A June 2024 Canadian Climate Institute (CCI) Report: Heat Exchange: How today’s policies will drive or delay Canada’s transition to clean, reliable heat for buildings, concludes that Canadians must stop using natural gas and rely increasingly on higher cost, less reliable electricity to heat their homes and water. CCI further calls for radical changes to the way governments and independent regulators carry out their mandates — recommending government interventions to halt a consumer’s ability to choose natural gas. This is despite the fact that natural gas is not only Canada’s most affordable and reliable heating energy option but also the most widely used: it accounts for almost 50% of all residential energy use in Canada across 7 million households.
Energy systems are evolving — this is happening, has always happened, and will continue to happen. The gas energy delivery industry has been and will continue to be at the forefront of efforts to implement programs and technologies that meet Canadians’ evolving energy needs. However, any proposal to ban an energy choice that is preferred and relied on by millions of citizens must be called out for what it is — unrealistic and irresponsible.
The call for a gas ban is unrealistic
The electrification of natural gas peak-energy delivery, as envisioned by CCI and several other special interest groups, would require at least a threefold buildout of Canada’s current electricity system, at a phenomenally high cost with incredible disruption and difficulty.
On cost, we are talking about the buildout of the equivalent of hundreds of dams and nuclear facilities and all the infrastructure that would be needed to support them at a cost of hundreds of billions of dollars. No one talks about the material effect that will have on the cost of everything for Canadians — energy costs, food costs, housing costs, and more.
The time involved would be decades and decades (look at how long it takes to build a major dam or a major nuclear facility) and the disruption involved would be overwhelming (the scenario involves the removal of a whole infrastructure system as comprehensive as our network of highways and roads, which millions rely on).
A key reason we use natural gas to meet a range of our energy needs is that it is cost-effective. The energy intensity of this widely available molecule, which can be transported over vast distances reliably and safely to its point of use, makes it a truly remarkable advantage — which is why the world wants more of it.
Over and above those concerns, mandating electricity use as the only option for Canadians’ energy needs i.e., governments directing citizens on how to access and use energy, is not at all aligned with Canadian values and consumer preferences. This is about taking services of fundamental value off the market because officials think that is what should be done.
The call for a gas ban is irresponsible
No dictate from governments will change the realities of physics here: if you impose gas bans, you will create massive energy shortfalls. Try a Canadian winter when the power goes out for any length of time beyond a few hours, and you create a serious crisis. And this is why a natural gas ban would be irresponsible.
Energy infrastructure is capital-intensive and faces long permitting and regulatory approval processes. Looking at history, the generation of electricity in Canada has grown at an annual rate of 1.1%/year between 1990 and today. To double the amount of electricity in Canada by 2050 would require a build-out of approximately 3.8%/year, a 250% increase in annual growth rates. Add this to the fact that Canada is already confronting a reality whereby major electricity generating provinces are witnessing shortages of electricity. One must ask — is a 250% increase in the historical average additions to generation feasible? Has CCI properly assessed the infrastructure, land use, permitting, storage, and most importantly, the cost to replace the energy content delivery by natural gas on a peak winter day?
Canada does need more energy – including electricity
The CGA believes Canada needs more energy — including more electricity. Electricity is a technology that makes modern life possible in a host of ways — including ways that help gas-fired appliances work well. But electricity is a technology: it needs fuel to work. That fuel might be water, uranium, biomass (wood), coal, oil, wind, the sun and natural gas. In fact, natural gas use for electricity generation reached a 20-year high in Canada this past year and is set for another record in 2024[1], and this is because electricity needs to be reliable. Consumers who choose and can afford to buy a cold climate air source heat pump or an electric vehicle should be, and are, free to do so. However, there is a fundamental difference between market-based electrification and policy-driven electrification. The latter is driven by government mandates and not by the market or consumer. History has taught us before, and it will again, that a policy overreach into the market leads to very negative unintended consequences for consumers.
CCI seems to be disconnected from the consumer
CCI’s research lacks a sense of understanding of consumer energy use preferences. They use a net zero modelling tool that ‘forces’ an outcome that is out of step with what consumers want. Consumer preference for electricity over natural is not a reality in Canada. The annual natural gas growth has been 1.7% since 2000 vs. 0.9% for electricity. Consumer demand for gas shows no sign of slowing. In both 2022 and 2023, Canada set new all-time records in natural gas consumption. Consumers choose natural gas for more than just home heating. Many homes have — in addition to their furnace and water heater — natural gas stoves, dryers, fireplaces, backup generators, patio heaters and BBQs, each of which is there because it serves a particular consumer need and desire. Does moving to electric heating suggest all these appliances must also be electrified? And at what cost? Let us not forget about the importance of energy choice. In a recent poll[2], 77% of Canadians believe it’s important for a home to have more than one source of energy, with 84% believing it is their right to choose the energy source they use at home.
