North American Electricity Grid: A Delicate Balance of Power and Trade

The intricate web of electricity trade between Canada and the United States is facing potential disruptions, raising concerns about energy costs and grid reliability. While Canada exports electricity to the U.S., leveraging its “strength – something that they really, really need,” this relationship is more complex than it appears.

The interconnected Grid

North America’s electricity grid is highly integrated, with power flowing across the Canada-U.S. border via 31 high-voltage transmission lines. According to the North American Electric Reliability Corporation (NERC), this interconnection enhances reliability and flexibility. for example, states and provinces can assist each other during emergencies. However, the U.S.also possesses significant internal transfer capacity, adding another layer to the equation.

Two Paths of Electricity Export

Electricity exports follow two primary models:

• Spot Market Sales: Short-term sales in markets managed by independent system operators or direct negotiations with buyers, typically involving “surplus” power at lower prices.
• Long-Term Contracts: “Firm” exports under contracts spanning months or years at fixed prices, perhaps more profitable but also carrying significant legal obligations.

According to Mr. Timmins, provinces are unlikely to breach power delivery commitments as “they’re not in the habit of willy-nilly breaching of power delivery obligations.”

Flowing Both Ways

While Canada is a net exporter, the U.S. also sends power north. In 2023, the U.S. exported 18.4 terawatt hours to Canada, over ten times its exports to Mexico, its only other electricity customer. This two-way flow underscores the interdependence of the system.

Provincial Perspectives

B.C. Energy Minister Adrian Dix notes that North America’s integrated system allows B.C. to import power during droughts. Powerex, B.C.’s power trading arm, generates an annual average profit of $550 million.Cutting off trade would pressure hydro rates in B.C., potentially increasing them by 1% for every $60 million in cost pressure. Powerex’s profits offset rates by around 9%. “It would not be good news for us,” Dix said. “I think we could withstand that, but it would not be without consequences, not just now, but over the next years and decades.”

Manitoba Hydro has long championed export revenues, which accounted for over 22% of its total electricity sales in the 2010s. Without these exports, rates would have been approximately one-fifth higher. The utility intends to sell surplus electricity from the Keeyask hydroelectric project until domestic consumption catches up.

Cooperation Beyond Economics

Beyond financial gains, the U.S. and Canada cooperate to prevent blackouts. The North American electricity grid is divided into nine jurisdictions, each with its reliability council. NERC advocates for enhanced transfer capabilities to bolster grid reliability.

NERC declined to comment directly on the implications of Canada’s export threats but plans to release a study later this year. The study will examine the benefits of enhanced electricity transfer within and into Canada,acknowledging the country’s “crucial role” in North America’s power system.

According to NERC spokesperson Rachel Sherrard, “North America’s integrated grid is designed to operate across the U.S./Canada border,” adding that “Cross-border power transfer is valuable for reliability as the free flow of electricity provides operating flexibility between regions during periods of greatest need, particularly for managing seasonal peaks.”

Electricity Canada aligns with NERC’s stance. In a statement, CEO Francis Bradley wrote, “Electricity Canada strongly supports an integrated North American electricity grid which has enhanced the reliability and resilience of both systems.”

Uncertainty and Potential Surcharges

The provinces’ precise plans remain unclear. Ontario is considering surcharges on U.S. electricity exports. While details remain sparse, ontario Premier’s Office and Energy Minister Stephen Lecce said details would be released soon. Implementing a per-megawatt surcharge would likely require legislative action. Mr. Ford stated his administration would look into implementing the charges quickly. A new cabinet will be sworn in on March 19, with the legislature returning on April 14.

Manitoba and B.C. are also evaluating similar surcharges. Mr. Dix from B.C. emphasized the need for careful assessment to ensure that the U.S. suffers greater consequences than B.C. “Everything’s on the table, but I would say that our circumstances are very different than their circumstances,” he said. “If you’re only imposing the pain on yourself, that’s not very effective.”

Mr. Kinew stated, “Given the stakes – hundreds of megawatts, thousands of megawatts, depending on the time of year, billions of dollars – we’ve got to be really judicious here.”

The Road Ahead

the future of electricity trade between Canada and the U.S. hinges on careful negotiations and strategic decisions.Provinces must weigh the potential benefits of surcharges against the risks to grid reliability and their own economies. The intricate balance of power requires a thorough understanding of the interconnected system and the consequences of any disruptions.

