Canada: US Electricity Trade: Challenges And Opportunities

Canada is the largest foreign supplier to the US of all forms of power generation – oil and gas, uranium and, of course, electricity. (More than $125B in exports annually.) There is a high degree of mutual economic dependence at stake reflecting the extent to which our two economies are closely integrated, more so in fact than any other two markets in the world.

Electricity trade, primarily hydropower from Canada to the US, is a key element of this unique market. It is cheap, abundant and clean. With the right policy and regulatory framework, we can ensure that electricity, particularly from hydro, will be an indispensable part of energy security for both Canada and the US. Most of this trade is the export of hydro electricity from Quebec into the Northeast and from Manitoba into the mid-west. The other part is the outcome of efficient load management through the North American grid.

Statistics understate the high degree of mutual economic dependence at stake in hydropower trade. The Canada-US border runs mostly east-west but the power grids are constructed north-south. In fact, the Canada-US bulk power system is perhaps the greatest example of cross border collaboration. Power generators and transmitters are uniquely dependent upon one another. But they are only as strong as the weakest link.

The electricity blackout that hit central Canada and much of the US mid-west corridor in the summer of 2003 proved dramatically – and to the surprise of many – just how integrated we are. It also pointed dramatically to the need to upgrade that grid – a challenge both governments are addressing, to some extent, with stimulus spending.

But if we hope to exploit the potential of clean power, there are a number of challenges to overcome. The 2008 Long-Term Reliability Assessment of the North American Electric Reliability Corporation (NERC) projected that over 260,000 Megawatts of new variable power would be needed for the North American bulk power system in the next decade. Even if only ½ of this capacity comes into service, it would represent a 450% increase in variable resources compared to last year. That is a staggering undertaking.

If we are going to accomplish major expansion, we will need:

  • to deploy different types of variable power resources to take advantage of complementary patterns of production; and minimize the unreliability of wind and solar power.
  • we will need to reach early agreement on common, open standards to channel research and development efforts. Currently definitions vary widely among states and provinces complicating the regulation of renewable power across the border.
  • we will also need a massive investment in new transmission lines, in advanced control technologies and in new materials to limit power loss during transmission over long distances.

These are some of the financial and technical requirements. But there are political challenges as well, including proposals in the US Congress that would exclude large-scale hydro projects from its unique definition of "qualified" sources for the national renewable electricity standard. Part of a package of legislation incidentally which offers huge, free credits to coal-fired electricity producers, the most carbon intensive by far. Absurd as this may seem, denying that hydropower is renewable explains the power of lobbyists in Washington. The reasoning is simple enough. As the American Wind Power Association stated "output from the large base of Canadian hydro projects could potentially be rerouted and flood the US market, depressing electricity prices to levels too low to support non-hydro renewables"! So hydro electricity from Canada is a "threat" to the US because it is clean, low cost and reliable.

It reminds me of the famous complaint from candle makers centuries ago claiming unfair competition from the sun. That was satire highlighting the dangers of protectionism. Those opposed to Canadian hydro imports are serious, hiding under the umbrella of "green protectionism", transparent, blatant but potentially harmful to economic reality.

Denying that Canadian hydropower is renewable power should be a serious matter, both for the US and Canada. It is serious for Americans because they will be consciously making their value-added industries less competitive by adding needless cost. It is also serious for the US because it constrains their ability to displace coal-fired power. It is serious for Canada because it would distort trade in a manner that is contrary to America's WTO and NAFTA obligations.

Ontario's "FIT" programme – essentially a "supply management system" for electricity – is, in my view, similarly flawed. Trade negotiators, I confess, abhor "supply management" systems of any kind because they are, by their nature, trade distorting. What it means, however, is that Ontario consumers will pay about 7 times more for boutique wind or small hydro power than for big hydro or nuclear, including hydro Ontario might more easily get from Quebec in a "fit" of nation-building. The Buy Ontario features of this programme are simply perverse.

The proposed merger of Hydro Quebec and New Brunswick Power is a compelling example that should bring new light to the definitions emerging in Washington and should inspire broader thinking in Canada as well. The enormous hydro capacity in Canada –and not just Quebec – offers opportunities for consumers on both sides of the border provided major future projects are not strangled at birth by advocacy groups with dogmatic views. The debate about the potential of hydro for both countries would benefit from some adult supervision!

What is also missing from the debate in both countries is the dramatic potential for natural gas – the cleanest of the fossil fuels – in meeting energy security objectives. Technology breakthroughs have made shale gas a real game-changer for the industry and should transform the debate over generating electricity. (States such as Pennsylvania and New York, traditionally importers of the bulk of their energy, could instead become energy producers.) Keep in mind, too, that gas-fired electricity, like hydro power, can pick up the slack for intermittent wind and solar sources when the wind does not blow or the sun does not shine.

