Powering Up: Canada’s New National Electricity Strategy

On May 14, 2026, the federal government released Powering Canada Strong: A National Strategy for an Electrified Canadian Economy (the “Strategy”). The Strategy signals that the federal government views electricity as playing an important role in nation-building, with provinces, territories, and Ottawa all having a role to play in advancing a national strategy that places electrification at the centre of efforts to address affordability, economic growth, and climate change. For any participant active in Canadian electricity infrastructure, the Strategy has immediate practical significance: it reshapes the federal financing toolkit and introduces new cost-allocation and regulatory coordination mechanisms, potentially affecting project economics, capital structures, and the bankability of transactions across the generation, transmission, and distribution value chain.

Highlights of the Strategy

The Strategy is premised on the projection that Canada will need to double the output of its electricity system by 2050 to meet anticipated demand growth driven by electrification, industrial expansion, and the emergence of energy-intensive sectors such as AI data centres and critical minerals development.

The Strategy also projects that interprovincial transmission infrastructure could grow by up to 27% by 2035 and 70% by 2050 to support greater electricity trade and coordination across provincial systems.

In order to meet these thresholds, the Strategy is organized around eight areas for action:

1. Building the electricity system;
2. Financing the build;
3. Increasing regional integration;
4. Improving regulatory certainty and speed;
5. Managing demand and modernizing the system;
6. Building capacity across the value chain;
7. Ensuring the availability of required skills and labour; and
8. Securing the North.

Consultations with provinces, territories, Indigenous Peoples, utilities, and industry on all of the foregoing are expected to follow in the coming months.

A $1 Trillion Question: Who Foots the Bill?

To support the required build-out, the federal government has established three tiers of financial support:

• tens of billions in investment tax credits (ITCs), including the Clean Electricity, Clean Technology, and Carbon Capture, Utilization, and Storage ITCs;
• strategic financing through the Canada Infrastructure Bank (CIB, with a clean energy target of at least $20 billion), the Canada Growth Fund (CGF), and the Indigenous Loan Guarantee Program (ILGP, whose envelope has been doubled from $5 billion to $10 billion); and
• targeted programming such as the $4.5 billion Smart Renewables and Electrification Pathways Program.

Going forward, the Government plans to extend the Clean Electricity ITC to certain major high-voltage intra-provincial transmission projects, a significant expansion that would bring a previously excluded category of infrastructure into a more favourable financing environment, complementing existing support for inter-provincial interties. The Clean Electricity Regulations (CER) are also to be amended to pursue three objectives: maintaining the net-zero by 2050 goal while allowing greater use of credible carbon offsets; giving existing units more operational flexibility to avoid stranded assets; and creating more room to add new generation units in the near term.

To complement the above, as noted in our prior bulletin linked here, the Government is also launching the $25 billion Canada Strong Fund, Canada’s first national sovereign wealth fund, with a mandate to invest in nation-building projects such as ports, mines, and trade and energy corridors.

On affordability, the Strategy proposes to expand energy-saving retrofits for up to one million households through grants, financing, and complementary measures, including transitions from propane, oil, or electric baseboard heating to heat pumps, with a stated ambition of realizing $15 billion in energy savings by 2050. The federal government also intends to introduce Bill S-4, which would modernize the Energy Efficiency Act by strengthening its enforcement framework, updating it for modern technologies and new market actors, and allowing ministerial exemptions to support economic growth, competitiveness, and innovation.

The federal government views private capital as critical to financing the build-out, noting that institutional investors such as pension funds are increasingly gravitating toward infrastructure projects that offer long-term stability and predictable yields. However, the number and diversity of capital providers involved will require carefully structured financing arrangements that address intercreditor priorities, align the interests of each participant in the capital stack, and ensure that the costs and benefits of electrification are fairly distributed across current and future generations.

Beyond Financing: Demand Management, Workforce, and Domestic Manufacturing

Several of the Strategy’s other eight areas for action have direct implications for buildout timelines and costs.

First, on workforce: an estimated 130,000 skilled workers will be required to double Canada’s electricity grid by 2050. The Strategy commits to working with industry, labour, and training partners to address this gap. Labour supply constraints are a genuine execution risk, particularly for projects in remote or northern locations where site labour is already scarce.

