distribution channel of travel industry

What are the main types of tourism distribution channels?

The travel and tourism chain of distribution

Variations in the chain of distribution, what is a tourism distribution channel.

For the owners and employees of travel businesses, it’s important to have a good understanding of the distribution channels available to you. The digital revolution means there is a wide choice of online channels today. But do not forget your strategic partnerships and offline channels too. To avoid spending unnecessary time and money, you need to know which channels do the best job of getting your travel products in front of your target audience.

But before we look at the various sales and marketing avenues at your disposal, we need to focus on the chain of distribution first. In order to maximize opportunities and efficiencies, it’s essential to understand the chain of distribution and where your company is positioned within the chain.

Generally speaking, there are four key stages within the chain of distribution . These are: principals, wholesalers & aggregators, retailers, and consumers (see chart 1).

Chart 1: The Travel and Tourism Chain of Distribution

The principals are the separate components of a travel product. For example, a leisure traveler buys a three-night stay in Paris that includes flights, accommodation, entrance to the Louvre and the Eiffel Tower, with other ancillary services such as travel insurance and foreign exchange thrown in too. In this case, each of the principals could have been sold separately. Instead, they were bundled together by a travel business and sold as a mini-break promotion.

Wholesalers & aggregators

Tour operators take various components of the travel experience and create a travel product which is then traditionally sold by a travel agent.

At the wholesaler stage in the distribution chain, the tour operator is providing a business-to-business (B2B) service by selling the product to a travel agent who then sells it to the consumer (a B2C service). They have their tour operator business plan which they follow to provide the best options to other travel-related businesses.

A global distribution system (GDS) is a computer system that holds records of availability from airlines, hotels, and car hire. Retailers such as OTAs and B2C travel agents are able to directly access this inventory.

As the oldest type of distributor in the travel industry, GDS are predominantly involved in the sale of air tickets rather than accommodation.

Destination Management Companies (DMCs) or Destination Management Organizations (DMOs) often contract travel products and sell on packages and itineraries relevant to their destination to a tour operator.

A bed bank is a B2B company that buys rooms from hotel groups and other accommodation providers in bulk at discounted and fixed prices for specific dates.

Some bed banks might also sell ancillary services such as tickets to visitor attractions or car hire.

Bed banks are middlemen, or intermediaries, between hotel companies and retailers. They might sell on their discounted bulk accommodation products to airlines, other bed banks, travel agents, OTAs or tour operators (see Chart 2). Chart 2: Bed Bank Distribution Chain

Retailers and consumers

Retailers are the organizations that sell the travel products directly to the consumer. These include traditional travel agents with a physical store in the high street such as TUI, Hays, and Cooperative Travel in the UK, for example. Other travel retailers are found online and include OTAs, B2C tour operators, and travel agents that specialize in business travel. Consumers are the end-users who buy the travel products or services. The main types of consumers are business travelers, leisure tourists (either domestic or international) and people who are visiting friends or relatives.

Chart 1 identifies the four key stages in the chain of distribution, although this process can vary and be more direct or indirect. For instance, a leisure traveler booking accommodation directly from a hotel website means there is only one stage in the chain. A bed bank that sells to another bed bank, results in five stages in the chain.

The wholesaler and retailer stages may be carried out by the same company . This is known as vertical integration , which happens when two or more organizations at different stages in the supply chain merge.

It is fairly common for tour operators and travel agents to buy each other. After all, the role of tour operators in sustainable tourism is quite significant. When mergers occur at the same level in the distribution chain, this is called horizontal integration . The original brand names are often retained, so consumers may not be aware that booking.com, KAYAK, Agoda and priceline, for instance, are all owned by one company: Booking Holdings. Digitalization and corporate mergers have resulted in plenty of crossover and consolidation in the travel and tourism distribution system.

As a B2C travel agent or tour operator, distribution channels represent the various ways to sell or market your product. You need to have a multi-channel presence to maximize your sales opportunities and brand presence, and to reduce your risk. There is specialized tour operator software that can help you manage this workload more efficiently. At the same time, depending on the size of your business and the resources you have available, it could be an error to spread yourself too thinly over too many channels.

Choosing the best distribution channels for your business needs to be done with care and attention.

Generally speaking, we can divide distribution into three main categories: online channels, strategic partnerships and offline channels (see Chart 3).

Chart 3 Travel & Tourism Distribution Channels

Online channels

As a tour operator or travel agent, the overriding benefit of optimizing your own website is that you pay no commission on direct bookings and have full control over how consumers interact with your brand.

Being listed on Google My Business is essential today. Google is the default destination for most consumers to gather information of any kind. Your listing will come up in Google searches and on Google Maps and registering is free.

Online travel marketplaces like Bookmundi and Viator have large audiences. Most are free to join but take a significant amount of sales commission, so monitor performance carefully.

Select one or two and keep your profile and listings current. The same goes for review sites such as Tripadvisor and TrustPilot . Only concentrating your energies on one or two review sites is a sensible strategy.

Channel managers, such as HRS , provide a service that sources hotel accommodation for corporate clients from a wide variety of OTAs instead of the client having to go directly to each separate OTA.

Similarly, instead of having individual accounts with OTAs, many hotel companies – big and small – will use channel management technology.

Omnibees , for example, allows hoteliers to sell to end-users and intermediaries through a single platform connected to the hotel’s property management system. Such solutions can automate sales and reduce the amount of commission paid by hotels.

Strategic partnerships

Working with other travel agents or tour operators is a great way to increase your sales. Working directly with Destination Marketing Organizations (DMO) will allow travelers to book with you directly when you advertise on the DMO website.

Building a relationship with travel bloggers will help get your name out there, as will close involvement with trade bodies associations.

To attract more bookings made directly on your website , a ffiliate digital marketing services are an option .

Offline channels

It would be a mistake to overlook offline distribution channels. The worldwide web may give you global reach, but cross-selling partnerships with local businesses such as stores, restaurants, cafes and hotels can turn out to be extremely valuable distribution channels.

Visitor information centers can be useful too because many tourists do not book tours and activities until they are in the destination.

Attending trade shows and industry events can be costly, especially for small businesses, but the resulting contacts and sales leads are often invaluable.

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Cristóbal Reali, VP of Global Sales at Mize, with over 20 years of experience, has led high-performance teams in major companies in the tourism industry, as well as in the public sector. He has successfully undertaken ventures, including a DMO and technology transformation consulting. In his role at Mize, he stands out not only for his analytical and strategic ability but also for effective leadership. He speaks English, Spanish, Portuguese, and Italian. He holds a degree in Economics from UBA, complementing his professional training at Harvard Business School Online.

Mize is the leading hotel booking optimization solution in the world. With over 170 partners using our fintech products, Mize creates new extra profit for the hotel booking industry using its fully automated proprietary technology and has generated hundreds of millions of dollars in revenue across its suite of products for its partners. Mize was founded in 2016 with its headquarters in Tel Aviv and offices worldwide.

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An introduction to the travel distribution system

• Smart tools
• business improvement , distribution

The travel distribution system is an evolving beast, there are always new players, consolidations, new technologies and devices. So how do you as a tourism operator keep pace? The first step is to understand the landscape and who are the main players in online travel distribution.

Online bookings continue to grow

If you like statistics there here are some interesting facts and figures. Did you know that currently 57% of all travel bookings made online. This highlights the importance of having a great online booking system.  The average growth in online bookings has been 12.8% for the last 5 years and the projected growth for the next 5 is 8.5%.

So what does this mean to you as a business operator? Well if you don’t already, now is the time to get your head around the travel distribution system.

Online travel agency brands are consolidating into less companies.

This is good news, there are take overs, mergers, consolidations and start ups, but you are probably aware of the major players like:

• TripAdvisor
• Booking.com

and then there are the aggregators that seem to advertise on TV all the time!

• Hotelscombined

Try this simple exercise, go to Google and search on your own business.

Does your own website feature highly in the results? If not, we suggest that you look into your SEO ( Search engine optimisation ) it sounds complicated but it just means that the search engines like Google can easily find your website when a consumer enters a relevant keyword.

If your business is showing up on the big players websites, congratulations, your booking engine is working well and you should be receiving bookings through these channels. You may like to visit this Hub  and select “tutorials” to learn more and refine your strategy.

So what do you do if this is not the case? You need to learn how about the distribution system and develop a channel strategy.

What is a Channel Strategy?

A Channel Strategy is a plan that identifies the best websites, social networks and apps on which to market your business to move the consumer to purchase with you. It’s about ensuring your product can be found in the places your customers are looking.

The simplest approach is the direct channel

A direct channel means that you bring the customer direct to your own booking engine on your website, thus reducing commissions and fees. Your own website is an important place for customers to book online as you have reduced costs and usually money direct into your bank account. But, given the millions of websites, even with effective SEO you’d be wise to work with the larger players.

We recommend the you develop a balanced portfolio of distribution channels to build sustainability

So, if you found your own website in the Google search then your SEO is fine but if you’re not appearing on the big players websites you need to do the following;

The first step is to see where your current bookings are coming from and what commissions you are paying just so you understand your current state of play.

The second step is to ensure your booking system enables your product to reach the third parties you have identified as important. You can do this by checking on their websites, usually under “distribution partners” most will already be technically connected.

Price your product correctly and remember consumers search on average 7-13 websites before they make a booking and websites like hotelscombined and trivago compare prices for consumers!

Tip – Don’t promise every distribution partner the best rate and don’t advertise you’ll get the best rates direct with us or you may be in breach of distribution agreements.

Once your rates are correct on your website approach your booking system to enable distribution that matches your strategy.

Most booking systems have reports that enable you to see where your bookings are coming from and the cost per booking, review these reports to ensure you understand whats going on and adjust your strategy if necessary.

If the reverse is the case and your appearing on the “big players” websites and your own website is buried then you need to work on your SEO, quick smart. Click here for more information

• Know where your business is currently coming from and what it is costing you
• Research your own business online and understand your personal priorities
• Develop your own strategy which has a balanced portfolio of both direct and indirect bookings
• Focus your efforts on the best return on investment
• Review and refine

Where to from here?

• Get started with our Freebies
• Check out our upcoming live training events
• Get an overview of our services

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10 distribution channels your tours and experiences business should be using

By Rezdy — 30 Aug 2018

distribution   marketing   tour operator   tourism business strategy

Updated May 2023 – As a tour operator, bookings are your bread and butter. By maxing out your sessions and having high steady levels of bookings all year round, your business will flourish. However, achieving this goal isn’t always easy. It’s even more challenging when you solely rely on one distribution channel.

When it comes to examples of distribution channels in the tourism industry, many operators automatically assume that online travel agents (OTAs) are the only form of resellers available. However, this isn’t the case. Travel distribution channels come in a variety of different types of resellers and distribution strategies. By diversifying your distribution channels and understanding what the main types of tourism distribution channels are, you can maximize your visibility and attract a wider range of potential customers.

In this article, we’ll explore 10 types of distribution channels in the tourism industry that tour operators can use to reach new customers and increase bookings.

Why it’s important to target the right distribution channels

For many tourism businesses, broadening your distribution channels is a smart way to elevate your tourism marketing strategy. By delivering your products via different streams and using valuable third-party integrations, you’re expanding your reach to a bigger pool of potential customers.

Distribution channels are all the different ways that your services get delivered to your customers. There are many types of distribution channels in the tourism industry. A distribution channel can be a direct booking via your website or through third-party resellers within the tourism industry. To put it simply, any platform where your services can be turned into a transaction is considered a distribution channel.

Top 10 distribution channels

As a tour and activity operator, choosing the right distribution channels can greatly impact your business’s success. Below, we’ll take a closer look at 10 of the main distribution network partners in travel and tourism, along with the benefits of each one.

By understanding what the main types of tourism distribution channels are, you’ll be able to make an informed decision when forming partnerships with distributors and finding the right resellers for your products and services.

1. Your website

Don’t underestimate the power of your own website. Unlike other distribution channels, you remain in control of branding and customer experience during the booking process on your website. This enables you to take advantage of booking trends and more accurately finetune your messaging so that it is well received by customers.

Your website also has a direct impact on your business’s reputation. A professionally branded website helps foster trust and authority within the marketplace. Customers will be more willing to book directly through your website if they are welcomed by a mobile-optimized website that enables a seamless booking experience. When supported by a strong SEO strategy, your website can dramatically boost customer impressions of your website and increase overall engagement. 

Tip: When it comes to content, quality always trumps quantity. Don’t fall into the trap of stuffing your blog and website pages with long keywords or boring content. Rather, scatter in relevant keywords and create content that matches the user’s intent when searching for the keywords you are targeting.

2. Online travel agencies (OTAs)

Online travel agencies are one of the biggest players within the chain of distribution in travel and tourism. There are heaps of top online travel agencies you can partner with. These include big names such as Tripadvisor, Expedia, and Viator to name a few. By partnering with OTAs, you can reach a wider audience, regardless of whether you are an inbound or outbound tour operator.

OTAs are one of the most popular travel distribution channels as their websites gain millions of visitors every day. OTAs appeal to travelers as it’s a one-stop shop for both travel and tourism products. By being able to compare the prices of these travel products and book all of them at once, it provides travelers with an easy booking process. And with the majority of customers now booking on their mobile devices, OTAs have made their booking process a lot easier by building their own applications.

Furthermore, with the help of their strong domain authority, OTAs rank at the top of search engine results – making your services quicker and more accessible for customers to book.

Tip: The competition on OTA websites is tough. Be sure to display professional-looking photos and videos that showcase your services. Well-written tour descriptions will also go a long way.

3. Tourist information centers

Almost every major city has visitor information centers (or VICS). These centers are a place for travelers to enquire about everything related to the area. From accommodation, tours and activities, transportation, or simply suggestions on things to do. VICS will help visitors in suggesting and organizing itineraries and travel arrangements based on their preferences.

Partnering with VICs helps boost the perception of your business as VICs usually hold an authoritative position in the customers’ eyes. They’re perceived as a trusted source and will most likely trust your business for being affiliated with VICs. It’s for this reason that visitor information centers are great to partner with to broaden your distribution channels in travel and tourism.

Tip: Some VICs don’t ask for commission for bookings that they send to you, while others have a pricing structure to list on their site. Make sure you do your research before you decide to partner with a VIC in your travel distribution channel strategy.

4. Your partner network

Your partner network can include Destination Management Organizations (DMOs), local governments, vendors, hotel concierge services or even other tour operators.

Local government websites, for example, often promote different travel businesses and experiences for tourists visiting a specific location. For example, Tourism Australia helps promote events and businesses every month by featuring them on their monthly e-guide, The Hot List. The Hot List is filled with the latest activities, events, and things to do in Australia and is published each month with new suggestions. 

To expand your business’s travel distribution channels through partner networks, you can simply approach relevant businesses or organizations and enquire about promotional opportunities or partnerships. 

Tip: Travel networking events and tourism conferences are great places to build mutually beneficial partnerships with other businesses.

Google manages a variety of tools that can be employed to increase your business’s online visibility. Two of the most useful tools offered by Google that have significantly enhanced the chain of distribution in travel and tourism are Google Business Profile and Google Things to do .

By creating and optimizing a free business profile on Google, companies can encourage more lead generation and boost their visibility for local searches. Business profiles are also valuable when fostering customer engagement as they are open for customers to leave reviews, ask questions, and submit relevant photographs. 

Google Things to do is another free tool that can increase your business’s visibility and allow you to connect with potential customers. This search experience is designed specifically for tour, activity, and other attraction providers looking to increase their distribution channels in travel and tourism. By using Google Things to do, businesses can more seamlessly convert relevant Google searches into direct bookings. 

Tip: When managing your Google Business Profile, it’s important to check it every week or so to ensure that contact details are up to date and that customer queries are answered without delay.

6. Destination websites

The travel and tourism industry has a significant impact on economies worldwide. With this in mind, it’s no surprise that many governments have taken notice and responded by providing support to local tourism businesses.

Many local, state and national governments have recognized the power of the tourism industry by creating destination websites to promote their area to potential visitors. These websites offer a wealth of information on local attractions, events, and accommodations. They may also feature package deals that include tours, activities, and other services.  

As a tour or activity provider, you can benefit greatly from working with these destination management organizations. By offering your services as part of their packages, you can tap into a wider audience of potential customers. This can be especially valuable for businesses looking to attract international travelers who may not be familiar with the local area.

Tip: When reaching out to destination websites, it’s important to do your research first. Take the time to understand their audience, the type of content they feature, and the services they promote. This will help you tailor your pitch and ensure that your tours and activities align with their brand and messaging.

7. Daily deal sites

Who doesn’t love a bargain? Vouchers and daily deal sites like Groupon and Living Social can be a valuable distribution channel for your tour or activity business. These sites offer a platform to reach budget-savvy travelers who are always on the lookout for unique and affordable experiences.

When utilizing daily deal sites, it’s important to create a compelling offer that provides value to the customer while still generating revenue for your business. Consider offering a discounted rate on an activity package or bundling services for a more attractive deal.

However, it’s essential to limit the number of vouchers that can be sold to avoid 

overbooking and ensure a high-quality experience for all customers. Additionally, be sure to set clear expiration dates and redemption instructions to avoid any confusion or frustration among customers.

Tip: Daily deal sites can be especially useful during low-season travel periods and when you have remaining slots to fill up. By carefully crafting your promotion and utilizing this distribution channel, you can attract new customers and generate additional revenue for your business.

8. Hotel concierges

While traditional, working with hotel concierges is a highly effective distribution channel for tour and activity operators. By collaborating with hotels and accommodation centers, you can reach a wide range of potential customers who are looking for things to do during their stay.

This strategic partnership is particularly useful for providing opportunities to maximize last-minute bookings. Many travelers prefer to plan their activities after arriving at their destination, and featuring your services at hotels can help you capture those customers. By making it easy for guests to book your tours and activities through the hotel, you can increase your chances of securing those last-minute bookings.

Another key benefit of working with hotels and accommodation centers is the reduced competition. Hotels naturally have a reputation to maintain, and they typically only refer their guests to a handful of trusted and professional tour operators. Building a strong relationship with hotels through providing exceptional service can secure your business’s place as one of their preferred partners. 

Tip: To effectively work with hotels and accommodation centers, you must first develop a professional and trustworthy reputation. Make sure your tours and activities are high-quality, and prioritize providing exceptional customer service. You can also make it easier for hotels to refer their guests to your businesses by providing them with promotional materials such as brochures and flyers.

9. Retail travel agents

Retail travel agents can be a valuable distribution channel for tour and activity operators. These agents have an established customer base of travelers who are looking for assistance with planning their itineraries. By working closely with local travel agents, you can promote your tours and activities on a personal level to their customers.

One significant benefit of partnering with retail travel agents is that they offer personalized services that cater to their customers’ needs and wants. They have the ability to book multi-day tours, flights, private charters, and other services that complement your tours and activities. This personalized touch can be an excellent selling point for your business and can help you stand out from your competitors.

Another advantage of working with retail travel agents is that they offer consistency in incoming bookings. Their customers are often repeated customers who trust their agent’s recommendations and rebook their services through them. This provides a reliable source of bookings for your business and helps to ensure a steady stream of revenue.

Tip: To successfully work with retail travel agents, it’s essential to build and maintain strong relationships with them. Be sure to provide them with high-quality marketing materials, such as brochures and flyers, that showcase your tours and activities. You can even consider offering incentives or commissions for each booking they make on your behalf. These small gestures can go a long way in building a lasting partnership with retail travel agents.

10. Social media

Social media platforms such as Facebook, Instagram, Twitter, and LinkedIn can be an effective distribution channel for your business. With billions of users worldwide, social media platforms provide you with a massive audience to promote your services. By creating a social media marketing strategy that includes relevant hashtags, quality content, and engaging visuals, you can increase your brand visibility and reach a wider audience.

Social media has also become a key platform for customer engagement and communication. Customers expect brands to have a social media presence, and they often turn to social media to ask questions, provide feedback, or voice their concerns. By actively monitoring your social media channels and responding promptly to customer inquiries, you can build trust and loyalty with your audience.

Additionally, social media allows you to target specific audiences through paid advertising. With social media advertising, you can create highly targeted campaigns that reach the right people at the right time. For example, you can target users based on their location, interests, age, gender, and more. This can be a highly effective way to reach new customers and drive conversions.

Tip: Social media is a constantly evolving platform, and what works today may not work tomorrow. It’s essential to stay up to date with the latest social media trends, algorithms, and best practices to ensure that your social media marketing efforts remain effective.

Managing your distribution channels

Working with the main distribution channels in travel and tourism sure has its benefits, but it does come with added work. Connecting with them also comes with a set of challenges. Joining a tour operator marketplace and choosing the right channel manager can help alleviate the stress of setting up your travel distribution channels.

For instance, Rezdy Channel Manager is a marketplace platform designed specifically for tour operators. Through Rezdy Channel Manager, you’ll be able to connect with thousands of resellers and build your distribution channel with a click of a button.

Rezdy’s Marketplace platform simplifies the overall reselling process into 3 simple steps: 1. List your products 2. Set your commission rates 3. Let thousands of agents and resellers resell and promote your products

The good news is that if you’re already a Rezdy booking software customer, you instantly have access to Rezdy Channel Manager. Allowing you to benefit from the best of both worlds – an advanced booking system that will simplify your processes and the ability to instantly connect and manage thousands of resellers from one central system.

Ready to take the step to boost your bookings with Rezdy? Start a FREE 21-day trial or book a demo today.

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The Complete Guide to Hotel Distribution Channels

Your hotel has a number of options when it comes to distribution. You can receive direct bookings through your website or the phone, advertise on online travel agency (OTA) booking sites, and utilize a plethora of other channels to grow your business. But to maximize your hotel’s revenue , it’s of vital importance to use a mixture of channels that meet the needs of your target market(s).

Below, we cover a handful of the most popular hotel distribution channels, as well as strategies and examples for taking advantage of those channels.

What is a hotel distribution channel?

At its highest level, a hotel distribution channel is anywhere — online or offline — that properties can sell rooms to potential customers. Examples of hotel distribution channels include hotel websites , online travel agencies (OTAs), global distribution systems (GDS), metasearch sites, direct phone bookings, and more. 

How to build a hotel distribution channel strategy:

Your hotel's distribution strategy is a plan for booking rooms at a profit using a variety of channels. The right strategy for you will take into account your pricing, target audience, location, marketing resources , and more. 

To create the right strategy for your hotel, you should consider a few key things:

• Determine your business objectives. The goal of most hotel distribution strategies is to increase visibility with your ideal guests, thereby increasing bookings. Make sure that your distribution strategy aligns with your sales objectives and target metrics.
• Find your target audience.   Your brand is likely to appeal to certain demographics and types of customers and be less appealing to others. Your distribution strategy should take your audience into consideration so that your visibility is greatest for your target market. Some channels, like phone reservations, will appeal primarily to an older audience, for example, while channels like direct social media bookings may be more appealing for a younger audience.
• Compare key metrics across channels. After you determine which metrics are important to your hotel based on your goals and objectives, you’ll want to compare those across your distribution channels. Some channels will offer more visibility than others, but may also have higher costs or slimmer margins. The right strategy will find a mix of visibility, profitability, and optimized brand messaging.
• Test and optimize over time. Your disitribution strategy should not be static. You should continuously test new channels, optimize existing ones, and make sure that your core channels are delivering profitable results.

Popular types of hotel distribution channels:

1. direct website bookings.

If you’re like most hotels, your website is probably the primary source for direct bookings. Direct bookings are often more profitable, more likely to result in repeat visits, and better optimized for upselling. Because of this, most hotels consider their website as the No. 1 distribution channel in their distribution strategy.

Your website offers many opportunities to highlight your unique amenities, show off your property with high-quality imagery , and boost engagement with videos, interactive content, and testimonials.

In order to increase hotel direct bookings , make sure that the mobile version of your website is optimized for simple and speedy bookings. Many guests are now researching and booking hotels on mobile devices without ever opening a desktop browser, so you definitely don't want to miss out on that business. 

You’ll also want to make sure that your website is optimized for search engines and includes location-specific terms to increase discoverability. Clear navigation, responsive design, and a seamless booking experience will all increase the chances that guests choose this valuable hotel distribution channel.

Target more qualified business today

2. Direct phone bookings

Some target audience demographics, such as older adults, travel agents, and event planners, may find direct phone bookings to be the most useful way to get in touch with your hotel. This is especially true if the potential customers have specific questions related to their stay, or if their booking is complicated in some way.

Your call center, reservation line, and front desk are all channels that offer an opportunity for human connection and tailored customer service. Make sure that your staff are trained to take a booking, even if the guest calls the front desk.

This distribution channel is often low-cost because it is a direct line of communication with your guests . You can also get valuable feedback from this channel, since you’ll be able to hear why a guest made a booking (or why they chose not to book).

3. Online travel agencies (OTAs)

There is no getting around it: Online travel agencies are a ubiquitous and integral part of the hotel booking process. Sites like Priceline, Expedia, Booking.com, and Orbitz have huge audiences and are a great way to reach guests that you might not otherwise have reached.

You don’t have complete control over the messaging about your hotel on an OTA, but you can optimize your listing with photos, highlight certain amenities, and offer attractive pricing for OTA audiences. You should focus on OTAs that your target audience uses and understands in order to keep your costs down.

Learn more about how to increase hotel direct bookings

4. Global distribution systems

Global distribution systems (GDS) are an important distribution channel for connecting with travel agents. Travel agents use this system to browse hotels, view rates, and check availability. Well-known global distribution systems include Amadeus , Worldspan , Sabre , and Travelport .

Global distribution systems are helpful for keeping your information up-to-date with travel agent systems all around the world, as well as providing real-time pricing and availability information. To take full advantage of this channel, set your pricing at levels that will remain competitive against similar properties but high enough that you can overcome the GDS fees.

5. Metasearch sites

One level above an OTA is the metasearch engine. These sites, such as Tripadvisor , Trivago , and Google Hotels , charge hotels and OTAs on either a pay-per-click or commission basis for bookings.

