As far back as the 1880s, traditional utility businesses created value by building and operating electric power plants and transmission lines to satisfy the instantaneous demand for power on a 24/7 basis. Technological advances in the 1950s and 1960s led to bigger generators and cheaper power, with single generator units reaching one gigawatt – enough electricity to power 100 million LED light bulbs. And transmission lines operating at 500,000 volts and higher became commonplace. Power utilities achieved high levels of reliability through engineering design and redundancy. They also built business and financing models around the sale of largely undifferentiated kilowatt-hours in a regulated market to captive customers.

The grid in most neighbourhoods is currently energized with electricity that is brought in on high-voltage transmission lines from large-scale generation assets located either by necessity or by choice in rural or semi-rural areas. In a new call to action, Corporate Knights, members of the Council for Clean Capitalism, and others are urging the federal government to fund neighbourhood-scale “microgrid” pilot projects. These would integrate the technologies, business models and regulatory frameworks needed to decarbonize buildings and transportation, which together account for most greenhouse gas emissions in our cities.

The individual technologies required to achieve this have already been developed and deployed to varying degrees. They include advanced retrofits, heat pumps, battery storage and bidirectional electric vehicle charging, among others. What we urgently need now are demonstrations of how these new technologies can be deployed strategically and cost effectively at a neighbourhood scale. We also need to understand the regulatory barriers they face and how they can be integrated with the established, central grid.

Show me the microgrid

In the emerging system, technological and business model innovations are transforming the way electricity is produced, stored, used and marketed. There is a shift in value creation toward the consumer’s end of the business, and the grid itself is evolving to support the two-way flow of energy and information between producers, consumers and prosumers (those who consume and produce).

It is fertile ground for the new technologies of distributed generation, energy management and energy storage. Relatively short product-development cycles, the commodification of services, the “internet-of-energy,” sophisticated data analytics and mass production of distributed energy resources all challenge status quo business models and regulatory frameworks. Activities and technologies “beyond the meter” and out of reach of the traditional utility modus operandi are proliferating.

Fortunately, all this disruptive change can be aligned with the imperative to decarbonize building heating and transportation. But to fully capture that opportunity will require strategic coordination of business and government at all levels, which is why the Corporate Knights Council for Clean Capitalism is advocating for microgrid demonstration projects on an urgent basis.

The opportunity of microgrids

In 2019, Siemens announced a pilot project in New Brunswick and Nova Scotia in partnership with power utilities. In that project, smart energy consumers (and prosumers) are engaging with utilities to optimize the integration of renewable sources of energy, ensure the stability of the grid and manage decentralized distribution.

It is essential that what we learn from such projects is quickly deployed in other regions across Canada. And we need urgent clarification from governments on the enabling conditions (such as regulations) to ensure the ability to create living labs and test results within 12 to 18 months. If we can get this right, it will help to determine the financial requirements of the energy transition without compromising the reliability and resilience of the grid.

The action needed now

What is needed urgently now are 10 to 15 demonstration projects that will test and prove these effective business models. The required investment is approximately $25 million per project, for a total of around $375 million for 15 demonstration projects. Inclusion of this investment in the forthcoming federal budget will signal the government’s serious intention, and the signatories of this call to action will be there, willing and ready to help.

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“The race to net-zero will be a defining feature of the 21st-century global economy, but Canada’s climate change response is absolutely stuck at the starting gate,” Ralph Torrie told a webinar on December 1.

“The share of our electricity supply provided by clean, renewable power is stagnating when we need it to be galloping forward, and the share of fossil fuel use in our total energy is stalled when we need it to be declining dramatically.”

On December 1, Corporate Knights launched an Earth Index, in which it will track the two key elements of long-term decarbonization: scaling up the use of non-fossil energy on the grid and electrifying transportation, buildings and industry, which currently rely on oil and natural gas. A webinar coincided with the release of a white paper by Torrie on the details of the index.

The Earth Index is based on a scale of one to 100, with each of the two elements accounting for half the score. Based on 2019 data, Canada now sits at 43 on the scale and needs to get to at least 80 by 2030 to reflect a pathway that is consistent with its commitment to be net-zero by 2050.

The share of renewable power on the grid – mostly hydroelectricity but also wind and solar – is currently at 64%, while the resulting electricity provides just 22% of Canada’s total energy use. Torrie did not include nuclear power in his basket of fossil-free electricity, saying the Earth Index is aligned with the European Union’s definition of “clean” – which excludes nuclear.

In the webinar, Environment and Climate Change Minister Steven Guilbeault said the federal government is determined to close the yawning gap between commitments on climate change and the action needed to meet the pledges.

“We’re no longer talking about whether or why we need to take action on climate change but how we can get this done,” he said. Guilbeault added that the effort must be done with equity partnership with Indigenous Peoples and increased stringency of carbon pricing in the power sector.

The index represents an important tool to help ensure government actions move beyond the “say–do gap” to reflect their commitments, said Severn Cullis-Suzuki, executive director of the David Suzuki Foundation. She pointed to a recent report from Canada’s Environment Commissioner that highlighted 30 years of missed opportunities for meaningful climate action.

One key factor will be ensuring that Canada’s provincial energy regulators are aligned with the net-zero goals of decarbonizing the electricity grid and switching from fossil fuel use to electricity in transportation, buildings and industry, said WaterPower Canada chief executive Anne-Raphaëlle Audoin. She noted that hydro accounts for 60% of Canada’s electricity supply and more than 90% of its renewable output. “We are envied around the world by countries that don’t have access to this renewable hydro power,” she said.

To get to a score of 80 on the Earth Index by 2030, Canada will need to see a doubling of renewable power generation by 2030, or roughly 10% per year over the next eight years. Torrie estimates such an effort would require investment of between $30 billion and $40 billion per year over that time frame.

That includes growth in interprovincial transmission capacity to connect provinces with enormous hydro capacity, such as British Columbia, Manitoba and Quebec, with those that are phasing out coal but continue to rely on natural gas, such as Alberta, Saskatchewan and Nova Scotia.

The grid will also have to accommodate an expansion of electric vehicles and the use of electricity to heat buildings and power industry. However, investments in greater energy efficiency would reduce the need for greater electricity supply.

Torrie said the investments are already occurring as part of a reinvention of the electricity sector.

“This transformation is a global megatrend and is the centrepiece of the multi-trillion-dollar economic opportunity represented by the transition to sustainability,” he said in the white paper.

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