Second, on domestic manufacturing: the Strategy contemplates growing Canada’s manufacturing capacity for grid components. While this area for action is largely aspirational at this stage, it signals a policy direction toward supply chain localization that could affect procurement requirements and project costs for grid developers and equipment suppliers over time.

A third area is demand management and grid modernization. The Strategy treats energy efficiency, demand response, distributed energy resources, and grid digitalization as tools to curb peak loads, defer expensive new generation, and preserve affordability as demand doubles. For project developers and lenders, these measures are relevant to load-forecasting assumptions underlying generation investment cases and to the policy environment for smart grid and storage technologies. The scale of investment required also demands careful consideration of how costs are allocated across ratepayers, taxpayers, and private capital — both today and over the decades ahead. How that balance is ultimately struck will be critical for project economics and the commercial viability of the electricity build-out.

Splitting the Atom on Baseload: Nuclear and SMRs

The Strategy reserves particular attention for nuclear energy, and the federal government is separately developing a new Nuclear Energy Strategy to be released in parallel. Nuclear currently supplies approximately 15% of Canada’s electricity and forms the backbone of Ontario’s grid. Canada will be the first G7 nation to deploy a small modular reactor (SMR), at Ontario’s Darlington Nuclear Generating Station — a project now fast-tracked through the Major Projects Office.

The Strategy also frames nuclear as a competitive advantage in the international context. The federal government highlights Canada’s “Tier One” nuclear status — a country with a robust fuel cycle, domestic CANDU reactor technology, substantial uranium reserves, a skilled workforce, and a strong nuclear regulator. This positioning suggests that nuclear may also feature prominently in Canada’s trade diversification strategy and international energy partnerships, which is relevant for Canadian nuclear suppliers, service providers, and uranium producers as much as for domestic project developers.

For project developers and financiers, nuclear’s prominence in the Strategy matters in at least two respects. First, SMR project finance is an emerging and complex area: the Darlington transaction will establish early precedents for how federal financing instruments interact with nuclear project structures, offtake arrangements, and regulatory approvals under the Canadian Nuclear Safety Commission. As a result, developers and financiers will be pricing technology, construction, and licensing risks differently than for conventional generation. Second, the Strategy’s endorsement of nuclear as a long-term baseload solution, alongside natural gas, reinforces that Canada’s decarbonization path does not contemplate a purely renewable grid. This has direct implications for generation planning assumptions and the competitive landscape for new-build electricity projects.

Gas Keeps the Lights On: A Durable Role for Natural Gas?

One of the Strategy’s more pointed policy signals is its explicit endorsement of natural gas as a structural feature of Canada’s electricity toolkit. The Strategy highlights natural gas-fired generation as a source of reliable, affordable, and secure electricity that can respond in real time to changes in demand and complement intermittent renewable generation, noting that some jurisdictions have concluded that natural gas would be the preferred option for providing affordable baseload power. This aligns with Ontario’s Integrated Energy Plan, which similarly affirms natural gas as an important part of the province’s energy mix. For project finance practitioners active in gas-fired generation, the Strategy offers meaningful regulatory headroom: existing gas assets may be less exposed to forced early retirement than previous policy signals had suggested, and the proposed amendments to the CER are intended in part to avoid stranded assets.

Powering the North: Remote and Northern Energy Security

The Strategy dedicates specific attention to Canada’s North, recognizing the distinct challenges of delivering reliable and affordable power in remote and northern regions. The federal government contemplates targeted support for energy infrastructure planning and the deployment of Canadian-made technologies in these regions, together with enhanced collaboration with Indigenous communities to support resilient, community-driven energy systems. The federal government has already invested $40 million in predevelopment work for the British Columbia-Yukon Transmission Line and $44 million for the Taltson Hydro Expansion Project, laying the foundation for transformative northern energy infrastructure. For project developers and financiers, northern energy projects present a different risk-return profile than southern grid-connected infrastructure: longer permitting timelines, higher construction costs, limited grid connectivity, and greater reliance on federal funding. The Major Projects Office referrals already include the Iqaluit Nukkiksautiit Hydro Project and the Taltson Hydro Expansion Project as priorities, indicating that northern hydro is an active area of federal attention.

