How clean is your company’s power grid?
This is not a question that CFOs of Canadian manufacturers are used to answering. But that is changing rapidly.
In the face of global changes towards disclosure and transparencyinvestors are careful monitoring of greenhouse gas emissions as potential risks and expect companies to have credible plans to reduce them. That’s true for emissions across companies’ value chains, especially when it comes to electricity.
Leader greenhouse gas protocol corporate standard classifies company emissions into three groups.
Scope 1 emissions come from fossil fuels that companies burn directly.
Scope 2 emissions are indirect emissions from purchased power generation, including electricity, steam, heating and cooling.
Scope 3 emissions (also known as “tailpipe” emissions) are all other indirect emissions that occur in the company’s value chain, upstream and downstream.
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Canadian companies have well-established practices for tracking Scope 1 emissions and are increasingly tracking Scope 3 emissions with customers, suppliers and other partners as policy accelerates in the rest of the world.
Scope 2 emissions deserve additional attention. As the list of businesses in Canada seeking net-zero emissions grows, those businesses need access to a reliable and affordable source of clean electricity. In other words, having a modern and clean electrical system suddenly becomes a huge competitive advantage.
But here’s the thing: Electricity users can’t always affect the emissions produced by generating the electricity they use. Sometimes companies can directly reduce their Scope 2 emissions, for example, producer either procuring clean electricity. But that can be challenging or expensive and is not feasible in all provinces or territories. It is much easier if the grid itself is already capable of meeting the demand for clean, reliable and affordable electricity.
There are encouraging signs that building a modern, clean grid is feasible and affordable. However, across Canada, there is still work to be done, write to @dalebeugin @ClimateInstit and Michael Gullo @BizCouncilofCan. #CleanGrowth #cdnpoli #onpoli #NetZero #bcpoli
That means jurisdictions with clean networks have a competitive advantage in attracting projects and investments concerned about Scope 2 emissions, many of which are about to be great engines of growth.
We are already seeing companies deciding where to build based on electricity. According to press reports, LG Chem recently opted against build a battery plant in Ontario, at least in part, based on the availability of electricity.
Amazon, which has pledged to run entirely on renewable energy by 2030, announced last year that it would build a major distribution center in Alberta. powered by a nearby solar farm.
various global markets for green steel and zero emissions aluminum (both require large amounts of clean electricity) are growing, while Canada’s role in the North American zero-emission vehicle and battery market is growing. emergent.
Canada already has a head start. More than 80 percent of the country’s electricity production is emission-free, due to our wealth of hydroelectric resources, as well as nuclear power and a small but growing share of wind and solar power.
For comparison, the US and Australian networks are about 40 percent and 20 percent non-broadcast, respectively. As Ivan Vella, CEO Aluminum of Rio Tinto, has indicatedthis advantage of clean electricity means that “Canada is in a wonderful position to address its domestic needs as well as exports and other growth options that really help build the economy.”
However, across Canada, there is still work to be done. Even clean-grid provinces like British Columbia, Manitoba and Quebec, which rely almost entirely on zero-emission hydropower, will need to at least double its ability in the coming decades to meet growing demand and capitalize on emerging industries such as hydrogen and low-carbon steel. And critically, these changes must be implemented in a way that does not detract from reliability and cost competitiveness, qualities that for decades have been a hallmark of Canada’s attractiveness as a location for industrial investment.
Still, there are encouraging signs that building a clean, modern grid is feasible and affordable. Alberta, for example, is seeing some of the fastest growing wind, solar and battery storage in the country, largely because these energy sources are now cost competitive. Meanwhile, in Atlantic Canada, power companies are making inroads microgrid technologies.
Given the scale of the challenge ahead, building a network to support Canadian competitiveness will require government policy and an unprecedented amount of new investment. The federal government has committed to implementing a clean electricity standard which aims to deliver a net-zero electricity sector by 2035. This year’s federal budget also earmarked funds to create a Pan-Canadian Network Council provide advice in support of national and regional electricity planning.
Provinces will also have to step up to meet industry demands for a clean grid. Provinces oversee electrical systems, so they will need to provide clear guidance to their utilities, regulators, and system planners, and give them the tools and resources they need to get the job done.
Getting all of this right will require both levels of government. working together.
It is becoming clearer which way the wind is blowing: future growth in canada must be a clean growth. Clean, reliable and affordable electricity will drive that growth. CFOs have their eyes on the Scope 2 lower emissions prize because lower emissions are what investors demand. The question now is whether Canada can increase its clean electricity capacity fast enough to deliver on Canada’s promise as a clean growth powerhouse.
Dale Beugin is the executive vice president of the Canadian Climate Institute. Michael Gullo is the Vice President for Policy at the Business Council of Canada.