The user experience on metasearch sites is usually particularly good, with a simple booking process and easily-searchable information about your hotel. 

Here are a few ways you can maximize your bookings from metasearch:

• Make sure that your pricing in search engines matches the price listed on your website.
• Test your cost-per-click (CPC) to balance your costs and your competitiveness with OTAs.
• Adjust your strategy for the metasearch site that you’re targeting. Some sites will attract visitors with less booking intent, and should therefore have lower CPCs in order to be an efficient distribution channel.

6. Wholesalers

Wholesalers serve as an important link between travel agents and travel suppliers. Although profit margins may be thin for this channel, it's a helpful way to fill last-minute space at your hotel or book large blocks of rooms. Although this channel is important to increase occupancy , it should not be one of your primary distribution channels.

Technology you can use to manage your hotel's channels:

1. channel management tools.

A channel manager is a tool that helps you manage your distribution strategy, keeping track of all of your channels and providing useful performance insights. These tools are very helpful for keeping everything in one place and making sure all of your information is up-to-date.

2. Reputation management tools

Reputation management tools help you monitor online channels for mentions of your hotel and respond to guest feedback in a timely manner. This may not seem related to distribution, but if guests are leaving negative feedback on your most popular channel, you’ll want to respond to it right away to make sure that channel stays strong for your business.

3. Revenue management tools

Your revenue management system helps you to plan and forecast demand for your rooms through peak periods, slow periods, and everything in between. It’s also a great tool for determining the right price bands on each of your hotel distribution channels. By analyzing your pricing, expenses, and profit across multiple channels, you’ll have a better idea of which channels are driving the most profitable outcomes for your hotel.

Put this hotel distribution channel guide to use today!

Up next, check out nine proven strategies to help increase hotel occupancy . 

Laura Fredericks

Laura brings a decade of insight to improving marketing, as she has worked in technology since 2010. She has experience starting and scaling a business, driving customer marketing, and speaking at live events, including WeDC Fest 2018. She founded Describli and Paradigm Labs, and currently works with companies to improve their customer relationship management and content strategy.

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The Best Distribution Channels in Travel and Tourism

Distribution channels in travel and tourism are the medium tour operators, attractions, travel agencies and other travel companies use to sell their products to their customers.

This article aims to answer the following question:

What are the main types of tourism distribution channels?

Before giving you the answer, you must understand how distribution channels can help you grow your tour company.

Understanding the distribution channels in travel and tourism

The chain of distribution in travel and tourism has grown with the surge of new technologies. Nowadays, distributing brochures to hotels is not enough to stay competitive in the market.

Not only being listed in the right distribution channels will assure better exposure for your tour company , but it will also make it more credible. That is the combination you are looking for to increase your profits.

Basically there are two ways of reaching customers in tourism :

• Directly – In a travel agency or through a travel agency’s website.
• Indirectly – Through a partnership with third-party distribution channels.

The distribution channels in travel and tourism can also be divided into offline and online channels .

Offline channels are more traditional and most tour operators are familiar with them. I’m talking about hotels, hostels, B&Bs, souvenir stores, restaurants, cafes, visitor information centers, trade shows and local partners .

Social networks, review platforms, mobile location-based services, and online travel agencies are examples of online distribution channels.

The role of these new technologies in distributing travel products and generating revenue has grown a lot in the past years.

However, the virtual landscape changes fast. For that reason, it’s important to be aware of new opportunities to list your products to remain competitive and successful.

After this brief introduction, time to break down the distribution channels in travel and tourism.

The best distribution channels in travel and tourism

We’re highlighting five distribution channels for tours and trips , where a tour company should be, to stay competitive.

1. Tour company’s website – the number one direct distribution channel in travel and tourism

When was the last time you didn’t start planning a trip online? Not for a long time, right? It’s obvious, the internet changed the traveler’s behavior.

The time from finding travel inspiration to packing your bags for a new travel adventure has never been shorter. And travelers love it!

That said, we can guarantee that remarkable tour photos published on your tour company’s website will attract curious eyes. Videos from the trip you share on social media profiles will bring you sales too!

At the same time, you can integrate an online tour booking system to your website, turning it into a direct distribution channel. That way your future customers can easily book a tour with you and you pay no commission for that!

Did you know that in 2019 $755 billion worth of travel was booked online ?!

By the end of 2023, travel and tourism revenues are expected to reach this same level again.

Nowadays, travelers start and finish their travel arrangements online. Because of that, it’s so important to maintain an updated and optimized website.

2. Google My Business – a must for a successful tour company

Google My Business is one of the most important indirect distribution channel in travel and tourism to sell your trips online.

Most of it is related to Search Engine Optimisation (SEO). Being listed in Google My Business helps your organic reach on Google search because it improves your SEO ranking .

Another benefit is having your business featured on Google Maps, which includes relevant details, such as opening hours, website link, contact number and customer reviews .

If you don’t have a business profile in Google My Business, creating one should be your priority right now. Use this guide to create the perfect listing for your business in Google and other platforms.

3. Hostels & tourist information centers – sell more tours and activities

After checking-in at a hostel, visitors often ask an employee at the check desk for a tour recommendation. Hence, tour and activity operators can benefit from a partnership with their local hostel.

On the other hand, travelers who are not staying at a hostel usually seek information in a tourist information center. So, it would be wise to contact your local tourist information center and see how you can partner with them.

Tour companies usually drop off flyers and brochures to hostels and tourist information centers. And interested travelers will call to set up a reservation with your tour company .

Now you know how important it is to stay in good grace with the front desk and to develop perfect relationships!

4. Review sites – they will make or break your tour business

Is there a traveler who hasn’t heard about TripAdvisor ? I don’t think so.

Depending on the reviews you get , they will either make or break your tour business. All your marketing efforts won’t be able to reverse the negative effect of a couple of negative reviews.

However, not so much effort will be needed to marketing your travel packages , if your tour business has hundreds of positive reviews.

This is because only 14% of consumers trust traditional advertising, while 92% respect reviews on sites such as TripAdvisor .

That makes it a very important distribution channel in travel and tourism. So, you better be good!

5. Online travel agencies – online giants with huge audiences

Online Travel Agencies ( OTAs ) are powerful distribution channels in travel and tourism, boasting millions of users to their websites every month.

OTAs will list your tours and trips on their site and allow their users to book with you.

Usually, this works through a pay-per-click format. But it might worth the money, considering that bookings through those platforms are expected to grow year over year .

Three global OTAs that tour operators should consider partnering with are:

• GetYourGuide
• Touriosity (commission-free OTA)

There are also much less known local OTAs. Consider partnering with them, too.

Finally, choosing wisely the right distribution channels in travel and tourism means a strategic advantage for your tour company .

It takes a bit of time to figure out which one works best for your tour business. Anyway, starting from enabling direct online sales through a tour company’s website is always a good practice.

If you liked this article, consider downloading our infographic 5 Channel Ideas to Sell your Tours.

What are the distribution channels you find the most suitable for your tour business?

ORIOLY on May 5, 2021

by Lidija Šomodi

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Low Budget Digital Marketing Strategies for Tour Operators

In this ebook you will learn strategies to boost your digital marketing efforts, and the best part, at a low and even zero cost for your business.

The Ultimate Guide to Mastering Trip Advisor

TripAdvisor is an excellent tool to sell tours and activities online and this guide will teach everything you need to know to master it.

A Simple Guide on How to Sell Tours With Facebook

Zuckerberg’s platform is by far the most popular among all social media. So why not selling tours and activities with Facebook help?

Comprehensive Guide on Digital Marketing in Tourism for 2021

Online marketing is a new thing and it changes fast, for that reason we made this eBook where we compiled the latest online marketing trends in tourism!

Other resources

Live Virtual Tours: Everything You Need

5 Channel Ideas to Sell your Tours

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How to Use TikTok to Promote Your Travel Business

Learn how to showcase your tours and activities on TikTok to convert potential customers into new guests for your travel business.

7 Tips to Get More Bookings From Gen Z Travelers

As Gen Z’s influence in travel grows, adapting to these shifts is not just advantageous—it’s imperative to success in the travel industry.

Unlocking Global Reach: The Ultimate Guide to OTAs for Tour Operators

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Travel Trends 2024: How the Digital Revolution Is Shaping the Future of Our Industry

Table of Content

Digital transformation in the travel industry, sales channels: balancing the old and the new, direct bookings vs resellers, marketing channels and strategies for 2024.

The world of travel is experiencing an unprecedented era of transformation: as we enter 2024, the industry continues to deal with the aftermath of the global pandemic and adapt to new consumer behaviors, technological advancements and evolving market dynamics. In 2023, we have witnessed a robust recovery, with international travel volumes approaching pre-Covid levels . However, this doesn’t mean a return to the old ways, as customer preferences have changed significantly in recent years.

There is a growing appetite for personalized, flexible and sustainable travel options, with digital nomadism redefining the concept of both leisure and business travel, blurring the lines between the two. In addition, the rise of experiential tourism is shifting the focus from sightseeing to immersive cultural adventures. Sustainability has also moved from a niche consideration to a mainstream demand , as most people are increasingly aware of their environmental footprint and seek out eco-friendly accommodations and responsible travel experiences. This is more than a fad: it is a broader societal movement that is forcing the tourism industry to rethink its practices and offerings.

For tour operators and activity providers, staying abreast of these changes is essential to survival and growth. To better understand the travel trends that will shape the future of the industry in 2024, we interviewed over 100 industry professionals from all across Europe. This article is designed to accompany our infographic detailing their responses . We hope it will provide valuable insight into the key drivers behind their business strategies and offer actionable takeaways to help you replicate their success. Without further ado, let’s dive right in!

Tourism is undergoing a profound digital transformation, reshaping the way services are delivered and experienced. The emergence of smart technology in accommodations, such as IoT-enabled rooms, and the use of big data for personalized recommendations are examples of how technology is becoming an integral part of the travel experience itself. This integration presents an opportunity for providers to deliver unique value to their customers and stand out in a competitive marketplace.

The pivotal role of booking systems

Booking systems are at the heart of this digital revolution and have quickly become a critical interface between the supplier and the customer. Not surprisingly, 89% of respondents to our survey use them to easily manage bookings, sell tickets online and connect with leading OTAs. Let’s explore the top 5 features they find most beneficial in a booking system:

Key features of booking systems

• Online payments: Offering secure, versatile online payment options is essential. This includes accepting multiple payment methods such as credit cards, PayPal, and digital wallets to serve a global customer base.
• Dashboard calendar: An intuitive dashboard calendar facilitates the management of bookings, availability, and scheduling. This feature enables suppliers to stay organized and respond quickly to changes, minimizing overbooking and scheduling conflicts.
• Booking widget: A customizable booking widget on the supplier’s website allows the booking process to be seamlessly integrated into the user experience. This results in a smoother booking flow and encourages more direct bookings.
• Channel manager: With the proliferation of distribution channels, a channel manager becomes vital. It ensures real-time synchronization of availability across multiple platforms such as OTAs, the official website of the supplier and other portals, reducing the risk of overbooking and facilitating inventory management.
• Booking management: Efficient booking management includes features such as easy cancellations or changes, automated confirmation and reminder emails, and customer management tools. This improves the overall customer experience and operational efficiency.

As the leading booking system provider in Europe, Regiondo has been at the forefront of incorporating these essential features. The platform offers a comprehensive solution that not only addresses the basic needs of booking and payment processing, but also provides advanced tools such as resource management , marketing integrations and detailed analytics. This makes Regiondo a model for digital transformation in the travel industry, demonstrating how technology can facilitate business operations and enhance the customer journey. To learn more about how Regiondo can help your business thrive, book a demo with one of our consultants.

In 2024, the sales channels of the travel industry will continue to evolve: understanding how to balance them is key to maximizing reach and profitability.

Offline vs online dynamics

The travel industry has historically relied on a mix of offline and online distribution channels. While online channels have seen tremendous growth, especially in the wake of digital transformation, offline channels such as in-person travel agents and booking offices still play an important role, especially for certain markets and demographics.

Current balance: In our Trends 2024 survey, we asked participants to break down the share of sales they make online vs. offline. The weighted average shows that 56.67% of tickets are sold through digital channels, while the rest (43.33%) are sold through phone, in-person, and other offline channels. In summary, the current landscape is skewed towards online, driven by the convenience, accessibility and wide range of options it offers. However, offline continues to thrive by catering to customers who value personal interaction and customized service.

Future trends: The future points to a more integrated approach, with a growing emphasis on phygital experiences that blend physical and digital elements. For example, interactive digital displays in physical travel agencies could increase customer engagement.

Another issue we wanted our experts to weigh is their relationship with distribution partners. Specifically, we asked them to disclose the number of online bookings they receive through direct channels (website, official social media pages, emails) versus those received through resellers. The results paint a clear picture, with a weighted average of only 33% of tickets sold through intermediaries. But let’s take a closer look at the pros and cons of these two types of channels:

Direct Bookings

• Pros: Higher margins, direct relationship with customers, greater control over customer experience.
• Cons: In order to attract direct bookings, you need to invest in marketing, technology and a strong brand presence.
• Pros: Extended reach, especially in markets where your brand has less presence; reduced marketing costs.
• Cons: Lower margins due to commissions, less control over the customer experience.

Leveraging Both

In our humble opinion, the key is to find the right balance. Leverage resellers to reach new markets and demographics, while building a robust direct booking strategy to drive customer loyalty and brand identity.

The Role of OTAs (Online Travel Agencies)

Among the various resellers, OTAs have become a dominant force in the travel booking landscape. As you know, they offer exposure to a huge audience, but at the cost of commissions. Speaking of which, we asked our survey participants about the average percentage of commission they pay to OTAs on each order. The results are interesting: 1 in 3 respondents said they don’t work with OTAs at all to save on these costs. As for the rest, the vast majority pay fees ranging from 20% to 29% of the price of their tickets.

We also asked our industry experts to identify which OTAs drive the most bookings for them from a selection of the most popular. Their response highlights how fragmented the digital distribution landscape can be, as a quarter of respondents said the resellers they have the most lucrative relationships with are not on our list. Still, when it comes to the top dogs, this is the podium:

• GetYourGuide
• TripAdvisor

Love ’em or hate ’em, OTAs continue to be a mainstay of the leisure industry, which is why we want to draw your attention to three important key elements that will help you get the most out of the commissions you pay:

• Perform a cost/benefit analysis: As we have seen, commissions can vary widely, typically ranging from 15% to 30%. It’s important to understand the cost/benefit ratio and how it impacts overall profitability.
• Negotiate: Negotiate better rates as your business grows, bundle services to increase the value of each booking, and use OTAs for visibility while encouraging repeat bookings through your direct channels.
• Follow these best practices: Ensure your listings are up-to-date and engaging, take advantage of OTA marketing tools and analytics, and tap into OTA platforms for market insights and trend analysis.

As the travel landscape continues to evolve with ever-changing customer preferences, it can be difficult for tour and activity providers to understand the most effective marketing strategies to employ. So we asked our experts to list the marketing channels that drive more bookings for their businesses. Here are their top 5:

SEO (Search Engine Optimization)

SEO (66% of respondents) continues to be a cornerstone of digital marketing strategies. It’s critical for increasing visibility in search engine results, driving organic traffic and building online authority.

• Key areas of focus: Local SEO is especially important for travel businesses to ensure they appear in searches for local attractions and services. Optimizing for mobile and voice search is also essential as these trends continue to grow.
• Content marketing: Creating valuable, engaging content that answers potential travelers’ questions can significantly improve search rankings and drive organic traffic.

Word of mouth

Word of mouth (61% of respondents) is a powerful tool, especially in the digital age. It can happen organically or be encouraged through referral programs.

• Leverage social proof: Encourage happy customers to share their experiences online, whether through social media, blogs or video content.
• Referral programs: Implementing referral incentives can motivate past customers to spread the word to friends and family.

Social media (Organic)

Organic social media marketing (54% of respondents) is about building community and engaging authentically with your audience.

• Platform-specific strategies: Tailor content to the strengths and audience of each platform, whether it’s visually-driven Instagram, conversation-centric X (previously known as Twitter), or the increasingly popular TikTok.
• Engagement and community building: Posting regularly, interacting with followers, and creating shareable content are key strategies.

Social media and Search ads

Paid social media and search advertising (29% of respondents) is a critical component of a comprehensive marketing strategy.

• Targeted campaigns: Use the granular targeting options available on platforms like Facebook, Instagram, and Google to reach specific demographics, interests, and behaviors.
• Retargeting: Implement retargeting campaigns to capture prospects who have shown interest but haven’t yet booked.

Online reviews (25% of respondents) continue to have a significant impact on consumer decisions in the travel industry.

• Online reputation management: Actively manage your presence on review platforms such as TripAdvisor, Google Reviews and Yelp.

But how much should you spend on marketing? As a point of reference, the estimated average marketing budget for respondents to our survey is €972.82 per month. The key, however, is to take a balanced (no pun intended) approach. While it’s tempting to focus on the latest trends, it’s more important to allocate resources across channels based on their performance and your target audience. We recommend regularly reviewing and adjusting your marketing budget based on analytics and ROI. This may mean shifting funds from underperforming campaigns to those that are delivering better results, or investing in new platforms and technologies.

As we look ahead to 2024, the travel industry is at a pivotal crossroads, marked by rapid technological advances, changing consumer behavior and evolving market dynamics.

Key points:

• Digital transformation: The integration of technology into the travel experience, particularly through advanced booking systems such as Regiondo, is fundamental. The adoption of digital tools and features such as online payments, dashboard calendars, and AI-driven personalization can significantly improve efficiency and customer experience.
• Sales channels: A balanced approach between offline and online distribution channels, and between direct bookings and resellers (primarily OTAs), is critical for long-term success.
• Marketing strategies: The marketing landscape of 2024 will require a mix of advanced digital marketing, content marketing through storytelling, strategic influencer partnerships, local SEO optimization, and well-planned budget allocation across channels.

Looking ahead, the call to action for travel and activity providers is clear: adapt, innovate and thrive. Embrace digital transformation with open arms, understanding that technology is not just a tool, but a bridge to connect with and better serve your customers. Align your sales and marketing strategies to leverage multiple channels and respond to the changing needs and habits of travelers. Most importantly, stay attuned to your audience’s preferences and values to ensure your offerings resonate with their desire for unique, sustainable and culturally rich experiences.

The future of travel is bright and full of possibilities. Let’s embark on this journey together, innovating and evolving to create memorable experiences for tourists around the world.

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The travel distribution system

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Distribution channels and consumer purchasing behaviour varies from market to market, so you need to understand the structure of the distribution system specific to your target markets before attending a trade show.

How does the distribution system work?

The travel distribution system is a complex, global network of independent businesses. This network includes a series of distributors or intermediaries, who play a specific role in the development, promotion and purchasing process of Australian tourism experiences.

Online technology and company mergers have transformed the tourism industry, with an increasing amount of crossover in the roles and functions of various sectors of the distribution system. Businesses engage a mix of distribution partners to reach their  target consumers.

The traditional structure of the distribution system includes Inbound Tour Operators (ITOs) based in Australia; wholesalers based overseas and international retail travel agents. However, this varies considerably from market to market. For example, it is not uncommon for an inbound tour operator to be part of a larger company that may also operate a wholesale arm in an overseas market, or for a wholesaler to also operate the travel agencies that sell its packages.

Many traditional travel distributors such as wholesalers and travel agents take an online approach as well as offering their services from a retail shop front.

Both online and traditional distribution partners have the opportunity to work with each other and directly with products and customers. As the traditional distribution system continues to evolve, it is important to clearly understand the structure of the companies that you work with and their relationships with other organisations. 

Why work with travel distributors?

Travel distributors allow you to broaden your customer base far beyond the reach of your own marketing budget.

They are important to the inbound tourism industry as overseas consumers still heavily rely on the advice of local travel experts when planning and booking their Australian holiday, particularly in long-haul and emerging markets. Travel distributors can also provide market intelligence, insights and advice on a specific market. The travel distribution system covers all the channels through which an international traveller can buy your product. 

Inbound tour operators

An inbound tour operator (ITO), also known as a ground operator or destination management company (DMC), is an Australian based business that provides itinerary planning and product selection, and coordinates the reservation, confirmation and payment of travel arrangements on behalf of their overseas clients. They bring the components of accommodation, tours, transport and meals together to create a fully inclusive itinerary. ITOs are the link between Australian tourism products and the overseas travel distributors that buy them, including travel wholesalers, direct sellers, travel agents, meeting planners and event planners.

Wholesalers

Wholesalers are located in overseas markets and have traditionally provided a link between travel agents and ITOs or tourism product. Wholesalers purchase programs developed by ITOs or develop their own packages and itineraries for travel agents and consumers. These packages will usually offer transport, accommodation, tours and attractions. In some markets, wholesalers are also ‘direct sellers’ who bypass travel agents to directly target consumers. In other markets, there are no wholesalers in the traditional sense and travel agents perform both roles. Traditionally, travel packages are published in brochures and promoted and distributed via retail travel networks. Wholesalers may operate their own retail outlets or work with an established network of travel agents in their own country. Many wholesalers specialise in specific market segments such as adventure or the seniors market and many also have an online presence.

Retail travel agents

Retail travel agents offer wide distribution in prominent shop front locations and a convenient place for travellers to make bookings and buy holidays. Traditionally, retail travel agents have provided a link between the wholesaler and consumers. With the integration of distribution roles, the retailer may deal directly with ITOs or Australian-based products, particularly in Asian markets. Many retail travel agents belong to a larger chain of travel agencies or consortiums that use their combined resources to market the agency brand. In some countries, retail agencies may be operated by travel wholesalers, or may concentrate on particular market segments such as special interest or family travel. Many retail travel agents also have an online presence.

Online travel agents

Online travel agents (OTAs) specialise in online distribution and have no intermediaries – they deal directly with consumers and tourism product. Consumers can purchase a product or an entire holiday package online. Online distribution is less structured than the traditional travel distribution system. Commission levels vary, depending on how the site is operated.

Meeting and incentive partners

The business events sector is one of the highest yielding inbound tourism segments. Meeting and incentive planners organise and manage all aspects of meetings and events including conventions, conferences, incentives, seminars, workshops, symposiums, exhibitions and special events.

Meeting and incentive planners use a wide variety of venues, tour operators, accommodation, team building companies and restaurants. They look for unique travel experiences and require different support and facilities to leisure tourism. Meeting and incentive planners are also known as: Professional Conference Organisers (PCO); Destination Management Companies (DMC); Conference Managers; Event Managers; Incentive Houses; Travel Fulfillment Companies; and Special Project Managers.

How do I price my products for distribution system partners?

Travel agents, wholesalers and ITOs provide valuable distribution that you may never be able to secure on your own. Commission is only paid once a sale has been made. You must understand the difference between nett and gross (or retail) rates and protect your rates by providing the correct rates to each level of the distribution system.

Rates should be clearly marked as either gross (retail) or nett. Gross Rate = Nett Rate + Agent’s Commission. The gross or retail rate of a product is the amount that the consumer pays and should be consistent across all distribution channels.

For example, a customer should pay the same price if they book direct, via an international travel agent or via the internet. Consumers will not purchase the product from a travel agent in advance if they know they can purchase it directly from you at a reduced price. Agents will not promote and market your product if they know the consumer is not going to buy from them.

Please note: Information on commission levels is intended as a guide only. For further details on the information you need to include in your rates agreements to distribution partners please refer to the Fact Sheet –“Product & Rate Information”. For further details on how to distribute your products via these distribution partners please refer to the Tourism Export Toolkit .

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Understanding Global Distribution Channels For Hotels: Bedbanks

3 March 2023

Understanding Global Distribution Channels for Hotels: Bedbanks

Within an industry as competitive and fast-paced as travel and hospitality, it can often be a challenge for many businesses to understand the complex nature of distribution channels , and the changing distribution landscape.  

As hotel owners this, of course, is a crucial aspect of the hospitality sector to understand and ensure is bringing the utmost benefits for your hotel. Especially considering that the global hospitality market is expected to grow to as much as $6.7 billion by 2026 according to a recent global  report .  

So, it’s no longer enough to be competitive – as hotel owners you must remain competitive, capitalise on every available opportunity, and be as visible as possible to the right customer, at the right time, to maximise occupancy rates.   To remain competitive and to develop a profitable strategy that works best for your hotel, it’s important to utilise technology and meet new and upcoming demands from potential guests. The best way to do this is by maximising your use of global distribution channels – such as Bedbanks, Direct Channel and Online Travel Agencies (OTAs).   In this article, we'll have a closer look at the benefits of working with a Bedbank as a part of your wider distribution strategy, and how Bedbanks as a distribution channel offer many opportunities to boost your hotel’s success. For an even more in-depth look at the distribution landscape and its different channels, download our guide to understanding global distribution , a free resource available at the end of this article.  

What Is a Distribution Channel?

In the travel industry, a distribution channel is a key chain of businesses and intermediaries , through which hotel rooms, travel services or products are passed through before they reach the final customer - the guest. These channels of distribution offer their own benefits to you as hotel owners and are commonly used alongside each other, with unique weightings depending on what works best for each hotel on an individual basis.  

The most common types of travel distribution channels include:   

Bedbanks  

Online Travel Agencies (OTAs) - such as Booking.com, Expedia 

Metasearch Platforms - such as Trivago, Kayak, TripAdvisor and Google 

Direct - often also referred to as dotcom or brand.com distribution, direct channel distribution is via the hotel’s own website, point-of-sale system, app or affiliate website  

Ensuring that you choose the right distribution strategy for your hotel(s) is vital, and can have a significant impact on your revenue. This is why today we’re having a closer look at how partnering with a bedbank as part of your distribution channel strategy can bring large-scale benefits which you may not have access to via other channels.   

