Interview: Electrifying Canada and the Competitive Imperative
Climate change is an existential crisis but also a generational opportunity to transition to a cleaner, more sustainable future and a prosperous economy. If Canada wants to lead in the fight against climate change, a critical aspect of that will be electrification.
Although there is no one path to achieving Canada’s net-zero ambition, clean electrification is widely seen as the most affordable, reliable, and efficient path forward.
Electrifying Canada is a business-led task force established in 2019 to identify the barriers to progress and find targeted opportunities to accelerate the electrification of large swaths of the economy.
Following is a conversation about its work and progress over the course of the last year with Co-Chairs Susan McGeachie, Head of the BMO Climate Institute, and Richard Florizone, CEO of IISD. The discussion, edited for length, also explores the cost of inaction and how businesses, governments and financial institutions can work together to remove barriers to reach net-zero goals.
Electrifying Canada is just over a year old. Can you speak a little about the goal of this task force?
Richard: With Electrifying Canada, we wanted to bring Canada’s biggest businesses and employers together to talk about the importance of this issue, because this is important to Canada’s prosperity. The idea behind Electrifying Canada was to cut through some of the political uncertainty and noise and conflicting views. We need to start moving. If we look incrementally about where we are today, we’re not going to where we need to go. We need the leadership of business in this country to help give governments and regulators and others the confidence to move ahead.
As co-chairs of Electrifying Canada, can you reflect on the work you’ve done over the past year?
Richard: I’m proud that we are seeing increased attention to electrification. Electrification is really the clearest path to net zero, given the increased performance and cost-effectiveness of renewables. Plus, when you electrify things, you also get an efficiency advantage, so there’s kind of a double dividend with electrification. If Canada doesn’t get on this trend and respond to it, we’re going to be weaker as a country, both in terms of our climate performance and our economic growth.
Susan: Electrification underpins decarbonization across sectors. What needs to happen in industry? What needs to happen in buildings? What needs to happen in transportation? There are consistent catalysts affecting those sectors. I was very engaged in working with different industry players to understand those catalysts because there are different ways banks can support end results.
From a banking perspective, which of those catalysts can have the most impact?
Susan: Within the financing catalyst, there is a recognition that the banks have an increased role to play in decarbonization. We no longer simply walk away because it’s not ‘bankable.’ Instead, we ask ‘what can we do to make it bankable?’ We need to be engaged in that whole journey to support our clients.
How is BMO positioning itself to industry on this issue?
Susan: BMO is primarily a financier, but we can also be an advisor, an aggregator or a bridge builder to put together different partners in different parts of the economy so that they can work together to advance solutions. Sharing cost and risk with multiple partners minimizes risk to any one player.
Which catalysts will help accelerate the electrification of Canada?
Richard: It’s hard to pick one. Clearly, financing is very important, as Susan mentioned, but I can’t help but think it’s about that empowerment and alignment upfront. In other words, you’ve got to start to get regulators and utilities kind of saying, ‘Yeah, we have to align with this net zero scenario. If Canada doesn’t keep up with it, we’re going to fall behind.’ That’s really the big one for me.
Where are the barriers?
Susan: There are still gaps in the financing value chain to support technological implementation at scale. We have large corporate players spending a lot of money every year in Canada piloting solutions, but then how do we support them to accelerate these solutions? The entire financing ecosystem needs to come together: from governments and corporate investment to pension funds and banks. Where we don’t have the answers, we continue to have the conversation until we figure it out. And this is what I appreciated about Electrifying Canada; it’s very collaborative. Different players in the industry coming together to share information and advance a major decarbonization solution.
Can you describe the sense of urgency around electrification?
Richard: We’ve got very, very aggressive emissions reduction targets for 2030. That is seven years away. For one of our partner companies, Teck Resources, seven years from now is today because that’s your 10-year capital plan. You’re planning now. Teck is one of Canada’s largest mining companies and when you look at the potential for electrification, mining is huge, both in terms of the electrification of mining operations and production of metals and minerals that are needed for renewable energy. When you have your trucks underground that are electrified, you don’t have to worry about emissions and ventilation systems. If Teck is making plans to electrify, it needs to know where that electricity is coming from – and it needs to know that now. In some ways, we are behind and that’s why we wanted to come together and push for more urgency.
Where does the focus need to be right now?
Susan: I see an urgent need for a national resourcing plan. We need to accelerate the project approvals process like other regions are doing. The EU and South Africa have both accelerated permitting for clean energy. Australia’s resource development is planned and executed at a national level. That hasn’t been Canada’s approach. There’s a great opportunity for us to reduce the carbon intensity of our materials and competitively position ourselves, but we need to get shovels in the ground; as Richard said, we only have seven short years to realize our 2030 interim targets.
Is there enough awareness about the financing options out there?
Susan: I think companies still primarily go to governments to get the funding that they need as opposed to their bank. The reason for that is not just the fact that businesses think governments are more inclined to support them in these areas, but the capital is also cheaper. Another strategy could be that the government leverages some of its financing and rolls it out through the banks. Often, it’s the most sophisticated users who know how to put a proposal together for government, but then you’ve got everybody else. We just came out with our small and medium-sized enterprise (SME) survey to find out where SMEs are in all of this. In Canada, 98% of our businesses aren’t yet actively engaged in this major economic transformation.
There are several power sources vying for a leading role in electrification, including renewables, hydrogen, and nuclear. Is this a race?
Richard: There’s no question it’s a race. If you talk to utility executives, they focus on how to deliver those electrons at a reasonable cost, with low carbon emissions and with high reliability. With technological change, it can be kind of hard to predict which power source will win. For example, wind and solar on the cost front have become way more cost competitive than anyone thought. What is highly, highly certain is this increased role of electrification, because of the double dividend for reduced emissions and increased efficiency. As an investor, you want to do your due diligence and you probably want to hedge with regard to different technologies. There’s a role for all of them where they have different strengths and weaknesses.
What’s the cost of inaction?
Susan: Increasingly severe and unpredictable weather that will require expensive investments in resilience. And the longer we live through the impacts before investing in adaptation, the higher the cost, as noted by the Canadian Climate Institute in their recently released report on this topic. The longer we put off investments in the low carbon transition, the more urgent the interventions will become, which will also increase costs.
Working with the Indigenous communities comes up regularly in the reports issued by the task force. But, while working with Indigenous communities is important for all industries, I’m not sure if the broader public knows why these communities are vital to electrification. Can you explain why it’s so important?
Richard: I think it’s essential because it’s good for reconciliation, it’s good for Indigenous communities, it’s good for Canada. It’s also just good business. Some of the most inspiring examples I’ve seen in Canada, in the clean economy, have been Indigenous clean energy projects. It’s incredible to see the kinds of things that are happening in the clean energy space that are being led by Indigenous people.
Electrifying Canada was a way to share information across industries. What are BMO’s priorities?
Susan: Our main priority is to partner with our clients across all sectors to achieve their net-zero ambition. One way to do so is through our work at the BMO Climate Institute in identifying and evaluating all the different technologies that can get us farther along a net-zero pathway, and where we need to invest by 2030. How, as a bank, we can help accelerate market penetration of high impact decarbonization technologies. Our goal is to facilitate adoption, acceleration, and scale of priority climate solutions.