Cybersecurity and the Grid

The Strategy also identifies cybersecurity as a growing risk to electricity infrastructure. Canada’s electricity grid is recognized as a prime and growing target for cyber threat actors, including state and non-state actors, with potential consequences ranging from widespread power outages to cascading disruptions compounded by climate-related events. As grid modernization accelerates, the federal government has signalled its intention to bolster cybersecurity resilience through collaborative efforts with the energy sector.

Wiring the Nation Together: The Federal Push on Interties

The Strategy references two third-party studies to illustrate the potential value of greater interprovincial connectivity. A 2020 study (cited in the Strategy) found that a $1.7 billion investment in interprovincial transmission could attract an additional $6.6 billion in private funding for transmission alone and an additional $92.5 billion in renewable power over ten years. A 2025 study (also cited in the Strategy) indicated that doubling the capacity of the BC-Alberta interconnection could yield $1.7 billion in net benefits to 2050, and a tripling of capacity between Manitoba and Saskatchewan could yield $2.3 billion in net benefits.

The federal government, which plays a key role in interprovincial trade, is committed to actively supporting provinces and territories in developing intertie connections. Going forward, the Strategy proposes to give priority consideration to intertie projects for MPO referrals and federal funding, and to develop a standard cost-allocation mechanism drawing on the EU’s Projects of Common Interest model. It will also establish new federal-provincial-territorial collaboration frameworks to resolve disputes and advance long-term regional planning. Further, the federal government will refer the development of a new comprehensive Transmission InterConnect Investment Strategy to the Major Projects Office. These mechanisms will have direct implications for how interprovincial transmission projects are structured, costed, and financed.

The Strategy also highlights a new partnership among most provinces and the Northwest Territories to advance strategic interties and electricity transmission projects across Canada, reflecting an emerging national consensus on grid connectivity that extends beyond bilateral federal-provincial negotiations.

The Strategy was released alongside a Canada-Alberta Implementation Agreement, which establishes a joint Electricity Working Group to support a shared net-zero electricity objective by 2050, while simultaneously allowing Alberta to continue its existing constitutional challenge to the CER and to repeal those regulations if the courts ultimately find them unconstitutional. This carve-out illustrates the constitutional fault lines that underpin the federal-provincial dynamic in the electricity sector, and it underscores that the implementation of federal electricity policy in Alberta will be influenced by the outcome of that litigation and the trajectory of ongoing intergovernmental negotiations.

Live Wires: Key Legal and Regulatory Issues to Watch

The announced strategy raises several issues that warrant close attention as consultations proceed:

Federal-provincial relationships. The federal government’s expanded financing and project coordination role will inevitably intersect with provincial authority over electricity. How that interface is managed, particularly on intertie cost allocation and regulatory approvals, will shape project timelines and structures.

Regulatory reform and approval timelines. The Strategy commits to completing federal reviews within one year of receiving complete information from a project proponent, and to moving to a “single federal decision” model for major projects, assigning review authority to the regulator with lifecycle responsibilities and greatest expertise. A Crown Consultation Hub would coordinate Indigenous consultation, with the objective of one process per community per project. These commitments, if implemented, would materially reduce approval timeline risk for project developers and improve the certainty that lenders require to underwrite long-tenor project finance debt. The details of implementation, particularly the interface between the single-decision model and the Impact Assessment Act framework, remain to be worked out and will be watched closely, as approval timeline risk is an important factor in pricing and structuring project finance transactions.

ITC expansion and project economics. The extension of the Clean Electricity ITC to intra-provincial high-voltage transmission projects brings a category of infrastructure that was previously outside the credit’s scope into a more favourable financing environment. The key outstanding questions, including which projects will qualify, at what threshold, and whether the credit can be stacked alongside other federal or provincial incentives, will materially affect how in-flight and prospective transactions are structured and underwritten.