Stay informed about the latest developments in North American energy policy and how they may impact your electricity rates and energy security. Consider supporting policies that promote grid modernization and cross-border cooperation for a more reliable and resilient energy future.

How might surcharges on US electricity exports impact grid reliability and energy costs in both canada and the United States?

Canada-US Electricity Trade: An Expert’s View on Grid Reliability and Energy Costs

The intertwined electricity grid between Canada and the United States is facing potential shifts that could impact grid reliability and energy costs. To delve deeper into this complex issue, we spoke with Dr.Eleanor Vance, Senior Energy Analyst at the North American energy Institute.

Understanding the Interconnected grid

Archyde News: Dr. Vance, thank you for joining us. Could you elaborate on the meaning of the interconnected electricity grid between Canada and the US?

Dr. Vance: Absolutely. The North American electricity grid is a marvel of engineering, allowing power to flow bidirectionally across borders. This interconnectedness, with its 31 high-voltage transmission lines, is fundamental to enhancing reliability. When one region faces an energy shortfall, whether due to a natural disaster or increased demand, the others can step in to provide support. It’s essentially a shared safety net.

Spot Market Sales vs. Long-Term Contracts

Archyde News: The report mentions two main models for electricity exports: spot market sales and long-term contracts. What are the key differences and implications of each?

Dr. Vance: Spot market sales are short-term, opportunistic transactions. Provinces or states with surplus power can sell it off at prevailing market prices. Long-term contracts, on the other hand, offer stability with fixed prices over extended periods. While they provide a steady revenue stream,they also come with legal obligations to ensure consistent power delivery. The choice between these models depends on various factors, including the province’s energy mix, demand forecasts, and risk appetite.

Two-Way Flow and Interdependence

Archyde News: While Canada is often seen as an electricity exporter,the US also sends power north. How does this two-way flow emphasize the interdependence of the system?

Dr. Vance: Exactly. Recognizing that the electricity trade isn’t just one-way is vital. The flow of electricity in both directions highlights the integrated nature of our energy infrastructure. The fact that in 2023 the US sent over 18 terawatt hours of electricity to its northern neighbors is a testament to the mutual dependence each country has on the other’s power systems.

Potential Surcharges and Provincial Perspectives

Archyde News: Several provinces are considering surcharges on US electricity exports.What are the potential consequences of such decisions, both for Canada and the US?

Dr. Vance: Proposed surcharges introduce considerable uncertainty. while the intent may be to redistribute some of the economic benefits, such measures could disrupt the existing trade dynamic. This could lead to higher energy costs for consumers, notably in regions highly reliant on cross-border electricity. Additionally, it could negatively impact grid reliability if it discourages energy sharing during critical periods.Provinces must carefully weigh the potential benefits against these risks before implementing any surcharges.

Cooperation Beyond Economics: NERC’s Role

Archyde News: What is the role of organizations like NERC in ensuring the reliability and resilience of the North American electricity grid, especially considering these potential trade disruptions?

Dr. Vance: NERC ensures the reliability of the bulk power system in North America. To do so, they create strict technical standards that all grid operators must follow. NERC is also responsible to monitor and assess where the risk of future outages may exist and identify plans and procedures to reduce risks. As such, NERC is an important advocate for grid modernization. Their reports and recommendations are crucial for guiding policymakers and industry stakeholders in making informed decisions about the future of the North American electricity grid.

The Road ahead

Archyde News: what key actions or policies do you believe are essential to ensure a stable and reliable electricity future for North America in light of these developments?

Dr. Vance: The long-term stability of the North American electricity grid depends on continued collaboration and strategic investments. Governments should prioritize policies that promote grid modernization,enhance cross-border infrastructure,and support the growth of diverse energy sources. Open dialog and collaboration between provinces, states, and federal entities are essential to navigate these complex issues and ensure a secure and affordable energy future for all.

A thought-Provoking Question:

Archyde News: Dr. Vance, what do you think is the biggest misconception people have about the north American electricity grid, and what should they know instead?

Dr. Vance: Many people assume the electricity grid is a static, unchanging system. In reality, it’s a dynamic, constantly evolving entity influenced by factors ranging from weather patterns to technological advancements and policy changes.Understanding this dynamic nature is crucial for appreciating the complexities of ensuring a reliable and sustainable energy supply.

Archyde news: Dr. Vance, thank you for your insightful perspective.

Dr. Vance: My pleasure.

What are your thoughts on the potential impacts of surcharges on cross-border electricity trade? Share your comments below!