It’s also important to remember that your distribution channel strategy needs to be constantly reviewed and updated to align with the travel industry’s changing demands. What works today may not work tomorrow, so it’s a valuable practice to ensure that you’re allocating the right capacity to each of your hotel distribution channels.  

How Do Bedbanks Fit Into The Distribution Channel Landscape?

Bedbanks form an exclusively business to business (B2B) link between travel buyers and you as hotel owners.   

Here is a simplified breakdown of how a bedbank fits operates as one of the most common travel distribution channels for hotels:  

A Bedbank acts as a wholesaler, providing easy access to opaque, B2B channels.

This includes retail travel agencies, tour operators, airlines and loyalty programmes.

The hotelier acts as a supplier, making rooms available on the Bedbanks’ wholesaler network.

This network is distributed to B2B buyers, and the hotel owner increases their occupancy rates as a result of increased exposure.   

What Are the Advantages of Partnering With a Bedbank As a Channel of Distribution?

One of the most common challenges that many hotel owners will face is exposure to the right source markets. International travel is one of the highest earners in the travel industry, and is certainly a sector of the market that promises high revenue - for hotels that are visible.  

Here are a few insights as to how, as an impactful hotel distribution channel, Bedbanks provide many significant benefits:   

Generates a high percentage of non-domestic and long-haul bookings.  

Matches capacity with demand - dedicated account managers will assist with yield management strategies and advise on prime opportunities to sell the right room to the right guest, for the highest amount.  

Connects offline and online distribution channels.  

Offers easy global reach and high-value guests - often from hard-to-reach source markets that would be challenging or costly for hotels to reach directly.  

Complements your direct channel distribution - without competing for the end customer.  

Provides clear commission and stable conditions - which means there are no surprises for you as hotel owners.  

Offers dedicated account managers and marketing experts - to help scale the success of your business at every opportunity.  

Maintaining a healthy distribution mix is vital to the success of your hotel, and while there is no one-size-fits-all recommendation for how to weight your distribution channels, working with a Bedbank allows you to fully realise the potential of your hotels by diversifying your channels. Apart from this, as a true ecosystem player, Hotelbeds possesses many of the Bedbank's advantages and more.   

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The (ongoing) trouble with travel distribution: Customer experience

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The landscape of travel distribution has been shifting. Until the mid-1990s, distribution was a straightforward mix of brand call centers, travel agencies, and in-person bookings at the hotel front desk, airline ticket counter, or car-rental outpost. 1 1. In hotels, for example, the launch of the Holiday Inn booking website in June 1995 marked the beginning of a turbulent assault on owner profit margins, brand value proposition, and the viability of independence. The launch of online booking gave companies a new way to engage with customers and also opened the door to new business models such as online travel agencies (OTAs). However, in the 2000s, most travel suppliers, aggregators, and service providers focused on managing transaction costs rather than improving the customer experience, with serious implications. In 2012, we wrote about the “trouble” with travel distribution, noting, “The game is now about delivering a superior customer experience.” 2 2. Robert Carey, David Kang, and Michael Zea, “ The trouble with travel distribution ,” February 2012.

Since then, the pace of change has accelerated due to three factors. First, the competitive bar continues to rise. Among OTAs, three leading players—Ctrip, Expedia, and Priceline—have achieved global scale and relevance. And suppliers are seeking a competitive edge through several levers, including loyalty partnerships; building on the foundation set by Delta and Starwood, today’s major travel partnerships include those between Starwood and Uber, United and Marriott, and Qantas and Airbnb, among others. Second, travel technologies—especially mobile platforms—have continued to evolve as customers alter how they browse for and purchase travel. Expedia reports that 40 to 60 percent of its leisure-travel-brand traffic is through mobile devices, and about half of bookings on some brands comes from mobile. 3 3. “Edited transcript: EXPE—Q3 2016 Expedia Inc earnings call,” Thomson Reuters Streetevents, October 27, 2016, files.shareholder.com. Third, potential sources of disruption are on the horizon. For example, business travel currently accounts for 10 percent of Airbnb bookings—but that number is growing, thanks to the company’s integration into the platforms of several leading travel-management companies. 4 4. Dan Peltier, “Airbnb scores another win with corporate travel management integration,” Skift.com , July 12, 2016, skift.com.

The shifting conditions make it more important than ever to put the customer at the center. But despite some examples of progress, we continue to see companies solve for business requirements over customer needs. Many suppliers are falling short of their potential because they focus on transaction costs instead of lifetime value. And for many intermediaries, earnings expectations, contentious supplier relationships, and an onslaught of digital newcomers have eroded the ability to test, learn, and “fail fast” that helped them identify and solve unmet needs in the first place.

The good news? The path to success is likely more straightforward than it seems. In fact, we see examples of companies implementing some or all of the strategies we will discuss:

1. Harness advanced analytics to understand the customer better.

2. Adjust mobile offerings to capture, secure, and serve the customer.

3. Safeguard against future disruption.

What’s the catch? Unless executives focus relentlessly on solving for customer needs, we will continue to see ineffective promotions, lackluster apps, and uninspired pivots and product launches. Companies that can solve real customer needs, including through partnerships with other members of the travel ecosystem, will position themselves at the vanguard of travel distribution.

Trends in the shifting distribution landscape

From travelers to technology, several significant trends are influencing how companies engage with customers.

Suppliers are emboldened to innovate product development, marketing, and distribution

Intermediaries connect suppliers with consumers, but such bookings come at a cost. Thus, suppliers are pursuing strategies to drive more direct bookings:

• Launching large-scale marketing campaigns. For example, Hilton’s “Stop Clicking Around” campaign, along with other initiatives, contributed to a 60 percent increase in HHonors enrollments and a shift toward direct channels in the third quarter of 2016. 5 5. “Hilton Worldwide Holdings, Inc.: Q3 2016 earning call,” Hilton, October 26, 2016, ir.hiltonworldwide.com.
• Enhancing direct-channel offerings. AccorHotels has begun distributing independent hotels through AccorHotels.com at up to 14 percent commission and plans to reach more than 8,000 properties over time. 6 6. Terence Baker, “Accor’s distribution gamble takes shape,” Hotel News Now , September 23, 2015, hotelnewsnow.com; Deanna Ting, “AccorHotels CEO to the hotels industry: ‘You have an obligation to be bold,’” Skift.com , August 5, 2016, skift.com.
• Providing disincentives for indirect bookings. In September 2015, Lufthansa implemented a €16 fee for bookings made through global distribution systems (GDSs). While Lufthansa and third parties differ in their assessment of the fee’s impact, the move helps enable a longer-term shift to more dynamic pricing. 7 7. Martin Cowen, “Lufthansa flatbats DCC questions,” Tnooz , November 16, 2016, tnooz.com.
• Consolidating to achieve scale. Among US airlines, mergers over the past ten years have led to four clear leaders with combined 80 percent domestic market share (and Alaska Air recently became the fifth-leading carrier, with 6 percent share, after the acquisition of Virgin America). 8 8. Susan Carey and Brent Kendall, “Alaska Air-Virgin America merger gets US approval,” Wall Street Journal , December 6, 2016, wsj.com.

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While the specific strategy varies by supplier, the trend is clear: suppliers throughout the travel industry are willing to go further than ever to convince customers to book directly.

Intermediaries are consolidating and expanding their footprint

Three leading OTAs—Expedia, Priceline, and Ctrip—also own (at least for now) the world’s leading metasearch players. 9 9. “Metasearch” refers to companies such as Kayak and Trivago that aggregate search results from several travel websites. Each continues to assume, in its own way, an expanded role in the customer journey:

• Expedia (which recorded $61 billion in 2015 gross bookings) acquired Orbitz and Travelocity in 2015. It is the clear leader in the United States, with approximately two-thirds OTA market share. It is present in many travel verticals, including metasearch (Trivago), vacation rentals (HomeAway), and corporate travel (Egencia). 10 10. Angelo Rossini, “State of online travel agencies: Ctrip joins Priceline and Expedia as global giant,” Skift.com , July 7, 2016, skift.com.
• Priceline ($56 billion in 2015 gross bookings) is the largest player by revenue and market value, given strength in hotels through Booking.com. The clear leader in Europe, it is also present in many travel verticals, including metasearch (Kayak.com), vacation rentals (Booking.com), and restaurant bookings (OpenTable). It owns a 9 percent stake in Ctrip. 11 11. Rossini, “State of online travel agencies”; Gerrit De Vynck, “Priceline takes $941 million charge; earnings beat estimates,” Bloomberg , November 7, 2016, bloomberg.com; Dennis Schaal, “Exclusive: Ctrip CEO on global ambitions, Skyscanner buy and the Priceline relationship,” Skift.com , November 28, 2016, skift.com.
• Ctrip ($27 billion in 2015 gross bookings) is the fastest-growing global OTA, with a growth rate of 58 percent in 2015 alone. It is the clear leader in Chinese domestic and outbound travel and is a mobile leader, with an estimated 70 percent of bookings via app. It is consolidating its position in Asia through stakes in Qunar, eLong, and MakeMyTrip. It also has an expanding presence in many travel verticals, including metasearch (Skyscanner) and tour operators. 12 12. Rossini, “State of online travel agencies”; Dennis Schall, “Exclusive: Ctrip CEO on how it moves in to buy Skyscanner,” Skift.com , November 25, 2016, skift.com; Dennis Schaal, “China’s Ctrip makes strategic investments in 3 U.S. tour operators,” Skift.com , October 25, 2016, skift.com.

These giants, along with Google and TripAdvisor, will continue to play a major role in shaping the future of distribution. 13 13. For a summary of recent moves, including Book on Google and Trips, see Dennis Schaal, “Google’s travel business is already twice the size of Expedia’s,” Skift.com , November 1, 2016, skift.com. To hear directly from Google, see Dennis Schaal, “Video: Google’s travel leader on paid links and being a booking player,” Skift.com , October 27, 2016, skift.com. For details on TripAdvisor’s Instant Booking, see Dennis Schaal, “Video: TripAdvisor CEO is committed to instant booking and long-term growth,” Skift.com , October 31, 2016, skift.com. In many cases, the relationship between these intermediaries, and between intermediaries and suppliers, is multifaceted. As recently as 2014, analysts estimated that Expedia and Priceline accounted for up to 5 percent of Google’s total ad revenue. 14 14. Rolfe Winkler and Craig Karmin, “Google checks in to the hotel business,” Wall Street Journal , April 8, 2014, wsj.com. Marriott partners with Expedia to sell dynamic travel packages through Vacations by Marriott. 15 15. Kevin May, “OTAs aren’t so bad after all—Expedia to power Marriott packages channel,” Tnooz , September 6, 2016, tnooz.com. And Southwest Airlines’ hotel offerings are provided by Priceline’s Booking.com. 16 16. Dennis Schaal, “Booking.com powers hotels for Southwest, its first U.S. airline,” Skift.com , November 2, 2016, skift.com. The continued evolution of intermediary business models will be critical to watch.

Customer behavior is maturing and shifting to mobile

Mobile is increasingly the customer’s channel of choice: by 2019, nearly 80 percent of US travelers who book online will do so via mobile, up from 36 percent in 2014. 17 17. “By 2016, most digital travel bookers will use mobile devices,” eMarketer , November 19, 2015, emarketer.com. “Mobile first” has become a favorite catchphrase, but given the massive shift in behavior, travel companies must develop a deep understanding of why and how customers are using mobile. Consider, for example, the following trends:

• Mobile search is on the rise. In 2015, mobile flight and hotel searches on Google increased 33 and 49 percent year over year, respectively. 18 18. “Travel Dashboard—a look back at recent trends,” Google, thinkwithgoogle.com, accessed November 29, 2016.
• Mobile plays a critical role after arrival. For instance, 85 percent of leisure travelers choose activities after their arrival, and half of international travelers use their mobile devices to search for such activities after their arrival. 19 19. “Travel trends 2016: Data reveals hot spots and new consumer insights,” Google, September 2016, thinkwithgoogle.com.
• Not all mobile experiences are created equal. The average rating of OTA/metasearch apps is 19 percent higher than the average of hotel brand apps. 20 20. McKinsey analysis of Apple App Store data, August 2015.

The industry has seen some recent mobile-focused innovations. These include day-of-travel features such as keyless or app-enabled hotel room entry, in-app passport scanning at check-in, and real-time luggage tracking. Other developments involve context-based design; for example, 24 hours before a scheduled flight, Virgin America’s app shifts from emphasizing booking to focusing on check-in. 21 21. Diana Budds, “Virgin America’s new app puts a travel agent in your pocket,” Fast Company , July 28, 2016, fastcodesign.com. Finally, a growing list of brands across the value chain—including Booking.com, Cheapflights, Expedia, Hyatt, Kayak, KLM, Lola, and Skyscanner—have introduced messaging platforms and bots. 22 22. Den Peltier, “Travel bots on messaging platforms are the trend now,” Skift.com , June 14, 2016, skift.com; Marisa Garcia, “Icelandair and Travelaer build airline industry’s first Facebook Messenger booking bot,” Tnooz , August 3, 2016, tnooz.com.

Looking forward, booking may be the function ripest for innovation, as relatively few players have created a compelling, mobile-friendly booking experience.

Proliferation of big data and advanced analytics

As our colleagues recently wrote, “The data analytics revolution now under way has the potential to transform how companies organize, operate, manage talent, and create value. That’s starting to happen in a few companies—typically ones that are reaping major rewards from their data—but it’s far from the norm.” 23 23. Helen Mayhew, Tamim Saleh, and Simon Williams, “ Making data analytics work for you—instead of the other way around ,” McKinsey Quarterly , October 2016. This truth certainly holds in travel, where a wide range of use cases is emerging:

• Enhancing commercial effectiveness. Red Roof Inn used analytics on publicly available weather and flight data to predict and target customers facing flight cancellations. 24 24. Sunil Gupta, “In mobile advertising, timing is everything,” Harvard Business Review , November 4, 2015, hbr.org.
• Refining customer experience. British Airways’ “Know Me” program, driven partially by Opera Solutions, mines customer data including loyalty information and buying habits to generate targeted offers and experiences. 25 25. “Big data at British Airways,” CIO2CIO Middle East , January 12, 2014, cio2cio.me.
• Optimizing network and portfolio. Aloft, for example, is piloting a digital hotel experience, with rooms equipped with Internet of Things–enabled technologies such as intelligent climate control, and using the data generated to support product innovation. 26 26. Nancy Trejos, “Aloft Hotels debut voice-activated rooms,” USA Today , August 30, 2016, usatoday.com.
• Driving operational and administrative efficiency. Hotels are using platforms such as ALICE (which counts Expedia as an investor) to consolidate, track, and analyze guest requests and interactions to improve the quality and speed of operations. 27 27. Sean O’Neill, “ALICE thinks hotel operations could learn from innovation in other industries,” Tnooz , August 18, 2016, tnooz.com.

Before embarking on new big data or analytics ventures, it is critical to ensure adequate data security—particularly given the numerous high-profile, highly damaging data breaches in other industries.

‘New’ and increasingly powerful business models emerging

The sharing or on-demand economy, exemplified by companies such as Airbnb and Uber, is the most significant business model to emerge and scale over the past five years. The numbers themselves are notable—including rapid growth (Piper Jaffray estimates a 10 percent compound annual growth rate for short-term and peer-to-peer accommodations from 2014 to 2025, versus 3 percent for traditional accommodations 28 28. Michael J. Olson and Samuel J. Kemp, Sharing economy: An in-depth look at its evolution and trajectory across industries , Piper Jaffray, March 2015, collaborativeeconomy.com. ) and valuations (including Uber at $68 billion, Didi Chuxing at $33 billion, and Airbnb at $30 billion 29 29. Scott Austin, Chris Canipe, and Sarah Slobin, “The billion dollar startup club,” Wall Street Journal , February 18, 2015, wsj.com. ). But more interesting is the degree to which innovative current players continue to innovate:

The CEO guide to customer experience

• Uber’s expansion continues not only into new cities but also into new modes of transportation. In a recently published white paper, the company laid out the potential for vertical take-off and landing (VTOL) aircraft for on-demand transportation, particularly in dense urban networks. 30 30. Fast-forwarding to a future of on-demand urban air transportation , Uber, October 27, 2016, uber.com.
• Airbnb’s recently announced expansion into Trips (peer-to-peer tours and activities ranging from a few hours to a few days) and Places (including meet-ups with other users, destination guides, local recommendations, audio guides, and eventually, restaurant reservations) represents the latest step in a journey from air mattresses in spare rooms to a “super brand of travel.” 31 31. Deanna Ting, “Airbnb launches Trips, its big tours and activities gamble,” Skift.com , November 17, 2016, skift.com. We highly recommend listening to the story of Airbnb’s founding; see How I built this , “Airbnb: Joe Gebbia,” NPR podcast, October 17, 2016, npr.org. Some observers, particularly Airbnb’s newfound competitors in tours and activities, are not sold on the potential of Trips; see Tony Carne, “How to burst the bubble of Airbnb Trips in two phone calls,” Tnooz , November 21, 2016, tnooz.com.

While hospitality and ground transportation have been most heavily disrupted, other modes such as air travel also continue to see innovation from models such as Rise, Surf Air, OneGo, and Set Jet. Beyond the sharing economy, specialized models continue to emerge with a focus on capturing an outsize share of specific segments. For example, Priceline founder Jay Walker’s Upside rewards “free agent” business travelers for flexibility in flight and hotel bookings. 32 32. Kirsten Korosec, “Priceline founder launches new company aimed at business travelers,” Fortune , June 21, 2016, fortune.com.

Five questions for travel executives amid disruption

Amid these changes, we are regularly asked a number of tough questions that “keep us up at night” because there’s no easy or right answer. Nevertheless, it is increasingly important for travel-industry leaders to consider each of these issues:

• If Amazon—or Apple or Google—ran a major hotel chain (or an airline, or cruise line), what would be different?
• If Google aspires to be the “connector that builds awesome travel experiences, qualifies users, and then sends them off to the right partners,” what impact will this have throughout the value chain?
• What deeper, unmet customer needs (beyond a play on underutilized assets and aggressive technology adoption) are driving the growth of the sharing economy?
• What is the right approach to industry partnerships, consortia, joint ventures, and collaboration within regulatory and competitive dynamics?
• As an incumbent looking to adapt and digitize my business to compete, how do I know where to start?

What really matters

Executives should resist the temptation to be pulled in directions that distract from their top priorities: engaging with customers more effectively, enhancing attraction and retention, and capturing more value throughout the customer life cycle. To begin the process of thinking in terms of customer lifetime value instead of cost per booking, they must answer some fundamental questions:

• How much is a customer worth? In banking and many other industries, analyzing and predicting a customer’s lifetime value at acquisition is standard operating procedure. In travel, we’ve encountered very few companies that conduct this analysis consistently or at scale, despite the available data on marketing, transactions, loyalty, satisfaction, and referrals.
• What can every employee do to secure the next purchase? Customer acquisition and retention can no longer be the purview of marketing and sales groups alone. Everything from back-office accounting to human resources to maintenance must be oriented toward enhancing the lifetime value of each customer.
• How do customer needs and booking scenarios influence the choice of booking channel? Companies must identify and exploit the many “micro moments” in the customer journey. This journey should be mapped starting with the inspiration for the trip and combined with factors such as the customer’s location at point of purchase, the device used, historical preferences, and past experiences to deliver the right offer through the right channel at the right time.

If Amazon—or Apple or Google—ran a major hotel chain, what would be different?

Across a range of industries, tech companies have been exploiting key points in the customer journey—including consideration and evaluation, booking, guest experience, and loyalty. Applying lessons from these innovators to the hotel of the future yields some thought-provoking ideas for travel companies of all stripes. Some customer-facing elements, such as side-by-side comparisons of room types, exist today, while other approaches to personalization have yet to take hold across the industry (exhibit). Hallmarks of successful tech companies, such as the use of data analytics and an agile response to changing customer preferences, would no doubt inform and reshape the entire customer experience.

Focusing on these three strategies—and executing each of them in a more customer-focused way—will position companies for success amid the continued turbulence.

1. Harness advanced analytics to understand the customer better

We often hear travel companies talking about the advances they’ve made in creating “integrated data views,” but many cannot articulate positive, bottom-line impact. Compare that with these examples:

• OTAs are currently experimenting with facial-recognition software to personalize recommendations. In fact, they have been using similar methods to improve website conversion for years. 33 33. Drake Bennett, “Expedia thinks it can help you find the dream vacation you didn’t know you wanted,” Bloomberg Businessweek , February 25, 2016, bloomberg.com.
• Providers that use analytics to help companies boost revenue and customer satisfaction, such as Optiontown, Plusgrade, and Boxever, are expanding quickly.
• Airlines are now collecting customer information on board. For example, Delta uses a “guest service tool” to identify key information such as frequent-flier status and tight connection times. 34 34. Justin Bachman, “American ends in-flight gate announcements,” Las Vegas Review-Journal , May 16, 2016, reviewjournal.com. On loyalty, airlines are moving beyond traditional award charts to dynamically linking redemption to value.
• Hotels are exploring ways to combine site-selection models with new sources of information, such as Airbnb data; apply machine learning to enhance forecasting models for yield and revenue management; and deliver personalized, real-time offers based on a guest’s past behavior, current location, and propensity to buy.

The key difference? Starting with and focusing on the customer. While our research across industries suggests there are four key building blocks to ensure a successful analytics transformation, determining which customer needs can be solved with analytics must come before thinking about the data you have and need.

• strategy: a detailed definition of the vision, a specific plan and milestones to be achieved, and the selection of the most effective use cases based on customer needs
• organization: a targeted governance model that includes data owners and committees, clear data-aggregation and integrity-management processes, and alignment on data-quality principles and policies
• technology: strategic big data architecture and the identification of additional enablers, such as data ingestion, management platforms, and analytics and visualization tools
• culture: change management during the transformation (for example, training and workshops) and an agile approach to ensure delivery

It is also important to get to impact quickly. Too often, we see companies try expensive “big bang” approaches similar to mega IT projects, rather than treating analytics as a core capability to be developed over time. Instead, companies should focus on starting small and then scaling. The progression should involve identifying several high-value problems that analytics can solve, building specific data needs for the use cases, conducting pilots, and then developing the road map to scale.

2. Adjust mobile offerings to capture, secure, and serve the customer

Mobile represents the most likely vector for disruption over the next five years, as capabilities are changing more rapidly than any other technology-driven platform for customer interaction. Today, customer behavior on mobile has distinct characteristics when compared with desktop, tablet, and offline:

• Shorter user sessions. Mobile users engage with content for less than half the time of desktop Web users. 35 35. Raluca Budiu, “Mobile user experience: Limitations and strengths,” Nielsen Norman Group, April 19, 2015, nngroup.com.
• No idle time. Mobile users rarely return to a previous browsing session, so a click away to another site is an exit, not a detour. 36 36. Interviews with three travel industry e-commerce executives, August and September 2016.
• Preoccupied user. Mobile users are often doing something else, such as standing in line, commuting, riding in an elevator, or sitting in a meeting. 37 37. The 2014 traveler’s road to decision , Google, June 2014, thinkwithgoogle.com, p. 27.
• Specific goals. Typically, mobile users do not browse travel sites randomly but are looking for quick answers to precise questions such as rates and availability, product specifics (for example, operating hours), booking confirmation, or a purchase-transaction record. 38 38. “How micro-moments are reshaping the travel customer journey,” Google, July 2016, thinkwithgoogle.com.
• Zero tolerance. A mobile site or app must load quickly, respond accurately, and answer the query thoroughly—or the user will abandon it (and likely not return). 39 39. The 2014 traveler’s road to decision , Google, p. 37.

Too often, companies start by asking, “How do I get people to use my app?” instead of focusing on creating mobile experiences that reflect customer usage. Remember that when a customer engages with a mobile website or app, navigation to the solution must be obvious and immediate. Smart design will store the most recent search or query (for example, airfares between LGA and LAX) and, in the case of a purchase transaction, suggest the most obvious next use. Similarly, if a traveler recently booked a hotel room, the platform should ask if he or she needs directions to the hotel or other destination details.

For companies wondering which platform—mobile website or app—to invest in, the answer is both. Most travelers are not loyal customers; for example, 50 percent of American Airlines’ revenue in 2015 came from the 87 percent of its customers who flew AA only once that year. 40 40. Adam Levine-Weinberg, “5 things American Airlines Group, Inc. wants you to know,” Motley Fool, October 30, 2015, fool.com. Such travelers are unlikely to download and keep your app.

Mobile sites, which are generally less expensive to develop, promote, and maintain, should provide a quick and easy booking and fact-finding experience, especially for infrequent customers. Apps should always be functional both on- and offline but should be developed specifically with offline utility and focused on loyal travelers, who are likely to make it one of their core apps.

3. Safeguard against future disruptions

One of the most common questions we hear from clients today is, “How do I avoid being disrupted by the next Uber or Airbnb?” Most big companies are playing defense—reacting to established competitors and upstarts—instead of thinking about how they can identify and solve customer needs before somebody else does.

Many in the industry are already establishing a more proactive stance. Airlines alone offer many examples: JetBlue launched a travel start-up investment arm, JetBlue Technology Ventures, in 2016, and invested in JetSuiteX in an attempt to capture the market between large commercial carriers and on-demand charters and private jets. 41 41. Leena Rao, “Why JetBlue is landing in Silicon Valley,” Fortune , March 26, 2016; Doug Gollan, “JetSuiteX to launch scheduled flights in the West; Can a private jet airline be the next Southwest?” Forbes , April 5, 2016. EasyJet took a stake in Founders Factory, which invests in start-ups, and has created a data-science team to explore operational applications of predictive artificial intelligence. 42 42. Patrick Whyte, “EasyJet hopes its plan to invest in start-ups will help it stay ahead of competition,” skift.com, November 28, 2016; Derek du Preez, “EasyJet hires its first head of data science and posts record profits,” diginomica.com, November 17, 2015. And Emirates Group partnered with Carnegie Mellon University to create the CMU-Emirates Silicon Valley Innovation Lab in an effort to put data at the center of its operations. 43 43. Tara Rae Moore, “Emirates Group debuts Silicon Valley–based innovation lab in partnership with Carnegie Mellon,” Carnegie Mellon University, November 3, 2015.

