Energy Storage Between Nations
Entry #1: Why are America’s energy storage projections far more optimistic than Canada’s?
Energy Storage Developments in America
In January 2021, US President Joe Biden issued an executive order regarding clean energy and electric vehicle procurement. This directive reflects America’s newfound focus on unlocking the power of emission-free technologies. The federal government is planning to reserve $400 billion USD of funding for energy storage procurement. This movement can directly drive the integration of batteries in the upcoming American zero-carbon economy.
Energy storage has been mentioned several times in Joe Biden’s climate and energy policies; it is recognized as an essential part of the post-COVID national economic recovery plan. The Energy Storage Association (ESA) is predicting that 3.6 Gigawatts of energy storage will be deployed in 2021; it also forecasts that 100 Gigawatts of American energy storage facilities will be available by 2030.
Many US jurisdictions are already ahead of Canada with existing policies, programs, and financing tools. For instance, the federal Solar Investment Tax Credit (established in 2019) provides tax rebates on solar-related system installations. Under this incentive, commercial energy storage is often paired with solar energy generation to take advantage of this reimbursement. Recently, the Energy Storage Tax Incentive and Deployment Act was introduced to create stand-alone tax credits for the production of energy storage systems in utility, business, and residential applications. This new act will significantly promote the development of domestic and utility-scale energy storage projects.
Canada’s Recent Energy Storage Developments
The most recent federal-level clean energy movement was the introduction of the Canadian Net-Zero Emissions Accountability Act. Established in November 2020, the Act showcases the federal government’s commitment towards reaching net zero emissions by 2050, with 5-year interval emission reduction targets from 2030 to 2050. A Net-Zero Advisory Body was subsequently formed in February 2021; 14 experts across Canada were given the goal of overseeing target achievements and engaging the provinces with progress and feedback reports. The introduction of the Act can potentially highlight the crucial role energy storage plays in emission reductions within electrical grid systems.
Another recent energy storage program by the Canada Infrastructure Bank aims to invest $2.5 billion CAD into low-carbon economic developments, potentially resulting in one of the world’s largest energy storage projects. In recent years, the Canadian government has also allocated ongoing finances to green infrastructure. The Canada Infrastructure Plan was created in 2016, containing 5 key investment areas and $95.6 billion CAD of funding. $23.9 billion CAD of this fund will be allocated to green infrastructure and off-grid rural/northern communities. These categories represent excellent opportunities for energy storage projects, which can solve both the issues of emissions reduction and energy insecurity.
However, despite federal-level funding, there is no corresponding policy to guide the detailed process of funding allocations. Additionally, the current Canadian energy storage market is largely tied to its electricity generation composition. Without the high demand for non-hydro renewables, the drive to create relevant energy storage policies is limited. Hydro is the predominant source of electricity generation in Canada, accounting for 60% of all energy production (with some provinces reaching as high as 90%). Overall, the demands of smart grids are lower for these hydro-dominated provinces due to the abundance of existing electricity and grid flexibility.
By contrast, non-hydro renewable energy sources in the US are used nearly 3 times as much in America compared to Canada (20% vs. 7%); this affords more opportunities for energy storage development in the USA. The unavailability of hydropower means that there are more incentives in America for electricity market reformation; this additional competition would allow for grid emissions reduction and electricity stability.
Federal Energy Regulation and its Contributions
In America, the Federal Energy Regulatory Commission (FERC) oversees transmission and interstate electricity trading. By contrast, Canada does not have a national energy regulatory agency. Electricity generation and transmission policies fall under the authority of provincial governments. Consequently, the energy storage market structures can differ significantly depending on various provincial conditions.
There are two main existing market structures: publicly owned monopolies and deregulated markets. In provinces with monopoly providers, provincial governments have the authority to control electricity generation and transmission operations; consequently, these markets are not economically friendly for wholesalers and retailers. In comparison, deregulated markets encourage independent retail and wholesale electricity sales. Only two provinces in Canada (Alberta & Ontario) have competitive markets, in which independent system operators regulate transmission systems and market prices. As such, retailers and generators are limited to working exclusively with these two provinces in regards to private sector electricity investments.
Conclusions
Canadian electricity generation is heavily reliant on hydro resources. Since policies and actions occur at the provincial level, provinces with hydroelectricity generation lack the incentive to create free-market competition due to existing cheap electricity prices. With only Alberta and Ontario having deregulated markets, retailers and investors can find it difficult to build sustainable business models and profit from energy storage systems.
To meet the net-zero target established in the Emission Accountability Act, members of the Canadian government (federal & provincial) should create economically friendly business models for energy storage generators and investors. Despite relying more heavily on non-renewable energy sources, the US has made a significant investment in energy storage technologies to provide for their power needs. If a similarly bold approach were taken by the Canadian government and combined with their existing hydroelectricity infrastructure, the resulting product would manage to easily meet their zero-emissions targets and provide a stable electricity supply for all Canadians.