Hydro looks set to face a more limited role in Canada, suggests Neil Ford

Canada’s role as a hydroelectric super power is well established. It produces more hydroelectricity than any other country, earns large sums from exports to the US and has sold its hydro technology to companies in many other countries around the world. Despite the hydro sector’s obvious role in helping to cut greenhouse gas emissions, the Canadian government is eager to develop new nuclear plants in order to meet its Kyoto obligations, while greater investment in gas fired plants is planned. Is hydroelectric power’s dominant position in the Canadian generation mix under threat?

The North American giant has the fourth most carbon intensive economy in the world and records very high carbon emissions of 18.9 tonnes per capita, partly because of the large role energy intensive industries have in the economy. During the 1950s and 1960s, demand for electricity doubled roughly every seven years and the hydro sector was seen as the ideal source of new generating capacity. In some provinces power companies planned to put at least one dam on every large river. Today the situation remains largely unchanged, as the country continues to rely very heavily on energy intensive industries that require large amounts of electricity, and hydro schemes still provide the lion’s share of the required power.

Changing times

Looking ahead, however, the government is keen to reposition the economy, so that although aluminium production and similar industries will continue to play a major role, it is hoped that high technology companies with smaller electricity
requirements will become more significant players in the economy. In effect, the link between job creation and ever greater generating capacity is being broken. At the same time, the government has agreed to meet its Kyoto target on greenhouse gas emissions by reducing its carbon emissions to 6% below 1990 levels by 2012.

The government has focused on minimising carbon emissions rather than dampening down demand for electricity. National demand is expected to rise by 1.3% per year over the next decade, so a substantial increase in generating capacity is required. It is perhaps remarkable that hydro power has not been given a more significant role in the national strategy to cut carbon emissions. The main strands of the strategy are instead the introduction of tax credits for industrial reductions of carbon emissions, the purchase of emissions credits and increased investment in renewable technologies, such as solar and wind power.

Most new generating capacity over the next two decades is likely to be provided by nuclear and thermal power plants. Canada has nearly 20 operating nuclear reactors, mainly in Ontario, although the sector’s contribution to national generating capacity and electricity production has fallen in recent years because no new reactors have been developed in the past two decades. Ontario Hydro took seven reactors temporarily out of action during the 1990s, with the final unit expected to be brought back on stream by 2009. However, the government is now keen to press ahead with the construction of a new nuclear plant in Ontario and others could follow.

With or without renewed government enthusiasm for nuclear technology,
thermal plants are likely to be the big winners in the move away from hydro. Most existing thermal plants are fed by coal but the government is trying to encourage producers to switch to gas in order to cut pollution and help meet the country’s targets on greenhouse gas emissions. However, despite some movement in this direction, domestic gas reserves are falling and competition is likely to drive up prices. A relatively limited proportion of national generating capacity is likely to be provided by wind power; the country currently has just 370MW of generating capacity, although hydro-quebec is committed to developing a further 1000MW at a number of different sites.

Hydroelectric dominance

However, it would be wrong to suggest that new hydroelectric generating capacity is not being brought on stream. New capacity is currently being developed at several locations, including the La Romaine (1500MW), Toulnustouc (526MW), Eastmain (480MW), Péribonka (385MW), Grand Mère (220MW) and Rapides des Coeurs (138MW) projects in Quebec. Several plants in the same province are also being modernised, including the 254MW Outardes 3 unit.

The Waneta Hydroelectric Expansion project is increasing generating capacity at the Waneta site in British Columbia by 435MW, while the Brilliant Expansion scheme in the same province will contribute another 120MW. However, the capacity provided by new projects is dwarfed by the ambition of previous decades. The La Grange facility in Quebec is the country’s biggest hydro plant, with generating capacity of 15,000MW, followed by the 5429MW Churchill Falls facility in Labrador and the 5328MW Robert-Bourassa Complex in Quebec.

The size of the country, its climate and the existence of mountainous areas has provided Canada with a great deal of hydro power potential. Part of the sector’s success can be attributed to the fact that suitable sites are scattered around the country and, with the exception of Prince Edward Island, every other Canadian province produces electricity from hydro projects. However, hydro schemes are concentrated in Quebec and British Columbia, with 97% of national hydro generating capacity located in these two provinces, plus Labrador, Manitoba, Newfoundland and Ontario.

Despite the fact that the US has 94GW of hydro generating capacity in comparison with Canada’s 69GW, Canada’s hydro schemes make a far larger contribution to national power needs. The hydro sector has also given Canada a sense of prestige in that it can now boast the world’s fifth biggest total generating capacity – a remarkable feat given the size of the country’s population and economy. As Table 1 demonstrates, Canada produces more hydroelectricity than any other country, although it is only marginally ahead of Brazil and the US, while China is likely to take top spot at some stage over the next decade.