Beyond investments and partnerships, there are some approaches for executives to assess their organization’s vulnerability and identify possible solutions. These approaches cannot be theoretical and must be grounded in a simple objective: to identify unmet customer needs (largely among the existing customer base) that the company can solve before somebody else does.

• Growth hacking. This tactic, based on agile principles, is commonly used by start-ups to achieve rapid scale with limited resources. Companies should review all current revenue-generation initiatives and discretionary spending to determine which ones are being measured and tracked against overarching strategic objectives (for example, increasing customer lifetime value). Where necessary, they should implement new measures (for example, a customer feedback loop) and eliminate all activities that are “too intangible” to measure. Based on this insight, they can adjust business practices to amplify the high-performing initiatives and eliminate those that do not perform well.
• Skunk Works. This approach involves selecting a cross-functional team of high achievers across multiple levels and assigning them to a special task force whose objective is to disrupt from within. This team should be tasked with developing new, independent offerings that compete with or replace existing products and services, complement the current business, or divert the profitability of the prevailing business model. The Skunk Works initiative, which may need to be carved out from the core day-to-day business to ensure independence, should launch new programs, products, and services to both current and new customers.

Each of these approaches requires executives to take risks and embrace failure—both rare traits in many established companies. At the same time, only new mistakes should be accepted, with shared learning celebrated at an institutional level.

The only constant in travel distribution is that innovators will thrive by identifying and addressing latent customer needs more effectively than traditional players. Most innovators don’t do it alone; as we discussed four years ago, 44 44. Carey, Kang, and Zea, “The trouble with travel distribution.” companies must unlock the power of partnerships to make progress in each of the three areas of customer centricity. The question now, with billions of dollars at stake, is whether change will again require a wave of new companies and models—or whether current companies can rise to the challenge of putting the customer at the center.

Robert Carey is a partner in McKinsey’s Atlanta office, where Del Ross is a senior adviser; Nathan Seitzman is an associate partner in the Dallas office.

The authors wish to thank Alex Dichter for his contributions to this article.

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Home » Press Release » NYU SPS Jonathan M. Tisch Center of Hospitality, HEDNA, and RateGain collaborate on a Benchmark Report Urging Tech Prioritization and Strategic Restructuring in the Hospitality Industry

NYU SPS Jonathan M. Tisch Center of Hospitality, HEDNA, and RateGain collaborate on a Benchmark Report Urging Tech Prioritization and Strategic Restructuring in the Hospitality Industry

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The report aims to create benchmarks for the hospitality industry and help with crucial decisions impacting the evolution of distribution

Noida, 18 June 2024: RateGain Travel Technologies Limited (RateGain), a leading provider of AI-powered SaaS solutions for travel and hospitality, announced today that the NYU School of Professional Studies Jonathan M. Tisch Center of Hospitality (NYU SPS Tisch Center) and its Hospitality Innovation Hub (HI Hub) Experiential Learning Lab, along with HEDNA and RateGain, released the first edition of The State of Distribution for 2024. The first of its kind report was created with an aim to help leaders with strategic decision-making, prioritizing technology investments, organizational restructuring, and training and education.

Today, more than ever, hotel commercial teams are getting involved in making technology decisions in the organization. While commercial teams in other industries have online communities and benchmark studies to help them make decisions, there has been an absence of defined standards and benchmarks in hospitality technology and this report will address that.

The report created through primary research conducted from December 2023 through May 2024 with representing 11,000+ hotel properties across various regions, is an essential read for commercial teams, students, hotel management companies, and anyone interested in understanding the evolution of the distribution landscape in hospitality.

Few of the insights from the report that can help hoteliers make strategic decisions include:

• Ease of implementation and Clear ROI continue to be the top two factors for deciding on technology solutions
• Investing in technology training is a key area of investment for all types of hotels. Large chains focus on comprehensive training, mid-size chains on high-impact training for ROI, and independent hotels on maximizing critical systems.
• Tracking intent is a major challenge , with 50% of hotels unable to track intent outside of the hotel website and social media analytics
• Hoteliers are spending 25% of their time on reporting with a majority of them stating it as a key area of increased manual effort

Insights are critical today as plagued by multiple challenges; the industry needed to understand what their peers are doing to give them a direction on where to invest their resources to drive profitability.

Vanja Bogicevic, PhD, the director of the HI Hub Experiential Learning Lab at the NYU SPS Tisch Center , highlighted, “The State of Distribution 2024 report not only empowers hoteliers with the insights needed to thrive in an ever-evolving landscape, but also educates the future workforce with the technology knowledge and benchmarks to face the challenges of tomorrow.”

Peter Strebel, President (Americas) at RateGain , highlighted, “The hospitality industry has evolved tremendously, from manual reservation systems to cutting-edge technology solutions. Yet, one thing remains constant: the need for a comprehensive understanding of distribution challenges faced by hoteliers. That’s why RateGain, in partnership with HEDNA and New York University, has developed a groundbreaking State of Distribution Report.”

Christopher Murdock, HEDNA President and Director of Distribution System Support and Strategy at Accor , stated, “The State of Distribution 2024 report is more than a resource—it’s a strategic tool tailored to empower hoteliers to face current challenges and seize future opportunities. With HEDNA’s hotelier perspective, RateGain’s global reach and data insights, and NYU’s educational excellence, we’re bringing together expertise to educate future leaders and provide invaluable insights into the industry.”

To learn more about the report, visit stateofdistribution.com

About The State of Distribution 2024

The State of Distribution report is a comprehensive analysis designed to demystify the complexities of the hospitality industry, offering insights into current trends, future forecasts, and actionable strategies for optimizing distribution channels. This initiative, born from the collaboration between HEDNA, RateGain, and NYU SPS, aims to bridge the gap between industry professionals and academic excellence, providing a data-driven foundation for enhancing guest experiences and driving success in the hospitality sector. Learn more at stateofdistribution.com .

About HEDNA

HEDNA is a global community of hospitality professionals, technology providers, educators, and consultants passionate about elevating the role of distribution. Through influence, collaboration, and networking, we elevate careers, harness new business opportunities, and drive the business of hospitality forward, together. Through our global conferences, local networking events and industry working groups, we help our stakeholders appreciate the nuances of today’s technologies, gauge the impact of today’s trends, and prepare for the challenges of tomorrow. Learn more at hedna.org .

About The NYU SPS Jonathan M. Tisch Center of Hospitality

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How Singapore brands can optimize sales through multichannel distribution

• June 21, 2024

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Table of contents.

In today’s dynamic retail landscape, reaching customers where they are is key to e-commerce success. One recent strategy to remain accessible across different e-commerce shopping platforms and closer to customers is through multichannel distribution. 

Singapore, with its tech-savvy population and booming e-commerce sector, presents a perfect landscape for brands to embrace multichannel distribution. This approach allows local businesses to tap into a wider consumer base, enhance customer experience, and shorten fulfillment timelines, and ultimately optimize sales. 

This article delves deep into what multichannel distribution is for Singaporean brands. We’ll explore the potential benefits of this strategy, uncover the challenges you might encounter, and provide solutions to overcome them. Additionally, we’ll offer insights on setting up a robust multichannel distribution system specifically tailored to the Singaporean market and inform you on how you can leverage a 3PL to help your multichannel distribution strategy.

What is Multichannel Distribution in Singapore E-commerce? 

It’s a strategic approach in which e-commerce businesses leverage a combination of channels, both online and offline, to market, sell, and distribute their products. Think of businesses in Singapore selling their products to shoppers in physical stores, websites built using Shopify, mobile apps, and even popular e-commerce marketplaces like Shopee, Lazada, or TikTok Shop. 

Popular Retail Sales Channels in Singapore

Singapore’s retail landscape thrives on diversity, offering a multitude of channels for brands to connect with customers. Here’s a closer look at the key selling channels available:

• Brand’s Own Online Stores: Building your own e-commerce platform allows complete control over branding, customer experience, and pricing. Platforms like Shopify Singapore can help you create a user-friendly online store.
• Online Marketplaces: Giant platforms like Shopee, Lazada, and TikTok Shop dominate the online marketplace scene in Singapore. These platforms offer high visibility to a vast customer base but come with commission fees and competition.
• Social Media: Social media giants like Facebook, Instagram, and TikTok Shop are powerful marketing and selling tools. Leverage these platforms to showcase products, run targeted ads, and interact directly with potential customers.
• Mobile Apps: Developing a dedicated mobile app provides a convenient and personalized shopping experience for customers. This is particularly valuable for brands with repeat customers or loyalty programs.
• Physical Stores: Despite the e-commerce boom, brick-and-mortar stores remain relevant. They offer a tangible shopping experience, allow for product trials, and build a sense of brand identity.

Potential benefits of Multichannel Distribution in Singapore

Now that we know of all of the different selling channels around Singapore, let us take a look at what entails the adoption of a multichannel distribution strategy. By embracing a multichannel distribution strategy, Singaporean brands unlock a treasure trove of benefits:

• Enhanced Customer Experiences: Today’s consumers are omnichannel, meaning they navigate seamlessly between online and offline touchpoints throughout their buying journey. A recent study by GlobalData reveals that nearly 49% Singapore shoppers browse in physical stores before buying online, while the other 49 % browse online before buying in a physical shop. A multichannel presence ensures you’re there when and where they need you. They can browse online, visit your physical store, or make a purchase through your mobile app – the power is in their hands.
• Loyal Customer Base Leading to Higher Profits: Studies show that multichannel customers spend more and have a higher lifetime value. Offering a seamless experience across channels fosters brand loyalty and encourages repeat purchases.
• Agility in a Dynamic Market: Consumer preferences and market trends are constantly evolving. A multichannel approach allows you to adapt quickly. For example, if social media shopping surges in popularity, you can leverage your existing social media presence to capitalize on the trend.
• Channel Synergy for Maximum Impact: Each channel has its own strengths. Brick-and-mortar stores offer a personalized touch, while online platforms provide detailed product information. A multichannel strategy allows you to leverage these strengths. Promote exclusive online deals in-store or showcase customer testimonials from social media on your website. This synergy creates a more impactful brand experience and boosts sales across the board.
• Data-Driven Customer Insights: Multichannel distribution generates a wealth of customer data across different touchpoints. By analyzing this data, you gain valuable insights into customer preferences, buying habits, and behavior patterns. This knowledge allows you to personalize marketing campaigns, optimize product offerings, and, ultimately, cater more effectively to your target audience.
• Expanded Market Reach: Multichannel distribution allows you to tap into diverse market segments that might not be readily accessible through a single channel. Social media can connect you with younger, tech-savvy consumers, while physical stores cater to those who prefer a traditional shopping experience.
• Offering Customers Choice and Convenience: The beauty of multichannel distribution lies in empowering customers. They have the flexibility to choose their preferred channel—whether browsing online or physically interacting with your product in-store. This convenience leads to higher customer satisfaction and, ultimately, increased sales.
• Capture Missed Sales: Single-channel distribution limits your ability to capture every potential sale. A customer who starts browsing online might need the reassurance of trying a product in-store before committing. Conversely, someone in a physical store might not find their desired size and opt to purchase online later.  Shoppers can also avail themselves of faster fulfillment instead of having to wait for the physical store to restock. By being present across channels, you capture these “missed sales” and convert potential customers into loyal buyers.

Challenges in a Multichannel Distribution System in Singapore and How to Overcome Them

While multichannel distribution offers significant advantages, it also presents some challenges. Here’s a look at some common hurdles and strategies to overcome them:

• Inventory Management:  Keeping inventory synchronized across multiple online and offline channels is crucial. This can be a complex task, especially during peak seasons. Consider using a 3PL’s inventory management software to acquire a centralized overview and real-time data on stock levels across all channels. This helps prevent stockouts and ensures a smooth customer experience.
• Pricing Consistency: Maintaining consistent pricing across all channels can be tricky, particularly with marketplaces that have commission fees. Develop a pricing strategy that considers these factors while ensuring competitiveness. Utilize tools that automate price updates across different platforms to minimize errors.
• Multichannel Order Fulfillment:  Fulfilling orders from multiple channels requires a robust logistics system. Look for solutions like Locad’s that facilitate B2B and B2C fulfillment. Consider consolidating storage facilities to streamline operations and optimize stock allocation for each marketplace. Implement efficient picking and packing processes, potentially dividing them between B2B and B2C orders to ensure smooth execution. Additionally, explore value-added services like kitting and bundling during sales periods to enhance customer offerings.

How to Set up a Multichannel Distribution System in Singapore

Now that you understand the potential of multichannel distribution, let’s explore setting up your own system.

• Define Your Objectives

The first step is to identify your goals clearly. Do you aim to reach new customer segments, increase brand awareness, or boost sales? Defining these objectives will guide your overall strategy and channel selection.

• Identify Target Channels

Analyze your target audience and business goals to determine which channels best align with them. These might include physical stores, e-commerce platforms like your website, marketplaces like Shopee, Lazada, TikTok Shop, and mobile apps.

• Decentralize Inventory

Even as you implement multichannel distribution, ensure that your products are stored in warehouses close to your customers. Opt for a 3PL service that decentralizes your inventory and helps you achieve those one-day and two-day delivery metrics by spacing out your inventory across multiple warehouses and allotted across different platforms.

• Develop Channel-Specific Strategies

Each channel requires a tailored approach.  Consider factors like pricing strategies, promotional offers, inventory allocation, and customer service specific to each platform.  For example, social media might focus on engaging content and influencer marketing, while your website prioritizes detailed product information and secure checkout processes.

• Look for Fulfilment Options

Once your selling channels have been decided and strategies mapped out, make it a point to figure out the fulfillment options available to you. As a priority, if you’re using physical stores to distribute your products, look for a 3PL like Locad that can also ensure mid-mile delivery to physical stores in addition to last-mile options that offer a diverse array of delivery speeds depending on your customer’s preferences.

• Embrace Technology Solutions

Invest in systems that facilitate integration and coordination across all channels. Consider opting for an inventory management software similar to the one offered through Locad to ensure real-time accurate stock levels and avoid overselling. Moreover, utilize scheduled reports to gain insights into performance and identify areas for improvement.

• Ensure Consistent Brand Experience

Consistency is key to building brand trust. Maintain a unified brand identity across all channels, from messaging and visuals to customer service approach. This creates a seamless experience for customers regardless of their chosen channel.

• Monitor and Analyze Performance

Your multichannel journey doesn’t end with setup. On your sales overview dashboard, regularly track key metrics like sales figures, conversion rates, and customer engagement across each channel. Analyze this data to identify what works and what doesn’t.

• Continuously Adapt and Optimize

The retail landscape is constantly evolving. Stay updated on emerging trends and technologies.  Be prepared to adapt your multichannel strategy based on evolving customer needs and market changes. This continuous optimization ensures your brand remains relevant and thrives in the dynamic world of multichannel distribution.

Singaporean brands and sellers have a golden opportunity to unlock significant growth through multichannel distribution. By leveraging a combination of online and offline channels, you can reach a wider audience, enhance customer experience, and ultimately, optimize sales.

From capturing missed sales and boosting customer loyalty to gaining valuable data insights and adapting to market changes, the right approach to multi-channel inventory distribution can be a game changer. However, navigating the multichannel maze requires careful planning and the right tools.

Locad’s innovative solutions empower Singaporean brands to manage their multichannel inventory distribution and streamline multichannel sales. With a cloud-run Locad logistics engine, sellers can consolidate inventory management, sync multiple e-commerce platform, and monitor stock levels across all channels, preventing stockouts and ensuring a smooth shopping experience. Additionally, the Locad plug-in unifies B2B and B2C fulfillment, offering efficient picking, packing, and last-mile shipping in one platform.

Are you ready to unlock the full potential of multichannel distribution?  Contact Locad today to schedule a free consultation and discover how our solutions can help you build a winning multichannel strategy for your Singaporean brand.  Remember, in retail, agility and a customer-centric approach are key to success. Embrace the power of multichannel distribution and watch your sales soar!

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Distribution channel, tourism

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A tourism distribution channel is a network of intermediaries that facilitates the sales and delivery of products and services specifically related to tourism from suppliers to consumers (Buhalis and Laws 2001 ; Kracht and Wang 2010 ; Longhi 2009 ). Tourism distribution channels can be distinguished from the ones of tangible goods in that goods are conveyed to consumers whereas tourists, in most cases, are conveyed to the products and/or services they purchase and consume (Buhalis and Laws 2001 ).

Evolution of tourism distribution channels

The information and communication technology has facilitated the evolution of tourism distribution channels. This evolution has involved the introduction of additional layers and categories of emerging intermediaries, which has transformed the structure of tourism distribution channels into an increasingly complex one.

A milestone in the evolution of the structure of tourism distribution channels occurred in 1993 when the commercialization of the...

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Buhalis, D., and E. Laws 2001 Tourism Distribution Channels: Practices, Issues and Transformations. London: Continuum.

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Buhalis, D., and P. O’Connor 2005 Information Communication Technology Revolutionizing Tourism. Tourism Recreation Research 30(3):7-16.

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Kracht, J., and Y. Wang 2010 Examining the Tourism Distribution Channels: Evolution and Transformation. International Journal of Contemporary Hospitality Management 22:736-757.

Longhi, C. 2009 Internet and Organization of the Industry in Tourism: A Focus on the Distribution of Travel and Tourism Services. International Journal of Leisure and Tourism Marketing 1(2):131-151.

Werthner, H., and S. Klein 1999 Information Technology and Tourism – A Challenging Relationship. Vienna: Springer.

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Honggen Xiao

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Wang, Y., Kracht, J. (2014). Distribution channel, tourism. In: Jafari, J., Xiao, H. (eds) Encyclopedia of Tourism. Springer, Cham. https://doi.org/10.1007/978-3-319-01669-6_60-1

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Powering Canada: A blueprint for success

Canada Electricity Advisory Council: Final report

Council membership

Recommendations, letter from the council chair, about the council, global view, what does this mean for canada, affordability, reliability, indigenous participation, policy clarity now and in the future, mandates consistent with climate goals, flexibility for jurisdictions across canada, data transparency and trust, a champion to reform clean electricity approvals, a risk-based approach to project reviews, proactively eliminating duplication and leveraging crown lands.

• Clarifying indigenous consultation and engagement

Paving the way for capital and labour

Optimizing investment tax credits, a framework for inter-regional grid infrastructure.

• Support for Indigenous, northern and remote communities

Targeted support for low-income Canadians

Accountability and consistency, federal support for demand management, maximizing federal levers, suggested features for energy planning instruments, who the council heard from, highlights: what we heard, additional feedback, list of figures.

• Figure 1: 100 Years of Electricity Generation in Canada
• Figure 2: Share of Non-emitting Electricity Generation by Province and Territory
• Figure 3: Role of Electricity Decarbonization and Electricity Growth

Figure 4: The Steps for a More Affordable, Reliable, and Inclusive Transition

Figure 5: Illustrative directional impact of ‘Align on goals’ recommendations

Figure 6: Illustrative directional impact of ‘Enable the Build’ Recommendations

Figure 7: Illustrative directional impact of ‘Support the Transition’ Recommendations

Figure 8: Illustrative directional impact of ‘Save energy to lighten the load’ Recommendations

• Figure 9: Share of Annual Global Energy Transition Investment to 2050
• Figure 10: Canada's Share of Non-Emitting Electricity Generation Compared to G7 and G20 Countries
• Figure 11: 100 Years of Electricity Generation in Canada
• Figure 12: Emissions Reductions by Sector, 2000-2020
• Figure 13: Share of Non-Emitting Electricity Generation by Province and Territory, 2022

Figure 14: Role of Electricity Decarbonization and Electricity Growth

Figure 15: Change in energy wallet, 2024 to 2050

Figure 16: Benefits of Inter-Regional Transmission Lines

• Figure 17: The Steps for a More Affordable, Reliable and Inclusive Transition

Figure 18: Illustrative Directional Impact of ‘Align on Goals’ Recommendations

Figure 19: Illustrative Directional Impact of ‘Enable the Build’ Recommendations

• Figure 20: Time to Obtain a General Construction Permit, OECD Countries

Figure 21: Illustrative Directional Impact of ‘Support the Transition’ Recommendations

Figure 22: Illustrative Directional Impact of ‘Save Energy to Lighten the Load’ Recommendations

Figure 23: Average Annual Home Energy Costs of Different Housing Types

Philippe Dunsky (Chair) President Dunsky Energy + Climate Advisors

Pete Bothwell Vice President, Energy Transition and Industry Relations, Canadian Utilities Ltd. (ATCO Electric)

Jason Dion Footnote 1 Senior Research Director, Canadian Climate Institute

Tim Eckel Vice President (retired), SaskPower

Bob Elton Footnote 2 Former CEO, BC Hydro

Judith Ferguson Executive Vice President Nova Scotia Power Inc.

G.D. (Gerry) Forrest Former Chair, Manitoba Public Utilities Board

Wendy Franks CEO, Canadian Power-to-X Partners (former CSO, Northland Power)

Chief Sharleen Gale Chief, Fort Nelson First Nation Chair, First Nations Major Projects Coalition

Lesley Gallinger CEO, Independent Electricity System Operator (IESO)

John Gaudet Footnote 3 Former CEO Maritime Electric Co.

Bruce Lourie President, Ivey Foundation

Stephen MacDonald President and CEO EfficiencyOne

Kerry O’Reilly Wilks Footnote 4 Executive Vice President, TransAlta

Madeleine Redfern Former Mayor, Iqaluit COO, CanArctic Inuit Networks

Greg Robart CEO, Smart Grid Innovation Network

Stéphanie Trudeau Executive Vice President – Québec, Énergir

Darlene Whalen Footnote 5 Former Chair and CEO, Newfoundland and Labrador Board of Commissioners of Public Utilities

Emily Whetung-MacInnes Chief Emerita, Curve Lake First Nation Director of Indigenous Partnerships, Ontario Power Generation

Executive summary

Canada’s electricity story.

Canada has a storied history of bold moves in electricity. From the earliest innovations in the 1880s, including the country’s first hydropower plants, power lines and streetlights, to a wave of electrification in the second half of the twentieth century and major strides toward decarbonization that have characterized the past 2 decades, Canada has rarely shied away from big challenges in electricity.

Figure 1: 100 Years of Electricity Generation in Canada Footnote 18

Line chart depicting the increase in Canada’s electricity generation in TWh from 1950 to 2020. The period from 1950 to 2000 is characterized by electrification, where the supply of electricity grew ten times to meet new demand. The period from 2000 to 2020 is characterized by electricity system decarbonization, where emissions intensity fell by fifty percent and generation grew only marginally. Beyond 2020, the estimated average electricity generation trajectory out to 2050 will double, reflecting the rapid increase in demand due to both electrification and decarbonization. The predicted range of electricity generation trajectories is shown, with a low of approximately 1,000 TWh to a high of 1,800 TWh in 2050.

Now, Canada is about to embark on another great challenge: completing the decarbonization of its existing grids while vastly expanding electricity production and use. This report is about the pragmatic approaches Canada needs today to succeed in this endeavour.

The Council

The Minister of Natural Resources convened the Canada Electricity Advisory Council (“the Council”) in May 2023 to advise on policies to enable the electricity sector to play its pivotal role in Canada’s transition to net-zero.

The Council is an independent body of 19 electricity sector leaders from every region in Canada . During its 12-month mandate, the Council:

• Held 87 meetings , including full Council and Working Group meetings
• Heard from 117 stakeholders , through 66 private briefings and 72 written submissions
• Obtained full consensus on 28 key recommendations to the federal government

As the recommendations detailed in this report attest, the Council has found that there can be a viable route to achieving these goals – one that respects regional disparities, safeguards reliability, maintains affordability and cost-competitiveness, respects Indigenous rights, and includes Indigenous communities.

To be sure, there will be formidable challenges, risks and trade-offs along the way. But the opportunities for Canada’s economy – and the risks to future generations should the country fail in this endeavour – are far more substantial. Footnote 6

A dual challenge

To achieve Canada’s goals, the provinces and territories – the ultimate authorities over its electricity systems – will need to tackle a dual challenge: completing the decarbonization of existing electricity systems, while also rapidly growing capacity to meet new needs in everything from transport to buildings to industry.

Decarbonization

Figure 2: Share of Non-emitting Electricity Generation by Province and Territory Footnote 26

Map of Canada using pie charts in each province and territory to show the share of electricity generation produced by non-emitting sources for each region in 2022. The share of non-emitting electricity in each region is as follows: British Columbia – 97%, Alberta – 19%, Saskatchewan – 21%, Manitoba – 99%, Ontario – 92%, Quebec – over 99%, New Brunswick – 71%, Nova Scotia – 41%, Prince Edward Island – 98%, Newfoundland and Labrador – 99%, Yukon – 68%, Northwest Territories – 83%, and Nunavut – less than 1%.

Approximately 4 in 5 Canadians live in provinces where electricity is already largely decarbonized (more than 90% non-emitting). In this regard, Canada as a whole is already well ahead in the global race to clean electricity.

But for some regions of the country, the challenge of decarbonizing existing grids is daunting, despite significant progress in recent years. This is the case in Alberta, Saskatchewan, Nova Scotia and remote communities of the North, which have historically relied on fossil fuels for the bulk of their power generation.

Supporting these regions in their efforts to decarbonize their existing power systems is one challenge the federal government must take on.

Rapid growth

The other challenge facing the country is one of growth. If Canada is to achieve its long-term goal of net-zero emissions across all sectors, a rapidly expanding supply of clean power will be essential.

Electricity’s share of Canada’s energy consumption is currently around 20%. Most studies find that to achieve the country’s goals in the most cost-efficient way, electricity’s market share will need to grow roughly threefold within a single generation . At that point, it would be the country’s primary form of energy supply.