Clean Electricity Regulations reform. As noted in the highlights above, the proposed amendments pursue three objectives: maintaining the net-zero by 2050 goal while allowing greater use of credible carbon offsets; avoiding stranded assets by giving existing fossil fuel-fired generators greater operational flexibility before the end of their economic life; and creating more room for new generation units in the near term. Notably, the Strategy addresses carbon pricing only in the narrow context of ensuring that industrial carbon pricing systems remain “stringent, effective, and fair”; it does not address the trajectory of economy-wide carbon pricing, which is important given that carbon price levels and design are among the most consequential variables in electricity generation economics and long-term investment modelling. Where the federal industrial carbon pricing system applies, the federal government has introduced the Decarbonization Incentive Program and the Future Electricity Fund to return carbon pricing revenues to industry while supporting investments in clean electricity production, transmission, and related demand-side measures, mechanisms that may affect the net cost of compliance for fossil fuel-fired generators and the economics of new clean generation projects.

Offshore wind. The legislative foundation for offshore wind in Atlantic Canada is already partially in place: Bill C-49, which amends the Canada-Newfoundland and Labrador Atlantic Accord Implementation Act and the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act to expand the offshore boards’ mandates to include renewable energy, received Royal Assent on October 3, 2024. The Strategy builds on this by committing to further engagement on the regulatory frameworks necessary to develop offshore wind, including evolved governance roles for the offshore boards jointly administered with Nova Scotia and Newfoundland and Labrador. Regional assessments of offshore wind development in both provinces are underway as an important first step in identifying potential areas and mitigation measures. This is a nascent but active area, with significant project interest in Atlantic Canada. The design of the licensing, permitting, and environmental assessment regimes will be foundational to whether offshore projects can attract the institutional capital and project finance structures that have supported offshore wind development in Europe and the United States.

Indigenous partnership. The Strategy’s emphasis on Indigenous co-ownership, including the expanded ILGP and the Crown Consultation Hub, signals that partnership structures will be a central feature of deal design, particularly for northern and transmission projects. At the same time, the duty to consult remains a live legal obligation that operates independently of the Strategy’s coordination mechanisms.

The Bottom Line

• The Strategy mobilizes an unprecedented federal financing toolkit now in play, including ITCs, the CIB, the CGF, the ILGP, and a new $25 billion sovereign wealth fund, that will reshape the capital structure for electricity infrastructure projects across Canada.
• The proposed extension of the Clean Electricity ITC to major intra-provincial high-voltage transmission is a material development for project developers and lenders active in that space, though the eligibility criteria and stacking rules remain to be confirmed.
• Natural gas receives an explicit federal endorsement as a structural feature of the long-term electricity mix, and the proposed CER amendments reduce stranded-asset risk for existing gas-fired generation while also creating regulatory headroom for new-build capacity.
• Interprovincial transmission is elevated to a federal priority, with new cost-allocation mechanisms, a federal-provincial-territorial coordination framework, and a Transmission InterConnect Investment Strategy all on the horizon.
• The pressure points to watch as consultations unfold are the constitutional division of powers (including Alberta’s ongoing challenge to the CER), the eligibility thresholds and stacking rules for the expanded ITC, the scope of the CER amendments, the design of Indigenous partnership and co-ownership structures, and the practical capacity constraints — workforce supply and domestic manufacturing — that will determine how quickly projects move from policy ambition to construction reality. Each of these will have direct implications for how transactions in the electricity sector are structured and financed.
• An immediate consideration for market participants is to address sequencing risk. Many of the Strategy’s most impactful measures remain at the consultation or pre-legislative stage, and sponsors and lenders will need to assess whether to proceed on the basis of current law and treat the Strategy’s commitments as upside optionality, or to defer key decisions until the legislative and regulatory framework is settled, a calculus that will vary by project, technology, and risk appetite.
• Notably, the Strategy’s release coincided with the announcement of a Canada-Alberta Memorandum of Understanding addressing a new pipeline initiative — a signal that the federal government’s energy sovereignty agenda encompasses oil and gas infrastructure alongside electricity, and that the two files are being advanced in parallel as part of a broader nation-building program.

What Happens Next

Canada will consult with provinces, territories, Indigenous Peoples, utilities, industry, and unions on the proposed action areas in the coming months, with the understanding that each province and territory will still determine what works best in its own market. Interested parties may provide input by contacting electricity-electricite@nrcan-rncan.gc.ca.

McMillan will continue to monitor developments under the Strategy as consultations unfold and the financing framework takes shape.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2025