pillars comprising the foundation of the electricity system. What is important is that not any one of the pillars get too long or short relative to the others to the point where the system becomes unstable. There are instances where a focus on sustainability was required to bring the system back into balance, even though it would impact affordability – for example Ontario’s coal phase out which was a policy objective all major political parties agreed to during the 2002 election campaign. And counter examples, including how Ontario’s Green Energy Act arguably went too far, and in part spurred on a populist backlash against renewables, especially in rural communities, that we are still experiencing 10 years after it was introduced.

These examples are very relevant and should not be dismissed as somehow being different from current circumstances. There is a political price that comes with pushing on affordability too far, too fast. It is relatively easy for municipalities to declare a climate emergency. It is far harder for governments to stay in power after consistent increases in energy bills, year after year. For some, rising energy bills are an annoyance and impact our disposable income and spending on leisure or luxury items. But for most making near or below the median income, energy bills are a very serious business. The spectre of ever-increasing energy bills are terrifying to many families struggling to make ends meet. For a progressive society like Canada, it is important to consider that increases in energy bills represent a type of regressive tax – that is, since electricity is a necessary commodity, those making less end up spending a higher percentage of their income on energy. This is especially true in jurisdictions where energy boards have moved to a higher proportion of fixed charges on bills, moving customers away from paying for what they use. Rising energy bills therefore increase wealth inequality, running counter to the ideals of the climate and social justice movements.

Electrification of everything comes with risks, especially to reliability, as one doesn’t need to be an energy expert to take heed to the age old warning to not put all your eggs in one basket. However, electrification of some things makes a lot of sense. Electrification of light duty transportation makes sense from a simple efficiency perspective. An internal combustion engine literally “combusts” gasoline in controlled explosions, only transferring about 15 per cent of the energy in the fuel to turn the wheels, losing the rest of that once useful energy as waste heat via the car’s tailpipe. Electric motors by contrast use no combustion, and are extremely efficient at transferring stored electricity into mechanical motion, with efficiencies commonly above 90%. Combined with lower maintenance costs, light-duty electric vehicles are far more affordable to operate. As battery prices continue to decline, the capital cost premium will narrow. And so electric cars offer a compelling value proposition on sustainability and affordability.

“Electrification of everything comes with risks, especially to reliability, as one doesn’t need to be an energy expert to take heed to the age old warning to not put all your eggs in one basket.”

The goal however, is not aimed at making the case for electric vehicles, but rather to point out that electrification of passenger transportation makes a lot of sense in terms of the three pillars of the electricity system. There are examples too, where electrification of heating makes sense. In communities dependent on fuel oil, and where natural gas distribution just isn’t feasible, for example, customers could be switched over to using geoexchange or air source heat pumps. This is capital intensive, but far better from a sustainability perspective, due to lower GHG emissions but also groundwater contamination, and can result in lower operating costs for customers. A win for sustainability, reliability and affordability. And one that is being driven by customers.

But electrification of all heating does not make sense. Even in hydropower provinces like BC, Manitoba and Quebec, the cost of heating with electricity is over twice that of heating with natural gas. In non-hydropower provinces like Ontario, the differential increases, to over four times as expensive. A mass switching over from natural gas heating to electric baseboards, or even heat pumps, would significantly impact customer affordability. The distinction here is that compared to electrification of transportation, natural gas customers aren’t the ones pushing for electrification of their heating systems.

“Electrification of light duty transportation makes tremendous sense from a simple efficiency perspective.”

As a society we have limited resources available to address problems. Climate change is an important, significant challenge that requires action, but also careful thinking and a strategic approach given our limited resources. The electricity system is currently going through a major transformation, largely spurred by climate concerns and the need to reduce greenhouse gas emissions, but also driven by new technologies and changing customer expectations. And the electricity sector is struggling to meet the challenge. The rise of distributed energy resources, particularly solar and battery storage (including electric vehicles) are destabilizing electricity systems where they are being introduced in significant numbers. Ontario and Alberta have both established regulatory reviews and are looking to other jurisdictions as examples for how to address issues with more distributed energy resources coming online. The UK, California, New York and other international jurisdictions are also grappling with this challenge. To expect the electricity sector to manage an increasingly customer-driven, distributed grid, as well as take on a doubling or tripling of the size of the electricity system to provide for transportation and heating is not a realistic option.

“Following these steps will not only result in reduced GHG emissions and concrete action to address environmental challenges, but it will also ensure that we don’t do so at the expense of reliability and affordability.”

So, if we accept that more action is needed to reduce greenhouse gas emissions, and that electrification of everything is not the right approach, what is an alternative prescription for Canada’s energy sector?

First, there are still great wins to be had in conservation and efficiency programs, for both electricity and natural gas, and these should be aggressively pursued, as no other policy direction truly benefits the system from a sustainability, reliability and affordability perspective like energy efficiency does and can continue to do so.

Second, electrification of some things where it makes sense. Electrification of passenger transportation makes sense, but doesn’t come without its own challenges. Electrification of some heating also makes sense, especially in areas where the cost of fuel is relatively high, or otherwise comes with other unwanted sustainability or reliability issues.

Third, look at conventional approaches to reduce the natural gas sector’s GHG footprint. This should be done in large part through conservation efforts, but also through the use of efficient combined heat and power systems for industry and buildings, and by building out thermal networks in urban communities that are able to capture waste and renewable heat sources.

Fourth, invest in more unconventional approaches to reduce carbon intensity of the gaseous fuel system. Introduce renewable natural gas from agricultural and food waste, as well as hydrogen into the mix to reduce carbon. Finally, look to next generation carbon capture and storage systems as a way to further reduce emissions.

Following these steps will not only result in reduced GHG emissions and concrete action to address environmental challenges, but it will also ensure that we don’t do so at the expense of reliability and affordability. Because when we compromise on those, the whole system will topple over, and that’s not good for anyone.