Figure 3: Role of Electricity Decarbonization and Electricity Growth Footnote 37

Schematic comparing electricity sector annual emissions at 47 Mt CO2e in 2022 to Canada’s total annual emissions in 2022 of 708 MT CO2e. The diagram also shows that electrification and clean grids could potentially reduce emissions by 268 MT CO2e in 2050.

This growth challenge – not dissimilar to the wave of growth that took place in the last half of the twentieth century – will require strong leadership and collaboration across Canada.

Four cornerstones of success

The Council has built its recommended policy measures on four cornerstones, which together form the foundation of a successful electricity transition:

• Speed : To achieve its goals, Canada needs to rapidly expand its clean electricity infrastructure. That simply will not happen without measures designed to attract capital, involve Indigenous Nations and communities, and, critically, recalibrate project review and approval processes across the country and at every level of government to enable more clean electricity.
• Affordability : If it is to succeed, the transition must be affordable and cost-competitive. Analysis prepared for the Council suggests this is possible, in large part because of the fuel savings that new electricity will create. But the path is narrow, and a wide array of pragmatic, thoughtful measures will be needed to attract the necessary capital, reduce project friction, and help Canadians use electricity more efficiently.
• Reliability : Ensuring the reliability of Canada’s electricity systems is vital during this accelerated transition. Doing so will require greater flexibility in decarbonization policies, especially for those regions that are currently most reliant on fossil fueled power plants, as well as financial support for investments that enhance system reliability.
• Indigenous Participation : Much of Canada’s new electricity infrastructure will be built on Indigenous lands. By embracing Indigenous Nations and communities as full partners in these projects, Canada has a unique opportunity to begin repairing the unequal relationship that has long dominated energy and resource development, and to harness a powerful force for reconciliation.

These 4 cornerstones are deeply intertwined – maximizing Indigenous participation, for example, can improve both the speed and the affordability of the transition – and pursuing all 4 with a balanced approach will be vital for Canada’s success. And they share a common focus: driving down costs to make the transition as rapid and cost-effective as possible.

The Council’s recommendations to the federal government follow 4 critical themes, all of which are aimed at improving the electricity transition’s speed, reliability, affordability, and Indigenous inclusion.

Illustrative line chart of net-zero transition cost trajectory scenarios to 2050 comparing a high-cost energy transition of approximately $2 trillion with a low-cost energy transition of approximately $1.1 trillion. The chart notes that the gap between the two scenarios can be bridged by taking the following steps: 1) Aligning on goals; 2) Enabling the build; 3) Supporting the transition; and 4) Saving energy to lighten the load.

Below are highlights of the key recommendations. In the full Recommendations section , each recommendation is accompanied by more substantive and specific Implementation Details .

Align on goals

The energy and policy landscape in Canada appears robust, but the array of overlapping policies at 3 levels of government is hindered at present by insufficient clarity, consistency and alignment. The Council is recommending a series of measures that can help create much clearer alignment on Canada’s path forward.

Illustrative line chart with two trajectories, high and low, for capital requirements. The chart indicates the directional impact of the “Align on goals” recommendations over time, suggesting that the higher trajectory and capital requirements could be reduced by aligning policies, mandates, and plans that offer greater certainty to decision-makers and support a lower-cost transition for all.

To ALIGN on goals, the Council recommends:

• Policy Clarity Now and in the Future : The federal government should expedite clarification of critical electricity policy rules (Recommendation 1). To further enhance clarity and equip decision-makers, the federal government should encourage energy roadmaps at the provincial and territorial levels (Recommendation 2), informed by pathway assessments (Recommendation 3).
• Mandates Consistent with Climate Goals: The federal government should lead by example and ensure that the mandates of relevant federal authorities integrate net-zero goals (Recommendation 4) to ensure that authorities are not working at cross purposes.
• Flexibility for Jurisdictions Across Canada: In recognition of the diverse needs and contexts across Canada, the federal government should lean into flexibility in defining key rules (Recommendation 5), including revising clean electricity investment tax credit (ITC) conditionality to focus on energy roadmaps (Recommendation 6).
• Data Transparency and Trust: The federal government should drive the availability of open and transparent data and modelling (Recommendation 7), as well as publish key progress indicators (Recommendation 8) to support stakeholders in making evidence-based decisions and enhancing public trust.

Enable the build

Canada simply cannot keep pace with demand for clean electricity without systemic reform of the tangle of current approval processes. While many of these fall within provincial and territorial jurisdiction, the federal government can both lead by example and play an important role in the reconfiguration of its own processes to enable timely build-out of the country’s electricity systems.

Illustrative line chart using two installed capacity (GW) trajectories, high and low, to show the directional impact of the “Enable the build” recommendations. The text suggests that higher levels of installed clean electricity capacity can be achieved over time by removing barriers to new project permitting, capital attraction, and Indigenous participation.

To ENABLE the build, the Council recommends:

• A Champion to Reform Clean Electricity Approvals: The federal government should designate an accountable champion to simultaneously: (a) lead the charge on multi-agency reform to streamline, accelerate and eliminate redundancies; and (b) adopt a systemic approach to identifying and supporting Clean Electricity Projects of Canadian Interest (Recommendation 9).
• A Risk-Based Approach to Project Reviews: The federal government should move to a risk-based approach to project reviews, streamlining their scoping (Recommendation 10) and adopting a compliance-based framework where possible (Recommendation 11), thereby demonstrating the increase in pace the transition requires.
• Proactively Eliminating Duplication and Leveraging Crown Lands: The federal government should work with provinces to eliminate duplication in project assessments by adopting equivalency mechanisms wherever possible (Recommendation 12). It should also designate more Crown lands for expedited clean electricity project development (Recommendation 13).
• Clarifying Indigenous Consultation and Engagement: The federal government should assist developers in understanding Indigenous rights as well as in defining their duty to consult Indigenous Nations and communities (Recommendation 14).
• Paving The Way for Capital and Labour: The federal government should align financial, tax, labour, and trade policies with net-zero goals (Recommendation 15), establish a one-stop shop for federal project support (Recommendation 16), and harmonize electrical codes and standards (Recommendation 17).

Support the transition

Although the switch to clean power is likely to be affordable for the average Canadian, that average can hide unevenly distributed costs and benefits. For some Canadians – particularly in fossil fuel-reliant provinces and territories, in lower-income households, and in Indigenous and remote communities – the challenge will be greater. The federal government should provide crucial support to address fairness and ensure that the overall costs and benefits of the transition are equitably shared.

Illustrative line chart showing the directional impact of the “Support the transition” recommendations on future percentage changes in consumer energy costs. The chart shows high, medium, and low scenarios for consumer energy costs. The text indicates that targeted federal funding can reduce costs for all Canadians while reducing the uneven distribution between households.

To SUPPORT the transition, the Council recommends:

• Optimizing Investment Tax Credits (ITCs): The federal government should bring a series of changes to clean electricity-related ITC programming, including adopting more pragmatic conditionality criteria, expanding to intra-provincial transmission, and adjusting credit levels (Recommendation 18). These changes are designed to enable a fairer distribution of costs and benefits.
• A Framework for Inter-regional Grid Infrastructure: The Minister of Energy and Natural Resources should engage counterparts at the 2024 Energy and Mines Ministers’ Conference (EMMC) to jointly develop, and table in time for the EMMC in 2025, a collaborative framework to identify and financially support inter-regional electricity transmission projects. Using the EU’s Projects of Common Interest (PCIs) framework as a starting model, it should outline governance, cost allocation, and funding components (Recommendation 19).
• Support for Indigenous, Northern, and Remote Communities: The federal government should target funding toward addressing the challenges unique to these communities, providing a coordinated approach to economic reconciliation with Indigenous communities (Recommendation 20) and addressing policy certainty and support in Northern and remote communities (Recommendation 21).
• Targeted Support for Low-Income Canadians: The federal government should significantly increase its commitments to fund provincial and territorial energy efficiency programs directed at lower-income households (Recommendation 22).

Save energy to lighten the load

Accelerating the build-out of clean electricity to meet the growing needs of a net zero economy is a daunting task. The scope and scale of that task – and the requisite capital investments – can be reduced by significant improvements in energy efficiency and demand flexibility.

Illustrative line chart with two trajectories of electricity demand to 2050 to depict the directional impact of the “Save energy to lighten the load” recommendations. The text indicates that energy efficiency and load flexibility can reduce electricity demand, minimize investment needs, reduce consumer bills, and enhance reliability.

To SAVE energy to lighten the load, the Council recommends:

• Accountability and Consistency: The federal government can reinvigorate its efforts and take on a national leadership role by creating an energy efficiency accountability framework (Recommendation 23) and linking federal investments in housing to the highest energy saving standards (Recommendation 24).
• Federal Support for Demand Management: The federal government should prioritize support for demand management, by refocusing existing funding toward demand-side solutions such as energy efficiency, demand flexibility, and grid modernization (Recommendation 25).
• Maximizing Federal Levers: The federal government should make maximum use of its own levers, notably energy efficiency equipment standards (Recommendation 26), building codes (Recommendation 27) and government operations and procurement rules (Recommendation 28).

The Linchpin: Pragmatism and collaboration

Electricity is poised to play an outsized role in Canadian society and in its economy, driven by a new wave of rapid growth in supply and demand for clean power. If the country gets this right, Canada will emerge from the energy transition on solid footing, having reinforced its position in the post-transition global economy.

The Council has laid out a blueprint of actions to that effect that are rooted in pragmatism. Taken as a whole, they offer a carefully balanced mix of clear policy direction, reductions in the regulatory muddle that is slowing the pace of growth, targeted funding to address the most urgent needs and ensure a fair transition for all Canadians, and new rules to dramatically reduce energy waste to make the transition more achievable.

These actions are driven by a crucial assumption: that despite an increasingly polarized political environment, Canadians can set aside their differences and work together toward a common outcome. Ultimately, that may be the most critical action of all.

• Recommendation 1: Expedite clarification of critical electricity policy rules

Recommendation 2: Encourage energy roadmaps

Recommendation 3: encourage pathway assessments to inform energy roadmaps, recommendation 4: align mandates of relevant authorities with net-zero goals, flexibility for jurisdictions across canada, recommendation 5: prioritize flexibility in policymaking, recommendation 6: focus itc conditions on energy roadmaps, data transparency and trust, recommendation 7: drive open and transparent data and modelling, recommendation 8: establish indicators to track national progress, a champion to reform clean electricity approvals, recommendation 9: designate an accountable champion to accelerate electricity project approvals, a risk-based approach to project reviews, recommendation 10: streamline scoping of clean electricity project reviews, recommendation 11: move to a compliance-based approvals framework where possible, proactively eliminating duplication and leveraging crown lands, recommendation 12: conclude equivalency agreements to limit duplication with provinces.

• Recommendation 13: Proactively develop federal crown lands

Clarifying Indigenous Consultation and Engagement

Recommendation 14: enhance clarity and awareness of expectations for indigenous consultations, paving the way for capital and labour, recommendation 15: align financial, tax, labour, and trade policies with net-zero, recommendation 16: establish a one-stop shop for federal financial support, recommendation 17: harmonize electrical codes and standards, recommendation 18: align itc programming with net-zero objectives, a framework for inter-regional grid infrastructure, recommendation 19: construct a framework to support inter-regional electricity transmission projects, support for indigenous, northern and remote communities, recommendation 20: advance economic reconciliation with indigenous nations, recommendation 21: support the north and remote communities, targeted support for low-income canadians, recommendation 22: expand funding for energy efficiency programs directed at lower-income canadians, accountability and consistency, recommendation 23: create an energy efficiency accountability framework, recommendation 24: link federal investments in housing to the highest energy-saving standards, federal support for demand management, recommendation 25: prioritize demand management in federal supports, maximizing federal levers, recommendation 26: update appliance and equipment standards, recommendation 27: advance building code modernization, recommendation 28: expand the greening government strategy.

Canadians come at energy from different perspectives. Some are primarily concerned about affordability and competitiveness, others about the effects of long-term climate change on our children’s future. For many, it's a matter of reliability — keeping the proverbial lights on. And for many Indigenous peoples, it's about undoing a legacy of energy development happening to — not with or by — their communities.

All of these perspectives matter . All are legitimate. Yet in our increasingly polarized debates, how often do we jump to assuming others are "wrong" or "don't care" about our perspective, or just "don't get it"?

Serving as chair of this Council has been a tremendous honour. And a large part of that honour has been working alongside its esteemed members who, like a microcosm of Canada, came at this challenge from varied perspectives.

My own perspective is simple: Energy is the backbone of economies and societies the world over. It always has been. And the world is now undergoing a rapid, arguably unprecedented energy transition.

How we navigate that transition — deliberately or not, thoughtfully or not, collaboratively or not — will determine how we emerge on the other side: as winners or losers in a historic, global shift. Our kids will have us to thank — or to blame — for the outcome.

As my daughter likes to say, “It’s better to try than not to try.”

Arguably the single biggest part of this transition comes down to electricity. Why? Because electricity can be produced emissions-free, can move across vast distances, can be produced in a multitude of ways using natural resources available in every region of the country, and can be consumed with extreme efficiency. As our report lays out, the challenge before us is twofold:

• to finish decarbonizing our existing grids (we’re already ahead of most of the world on that), and
• to rapidly expand them to deliver the clean electricity that Canadians will need in the decades to come.

As the Council deliberated on the steps necessary to set Canada’s electricity transition on a path to success, we arrived at a firm consensus on 3 clear parameters for our work:

• The first was a commitment to pragmatism . We understand that electricity is a vital daily need for all Canadians, and that it is delivered from a diverse and increasingly complex array of systems. Our recommendations could be ambitious, but they cannot be simplistic – there are simply no easy answers, silver bullets or one-size-fits-all solutions. Rather, to be effective they would have to be grounded in current realities, take stock of real-world complexities, and lead to viable near-term actions. There is undeniable urgency to act in the face of climate change, but no action will be sustainable if it does not safeguard the affordability and reliability that Canadians have come to rely on.
• We have also come to see not just the value but the necessity in collaboration . This Council has drawn its membership from every region of Canada and from a diverse range of backgrounds. At times it has felt like a microcosm of Confederation itself, with differing, competing and even clashing views and perspectives. Yet with pragmatism as our guide, we developed a spirit of mutual respect for the multitude of perspectives that were brought to the table. The fact we were able forge consensus on such detailed recommendations is a testament to what true collaboration can produce. In the end, while Council members’ respective provinces and territories may face different challenges, we are all members of the same Team Canada.
• Above all, this Council has been driven by a powerful desire to get this right . The energy transition is a once-in-a-generation opportunity to chart the best possible future path for Canada’s electricity systems, which will support Canadians in their daily lives for generations to come. We have focused on a route to net-zero aimed at quickening the pace and optimizing for reliability, affordability , and Indigenous participation . We believe that these 4 foundational principles will serve all Canadians as we come together to embrace this challenge head-on.

Some will critique this report. It is certainly not perfect; it will not solve every challenge; in choosing to be grounded in today’s reality, it may not be as bold as some would like.

Yet it is my sincere belief that the vision and recommendations herein reflect a pragmatic, considered, achievable path forward. I am proud of the work that this Council has completed, and hope that its recommendations serve Canada for years to come.

- Philippe Dunsky

The Canada Electricity Advisory Council (“the Council”) was convened in May 2023 by the Honourable Jonathan Wilkinson, Minister of Energy and Natural Resources.

The Council was mandated to provide independent advice to government on the key steps needed to ensure that Canada’s electricity sector is positioned to assume its central role in achieving Canada’s emissions goals affordably, reliably and in ways that facilitate Indigenous participation. The Council was provided with 1 year to complete its work.

The Council is an independent body comprised of 19 Canadian electricity sector experts, representing a cross-section of current and former leaders of electric utilities, power system operators, power producers, utility regulators, Indigenous Nations and stakeholders from every region of the country. See the Council Members section for the full list of members.

At its inaugural meeting, the Council unanimously adopted a set of principles to guide its work. Notable among these are:

• Respect for each other . Council membership reflects a great diversity of experiences and perspectives. Members agreed to bring 4 qualities to the table – respect, humility, expertise, and wisdom – to ensure its work best serves Canadians.
• Respect for provincial and territorial jurisdiction . Recognizing the Council was appointed by the federal government, the Council agreed that its work and recommendations must fully respect provincial and territorial jurisdiction over electricity systems.
• Technology agnosticism: The Council agreed to exclude electricity technology pathways from its scope of work, for two reasons. First, the Council believes there are no inherently”good” solutions, only ones that are more or less appropriate for a given region, context and need. Second, the Council agreed that the most daunting challenges facing Canada's clean energy transition are primarily structural—stemming from existing policies, practices, and priorities—rather than technological.

At its launch in May 2023, the Council established five working groups, which met every 2 to 3 weeks – a total of 79 meetings – throughout most of the year:

• Governance : Electricity system planning and oversight (12 meetings)
• Projects : Project approvals and Indigenous benefits (15 meetings)
• Capital and Affordability : Capital attraction and affordability (17 meetings)
• Cooperation : Regional planning and cooperation (21 meetings)
• Innovation and Reliability (14 meetings)

The working groups in turn shared their work with the full Council, which met in person over a total of nearly 100 hours across 8 meetings held across the country. Footnote 7

A Secretariat, housed at Natural Resources Canada (NRCan), and consisting of employees assigned to the Council’s work, supported the Council in conducting research and analysis, facilitating stakeholder engagement, and providing administrative support. They reported to the Council’s Chair.

To ensure that the Council's recommendations incorporated the diverse insights and realities of the full range of Canada's electricity sector stakeholders, the Council engaged with more than 100 stakeholders, from every province and territory across Canada, to better understand the opportunities, barriers, and needs associated with Canada’s electricity systems. These included:

• 25 briefings from stakeholders – including utility leaders, power sector associations, regulators, labour leaders, and others – to the full Council
• 41 thematic briefings from stakeholders to Council working groups
• 72 written submissions from stakeholders in response to written questions corresponding to each of the Council’s working group themes

In addition, Council members met individually with stakeholders and Indigenous leaders across the country, including provincial and federal officials, utility executives, and others. (A summary of What We Heard is presented in Appendix B .)

This report

This report represents the Council’s final findings and recommendations, which have been tabled with the Minister.

These findings and recommendations represent the consensus view of the full Council , defined in its Terms of Reference as prevailing “when all members can accept the proposed decision on a specific issue in the context of the full package of outcomes.” Footnote 8 There were notably no dissents.

Part 1: The electricity era

Canada’s challenge and opportunity

The Big Picture

Energy in transition.

Through its commitment to largely decarbonizing its electricity grids by 2035 and achieving net-zero emissions by 2050, Footnote 9 Canada has joined much of the world in pursuit of a significant economic transformation: the transition to clean energy.

At the core of this transition is a shift toward electrification – migrating many essential energy needs from fossil fuels to clean electric power. Footnote 10 This transition is now well underway globally, driven by declining clean technology costs, more robust policy support, and increasing demand from consumers and investors around the world. Footnote 11 From electric vehicles to electric-powered heat pumps to electricity replacing other energy sources feeding industrial processes and manufacturing facilities, we are likely witnessing the dawn of a new electric age.

“Reaching net-zero emissions hinges on a rapid expansion of the electricity sector, which will provide significant societal benefits.” Electricity Canada Footnote 12

This transition is, at its core, about producing more clean energy, using it more productively, and keeping it affordable. Electrification is becoming the preferred method for emissions reductions in much of the world for several reasons. Electricity can often be consumed far more efficiently than alternatives, it draws from resources that every region has in one form or another, and often offers the lowest overall cost and the greatest ease of implementation, especially when accompanied by major improvements in energy efficiency.

Electricity will not be the answer for every energy need. Traditional oil and gas, bioenergy, and hydrogen will remain vital fuels in hard-to-abate sectors for the foreseeable future. However, the accelerating trend in the energy transition clearly indicates that electricity is likely to dominate the world’s energy systems within a few decades. Footnote 13

Global energy transition investment

Figure 9: Share of Annual Global Energy Transition Investment to 2050 Footnote 14

Pie chart illustrating the share of estimated annual global energy transition investments to 2050 within the electricity sector. Electricity supply and delivery represents 70 percent of investments by 2050, electrification of end uses represents 19 percent, and other actions represent the remaining 11 percent.

Electricity is pivotal in the transition to a net-zero economy . According to an Energy Transitions Commission (ETC) study, an annual average of $3.5 trillion – or 3% of GDP – will need to be invested globally until 2050 to complete the transition.

Notably, the ETC study found that 70% of the necessary investment will need to flow to the electricity sector for new power supplies, delivery infrastructure (transmission and distribution) and storage. Another 19% will go to the electrification of most (but not all) end uses, notably through heat pumps and electric vehicles. The remaining 11% will be needed to support carbon removal, clean hydrogen, and other industrial decarbonization initiatives.

Canada’s head start

Canada has sound reasons for optimism in this emerging electricity era. Few countries begin this phase of the transition in a stronger position. Canada has one of the world’s cleanest electricity systems, with more than 80% of its power already emissions-free Footnote 15 (see Figure 10), and its vast land mass offers abundant clean energy resources waiting to be harnessed from coast to coast to coast. Its electricity sector has taken some important steps to date, working to phase out coal-fired power and making substantial investments in renewable energy and other technologies vital for the next phase of this shift.

Figure 10: Canada's Share of Non-Emitting Electricity Generation Compared to G7 and G20 Countries Footnote 16

Bar chart showing the share of non-emitting electricity generation in each G7 and G20 country, arranged in the order of highest to lowest. Canada is ranked third highest for non-emitting electricity below Brazil and France.

As Canada accelerates toward net-zero, there will be both formidable challenges and substantial opportunities. The transition will shape infrastructure investments, reconfigure employment markets and supply chains, and redefine Canada’s standing for foreign investment attraction and the competitiveness of its exports. It will also change how Canadians heat their homes and buildings, propel vehicles, and power industrial activity. It can help redefine—and strengthen—Canada’s relationship with the Indigenous Nations and communities that form an integral part of this country. And it will define the effectiveness of our collective response to climate change.

This is, in short, an era-defining project for Canada . The question is whether its primary impacts happen to us or for us—whether Canadians seize this opportunity as a nation-building project and tackle it in a serious, constructive and collaborative manner, or whether we wait until it’s thrust upon us, increasing the risk of falling behind in a post-transition economy and leaving the next generation of Canadians at risk of being poorly regarded internationally, ill-equipped technologically, and underprepared economically.

The Council believes the choice is clear.

Challenges for Canada

For Canada to reach its net-zero goal, multiple studies have concluded that in addition to largely eliminating the remaining emissions from current electricity production, the share of overall energy supplied by electricity will need to roughly triple, increasing from 17% to between 40 and 70%. Footnote 17 In a single generation, then, clean electricity will need to become the dominant source of energy in Canada.

This presents a dual challenge—largely decarbonizing the existing electricity system, while also significantly expanding the whole system to help other sectors of the economy achieve their necessary emissions reductions by 2050. There is not enough time to address one challenge and then the other—Canada must tackle both in parallel . And every region in the country must do so while maintaining sufficient flexibility regarding how their electricity systems decarbonize and grow to ensure that they remain safe, affordable, and reliable.

Canada’s electricity waves

While the dual challenge facing Canada – rapidly expanding electricity generation while simultaneously decarbonizing – is daunting, Canada’s electricity sector has risen to the occasion in the past.

From 1950 to 2000, annual electricity generation in Canada increased more than tenfold, from less than 50 terawatt-hours (TWh) per year to more than 500 TWh. The electricity infrastructure built in this period supported a dramatically increasing population, economic growth, and the rapid spread of new electric-powered appliances and equipment.

Figure 11: 100 Years of Electricity Generation in Canada Footnote 18

Line chart depicting the increase in Canada’s electricity generation in TWh from 1950 to 2020. The period from 1950 to 2000 is characterized by electrification, where the supply of electricity grew ten times to meet new demand. The period from 2000 to 2020 is characterized by electricity system decarbonization, where emissions intensity fell by fifty percent and generation grew only marginally. Beyond 2020, the estimated average electricity generation trajectory out to 2050 will double, reflecting the rapid increase in demand due to both electrification and decarbonization. The predicted range of electricity generation trajectories is shown, with a low of approximately 1,000 TWh to a high of 1,800 TWh in 2050.

More recently, from 2000 to 2020, electricity demand largely stabilized, in large part as a result of a deliberate push to improve the energy efficiency of key end uses. Footnote 19 During that time, several provinces also took strong action to reduce their electricity-related carbon emissions, resulting in a nationwide emissions decrease of 60% in barely 2 decades – more than any other sector of the Canadian economy. Footnote 20

Figure 12: Canada’s Emissions Reductions by Sector, 2000-2020 Footnote 21

A line chart illustrating Canada’s sectoral emissions trajectories from 2000 to 2020, showing the percentage reduced over time. The chart shows that the electricity sector has seen the highest decrease in emissions compared to other economic sectors, at 60 percent emissions reductions from 2000 to 2020.

Unequal starting points

Canada’s advantageous starting point masks significant regional differences. There are effectively 3 separate spots from which Canada begins this phase of the electricity transition. Footnote 22

• Largely decarbonized: 80% of Canadians live in provinces or territories where emissions-free renewable or nuclear power already generates nearly all their electricity (90% or more). Footnote 23 For this group — Quebec, British Columbia, Manitoba, Ontario, and Newfoundland and Labrador — the first challenge, decarbonizing the electricity system, has been largely achieved, and the challenge lies mostly in growing supply.
• Mostly decarbonized: For another group — New Brunswick, Prince Edward Island Footnote 24 , the Northwest Territories and Yukon — electricity is produced from a wider mix of sources, with non-emitting power predominating but significant amounts of fossil-based power still in use. In these jurisdictions, power systems still face important hurdles to decarbonize, but they are already well on their way.
• A greater challenge: The third group — Alberta, Saskatchewan, Nova Scotia, and Nunavut — still relies on fossil fuels for the majority of its electricity production. Nearly 1 in 5 Canadians live in these jurisdictions, Footnote 25 where the use of renewable power is growing but the challenge to decarbonizing existing grids remains a far greater undertaking.

