Electricity Trade in North America

Canada and the United States have been trading electricity for over a century. The integrated grid gives both countries a sense of security and flexibility over their energy use and they are able to rely on each other to help keep the lights on in times of need. Current Affairs sits down with Manager of U.S. Affairs, Robin Yee to discuss the opportunities and potential upcoming challenges in energy policy with the new administration.

Hi Robin. Thank you for joining us. How has cross-border electricity trade traditionally worked for the past 100 years up until now?

Cross-border trade grew out of natural strengths and needs that complemented each other...Instead of one region needing to overbuild to meet its highest demand throughout the entire year, it could coordinate with its neighbours and draw on their surplus when the electricity wasn’t being used. An example of this is how – generally – Canadians tend to use more electricity during the winter (for heating) while in the U.S. their demand is higher in the summer (for cooling). Rather than building up for a peak that will just happen a few weeks in the whole year, we can be strategic and balance between both of us.

If, as it's been threatened, the U.S places tariffs on Canadian goods including electricity, what exactly is at risk?

First of all, the whole electricity system has been built around tariff-free trade of electricity, so introducing tariffs will be hugely disruptive. Business decisions have been made based on the affordability and availability of electricity, and not just for our sector, but in the U.S. for industries that consume a lot of energy as well. If tariffs are introduced, that has a ripple effect.

But the most obvious one is economic. If the U.S. places tariffs on Canadian electricity, it means that their consumers and manufacturers will be paying more for electricity. The U.S. imports electricity from Canada because it makes sense for affordability. And electricity isn’t something you can source alternatives from overseas!

The same tariffs could also mean that bills go up here in Canada. It’s counterintuitive but a decline in exports could mean reduced revenues at home. The electricity sold is often surplus electricity, which is not needed in that moment. If there is extra flow or wind, it makes sense to sell to our neighbours and everyone benefits.

Also, even though Canada is a net exporter, we do still import from the U.S., and those imports are significant in the areas where they are used. B.C. is going through a drought cycle and has been importing more electricity over the last few years. If electricity costs go up in the U.S., that raises the price for U.S. exports to Canada, too.

We’re also watching for impacts on the overall supply chain. Again, the theme here is disruption, and for a regulated sector that has long lead times for planning, approval and procurement, tariffs introduce lots of uncertainty into the supply chain for costs and availability. It’s not just for new projects, but for maintenance and modernization too.

Beyond the tariffs, what other aspects of U.S/Canada are we watching?

We are also keeping an eye on the direction U.S. energy policy will take. The new government has very different priorities from the previous one and is much more focused on building up oil and gas production domestically. A lot of the policy from the last four years will be paused or rolled back. There’s a lot of regulatory uncertainty and I think that that’s something significant to watch for, will there be changes in the market structures or regulatory assumptions.

What have you and members of the Electricity Canada’s government relations team been doing?

We’ve been busy! I’d say we are talking with three main groups. The first is our members, especially those involved in power marketing, government relations or supply chain. We need to understand the questions they are asking and their priorities as the U.S. landscape changes.

We have also been engaged with key Canadian government officials to share industry information and understand the thinking around planning a response, and how we can inform and support this in a united way. That’s very important.

And we’ve been bringing the message directly to the U.S. as well, meeting with leaders from industry associations and stakeholders. As the new government settles in, we will meet with the energy policymakers too, as we’ve been doing for years. Electricity is one of those things that has worked so well, for so long in the cross-border relationship, that many people don’t even think about it. But I generally find that, once you take a look at how both countries benefit, people really do get it and understand the value.