Regulator sets out Canada’s routes to sustainable energy future

Canada’s energy regulator has said the path to a greener future will see a reduction in fossil fuels.

However, it has warned while Canada’s fossil fuel consumption will decline over the next 30 years but without an accelerated energy transition, fossil fuels will still make up more than 60 per cent of Canada’s fuel mix in 2050.

The Canada Energy Regulator (CER) has issued a new report “Canada’s Energy Future 2020: Energy Supply and Demand Projections to 2050” which examines how new technologies and climate policy will impact the country’s energy consumption and production trends over the next 30 years.

The outlook considers two scenarios with different rates of technological and government policy change: The Evolving Energy System Scenario and the Reference Energy System Scenario.

Under the Evolving Scenario, Canada’s domestic fossil fuel consumption has already peaked and will be 35 per cent lower by 2050. At the same time, renewables and nuclear become a larger share of Canada’s energy mix with electricity playing a greater role in satisfying end use energy needs. Electricity will become increasingly competitive with fossil fuels in many parts of the energy system, including for passenger vehicles.

Moderate growth in crude oil and natural gas production continues until it peaks around 2040. Canada’s major crude oil pipeline projects currently under construction will be able to accommodate expected future production growth over the next two decades.

Achieving net-zero greenhouse gases (GHG) emissions in Canada within the next 30 years will require stronger policies and greater adoption of low-carbon technologies. Canadian and international efforts to reduce GHG emissions will be a critical factor in how energy systems evolve in the long term.

Gitane De Silva, Chief Executive Officer CER said: “With the increasing pace of change in Canadian and global energy markets and climate policy, the need for up-to-date analysis on energy trends is greater than ever. Canada’s Energy Future series provides Canadians with a key reference point for discussing our country’s energy future and identifies key drivers of change that will impact Canada’s energy transition.”

“The COVID-19 pandemic continues to significantly impact Canada’s energy system,” said the report. “Canada’s economic recovery is a significant unknown facing the energy sector for the near-term, and one of many uncertainties for the long term.”

The report concluded energy use in 2020 will fall by six per cent because of the COVID-19 pandemic, while crude oil production will decrease by seven per cent or 335 thousand barrels per day (Mb/d) compared to 2019.

Under the Evolving Energy System Scenario, the report found:

  • Total renewable and nuclear demand across the energy system grows by 31 per cent by 2050 and becomes a larger share of the energy mix. In 2050, 90 per cent of electricity generation comes from renewable and nuclear generation compared to 81 per cent today.
  • Fossil fuel consumption peaked in 2019. By 2030, fossil fuel consumption is 12 per cent lower and 35 per cent lower by 2050. Coal declines in the 2020s as it is phased out of electric generation.
  • Crude oil production grows from 4.9 MMb/d in 2019 to 5.8 MMb/d in 2039 where it peaks and then declines in the last decade of the projection to 5.3 MMb/d by 2050. Growth is largely due to expansions of existing in situ oil sands projects.
  • Natural gas production increases from 15.7 Bcf/d in 2019 to its peak of 18.4 Bcf/d in 2040. This growth is driven by increasing LNG exports, which increase to 4.9 Bcf/d by 2039. After 2040, natural gas production slowly declines to 16.8 Bcf/d by 2050.
  • Total demand for renewable energy sources such as hydroelectricity, wind, solar, and biofuels increases by 45 per cent from 2019 to 2050.
  • Electricity’s share of end-use demand increases by an average of one per cent per year from 2019 to 2050 or approximately 16 per cent currently to over 27 per cent in 2050 when half of all passenger vehicles sales are electric vehicles.

Under the Reference Energy System Scenario:

  • Fossil fuel consumption is relatively unchanged throughout the projection period due to steady improvements in energy efficiency offsetting population growth and increasing industrial output, particularly in the oil sands.
  • Significantly higher assumed crude oil prices, greater volumes of assumed LNG exports, moderately higher natural gas prices, and a lack of additional domestic climate policies beyond those currently in place drive higher future production for both crude oil and natural gas.
  • In 2050, natural gas plays a larger role in the electricity mix, and renewable and nuclear generation account for 81 per cent of generation (the same share as today).
  • Electricity’s share of end-use demand grows more slowly and reaches 20 per cent in 2050, when 20 per cent of passenger vehicles sold are EVs. Renewable generation also grows in the Reference Scenario, although at a slower pace.

“Canada’s Energy Future 2020 marks an important inflection point, as Canada’s energy system is being shaped by COVID‑19 and ongoing innovations in energy technology and climate policy,” explained Darren Christie CER’s Chief Economist. “In our Evolving Scenario, we now project that Canada has passed its peak for fossil fuel consumption and total energy demand.”