While reflective of some policy choices, these starting points are largely the result of regional resource availability, not ideology. Considering the varying starting points of each region of Canada is critical for policy-makers to bear in mind as Canada considers its path forward to net-zero.

Figure 13: Share of Non-Emitting Electricity Generation by Province and Territory, 2022 Footnote 26

The need for policy clarity

Canada enjoys a meaningful head start in the race to clean power, but its electricity systems are not entering this new phase of expansion from ideal starting points. Federal, provincial, and territorial policies are not yet fully aligned with the goals of decarbonization, and many of these will need to be revised for Canada to reach those goals efficiently, affordably, and reliably.

Striking the right balance will not be easy. Policies will need to point in the right direction but also allow for enough flexibility to account for different regional starting points. Many electricity sector players want to make the needed changes but are often impeded by outmoded processes. For example:

• Utility regulation: Many utilities and system operators have made significant strides to reduce emissions and are being tasked with further decarbonizing their systems, while also greatly expanding capacity. In some cases, however, they and their regulators do not have clear mandates to that effect. As a result, some utilities are reluctant to propose needed investments, while some regulators are unsure if they have the authority to approve them.
• Permitting : Even as governments and power-sector players race forward to build new clean electricity infrastructure, there remain lengthy and duplicative processes between jurisdictions. In addition, project permitting and approval authorities are often focused primarily on local concerns. As these agencies work as directed to protect the local environment, current processes and regulatory overlap can delay vital clean energy projects aimed at broader environmental imperatives and inadvertently slow the transition.
• Others : Similar issues of misalignment threaten success on other fronts. Among these are: a lack of incentives for inter-jurisdictional cooperation on transmission interties; insufficiently competitive financial supports to attract capital; and market rules and price signals that slow customer adoption of new energy-efficient and peak-reducing equipment.

The Council’s recommendations address these and other impediments to progress.

“Lack of consensus on the paths to net-zero between governments and different orders of government creates paralysis amongst investors, especially in reaction to policies that require longevity to properly function, like the carbon pricing system and the Clean Electricity Regulations.” Energy Storage Canada

De-politicizing Electricity: A Call for More Collaboration and Consistency

Beyond policy alignment, Canada’s next phase of electrification will require much stronger intergovernmental collaboration.

Canada’s electricity systems are governed by 10 provinces and 3 territories, as well as the federal government. Those 14 distinct governments, with varying and frequently changing political perspectives, cannot be expected to share the same views on electricity (or any other issue) across the country or across time. This competition for ideas is a positive hallmark of our democracy.

At the same time, if Canada is to successfully navigate the current transition, greater policy stability and predictability will be essential, for two key reasons:

• First, for investor confidence . Policy swings create uncertainty, which can weaken investor confidence in the value of new projects. As a result, the investment capital that is so vital for a successful transition is at risk of flowing elsewhere or of becoming more expensive for Canadians.
• Second, for intergovernmental cooperation . Electricity trading – getting the most value out of each jurisdiction’s complementary resources and usage patterns – can be an effective tool to minimize costs for Canadians. But enhancing trade requires more cooperation, notably in planning and building new transmission infrastructure. An overly politicized environment could put the country’s ability to build large, multi-year, cross-jurisdictional projects at serious risk.

While the Council supports healthy debate, all parties – at all levels of government – should consider the real costs of disruption, as well as the considerable value of stability in electricity policy. A constructive, collaborative approach between national and sub-national governments will be crucial to build on the substantial work already being done across the country – by utilities as well as governments – and help ensure the orderly, affordable, reliable transition that Canadians expect.

Capital investments

The substantial capital investments required for this transition also pose significant challenges. Major new power generation and transmission projects, which can take a decade or longer to build, will need to be greenlighted despite substantial upfront costs. To best serve Canadians, electricity policies should strive to remove the procedural delays and duplicative permitting processes that can amplify uncertainties and increase costs for developers and their investors. At the same time, these policies must ensure the respect of constitutionally protected Indigenous rights.

Developers of new electricity projects in Canada are fighting in a hyper-competitive global marketplace for investment capital, supply chains, and skilled labour. Canada’s pace-setting peers – the United States (U.S.), Europe, and China – are already moving forward with increasing clarity and strong support, drawing investors away from Canadian projects.

Clear, deliberate policy, calibrated for the needs of net-zero electricity and implemented in a timely fashion, is essential to help attract the large amounts of private sector capital that will be needed to overcome Canada’s dual challenge of decarbonization and electricity growth.

Accelerating Canada’s electricity shift will undoubtedly involve substantial near-term investments, posing risks for affordability at a time when Canadians are facing increasing cost of living. Accordingly, many of the Council's recommendations are focused on reducing the overall investment requirements of the energy transition to keep costs affordable for all Canadians.

Affordability is equally important for Canadian industry, where electricity accounts for up to one-third of total operating costs; for businesses, including small and medium-sized enterprises sensitive to rate increases; and for residential customers, particularly lower-income Canadians and other groups most vulnerable to rising costs.

A Responsibility, a Challenge, and an Opportunity

Canadian policy-makers have a responsibility to chart a path for an orderly electricity transition. Canadians deserve access to affordable, reliable energy, while their safety and the future prosperity of the country are dependent on an abundance of clean electricity.

Accepting this responsibility means taking on the challenge of implementing the major changes necessary to place the country on sustainable foundations for the rest of the 21st century. In overcoming the challenge, Canada can seize the enormous opportunity to build a cleaner economy that attracts new investment and jobs, forges a collaborative relationship with Indigenous Nations and communities, and positions Canada to succeed in the global economy.

This Council has found in its analysis that there can be a route to net-zero that respects regional disparities, safeguards reliability, maintains affordability and cost-competitiveness, respects Indigenous rights, and welcomes Indigenous collaboration. Although planning for the future inevitably involves significant uncertainties, the Council believes its recommendations provide the most pragmatic way for the federal government to help move Canada in the right direction, while providing flexibility to deal with changing circumstances.

The risks and barriers along the way are undoubtedly significant, but so too are the rewards.

Other essential policy areas for a successful electricity transition

The electricity transition is a vast undertaking. In deference to its Terms of Reference and limited time, the Council chose to focus its attention on the issues central to its mandate. In its analysis, however, there emerged 3 other major issues that are outside the Council’s scope but deserving of the federal government’s serious attention:

• Labour and supply chains: Even if governments reduce permitting barriers and enable capital attraction, electricity projects cannot be built without certain kinds of skilled labour, the right materials, and reliable supply chains. The right skills are also vital for the operation and maintenance of electricity projects and systems. Over 80% of electricity employers foresee difficulties in attracting workers in the next 6 years. Footnote 27 This illustrates the need for a comprehensive human-resource strategy that aligns with Canada’s commitment to supporting workers in all sectors as they adapt to the new energy economy. Footnote 28 Additional efforts at a national scale are needed to address supply chain issues.
• Social license: Ensuring public buy-in is critical to enable the construction of new clean power projects. Carefully calibrated policies can support effective community involvement in system planning, siting, reviews, and ownership – valuable tools for gaining acceptance and thus reducing delays and uncertainty and respecting cost-effective development timelines for new clean electricity projects. New approaches being adopted in the European Union (EU) Footnote 29 , the U.S. Footnote 30 (nationally and at the state level in New York, California, and Illinois), and Australia Footnote 31 demonstrate options to enhance public support.
• Resilience: As the climate changes, Canada will continue to see increased impacts on critical electricity infrastructure, including generation (for example, drought impacts on hydropower), grids (for example, ice storms and wildfires), and demand (for example, heat waves that spike air-conditioning loads). The Council’s recommendations regarding load flexibility, improved building standards, and inter-regional transmission address these challenges in part, but further federal attention on infrastructure resiliency is needed.

Looking forward: The cornerstones of Canada’s electricity transition

The Council has dedicated the year of its mandate to examining where Canada’s electricity systems stand today and how they must transform to meet its net-zero goals— affordably, reliably, and to the benefit of Indigenous Nations and communities. Its broad consensus conclusion is that the goal, while challenging, is very much possible.

To enable the success of the energy transition in every region of Canada, the Council has determined that the federal government’s approach must be founded on the following 4 cornerstones:

• Speed : To meet its decarbonization objectives, Canada must rapidly accelerate the build-out of clean electricity infrastructure projects.
• Affordability : Affordability, fairness, and cost-competitiveness must be protected amidst soaring investment demands and a diversity of provincial and territorial energy landscapes.
• Reliability : Safeguarding the reliability of Canada’s electricity systems during this period of rapid change is essential.
• Indigenous participation: The inclusion of Indigenous Nations and communities in the energy transition must be prioritized to foster economic reconciliation and deliver the full benefits of the transition.

These 4 cornerstones—speed, reliability, affordability, and Indigenous participation—form the necessary foundation upon which a successful electricity system must be built. The Council’s findings on these 4 cornerstones are explored below.

Electricity is becoming a bottleneck

Electrification’s dual challenge of decarbonization and growth requires governments, utilities, and developers to act faster than ever before. Current forecasts show that more than 10 gigawatts (GW) of new, emissions-free electricity will need to be added to Canadian power systems every single year from now until 2050. Footnote 32

This means that electricity generation capacity must grow at least 3 times as fast as it has in recent decades . Footnote 33

Yet projects are increasingly ensnared in procedural delays. Canada ranks second worst among the 38 Organisation for Economic Co-operation and Development (OECD) countries for the pace of permitting. Footnote 34 If not tackled head-on, the resulting lack of new clean power risks becoming a significant bottleneck for Canada’s economy , the reliability of its electricity grids, and the achievement of its climate goals.

Lead times in large-scale electricity production and transmission are long, and the scale and cost of building the required infrastructure is measured in years and billions of dollars. There is also a “time cost” to emissions reductions. The sooner greenhouse gases are cut, the more benefit for reducing the impacts of climate change.

Electricity’s critical contribution to net-zero objectives

Electricity is the key to a net-zero future . According to the Canadian Climate Institute, clean electricity – both to decarbonize existing supplies and to electrify many end uses across buildings, industry and transportation – is central to every possible pathway to Canada’s net-zero target, contributing up to 37% of required reductions. Footnote 35 Footnote 36

Potential contribution of electricity to net-zero 2050 target, relative to Canada’s total annual emissions and emissions from the electricity sector Footnote 37

Focus on the bigger picture

Current regulatory frameworks, designed to safeguard against environmental harm, are paradoxically stalling the clean energy projects that are necessary to decarbonize the economy and mitigate the worst impacts of climate change.

Addressing climate change demands pragmatic flexibility . The Council has determined that the urgency of climate change and the associated global economic transition requires a recalibration of Canada’s priorities that accounts for the critical role of clean electricity. This is addressed in its recommendations 9 and 10 (in the section “ Enable the build ”).

To do this properly, it is critical to prioritize early engagement with Indigenous Nations and communities to ensure that their constitutionally recognized rights are protected. Proper engagement and consultation are opportunities to support reconciliation while helping to reduce unnecessary delays.

“The same regulatory systems that were designed to keep bad things from happening are now preventing high-quality projects from being built in the first place.” Business Council of Alberta , June 2023 Report Footnote 38

“To achieve Canada’s net-zero ambitions, it is critical to prioritize electricity projects with strategic importance by expediting their permitting processes.” The Atmospheric Fund

Build fast for reliability

The Council has determined that rapidly accelerating the pace of clean electricity growth is essential to enable widespread decarbonization of Canada’s electricity systems while maintaining reliability and keeping costs down.

Failure to accelerate clean electricity project approvals could intensify the mounting risk of overwhelming Canada’s current infrastructure , which would in turn hinder reliability and slow the pace of decarbonization.

The race to attract (and retain) industry

Building out clean energy infrastructure more efficiently is critical for securing Canada’s continued economic prosperity.

Businesses and industries around the world are in pursuit of reliable, affordable clean electricity to power their operations, driven by a marketplace that is increasingly placing a premium on low-carbon goods and services. From green steel production and electric vehicle manufacturing in Ontario, to battery production and supply chain in Quebec, to liquefied natural gas development in British Columbia and Alberta, to potash production in Saskatchewan, to hydrogen development in Atlantic Canada, access to low-carbon electricity is becoming a decisive factor in investment decisions .

At the same time, supplying sufficient clean electricity is critical to support the ongoing operations of existing Canadian businesses and industries, from small and medium enterprises to large emissions-intensive and trade-exposed firms.

“The problem is that we have [requests for] about 10,000 MW from interesting projects, and in the short term, we simply do not have that capacity.” Pierre Fitzgibbon , Québec Minister of the Economy, Innovation and Energy Footnote 39

“When we built Keeyask [hydroelectric project], we didn’t think we’d need that new power until 2045. We may need it by 2029 or 2030.” Jay Grewal , former CEO, Manitoba Hydro Footnote 40

Investing in Clean Electricity in Quebec

As global companies look to decarbonize their supply chains, many are hunting for low-cost, carbon-free electricity to power their operations.

Quebec is one region that has already seen new opportunities emerge from this new market advantage. In the past 3 years, large industrial operations have been flooding the province with requests for clean power to expand or build new plants. In total, these requests exceed 30,000 megawatts (MW) of new power, roughly three quarters of the utility's entire existing capacity. Footnote 41

The sudden spike in demand, combined with the province's goal to decarbonize its economy by 2050, has spurred Hydro-Québec to commit to an unprecedented investment plan. In its 2035 Action Plan Footnote 42 , the provincial utility committed to investing approximately $170 billion over 12 years to strengthen its existing grid and expand at an unprecedented pace. The planned expansion includes:

• more than 10 GW of new wind capacity
• 4 GW of additional hydro capacity
• 3.5 GW in savings through efficiency and demand management
• up to 1.5 GW of other renewables and storage
• more than 5,000 kms of new transmission and distribution infrastructure

Hydro-Québec’s 2035 plan is a down payment on its long-term goal of adding 150-200 TWh per year by 2050, nearly doubling its current output, to both enable the province's decarbonization and keep pace with growing demand for affordable, zero-emission power.

Permitting reform is needed to ease the bottleneck

Canada can no longer afford to continue at its current pace. The Council believes that governments have significant opportunities to reduce lead times for clean power project development in this country. Its recommendations in the section “ Enable the build ” address ways to seize those opportunities.

The Council has determined that a large portion of permitting bottlenecks exist within provincial processes. That said, the Council has focused its efforts on permitting reform, because the federal government also contributes to existing bottlenecks and must show leadership in removing its own unnecessary or duplicative processes. It can also pilot changes for the provinces and territories to consider where similar obstacles remain. The Council recognizes that a number of announcements made in the 2024 federal budget are aimed at accelerating project approvals, which is an important step.

Energy affordability plays a crucial role in Canada: for consumers, particularly given recent economy-wide inflation, and for business and industry, where energy can be an important factor for competitiveness.

How do we measure affordability?

Meeting Canada’s net-zero goals while maintaining the reliability of its electricity systems will require significant growth in capital investments. These additional investments, to the extent they are recovered through the rate base, will put upward pressure on electricity rates.

While rates overall are expected to increase, the Council understands that this represents only one part of the equation. Growth in electricity consumption will be offset by reductions in the purchase of other forms of energy, most notably natural gas and petroleum products. The resulting shift means that Canadians can expect to spend more on electricity and less on fossil fuels.

The sum of those changes — combined with any added costs for electricity-using equipment — indicates the net impact on the”energy wallets” of Canadians. This energy wallet represents the total amount Canadians will spend to receive all the services that energy provides in their daily lives.

“It is time to shift our thinking from electricity costs to total energy costs. Customers, large and small, need to understand total energy costs to make appropriate choices.” Hydro One

To understand the impact of the transition on affordability for Canadians — the changes to their energy wallets — the Council collaborated with the Transition Accelerator, an energy think tank, to conduct a nuanced and data-driven analysis. The Council provided oversight and guidance for this analysis.

Affordability: Modelling the Impact on Canadian Households

As part of the Council’s examination of affordability in Canada’s energy transition, the Transition Accelerator produced an independent analysis of the impact of electrification on households across the country.

The analysis, overseen by the Council (primarily through its Capital and Affordability working group), leveraged well-regarded, Canada-specific national and provincial studies that have modelled net-zero-aligned energy pathways, including projected energy demand and supply options and their associated capital and operating expenditures. To understand future electricity rate implications and the net energy-related costs to consumers, the analysis built bottom-up estimates of revenue requirements for each province’s electricity system through 2050, and then developed a range of scenarios for retail electricity rates, consumption of electricity and other fuels, and equipment-related consumer costs.

Key findings

The modelling sought to examine 3 main cost implications of electrification: (1) capital requirements; (2) net impact on the average household’s total energy costs; and (3) the distribution of those impacts for different income groups and regions.

1. Capital investments double (to $1.4 trillion by 2050)

The modelling results showed that under the most likely scenario, capital investments of approximately $1.4 trillion will be needed by 2050 to enable the necessary growth of the electricity system. At an average of $55 billion per year, this is roughly double the current rate of capital expenditure.

Beyond this medium-rate scenario, the analysis found a range of potential capital investment requirements stretching from $1.1 trillion to as high as $2 trillion. This highlights the extent to which Canadian governments can take deliberate actions to push costs down, a particular focus of the Council’s recommendations.

In all scenarios, roughly half of this capital investment will be needed for additional clean power generation (both to replace or upgrade existing infrastructure and to build new capacity to meet demand growth), while the other half would be invested in transmission and distribution infrastructure to deliver power to consumers.

2. For most households, energy bills decline by 2050

The net impact on households is a function of 4 factors:

• an increase in electricity rates, resulting from additional capital investments
• a decline in fossil fuel spending, as it is replaced to a significant degree by clean electricity
• a decline in overall energy consumption, because for most needs (heating and vehicles), electricity can be 2 to 4 times more efficient than the energy sources it will replace
• an increase in equipment costs, namely electric heating systems and vehicles

The modelling indicated that 7 in 10 Canadian households would see net savings, while 3 in 10 would see net cost increases. On the whole, Canadians could expect to save $15 billion in total energy-related costs, despite a doubling of the rate of electricity-sector investment.

Bar chart of the percentage change in household energy wallets from 2024 to 2050 under a medium electricity rate scenario to 2050. The bar chart depicts lower energy wallet costs (i.e. savings) on the left and higher costs energy wallet costs on the right of a center line that represents no change. The chart shows that by 2050, 70 percent of households would see net energy cost savings and 30 percent of the households would see higher net energy costs.

The combination of these factors was found to lead to a slight decline in net energy-related costs (including equipment) for the median Canadian household.

Under the medium-rate scenario, 70% of Canadian households are expected to see net savings in 2050 (Figure 15) of about $1500 per year on average. Specifically, 6.3 million households would see an increase in their energy wallet spending (an $8 billion increase overall). Meanwhile, 15 million homes would share a net savings of $23 billion. In aggregate, Canadian households stand to save $15 billion annually as a result of the switch to electricity.

3. Distribution: While most Canadians save, some face higher average costs

While most Canadian households are likely to see lower total energy-related bills despite increased electricity-sector investments, averages can mask great variation among consumers.

Low-income households benefit somewhat less

While 70% of all Canadian households are expected to see net savings, that number drops to 58% for lower-income households. Footnote 43 This is primarily because a higher proportion of lower-income households do not own personal vehicles and therefore will not benefit from the savings associated with electrified transportation. The modelling did not disaggregate impacts on Indigenous communities, but statistically these communities tend to face higher rates of energy poverty. Footnote 44

Two provinces experience more pain than gain

Households currently heated by natural gas in provinces with higher retail electricity rate projections (most notably Alberta and Saskatchewan) are far more likely to experience higher overall energy costs, partly since these jurisdictions already have high electricity rates. This is also a function of the assumption in the modelling that all heating would convert to electricity, an assumption the Council does not believe to be universally optimal. That said, their rate increases over time would be smaller relative to those in other provinces and their total energy expenditures would still be lower than those paid in the Maritimes today.

The Council’s take

The Council found this analysis useful overall. It provided valuable insight on possible transition pathways to Canada’s net-zero future, their implications for energy system investment, and related cost impacts. The findings are broadly consistent with other credible studies and provide an important basis from which to consider policy interventions. Modelling of this sort, however, should be understood as a snapshot in time of a very complex system, one that points clearly to the end-state (2050), but does not speak to interim impacts, which may evolve in a non-linear fashion.

The Council acknowledges that the modelling work was limited in some respects (due to pathway study assumptions, data availability, and limited time to conduct additional analysis). For example, while the results are disaggregated by province, they do not consider impacts on Canada’s North. Similarly, while results are focused on households (and disaggregated by income levels), they do not address business and industry. Finally, for simplicity, the energy wallet modelling assumed full electrification of heating and transportation, when in some circumstances other solutions may be more optimal. Footnote 45

Caveats aside, the Council finds there is sufficient evidence to suggest that most Canadians stand to see lower overall energy-related costs from the switch to electricity , if the transition is executed well, despite a requisite doubling in electricity sector investment.

Still, government intervention will be required to overcome uneven near-term cost impacts and ensure an efficient and equitable transition. From the Council’s perspective, these findings point to the critical need to focus efforts on (1) minimizing overall costs, so that the affordability impact on all Canadians skews even more toward net savings; and (2) addressing fairness concerns, in particular for lower-income households and certain regions of the country that stand a greater chance of seeing cost increases.

How do we ensure affordability?

For the Council, a focus on affordability means a dual focus on:

• Overall cost – reducing investment needs as much as possible; and
• Fairness – supporting those who might bear a disproportionate burden.

Overall cost

Canada’s net-zero transition will be a capital-intensive undertaking. The overall investment required to fully decarbonize the nation’s electricity production, while expanding to meet new demand, is estimated to be approximately $1.4 trillion, including both private capital and funding from multiple levels of government (refer to Affordability: Modelling the Impact on Canadian Households and Figure 15).

The overall total falls within a broad potential range—$1.1 trillion to $2.0 trillion—highlighting the opportunity for strategic action to put downward pressure on costs.

Better planning can lower costs

Better planning creates greater certainty for utilities, developers, and investors. This can significantly reduce financial risks and, by extension, the cost of capital. Better planning ensures that investments are directed efficiently towards projects that are essential for the transition, avoiding misallocation of resources and enabling a more streamlined path to decarbonization.

“Governments must demonstrate that Canada is a good place to do business. Investor confidence is paramount to attracting private capital investments.” ATCO

The Council believes that improved planning and market predictability can put downward pressure on costs . This is addressed in the Council’s recommendations in the section “ Align on goals ”.

Streamlined processes can enable rapid build-out of electricity projects

Barriers to building clean power projects in Canada are driving and amplifying delays and uncertainties.

“Fast-tracking high priority, clean energy projects by addressing bureaucracy, duplication, overlap, under resourcing, and excessive information requirements that lead to unnecessary delays is vital.” Association of Power Producers of Ontario

The Council believes that significant improvements to project approval processes and Indigenous engagement can put downward pressure on costs and attract much-needed early development risk capital . Similarly, proper consultation and partnerships with Indigenous Nations and communities can reduce uncertainty, disruption, and delays. These are addressed in its recommendations in the section “ Enable the build ”.

Energy efficiency and demand-side management can limit costs

A cost-effective transition means optimizing, not maximizing. Significant improvements to energy efficiency and load flexibility can dramatically reduce the need for expensive new electricity infrastructure, making both the required scale and speed of the clean power build-out more achievable and affordable.

From 2000 to 2019, energy efficiency improved by 12.3%, resulting in reduced annual energy demand of 815 petajoules and saving Canadians $23.2 billion in 2019 alone. Footnote 46 Going forward, research indicates that the adoption of net-zero energy ready building codes could save households $3 billion per year. Footnote 47 Another real-world example of enabling household and government savings can be found in Nova Scotia: an investment in demand-side management (DSM) by ratepayers of $173 million for a three-year period is projected to avoid $542.8 million in future supply costs. This investment is also expected to result in reduced average customer energy bills of between 1 and 8%. Footnote 48

“The most sustainable form of energy is the kilowatt hour you don’t need to produce.” Efficiency Manitoba

Energy efficiency and DSM also enhance electric system reliability by alleviating stress on power grids and facilitating the management of peak demands using flexible loads. Footnote 49 Prioritizing energy efficiency and DSM also benefits consumers in all sectors, reducing energy bills and aiding housing affordability and business competitiveness.

The Council believes that significant gains in energy efficiency and DSM can significantly reduce costs . This is addressed primarily in a suite of recommendations in the section “ Save energy to lighten the load ”.

Minimizing total costs is crucial, but addressing fairness is equally important to the overall success of Canada’s energy transition. Achieving Canada’s net-zero goals will be a much greater challenge for certain regions and for some lower-income Canadians, who may struggle to afford the higher-cost equipment that saves energy and bills in the long run.

The Council believes that measures to accelerate the transition to clean electricity must manage these distributional impacts carefully, which should include shifting a part of the cost from ratepayers to the tax base to balance out the overall costs. The Council’s Recommendation 18 addresses this.

Impacts on lower-income households

The affordability modelling conducted for the Council suggests that roughly 6 in 10 lower-income households will see net savings from the transition to electricity. However, lower-income households – especially those who currently heat with gas or do not own a vehicle – are more vulnerable to price increases.

The Council believes that the federal government, working with provinces and territories, has a role in enabling more lower-income households to see net savings and to minimize net costs. In particular, the federal government can help them access cost-saving opportunities that they might otherwise have to forego. The Council’s Recommendation 22 addresses this.