Although Canada is by no means as dependent on hydro schemes to produce electricity as Norway or Brazil, its generation mix is still heavily skewed towards hydro. According to figures from 2003, hydro projects accounted for 57.5% of domestic electricity generating capacity and a slightly higher proportion of actual production at around 61%. These figures have remained relatively constant over the past decade. Thermal plants currently account for around 28% of national
generating capacity and nuclear 13%.

Apart from the needs of the domestic power sector, another incentive behind continued government support for hydro projects is their role in generating export revenues. Hydroelectricity accounted for 60% of total 2003 Canadian electricity exports to the US of 40,436GWh. Although there is a great deal of cross-border electricity trading in both directions across the US-Canadian border as a result of the high degree of transmission integration within North America, Canada exports around 10,000GWh net to the US each year, making it one of the world’s biggest electricity exporters. The well publicised Northeast Blackout in 2003 prompted even greater cooperation between the power sectors in the two countries and the Electric Reliability Organisation is to be set up to ensure network reliability.

Looking ahead

Despite this, investment in new generating capacity has fallen over the past few years and so the gap between Canadian electricity imports and exports with the US has begun to close. It is difficult to assess how much new capacity could be added. It is estimated that the country possesses technically feasible potential of between 118,000MW and 180,000MW, although just 34,000MW of this is currently considered economically feasible. Moreover, on balance it seems that the level of political and environmental opposition to further large hydro schemes may deter a great deal of development.

It will be interesting to see how power sector deregulation affects the role of hydro within the overall generation mix over the coming decade. Responsibility for overseeing the power sector rests with provincial authorities more than with the national government and vertically integrated, province owned companies, such as BC Hydro and Hydro Quebec, dominate the sector. Independent power producers (IPPs) continue to play a relatively minor role in electricity generation, while the provincial operators continue to control transmission and distribution.

The provinces of Ontario and Alberta have already begun to deregulate their power sectors and the restructuring and privatisation of the provincial utilities is a long term aspiration. However, the process is proving slower than planned because price rises in the two provinces following deregulation provoked opposition from consumer organisations and led to the introduction of price caps.

There has been a move towards developing more small hydro facilities in recent years, because of the lack of need to divert rivers or flood land. More small and mini hydro projects could be developed to provide electricity in very remote areas in Northern Canada, where there is no access to the national grid and the transport of liquid fuels can cause environmental and safety problems, particularly during the winter. Over the past ten years, small scale hydro projects have added an average of 40MW a year to generating capacity. However, such schemes can be expensive because of the technology required to cope with the demands of the very cold Canadian winter. In addition, they are unlikely to make more than a minor contribution to overall generating capacity. Of the 475 hydro plants in Canada, the 233 with generating capacity in excess of 10MW account for 99% of total capacity.

One factor that is particular to the Canadian hydro sector is the role of native American communities, who hold rights to land and natural resources in some areas. In recent years, power companies have attempted to negotiate development rights with such groups. Last year, Hydro Quebec reached a deal with the Cree people to provide them with a stake in a hydro project, while Manitoba concluded a similar agreement with the same group on the development of the new Wuskwatim project. Such deals are likely to become increasingly likely in any further Canadian hydro schemes.

Although some new large scale hydro schemes may be developed, a wave of new developments seems unlikely, so the proportion of national generating capacity provided by hydroelectricity is expected to fall steadily over the next few years. Most new capacity is likely to be provided by nuclear reactors and new thermal plants, while it is still too soon to predict how great a role wind power and other sources of renewable energy will play. The government may intervene to provide financial incentives for wind power within the newly emerging deregulated power sector.

However, the government’s policies on cutting emissions and creating a more competitive power market could still leave room for smaller hydro schemes, particularly in more isolated areas that are not connected to the national grid and have few other options. At the same time, new technology could make Canada’s existing hydro schemes more efficient, so total national hydro generating capacity could increase for some time to come. Nevertheless, it seems obvious that the days of hydro dominating the Canadian power sector are coming to an end.


It is also difficult to avoid concluding that Canada’s days as the world’s biggest producer of hydroelectricity are numbered. China is almost certain to usurp its position within a very short space of time and although US environmental legislation also restricts the opportunities for development south of the border, Brazil does have the potential to overtake Canada. However, the world’s second biggest country is likely to remain a major provider of hydro technology and expertise, given that those dams that have been constructed are likely to stay in place for a long time to come, thereby cementing the relationship between the country and the hydro sector.


Table 1
Table 2
Table 3