The threat from cyber space against computer controls generally and electricity grids in particular is also a very serious challenge, calling for heightened vigilance from governments and industry on both sides of the border. We should not wait for an attack or a major breakdown to stimulate tighter surveillance and protection of computer systems that control critical infrastructure.

The complexity of the Climate Change debate in both Canada and the US poses a major challenge and makes our ten year hassle over acid rain look like child's play. There are acute provincial, state and regional sensitivities involved, making the prospect of a national consensus in either country extremely difficult. There are competitiveness issues – bilateral and global - that cannot be ignored. There are trends or fads of the moment that have seemingly more political appeal than tangible effect but which, nonetheless, tend to distort public opinion.

Given the complexities and the regional, national and multinational sensitivities at play, it is not surprising that finding the right solution is proving elusive. The most difficult aspect in my view is, as Jack Mintz has observed recently, that policies being proposed on climate change will affect the economy now whereas the hoped for benefits will not be evident for years to come.

Everyone involved in the Climate Change debate knows that, ultimately, industry and consumers will be obliged to pay the real environmental cost of energy, whatever the source, through Cap and Trade or a carbon tax. Newer, more fashionable forms of energy may help ultimately but they are also more costly. This, too, we all know.

Given that China, the US, Russia, India and Japan generate 55% of total Greenhouse Gas emissions, we also know that, without a consensus among these major emitters, action by others will be inconsequential. Similarly, we should know that it would be irresponsible for Canada to act unilaterally or at variance with the US on this issue. A coordinated, effective approach by Canada, acting in concert with the US, is the most sensible course. We have to get this one right.

The Clean Energy dialogue launched during President Obama's visit to Ottawa in February was a useful first step. One priority identified was the need to advance smart grid and clean power technologies and help develop government and industry-sponsored reliability standards, along with better cyber security and interoperability guidelines. Ambitious and yet limited. Vigorous support from the power industry on both sides of the border is needed to make this dialogue produce results.

In addition to closer collaboration on "smart grids", we need a high level commitment to develop smart policies, standards and regulations that will harmonize our approach to climate change in a way that delivers tangible results for our shared environment and is consistent with our mutual need for sustained economic growth.

We seem committed in principle to a collaborative approach on Cap and Trade and on the need for comprehensive and effective international agreement but there is a lot of unfinished detail, let alone commitment, outstanding.

For Canada, there is a need for greater sensitivity to the acute provincial and regional factors at play – an aspect that, in my view, the recent study sponsored by the TD Bank seemed to ignore. Without an unprecedented level of federal/provincial collaboration, we will wind up with an imbalance – a hodge-podge of laws, definitions and regulations. As every Canadian in this room knows, it is never certain whether overlapping federal/provincial interests and jurisdictions on any subject will yieldcoherence, procrastination or confusion. (Think vaccinations!)

In the U.S., the regional and federal/state factors are similarly complex and challenging. Never underestimate the political power of coal in America – the source of 50% of US electricity today.

For today's discussion, my simple objective is to try to give the electricity component in this critical debate a fair hearing and to underscore the reasons why a rational, binational approach to future needs and future supply be adopted. We should strengthen, not handicap, what are in fact natural assets. To be more credible in Copenhagen, I believe that we should add more substance to our dialogue and establish clear momentum towards a precise bilateral agreement.

Canada and the US have to get the balance right between measures that will be effective in reducing emissions while avoiding actions that would have prejudicial or discriminatory impacts on our need to sustain growth in our integrated economies.

At a minimum, we should agree to avoid border measures that would distort energy trade between us. "National treatment" is the principle that should prevail. We should 'make a virtue of necessity' and agree on how imported electricity can be credited and certified under a sensible, renewable portfolio standard. We also need to address the importance of competitiveness - nationally, bilaterally and internationally - as we press for a coordinated and effective global agreement.

Above all, we need a firm leadership commitment from governments at all levels in both countries and a serious negotiation leading to common definitions, shared targets, timetables and objectives with standards and mandates that are credible and achievable, based on science, not myths. Our mutual need for a healthy expansion of electricity trade, and energy trade more generally, should be a basic rudder in this debate.

About Ogilvy Renault

Ogilvy Renault LLP is a full-service law firm with close to 450 lawyers and patent and trade-mark agents practicing in the areas of business, litigation, intellectual property, and employment and labour. Ogilvy Renault has offices in Montréal, Ottawa, Québec, Toronto, and London (England), and serves some of the largest and most successful corporations in Canada and in more than 120 countries worldwide. Find out more at

Voted best law firm in Canada two years in a row.
2008 and 2009 International Legal Alliance Summit & Awards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.