CCI’s research is unclear
In addition to the lack of consumer understanding, the CCI research has provided no data on modeling inputs, making it impossible to assess the validity of the outcomes. NATEM and other models of its type typically underestimate the costs of certain energy system elements by a wide margin, sometimes ignoring these costs altogether. This is true for electric distribution system upgrades, yet these costs are the largest single line item associated with moving from natural gas to electric space heating at scale in many Canadian jurisdictions. When designed to accommodate peak demand, electric distribution system capacity is inevitably poorly utilized – a fact compounded by the declining performance of heat pumps with decreasing temperature. Poor system utilization results in high fixed costs, even when using no electricity at all. Notably, CCI insists on using the terminology “cost optimal pathway” without opining on what consumer heating bills might be. Until more clarity and transparency are provided on the modelling work, CCI’s results remain questionable. Work completed jointly by gas and electric utilities in some Canadian jurisdictions indicates that fully electrified space heating at scale will result in unbearable home heating costs for Canadians who use natural gas for this purpose today in many parts of the country. For example:
- Heat Pumps | SaskEnergy
- Heating and Cooling (saskpower.com)
- Implications of Policy Driven Electrification
The gas industry will continue to focus on continuous improvement for the customer
So, where does this leave us, and where do we go from here? The gas delivery industry is steadfast in its quest for innovation in the energy we deliver and the way it is used. Regardless of any future state, three themes will remain consistent: energy integration, new fuel integration, and a continued focus on improved energy efficiency.
Energy integration is happening and will benefit the consumer. As noted, gas and electric systems work remarkably well together. However, more can be done to integrate how we plan for and serve the future consumer. Electric and gas utilities have commenced a detailed discussion on this concept – called integrated resource planning; the aim of this planning is to build a joint plan for energy infrastructure and associated resources that will result in the most cost effective, reliable, and low emission energy. We are already seeing integration at the household level in Quebec, where Hydro Quebec and Énergir are piloting a heat pump/gas furnace hybrid project rollout. Other markets in Ontario and British Columbia are similarly working on hybrid heating applications.
On new gases, despite claims in the CCI report, new gases are one of the most cost-effective means to lower emissions as they do not require a new distribution system and current end-use appliances can use the energy. One of the many advantages of the Canadian gas system is its versatility. It is capable of safely and affordably delivering molecules other than natural gas to its millions of customers. Renewable natural gas (RNG) and hydrogen are both being blended into the natural gas system in different areas across Canada. Both are clean energy sources reducing the emission profile of natural gas. Renewable gases can and will reach new production records in the years to come. Utilities across all of Canada are bringing online or working to introduce new and incremental RNG and hydrogen project potential. The number of RNG production sites in Canada is expected to more than double by 2026, producing over 30 PJs of RNG. This amount of energy is more than 60% greater than the anticipated annual generation capacity of BC Hydro’s Site C dam. NRCan’s Hydrogen Strategy for Canada points to the natural gas distribution industry’s ability to blend up to 20% hydrogen into the existing gas networks. The introduction is already making concrete plans to go further with the initial phases of a 100% hydrogen community breaking ground in Alberta.
On efficiency, home heating will continue to become more efficient. Both the natural gas and electricity industries have positive records of success in residential and commercial energy efficiency and technology deployment. On the natural gas side, the industry, along with the government has successfully transitioned consumers from using low-efficiency furnaces and water heaters to increasingly high-efficiency models. This process was done with rigorous market testing, collaboration and timely regulation. Nothing was rushed; instead, it respected the market and the state of technology. We are seeing similar efficiency gains on the electric side with cold climate air source heat pumps. This technology is essential and will continue to play a growing role in Canada. Where to next? For gas utilities in particular, the next generation of heating equipment is the natural gas heat pump. This promising technology works in a similar manner to an electrical heat pump. While its upper-end efficiencies are not as high as their electric counterparts, they retain their efficiencies much better when the temperature drops. Whether you are in the gas or electric business, deeper energy efficiency for the homes we live in is and will continue to be a priority.
To conclude, the gas energy delivery industry is, and always has been, up for big challenges. We serve our customers first because their needs are paramount, and we adapt as those needs change. We welcome continued discussion and debate on our role in meeting those customer needs as we all work to build a more prosperous country for all Canadians — one where we can all rest assured that we won’t be left out in the cold.
Timothy M. Egan
President and CEO
Canadian Gas Association
[1] Environment and Climate Change Canada. (2024). National Inventory Report.
[2] Leger public opinion polling – Spring 2022, 2023, Fall 2023