Impacts on fossil fuel-reliant provinces

As the analysis suggests, some provinces—particularly those that are more reliant on fossil fuels today—are more likely to face increased costs during the transition. That is particularly true for Alberta, Saskatchewan and Nova Scotia, the jurisdictions identified earlier (see the section “ Challenges for Canada ”) as facing the greatest challenges on the road to decarbonization.

The Council believes that the federal government can help to minimize cost increases in certain provinces to avoid exacerbating regional cost disparities. In particular, the Council strongly supports that the federal ITCs applicable to electricity should skew disproportionately toward those provinces that need the most investment to achieve their decarbonization goals. Footnote 50 The Council also believes the federal government can and should go further, in particular by enabling and strongly supporting inter-regional transmission aimed at lowering the cost of decarbonization in those provinces. The Council’s Recommendation 19 addresses this.

Impacts on remote, Indigenous, and Northern communities

Finally, the affordability modelling commissioned by the Council was not able to examine impacts on remote, Indigenous, and Northern communities. The Council believes that there is a risk that those communities will be disproportionately impacted, which the federal government must address . This is especially true where access to new, efficient equipment is limited or cost-prohibitive, or where policies do not adequately reflect the unique conditions in those communities. The Council’s Recommendations 20 and Recommendation 21 in the section “ Support the transition ” address this.

“The transition is not just a dollars-for-carbon calculation – the cost of not participating in the changing economy, and not being included in the transition, despite the North suffering disproportionately from climate change, needs to be recognized.” Inuit Tapiriit Kanatami

Impacts on business and industry

Competitive and affordable rates are not only important for electricity suppliers (who need competitive rates of return to attract capital), but also for commercial customers. Supplying affordable, clean energy for business and industrial electricity users not only enhances their competitiveness but improves Canada’s ability to retain and attract such firms, notably those in electricity-intensive, emissions-intensive and trade-exposed sectors such as aluminum, mining and forestry.

Affordable power is also vital for small- to medium-sized enterprises that may lack the capacity to adopt energy efficiency measures on their own. Many small businesses and manufacturers are important suppliers for larger projects and play a critical role in the energy transition ecosystem. The majority of the Council’s recommendations address affordability (see the recommendations ).

Reliable electricity is vital to the success of Canada’s economy and to the health of all Canadians. Canadians require reliable power systems for countless daily needs, from winter warmth to cold refrigerators. The energy transition will only add to this list as new equipment, vehicles and industrial sectors shift from fossil fuels to electricity. These changes will amplify the scale of the risk that electricity systems face and place even greater importance on reliability.

Mitigating these risks is a crucial role for net-zero electricity policies, particularly as many of the country’s electricity systems are already under significant strain due to aging infrastructure and the damaging impacts of an increasingly volatile climate. Footnote 51

The need for flexibility

The challenge of reliably decarbonizing and expanding clean electricity generation in Canada is not only one of pace and cost, but also of technical complexity. For provinces with significant transmission interties and/or a strong base of existing hydropower or nuclear generation, the addition of variable power sources such as wind and solar is relatively straightforward. Provinces with weak transmission interties and without clean, dependable power already in place, however, will encounter more significant challenges.

New technology is improving rapidly – from advancements in nuclear, to new options like utility-scale batteries, long-duration storage systems, and a range of technologies to adjust the timing of demand. Despite this, the transition will not be an easy one, especially for those regions whose systems are currently primarily fossil fuel-reliant.

This is not a justification for complacency. Still, the Council believes that, for fossil fuel-reliant regions, the federal government must ensure sufficient flexibility in its decarbonization requirements so that the technical challenges can be overcome without risking reliability . The Council’s Recommendation 5 addresses this.

The role of inter-regional transmission

The diversity of Canada’s electricity landscape further amplifies the risks to reliability. In practice, there is no single Canadian electricity system. Electricity falls squarely under provincial and territorial jurisdiction, and each province and territory maintains its own independent system, complete with unique generation mixes, market structures, ownership models, oversight regimes and pricing mechanisms.

This decentralization, a hallmark of the Canadian federation, must be respected. But these siloed systems can lead to sub-optimal results, particularly in the case of inter-regional transmission.

The Council has identified the reinforcement and expansion of inter-regional transmission as a critical measure to support the reliability of Canada’s electricity systems, especially in fossil fuel-reliant regions such as Alberta, Saskatchewan, and Nova Scotia. Inter-regional transmission networks (often referred to as”interties”) can enhance reliability (and limit costs) by exploiting synergies between adjacent systems. Footnote 52 Footnote 53 Interties accomplish this most notably by:

• Expanding access to lowest-cost supplies: Interties enable more Canadians to access low-cost electricity supplies. Footnote 54 For example, Alberta has some of the country’s best wind and solar resources, while British Columbia has some of its most abundant hydropower. Enhanced trade could provide Albertans access to British Columbia’s dependable hydropower and enable British Columbia to benefit from Alberta’s variable renewable power at lower cost than building its own.
• Smoothing costly demand peaks: Connecting grids with complementary load profiles can diversify peak events (for example, weather-related spikes), diversify daily peaks (for example, through time zone differences), and broaden the pool of customer-enabled “demand response” contributions. Footnote 55
• Mitigating supply risks: Interties hedge against short-, medium-, and long-term supply risks, including but not limited to variability in resources (due to wind speeds, cloud cover or rainfall), planned or unplanned plant shutdowns, unexpected changes in demand, project construction delays, and regulatory changes.

Despite these and other benefits, electricity trading within Canada currently falls far short of its potential. While some inter-regional enhancements are moving forward, these efforts are neither as systematic nor as extensively developed as in other countries with similarly decentralized governance. Footnote 56

The absence of a cohesive approach to enabling greater internal electricity trading makes the transition more challenging, in particular for fossil fuel-reliant regions.

The Council believes systematically expanding inter-regional transmission can enhance reliability and benefit all provinces and territories, particularly those that are fossil fuel-reliant . This is addressed in Recommendation 19 .

The Example of a Hypothetical Western HDVC Line. Battery and money icons denote reliability and affordability benefits, respectively.

An infographic showing the potential value stack, or benefits, of inter-regional transmission, using a hypothetical Western high-voltage direct transmission line as an example. Ten benefit categories are shown, categorized into three groups: ‘Increasing Supply Options,’ ‘Decreasing Peak Demand,’ and ‘Lowering Risks.’ Under the first group, ‘Increasing Supply Options’, the following benefit categories are listed: access least-cost options; broaden access to U.S. supplies; unlock existing line capacity; reserve sharing and load balancing. Under the second group, ‘Decreasing Peak Demand,’ the following benefit categories are listed: diversify peak events; diversify daily peaks; and broaden demand response. Under the third group, ‘Lowering Risks,’ the following benefit categories are listed: mitigate short-term supply risks; mitigate mid/long-term supply risks; and mitigate political risks.

Focus on demand-side solutions

Grid reliability will also benefit from prioritizing efficiency and other demand-side resources . Reducing demand through efficiency enhancements and enabling grids to manage consumption more dynamically—especially during peak demand periods—can safeguard reliability, save money, and buy more time for the energy transition. Responsive loads will be crucial for reliability, enabling grids to shed significant amounts of electricity use during extreme events and other times of high demand. Distributed resources , including generation and storage resources, will also create significant improvements in grid resilience. Footnote 57

The Council believes that demand-side solutions can enhance reliability . This is addressed primarily in its recommendations in the section “ Save energy to lighten the load ”.

The Council’s 6 Principles for a Reliable Electricity Grid

• Dependable supply: Reliability requires access to dependable supplies that can be called upon in virtually any situation. This includes baseload supplies such as nuclear and load-following sources like hydro, thermal plants, and battery storage.
• Diversified supply: Because no electricity source is 100-percent secure (drought, calm winds, cloud cover, frozen pipes and unscheduled maintenance can all disrupt output), a diversity of sources is vital to minimize risks.
• Distributed supply: Distributed generation and storage resources can provide significant improvements for both grid and customer resilience.
• Efficient loads: Electricity supply is only half of the equation. Efficiency measures can significantly reduce demand and customer vulnerability to supply disruptions.
• Responsive loads: Enabling grids to shed or shift significant amounts of electricity demand during extreme events and other times of high demand is crucial for reliability.
• Resilient grids: Transmission and distribution infrastructure is more resilient to extreme climate events (wildfires, wind, and ice storms) when it has built-in, deliberate redundancies.

The history

Indigenous communities in Canada have long been unjustly harmed by the development of electricity projects in Canada. From the displacement of homes to the destruction of hunting and fishing grounds to the exclusion of Indigenous perspectives from project development, the electricity sector’s historical, colonial relationship with the Indigenous peoples of Canada (First Nations, Inuit, and Métis) is unacceptable and must not be perpetuated.

Canada’s legislative history complicates the needed change. The Indian Act legislatively prohibits Indigenous Nations from participating in economic benefits derived from their ancestral lands, Footnote 58 even as the Canadian Constitution recognizes that Indigenous peoples have specific and unique rights and entitlements, resulting from their original occupation of Canada. Footnote 59

In recent years, Canada has recognized and begun taking responsibility for these historic failings and has made commitments to ensure that Indigenous Nations and communities are no longer excluded from economic development. Footnote 60 In response, Indigenous nations have expressed a clear interest in participating in – and even leading - the energy transition and receiving its benefits.

The challenges

Achieving Canada’s net-zero targets will require substantial new electricity infrastructure. By and large, this infrastructure will need to be built on the ancestral lands of Indigenous peoples across the country.

By embracing Indigenous Nations and communities as full partners in clean electricity projects and actively enabling those partnerships, Canada has a unique opportunity to begin repairing the unequal relationship that has long dominated energy and resource development, and to harness a powerful force for economic reconciliation. Footnote 61

Many Indigenous organizations and communities have already taken steps to advance clean electricity projects. Footnote 62 But significant barriers remain for both industry and Indigenous Nations and communities.

To ensure meaningful and equitable participation, project developers building out energy infrastructure must identify and engage with Indigenous Nations and communities with sufficient time and leeway to allow them to shape and influence projects in ways that limit impacts and generate commercial participation options. For Indigenous communities, the barriers include insufficient access to financing and industry-specific technical knowledge, as well as limited human-resource capacity to actively engage with project development.

The opportunity

Indigenous commercial participation in electricity projects brings significant economic benefits to Indigenous communities and the broader Canadian economy. Footnote 63 Ownership of assets, revenue-sharing agreements, equity partnerships, job creation, and supply chain opportunities contribute to the economic well-being of Indigenous communities and allows them to assume a stronger role in decision-making. Indigenous participation also supports the diversification and growth of the Canadian electricity sector, while enhancing certainty and decreasing risk. In remote regions, this approach can also help reduce reliance on dirty and expensive diesel.

By taking into account the lessons learned from the negative impacts and exclusions of previous eras, the development of net-zero electricity infrastructure offers a substantial opportunity to generate benefits and help to advance economic reconciliation.

The Council believes that with increased understanding – and facilitation – of Indigenous rights, the energy transition offers an unprecedented opportunity to accelerate economic reconciliation. The Council’s Recommendation 14 . Recommendation 20 , and Recommendation 21 all address this.

Indigenous Energy Projects: Examples from Alberta, Saskatchewan, and Ontario

Indigenous communities have taken the lead on clean electricity projects from coast-to-coast-to-coast. According to the non-profit group Indigenous Clean Energy, as many as 2,100 micro-scale or small renewable energy systems, 200 medium-to-large renewable projects, and more than 19 transmission projects with Indigenous involvement are either in operation or in the final stages of planning or construction. Footnote 64

Some examples of groundbreaking Indigenous initiatives include:

• The Wataynikaneyap Power Transmission Project, majority-owned by 25 First Nations in partnership with FortisOntario, which will connect 17 remote communities that are currently reliant on diesel power to the Ontario power grid via 1,600 kilometres of transmission lines. The project is expected to reduce electricity rates, decrease emissions, increase reliability, and support local economic development.
• Cowessess First Nation in southern Saskatchewan has led development of both the Awasis solar project (10 MW) Footnote 65 and the Bekevar wind project (200 MW). Footnote 66 Awasis is majority-owned by the First Nation’s investment arm, and the developer Elemental Energy worked closely with the community on capacity building, employment, and training opportunities. The Bekevar project is Saskatchewan’s largest wind power project and is jointly owned with United Kingdom-based Innagreen, creating equity investment and training opportunities for community members. It will provide more than 100,000 homes with clean electricity as the province moves off coal.
• In Fort Chipewyan in northern Alberta, the Athabasca Chipewyan First Nation (ACFN), the Mikisew Cree First Nation and the Fort Chipewyan Métis Association collaborated with ATCO Electric to build a 2.2 MW solar farm. Footnote 67 The project was the first of its kind in Alberta and represented a significant step forward for partnerships between utilities and Indigenous Nations and communities. The project has reduced the need for almost a million litres of diesel per year and supplies a quarter of local electricity needs. The ACFN has gone on to partner in the development of 3 larger solar plants in southern Alberta. Footnote 68

Part 2: Seizing the opportunity

Council recommendations.

The Council’s terms of reference allow for the consideration of actions needed at every level of government. Given that it was established by the federal government, however, the Council has focused on providing advice regarding federal policy options for the electricity transition. Many of the recommended policies aim to support provinces and territories in their work, while respecting their jurisdiction and ultimate authority over electricity systems.

What should the federal government’s role look like, and what kinds of policy changes will make the path easiest to navigate for every province and territory?

The Council has taken a pragmatic approach. The recommendations that follow are focused on addressing “pain points”— clearly identified challenges and potential impediments to the pace, scale, affordability, and cost-competitiveness of the transition. Acknowledging Canada’s diversity in electricity systems, the Council has chosen not to focus on specific technologies.

The Council’s recommendations fit into 4 critical themes:

• Align on goals to ensure that the path forward is clear and decision-makers can commit
• Enable the build so that critical projects can move forward expeditiously and with Indigenous participation
• Support the transition with additional funding of targeted needs to ensure all Canadians benefit
• Save energy to lighten the load and thereby minimize investment needs and improve the likelihood of achieving Canada’s goals reliably and affordably.

The primary role for the federal government in this new phase of the electricity transition is to improve readiness and enable decision-makers – including other levels of government, Indigenous rightsholders, the electricity industry in general, consumers, and stakeholders – to make decisions clearly.

Figure 17: The Steps for a More Affordable, Reliable, and Inclusive Transition Footnote 69

On the surface, Canada’s current climate and energy landscape may appear robust, featuring an array of adopted and planned policies at the federal, provincial, and territorial levels. But look below the surface, and it remains riddled with a lack of clarity, consistency, and alignment that is impeding faster progress.

Going forward, the federal government needs to take specific actions to achieve the following:

• Urgently finalize the rules of the game, in particular regarding the Clean Electricity Regulations (CER) and ITC programs, so that planning can be locked in and investment decisions can move forward
• Clearly establish the ways forward – a range of pathways and roadmaps for different regions of the country – so that all players in the electricity sector can plan effectively and minimize costly mistakes
• Ensure the mandates of key institutions are aligned with the needs of the electricity transition, so that they are working in lockstep and not at cross purposes
• Provide sufficient flexibility so that each region can define a path that makes the most sense for its circumstances, even as all work toward the same ultimate goal
• Ensure that data is transparent and readily available to facilitate proper analysis and planning and enhance trust and cooperation among different levels of government

While the Council recognizes the important balancing act between thoughtful and timely decision-making, a more expeditious advancement of net-zero policies is essential to enable those making critical investment decisions to move forward with clarity, particularly given the federal government’s 2035 target for a net-zero electricity system.

Clear policy direction is essential to empower investors, planners, and decision-makers in driving the energy transition

Policy and regulatory clarity are vital prerequisites for facilitating cost-effective investments to expand the electricity sector. Footnote 70

Canada’s current policy environment is in urgent need of additional clarity to allow investors, planners, Indigenous Nations and communities, and other decision-makers to make timely choices about electrification now and in the future. Without clearer guidance on the policies and pathways best suited for pursuing Canada’s climate goals, investors may be hesitant to finance projects in Canada. Not only is policy clarity critical for capital attraction, but it will also improve competitiveness and enable more efficient international trade (see Recommendation 15 ).

The Council believes energy roadmaps are critical tools for provinces and territories to provide policy clarity

Energy roadmaps are comprehensive strategies developed by provincial or territorial governments that articulate their independent visions for the evolution of their energy systems to meet climate goals by 2050, incorporating five-year milestones and the perspectives of Indigenous rightsholders. They provide guidance to regulators and other market actors on how a provincial or territorial government intends to manage its energy transition. These roadmaps, when informed by comprehensive modelling of the costs and trade-offs of various options, can guide utilities, regulators, investors, Indigenous Nations and communities, developers, and other stakeholders in determining which projects to pursue or to support. Roadmaps can also help decision-makers to prioritize projects, for example by designating certain projects as being in the national interest and deserving of fast-track approval.

Some Canadian jurisdictions already leverage these tools. For example, the Ontario government’s roadmap Footnote 71 examines the current status of the province’s electricity system and outlines ways to evolve it for the needs of the 2030s and 2050.

Roadmaps of this kind provide policy clarity and a defensible basis for regulatory decisions. They are therefore essential for the task of producing a mandate that incorporates climate goals for Crown utilities, regulators, system operators, and permitting and approval authorities.

“Many of the challenges associated with expanding the mandate of economic regulators could be mitigated through clear policies, pathway assessments, or net-zero energy roadmaps.” Nova Scotia Utility and Review Board

Pathway assessments can inform the development of energy roadmaps

Pathway assessments are economy-wide studies commissioned or developed by provincial and territorial governments to inform energy system planning and policy. These assessments analyze resource scenarios and energy-system development options available in a region to align with climate goals, thereby informing the development of energy roadmaps. They can also assist governments, utilities, regulators, and other actors in building consensus regarding trade-offs and costs, the evaluation of options, and the identification of priority actions. Some provinces, including Quebec and Ontario, already use pathway assessments to guide their strategic planning. Footnote 72 Footnote 73

Pathway assessments can complement the more granular assessments undertaken by utilities or system operators. They can be developed by individual jurisdictions or at the broader regional level. Regional-level assessments can help identify opportunities that would not be apparent without a regional lens. Assessments can also incorporate distributed energy resources (DERs) and DSM to guide decision-making that is more reflective of the role that all options can play.

Energy Roadmaps and Pathway Assessments

Energy roadmaps and pathway assessments are important tools for provinces and territories to employ in order to create greater policy clarity for the decarbonization of their energy systems.

• A pathway assessment is a comprehensive study of all credible energy pathways to achieve net-zero or carbon-neutral objectives by a given date.
• An energy roadmap is a visioning document that translates government priorities into actionable guidance for utilities and system operators, and also provides policy guidance to ensure informed and aligned decision-making by regulators. Roadmaps include specific objectives and associated actions.

Recommendation 1: Expedite the clarification of critical electricity policy rules

The Council recommends that the federal government expedite policy and regulatory frameworks, as well as tax and trade measures related to electricity systems, to clarify climate targets and support their achievement via climate accountability frameworks. These include the Clean Electricity Regulations , the ITCs, the Output-Based Pricing System, tax and trade measures, the Impact Assessment Act , and other measures designed to drive electrification and the expansion of electricity systems needed to support it.

Implementation details

• Provide clarity on the final details of the Clean Electricity Regulations (CER) after undertaking the necessary consultations and incorporating flexibility by the end of 2024;
• Finalize the Clean Technology and Clean Electricity ITC by December 2024 at the latest;
• Table amendments to the Impact Assessment Act in Parliament by March 2025; and
• Initiate an immediate review of the treatment of electricity generation under the federal Output-Based Pricing System (OBPS) , in advance of the broader review of the OBPS scheduled for 2026 Footnote 74
• the carbon pricing fuel levy
• subsidies and other types of supports (e.g. energy efficiency in buildings, heat pumps, electric vehicles)
• codes and standards (for example, Zero-Emissions Vehicle mandates, appliance standards [see Recommendation 26 ] and proposed changes to the Canadian Electrical Code [see Recommendation 17 ])

What can provinces and territories do?

Sub-national jurisdictions can provide support for the clarification of federal policies by working in a collaborative and constructive manner with the federal government through cooperative mechanisms and consultations.

The Council recommends that the federal government encourage and support the development of provincial and territorial energy roadmaps for a net-zero or carbon-neutral energy system by 2050, to include Indigenous perspectives and ideally to be informed by pathway assessments.

To support provinces and territories in developing their energy roadmaps, the federal government should:

• Regularly engage with regional policy-makers, utilities, regulators, and Indigenous rightsholders in forums to share lessons learned and identify best practices;
• Share best practices and provide guidance on information to include in energy roadmaps (see Recommendation 6 ). These guidelines should include key roadmap components, such as the setting of five-year milestones, alignment across energy system actors including electricity and gas, scoping to include all energy systems, developing a participatory engagement process, and a consideration of labour market needs (see Appendix A );
• Provide additional support (beyond funding alone) for jurisdictions and communities with the least expertise and resource capacity to develop energy roadmaps; and
• Where roadmaps are available, the federal government should use these resources to inform its policy development initiatives as they relate to each region or jurisdiction, including in defining Clean Electricity Projects of Canadian Interest (see Recommendation 9 and Recommendation 19 ).

To support the federal government’s development of policies that accommodate the varying needs and capacities of different jurisdictions, provinces and territories can commit to producing, maintaining, and regularly reporting on jurisdictional and/or regional energy roadmaps that outline their energy system plans over 5-year periods for provincial and territorial stakeholders. Provinces and territories would determine the most appropriate pathways and details to include in the energy roadmaps, in accordance with the resources available to them, including opportunities for inter-regional transmission. (Advice with respect to information that be included in these roadmaps is presented in Appendix A ).

The Council recommends that the federal government support provinces, territories and Indigenous Nations and communities in their development and regular updating of economy-wide pathway assessments that explore available and credible pathways for achieving a net-zero or carbon-neutral economy by 2050. These pathways can inform the development of energy roadmaps and include opportunities for inter-regional cooperation.

The federal government can play an enabling role by:

• Supporting the regular development and updating of jurisdictional and/or regional pathway assessments and assisting in the coordination and development of assessments that consider inter-regional pathways and other opportunities, including financial support for meaningful Indigenous participation;
• Encouraging jurisdictions, utilities, system operators, regulators and Indigenous Nations and communities to engage in forums where they can share related lessons learned. The federal government may fund and/or convene forums that support efforts to maintain grid reliability, enhance system resilience, ensure cost-effectiveness, and enable the deployment of innovative technologies and practices; and
• Facilitating the development, identification and sharing of best practices for pathway assessments, which can both help improve their quality and accelerate their development (see Appendix A ).

New Brunswick’s Pathways to Net-Zero Emissions

The provincial government of New Brunswick developed its electricity systems pathway assessment, Pathways to net-zero greenhouse gas emissions , in 2023. Footnote 75 The assessment examines the province’s options for achieving its economy-wide net-zero goal using available electricity, bioenergy, hydrogen, and non-energy emissions sources. It found that the safest bet for all pathways to net-zero involved using low-carbon energy, renewables, and storage to meet most new electricity demand in the province. Carbon removal was seen as being required to counterbalance residual emissions, and the province’s economy could expect to continue to grow while pursuing the goal.

Provincial, territorial, and municipal governments can work alongside utilities, regulators, and system operators to develop economy-wide pathway assessments that complement the more granular ones that some of these actors may produce. Available resources in their jurisdictions can be used to provide impartial perspectives on opportunities and challenges, and to ensure the inclusion of Indigenous perspectives, in alignment with Canada's reconciliation objectives.

Regulatory and governance frameworks must be updated

To align electricity systems with climate goals, a range of public institutions, including energy regulators, must coordinate their processes and mandates. Climate change goals are often not explicitly included in regulator mandates, which can be a barrier to approving projects aligned with net-zero goals. As a result, agencies can sometimes operate at cross purposes, each protecting their respective mandate areas, leaving projects to advance more slowly due to uncertainty.

Aligning regulatory and governance frameworks that oversee Canadian energy decision-makers with current priorities, notably net-zero emissions, is essential to achieve the pace, scale and innovation a cost-effective energy transition will require.

“Evolving from the traditional least-cost regulatory model to one that values climate-related social benefits will be perhaps the most important catalyst to accelerate the clean energy transition.” Fortis Inc.

Within Canada, provincial and territorial governments have jurisdiction over energy within their boundaries. Some provinces have begun to align their regulators’ (and/or Crown utilities’) mandates with net-zero objectives – Nova Scotia recently did so, and at least two others are expected to do so in the coming year.

While it is imperative that regulator and Crown mandates be aligned in all provinces and territories, the federal government must also do its part. Currently, net-zero targets remain absent from the mandates of key federal regulators involved in electricity project development, including the Canada Energy Regulator (CER), the Canadian Nuclear Safety Commission (CNSC), and Fisheries and Oceans Canada (DFO).

DFO provides a valuable example: its requirements for studying the impacts on fish populations from hydropower or tidal power development, for example, need to be weighed against the threat to certain fish species from the harmful effects of climate change. Footnote 76 The department may therefore need direction in seeking a balance between protecting fisheries and not placing excessive barriers on offshore renewable energy development.

A review of climate and energy policies in jurisdictions with important similarities to Canada Footnote 77 found that some are beginning to broaden the mandate of their energy regulators. The United Kingdom (U.K.), for example, has brought in new legislation that amends the duties of its energy regulator Footnote 78 to include net-zero targets and five-year carbon budgets.

Reform of U.K. Energy Regulatory Regime

In 2023, the British government passed the Energy Act to transform the country’s energy system, strengthening energy security, supporting the achievement of net-zero goals, and ensuring household energy bills are affordable in the long-term. Footnote 79 The Act also amends the duties of the U.K.’s energy regulator to include reference to net-zero targets and five-year carbon budgets in the country’s Climate Change Act (2008). This requires the regulator to consider how its decisions may assist the Secretary of State in meeting the government’s net-zero target, while protecting the interests of existing and future consumers. In mid-2024, the regulator and the U.K. government will be launching an independent public corporation to take responsibility for planning the country‘s electricity and gas. Footnote 80

The Council recommends that the federal government, along with governments across Canada, update and clarify mandates for key authorities, including Crown utilities, energy regulators, system operators, and permitting and approvals authorities, so that mandates include a carbon-neutrality or net-zero objective alongside their existing goals.

