United States

State of the Canadian Electricity Industry 2022 Accelerate Net Zero

Theme 3 Regulating and Policymaking for Net Zero: Moving from Ambition to Transition

While The Economist proclaimed the events in Europe “the first big energy shock of the green era,”24 parallels can also be drawn to events in energy markets in Texas and California earlier in 2021. In February, Texas experienced prolonged power outages when abnormally harsh winter conditions resulted in the shut-down of pipelines and gas power plants that were not winterized. Low output from the state’s significant 30,000 MW25 of wind capacity worsened the situation, as did the state’s limited connections with neighbouring grids, which restricted the state’s ability to import power.26 The result was catastrophic, leaving millions without power and water, and resulting in hundreds of deaths.27

In California, 2021 was again marked by concerns about the reliability of the electricity grid and the prospect of rolling blackouts, which had affected the state the summer before. The outages were caused by a combination of extreme heat and the state’s power grid being unable to fill power demands in the late afternoon. The state’s 14,060 MW28 of solar generation capacity production slowed and drought over recent years reduced hydroelectric generation in the state.29 Moreover, California is phasing out its last nuclear power plant in the next five years; it generates approximately 10 percent of the state’s energy each year.30 These concerns culminated in the July 2021 emergency proclamation by the California governor that introduced measures intended to avert energy shortages in the state. Included in the measures is increased funding of $2 per kWh for a utility and grid operator-led program that pays customers to reduce consumption during periods of peak demand. The measures also provided $23 million in subsidies for the installation of customer smart meters and thermostats, and instructed San Diego Gas and Electric to construct four energy storage-based micro grids, with 40 MW/160 MWh of capacity, to address expected capacity shortfalls in the coming summers.

In addition, the state waived air emissions rules to enable large power users to use backup diesel generators during such periods.31 Finally, California initiated a significant power procurement that resulted in the recent regulatory approval of between two and three GW of new electricity supply and demand-side resources.32 All of these investments will come at significant cost to California customers, who already have the highest electricity costs on the continent. Moreover, the emergency measures are expected to stabilize the grid for only the next three years.33