The federal government should implement this by:

• Modifying the mandates of federal regulatory entities (for example, CER, CNSC, DFO, Environment and Climate Change Canada [ECCC]) using directives, orders in council, or (ideally) updating enabling legislation, to include carbon-neutrality or net-zero objectives alongside their respective regulatory mandates;
• Ensuring that the objectives and programs of Crown corporations such as Export Development Canada, the Canada Infrastructure Bank (CIB) and the Canadian Development Investment Corporation reflect climate goals;
• Encouraging and providing support to provinces and territories willing to undertake similar mandating of their Crown utilities, system operators and regulators, and help identify best practices for doing so (see Appendix A );
• Providing relevant authorities with the required resources (financial and human) and policy guidance - in particular, energy roadmaps and pathway assessments - to fulfill these updated mandates; and
• Adding additional specificity regarding the ways that relevant authorities could fulfill these mandates (for example, orders to electricity regulators that could direct them to consider important new resources along with generation, transmission, and distribution in their decision-making, including DERs and demand-side measures).

Nova Scotia Aligning Regulator Mandates with Net-Zero Goals

The Government of Nova Scotia established a Clean Electricity Solutions Task Force in 2023 for the purpose of exploring ways to modernize the province’s electricity grid and regulatory environment. Footnote 81 The Task Force proposed numerous changes to modernize Nova Scotia’s regulatory regime, including aligning with the province’s legislated emissions reduction goals, creating an independent energy system operator, implementing amendments for a holistic approach to electricity systems management, and improving policy for affordable residential electricity costs.

Acting on the advice of the Task Force, the Government of Nova Scotia passed its Energy Reform Act in 2024, creating 2 new acts and repealing the former Utility and Review Board Act . Footnote 82 The changes include the immediate creation of a new Nova Scotia Energy Board, mandated to consider environmental and climate change goals in its decisions. The new legislation also establishes an independent system operator responsible for procurement of new energy and overseeing the integration of renewable energy projects, to be operational by late 2025. Footnote 83

Other provinces are currently reviewing their regulators' mandates with a similar view toward alignment with net-zero emissions goals.

Provincial and territorial governments can include a carbon-neutrality or net-zero objective in the mandates and priorities of their respective relevant agencies, providing direction at the provincial and territorial level and aligning with changes at the federal level to coordinate efforts toward a common goal. Provincial and territorial governments could also provide the required resources (financial and human) and policy guidance (including energy roadmaps and pathway assessments) to fulfill these updated mandates.

Insufficient flexibility may hinder broader net-zero goals by impacting cost, reliability, and the pace of electrification

The pressures facing each province and territory in this energy transition vary significantly. While remaining focused on its overarching net-zero goals, the federal government should ensure that provinces and territories have flexibility within relevant federal policies to choose how they reach those goals and to design and implement their own policies in a manner that considers their unique effects on each region.

“Provinces and territories have unique supply and demand considerations. A one-sized solution will not fit all.” Government of Newfoundland and Labrador

In the Council’s view, for example, the original Clean Electricity Regulations Footnote 84 did not provide sufficient flexibility for utilities, system operators, and market participants to achieve the desired balance between decarbonization, cost, and reliability. As a result, there could be cost pressures or reliability risks that would put broader net-zero goals out of reach, particularly through impacts on the pace and extent of the electrification of existing non-electrical energy uses. The Council notes that the federal government has recognized that greater flexibility is necessary in the update on its consultation process released in February 2024, but the final regulations have not yet been published.

Similarly, the original conditions for the Clean Electricity ITC proposed in the 2023 federal budget Footnote 85 included a requirement for a competent authority in each province and territory to make certain commitments Footnote 86 for entities in these jurisdictions to claim the tax credits. The federal government revised those conditions in its 2024 budget, limiting the conditions on net-zero electricity by 2035 to Crown corporations and their respective jurisdictions. The Council believes that further revisions are warranted (see Recommendation 6 ).

The Council recommends that when developing and implementing policies that impact the electricity sector, the federal government should prioritize flexibility mechanisms wherever possible, in particular for jurisdictions facing disproportional cost burdens and reliability challenges.

The federal government can achieve this by:

• Ensuring that the published version of the Clean Electricity Regulations provides substantively greater flexibility to covered entities than its original version
• Examining and mitigating downstream impacts as greater stringency and cohesion is brought into the federal climate policy package, including consideration of Indigenous, Northern, and remote communities in policy design to advance equitable net-zero outcomes

Provinces and territories can continue to actively engage with the federal government to identify their unique needs and requirements for climate policy flexibility. Furthermore, they can develop Energy Roadmaps (see Recommendation 2 ), ideally supported by Pathway Assessments (see Recommendation 3 ), that can clarify how shared goals can be met in ways that are more aligned with provincial needs.

The Council recommends that the federal government adjust its proposed condition for provincial and territorial Crown corporations to access the Clean Electricity ITC by replacing the current proposal – a provincial or territorial government publicly committing to work towards a net-zero electricity grid by 2035 and demonstrating that benefits flow to ratepayers – with a single requirement to develop and publish provincial or territorial government-led energy roadmaps aligned with 2050 goals.

• The federal government should modify the condition currently proposed for the Clean Electricity ITC for a provincial or territorial government to commit to a net-zero electricity system by 2035 to instead focus on the development of energy roadmaps for a net-zero or carbon-neutral energy system by 2050. Modifying the ITC condition to align with the broader energy transition enables provincial and territorial governments to focus on reducing emissions from energy use generally, rather than focusing solely on emissions from power generation. This pragmatic approach would be more likely to encourage decision-making in line with climate goals, while providing flexibility to jurisdictions to define their pathways to achieving those goals.
• The federal government should remove the condition related to demonstrating that ITCs would flow through to ratepayers. The Council notes that this condition is unnecessary (provinces’ and territories’ regulatory and market structures are already designed to ensure that such savings flow to consumers) and impractical in its actual wording.

In line with this approach, and with Recommendation 2 , jurisdictions can develop and publish energy roadmaps to facilitate access for their public utilities in their jurisdictions to the ITC. By design, this modified condition for access to the Clean Electricity ITC recognizes provincial and territorial jurisdiction over energy systems, including discretion over the strategies and pathways they pursue. This more flexible condition also implicitly acknowledges the diversity of energy systems, available resources, and distinct considerations that each jurisdiction must address in their plans.

Transparency of federal modelling is a necessity

Modelling and data are used to inform operational planning, policy development, and investment decisions. For example, federal officials use economic and technical electricity models to inform their policy decisions. Similarly, utilities and system operators employ more detailed technical models to inform their daily operations, system planning, and investment decisions.

Trust in the models, input data, and assumptions used to inform public policy and investment in the electricity sector is critical for maintaining industry and public confidence in decision-making and for enhancing policy certainty. Unfortunately, privacy, security, and confidentiality concerns often limit the availability and sharing of data between sector stakeholders, which impacts the development of effective policies, contributes to industry confusion and frustration with federal decision-making, undermines the confidence in federal and utility policy and investment decisions, and amplifies investor uncertainty. In addition, carbon intensity data, which is growing in importance, is not currently available for electricity systems in Canada.

Stakeholders have expressed frustration with the limited federal transparency of the data used in its decision-making. Despite ongoing engagements with provinces, territories, and industry stakeholders, federal officials sometimes withhold or limit access to the data, models and inputs used in these exercises.

Data sharing can support collaboration and guide progress

Open data-sharing frameworks can enable innovation and enhance investment opportunities. The increasing use of connectivity and artificial intelligence is creating both new opportunities and increased risks for existing and new electricity industry players. Footnote 87 Improved access to secure energy systems data, as found in other advanced economies, can overcome hurdles in electricity technology development, market innovation, and the planning and implementation of solutions. It can also enable broader stakeholder participation and investment in distributed energy and other cost-saving, net-zero-aligned electricity technologies. Footnote 88

Electricity is a responsibility of the provinces and territories, and it is important that these jurisdictions track their own progress. However, the federal government is responsible for oversight of national progress, and sharing progress reports at the national level enhances the awareness of transition partners, particularly regarding areas where progress is lagging and more attention is required.

There are existing metrics to evaluate different aspects of the Canadian electricity ecosystem, overseen by various national and sub-national governments and civil society organizations. A single window into these metrics at the national level would be valuable to build momentum toward net-zero and affordability targets, track grid reliability, improve investor confidence, Footnote 89 Footnote 90 and track rate parity between jurisdictions.

Standardizing and sharing high-quality, open and transparent data, models, inputs, and assumptions in a secure and negotiated way can also improve modelling and regulatory and policy decision-making. This enhances private and public confidence in federal policy, supports broader stakeholder participation in the electricity market, and enables more informed, transparent discussions between electricity industry stakeholders. Footnote 91 Footnote 92 Footnote 93

The Council recommends that the federal government: (i) make its economic and electricity system models, as well as related data, assumptions, and other model inputs, publicly available in an open and transparent manner; (ii) work with provinces, territories, utilities (including public, private, and Indigenous-owned), and electricity system operators, and explore the use of federal authorities, to develop and implement approaches to electricity system data collection, aggregation and publication, in a manner that respects privacy and system reliability requirements, and makes Canadian data open and accessible in a manner similar to other advanced economies; and (iii) fund supporting entities to enable the collaboration and implementation of common approaches to electricity system data collection, aggregation and publication.

To implement the recommendation, the federal government should:

• Direct federal departments and agencies that have developed and managed economy, energy, and electricity-system models internally to consistently make these models, their underlying assumptions and data publicly available in an open, transparent, and consistent manner, in line with the 2014 Government of Canada Directive on Open Government. Footnote 94
• Federal departments and agencies should be further required to explain any differences between their unique modelling inputs, assumptions and outputs, should any exist (for example, differences between ECCC and CER models).
• Consider using the Energy and Mines Ministers' Conference (EMMC) as a convening opportunity to launch this proposed collaboration with provinces and territories, utilities, system operators and regulators.
• Explore existing federal policies, such as the Statistics Act , to identify mechanisms already in place to ensure electricity data is available to improve electricity and related energy-sector modelling and unlock innovative technology development and deployment on the grid.
• Include electricity system models (particularly capacity expansion and production-cost models owned or managed by the federal government) and related data when implementing the Government of Canada Data Strategy for the Public Service Footnote 95 and related policies and directives.
• Data collection and modelling organizations, specifically the Energy Modelling Hub Footnote 96 but also others that are identified in Canada, to advance open and transparent modelling, data, and assumptions, collaborate closely with utilities and power system operators, and expand modelling expertise and collaboration in Canada.
• Regulator collaboration organizations, specifically CAMPUT, to facilitate regulators to collaborate on regulatory approaches that enable enhanced open and transparent data collection and publication.

Provincial and territorial governments may need to direct relevant authorities from their respective electricity utilities, system operators, and regulators to engage with the federal government on data identification, provision and standardization.

Utilities and system operators will need to work with their respective provincial or territorial government and federal officials to implement any legal agreements, data security and privacy policies or protocols, and other potential commercial, legal, and technical details to inform their participation.

Regulators may need to oversee and approve the engagement of utility and system operators with an open and transparent data and modelling initiative, and provide resources, data, models, and other inputs for this initiative as needed.

The Council recommends that the federal government establish or enhance progress trackers and associated measurements to provide a comprehensive, transparent view of the national status and progress toward: (i) emission reductions; (ii) grid reliability; (iii) Indigenous reconciliation; and (iv) affordability and rate parity across Canada. This recommendation should include the aggregation and publication of existing metrics within a single federal web portal. These trackers would also help identify which jurisdictions need assistance on the way to net-zero.

• Identify and leverage existing measurements and trackers in use across federal, sub-national, and Indigenous governments, utilities, system operators, regulators, and civil society organizations
• Identify and fill gaps in existing progress trackers to fulfill this recommendation by developing any necessary new measurements and trackers
• Include specific measurements for Canadian territories, taking into account their unique circumstances and lack of interconnections with the North American continental grid
• Explore the concept of the “energy wallet” Footnote 97 and publish national, provincial, and territorial estimates and regular updates for an average “energy wallet”
• Provide a centralized Government of Canada web repository that lists the various trackers and associated measurements for ease of access by Canadians and international investors
• Provide stable resources for the implementation and maintenance of the web repository and any new trackers and associated measurements required

Provinces, territories, utilities, system operators, regulators, and Indigenous governments would need to collaborate to provide relevant data for existing and new measurements and trackers, where relevant and appropriate.

Industry and civil society organizations can collaborate with the federal government to streamline the collection and provision of their existing trackers and measurement data within a single federal repository.

Achieving Canada’s net-zero goals will require adding an average of 10 GW of new clean electricity generation per year. Footnote 98 Building that generating capacity, as well as the associated grid and storage infrastructure, will require a dramatic shift in the pace of electricity system expansion.

The proliferation of federal, provincial, territorial, and municipal regulatory requirements has made it difficult to obtain project approvals in a timely fashion.

Historically, economic development and environmental protection were often viewed as trade-offs. To build out clean electricity as now required, that trade-off must be turned on its head: to protect the environment from its single greatest threat, global climate change, clean power projects must be built more frequently and faster than ever before.

Put simply, without systemic reform of approval processes for essential clean electricity projects, Canada’s ability to achieve its climate goals will be in dire jeopardy.

Building clean electricity projects faster is essential but insufficient on its own. Canada also needs to develop these projects more inclusively, with particular emphasis on stronger partnerships with Indigenous Nations and communities. Canada has made significant strides on this front in recent years, but more must be done – including by helping guide the way for industry – to ensure that this new wave of growth involves the full participation and consent of Canada’s Indigenous peoples.

Finally, this new wave of infrastructure development will require capital and labour, at a time when the global competition for both is stiff, particularly in the clean electricity sector. Canada will need competitive finance, tax, trade, and labour policies to succeed.

The federal government requires systemic leadership to reform its policies and champion clean electricity development projects

Governments around the world are changing permitting and approval processes to shorten timelines and attract investment in clean electricity projects. In the United States, for example, the federal government released an action plan to strengthen and accelerate federal permitting and environmental reviews. Footnote 99 The plan builds on an earlier measure supporting large, complex, capital-intensive projects that require the approvals of multiple federal agencies. Footnote 100

To reduce overlap and duplication and expedite project reviews, approvals, and permitting, Canada’s federal government must eliminate areas of redundancy between its departments, and between federal and other levels of government, while providing clear direction on how to respect Indigenous rights. These measures would shorten approval timelines for federal review, particularly for projects where the general nature of potential impacts is already well-defined, and where federal resources may be better directed at targeted areas of concern or at other projects in need of greater scrutiny.

Furthermore, proponents of major clean electricity infrastructure projects often face challenges navigating approval and permitting requirements due to the complexity of the processes, lack of coordination among federal entities, and misalignment of approval and permitting requirements with Canada’s net-zero electricity objectives. The Clean Growth Office, a working group within the Privy Council Office (PCO), is currently attempting to address some of these challenges for certain major projects by providing guidance and facilitating support to project proponents within the federal system.

Canada is lagging behind on the pace of permitting

In 2019, the most recent year for which data is available, Canada ranked second worst in the OECD for time required to obtain a general construction permit. And from 2006 to 2019, Canada fell from fourth place to 22nd place in the World Bank’s ease of doing business rankings. Footnote 101

Comprehensive Canadian data on timelines for electricity project review, permitting, and approvals is not currently available (the information in Figure 20 is based only on data related to general construction permits). This lack of tracking data for electricity projects only serves to highlight the problem, as well as the need for a more systematic approach – including the measurement of performance improvements over time – to accelerate the pace of clean electricity project development.

Figure 20: Time to Obtain a General Construction Permit, OECD Countries Footnote 102

Bar chart depicting how many days it took to obtain a General Construction Permit in each of the 38 OECD countries in 2019. The chart is arranged in descending order from the highest number, or worst-performing, at the top. Canada is shown to have the second longest time required to obtain a permit at approximately 250 days, second only to the Slovak Republic.

Building on announcements in the 2024 federal budget, the federal government should formally designate the PCO’s Clean Growth Office as a central authority to champion the streamlining of clean electricity project reviews across departments and agencies, while also supporting major clean electricity infrastructure projects that would qualify as Clean Electricity Projects of Canadian Interest (CEPCIs). The central authority should emphasize impartiality, a cross-departmental perspective, and the consideration of all requests for the project-of-interest designation in an unbiased way. The central authority would also coordinate implementation of the Council’s recommendations related to accelerating project approvals.

The mandate of this office would be twofold:

• Champion the review and systemic reform of current federal regulatory and operational policies and frameworks applying to clean electricity projects to eliminate redundancies, define effective and clear timelines and mechanisms, and streamline processes. The Council has made recommendations 10 through 14 to shorten all clean electricity project approval timelines. This office would be responsible, first and foremost, for coordinating their implementation.
• Develop an objective CEPCI framework to: (i) define CEPCI criteria, focused on impact (for example, scale of benefit), need (e.g. regulatory complexity), and alignment with provincial or territorial roadmaps (see Recommendation 6 ); and (ii) provide concierge-type support to such projects to facilitate and expedite federal and other approvals for designated CEPCIs. Footnote 103

The Minister of Energy and Natural Resources should be accountable for the progress of the Clean Growth Office in fulfilling its mandate.

To implement the systemic reform of current federal regulatory and operational policies and frameworks, the central authority (ideally the Clean Growth Office and the proposed Federal Permitting Coordinator, announced in the 2024 federal budget) would initiate a comprehensive review of regulatory and policy requirements for clean electricity projects. Footnote 104

This review would:

• Examine the roles and responsibilities of different departments, as well as current approval and review timelines, to identify dependencies, redundancies, and opportunities for optimization
• Define appropriate alternate approval and review processes proportionate to the complexity of projects
• Identify interdependencies of application requirements and approval and review prerequisites among federal departments and other levels of government
• Work with provinces and territories to publish standards of project approval and review, including acceptable levels of impact and acceptable mitigations to potential impacts for net-zero projects and developments

The central office would be accountable for meeting measurable project review and approval targets for clean electricity projects, and it would direct specific authorities to coordinate with approving agencies to meet key milestones.

To implement the CEPCI framework, the federal government should define and make publicly available a draft framework by the end of 2024. The framework would:

• Define specific criteria for the designation of CEPCIs
• Outline the supporting resources that would be made available to such projects, with a view to helping prioritize projects, streamline federal engagement, and engage with responsible federal entities to expedite their reviews
• Examine the possibility of CEPCIs being subject to a pre-determination of need and/or reviewed and permitted on an expedited basis
• Consider implementing a specific mechanism or clause to safeguard public participation in CEPCI, similar to articles 9 and 18 of the EU’s trans-European energy infrastructure regulation, holding the federal government responsible to communicate key project and approval process details to avoid concerns around “black box” decision-making

The federal government must also give careful consideration to potential impacts on Indigenous rights and should consult with Indigenous Nations and communities to seek and identify community interests and concerns.

This recommendation calls on the federal government to undertake a review of policies and processes, and to introduce a framework to support projects of significance to the whole country. These processes and projects must still abide with jurisdictional authorities and processes as well. The Council encourages provinces and territories to launch assessments of their own review and permitting processes to identify opportunities to support the federal government in streamlining its processes. More specific analysis of inter-governmental collaboration opportunities is provided later in this section to highlight opportunities to optimize processes and minimize duplication .

An over-abundance of caution on federal permitting, reviews, and approvals undermines the clean energy transition

Canada’s existing regulatory review, approval, and permitting systems at all levels of government are not suited to the challenge of meeting climate targets. A business-as-usual approach to reviewing and approving major projects will compromise Canada’s ability to meet its climate targets and to capitalize on the economic opportunities associated with the transition to a low-carbon economy. Footnote 105

A risk-based approach to project reviews would have clear benefits. Reviews and approvals focused on critical project- or site-specific risks could reduce timelines and costs for project proponents and investors.

In addition, strategic assessments, as provided for under the Impact Assessment Act (2019) and already introduced in the EU Footnote 106 and other jurisdictions, provide the option for government and regulators to address the impacts of multiple projects through one assessment, which can inform broader policy and save time for future projects. Footnote 107 Strategic assessments can streamline the regulatory review process and address key issues such as cumulative impacts and downstream positive impacts. Footnote 108

“The Impact Assessment Agency of Canada should focus attention on matters of federal authority by ensuring that all the federal departments involved in the assessment, review, and permitting of a project work in a coordinated manner and by facilitating joint assessments and reviews with provinces.” Water Power Canada

“The focus placed by the Impact Assessment Act and the Strategic Assessment on Climate Change on the positive (and negative) impacts of new development projects could help advance clean energy projects and infrastructure by carefully considering their downstream positive impacts during the impact assessment process.” Pembina Institute

The federal government can shorten the review times allotted to all federal review, approval, and permitting processes associated with net-zero projects (including but not limited to those under the Impact Assessment Agency of Canada), where the general nature of potential project impacts is well-established, based on criteria such as location and technology type. Footnote 109

Review time and resources should focus on specific site considerations or potential impacts associated with unique technological or environmental considerations and be subject to rigid maximum approval timeline requirements (in a manner similar to measures implemented recently in California Footnote 110 ).

The federal government’s recent proposal in its 2024 budget to set clearer targets for federal permitting processes is welcome news to the Council and should be swiftly implemented. Footnote 111

Federal regulatory review timelines for major electricity projects can exceed 5 years

The table below outlines the federal regulatory review timeline for several major electricity infrastructure projects completed from 2010 to 2016, drawing information from a 2018 study. Footnote 112 The same study found that federal project approvals for electricity typically take 49 months for new generation projects and 38 months for transmission projects. This timeline is for the federal review process only, and does not account for provincial and municipal processes, which can be similarly time-consuming. These timelines pre-date the Impact Assessment Act (2019).

The Council recommends that the federal government revise the regulatory review and approval requirements for net-zero electricity projects, adopting a risk-based approach to determining the scope of project reviews that considers critical risks associated with different project types, as well as the risk of clean electricity projects not going ahead in a timely fashion. Footnote 114

The federal government should:

• project-specific critical risks by known project type, on a region-specific basis where relevant
• minimum permitting, review, and approval requirements for each identified project-specific critical risk
• mitigation requirements consistent with best practices for non-critical project risks and well-understood impacts that are not subject to federal permitting, review, and approval
• Limit the scope of permitting, review, and approval processes required for net-zero electricity projects to critical project- or site-specific risks without known or widely accepted mitigation strategies.
• Account for the risk of not completing a given project in a timely fashion (for example, risks for emissions and reliability).
• Follow through and create accountability on the 2024 federal budget announcements to reduce, publish, and enforce federal review and permitting timelines, and establish maximum timelines for net-zero-enabling electricity projects where they do not already exist.
• Work with provincial, territorial, municipal, and Indigenous governments to encourage adoption of similar reforms.

Streamlining scoping does not apply exclusively to the federal government. Provinces, territories, and municipalities can examine their own processes, as well as identify efficiency and coordination opportunities.

The Council recommends that the federal government develop and adopt a compliance-based approach to streamline the implementation of low-risk net-zero electricity projects by decreasing the number of advance approvals required, and instead relying on enforcement mechanisms to audit and confirm the compliance of the projects with established criteria. Development of this approach should be carried out by the central authority recommended in Recommendation 9 .

The federal government should establish a framework to:

• Identify established technologies or project types that have known risks and mitigation solutions
• Publish clear directives with respect to: i) data and documentation requirements; ii) risk assessment criteria; iii) known mitigation options required for specific risks; and iv) penalties for non-compliance
• Enable eligible project proponents to undertake their own risk assessment against the criteria and implement the appropriate mitigation option without prior approval. Project proponents would need to notify the specific agency that they have done so, allowing the agency or department to audit compliance of the project proponents’ risk assessments and the implementation of mitigation options for the identified risks.

Project proponents would be eligible to engage in this process if they demonstrate that they have the capacity to assess risks and implement mitigation options and have not previously been found substantively out of compliance.

Moving to a compliance-based model can be just as important for provincial and territorial governments, given their significant roles in project permitting and approvals. Provinces and territories can assess their own processes with a view to adopting more compliance-based frameworks wherever relevant. Additionally, they can work with the federal government to align processes, thereby enabling greater use of compliance-based frameworks by all parties.

Federal government assessments must be circumscribed to the issues that fall under federal jurisdiction

Duplicative environmental assessment and permitting processes between orders of government have grown common in Canadian governance.

This is acknowledged in the federal government’s reaffirmation of the principle “one project, one review” in the 2024 federal budget, with proposed actions such as the amendment of the Impact Assessment Act (2019) and enhanced coordination across orders of government. Footnote 115

As the Supreme Court of Canada’s 2023 decision on the Impact Assessment Act has ruled, the federal government must refocus its impact analyses for “designated projects” on the issues that are central to the federal government’s competencies. Acknowledging that the government has proposed actions to respond to the Court’s decision in the 2024 federal budget, the Council has not made additional recommendations in that regard.

Responding to the Supreme Court decision, while important, is insufficient to address all the concerns with federal oversight. Legislation that reflects federal areas of jurisdiction, such as the Fisheries Act (1985) and Migratory Birds Convention Act (2022), applies rigorous requirements on electricity project development. Overlaps exist between federal and provincial authority and related processes that seek to protect wildlife and their habitat. Footnote 116 As a result, many types of projects, including vital transmission and hydroelectric projects, can suffer delays of several years or more – meaning years of additional emissions not being offset by clean electricity, in addition to added cost and reliability concerns.

“Where appropriate, provincial regulatory processes and approvals should be accepted to avoid unnecessary duplication. If approvals at both provincial and federal levels are required, existing provincial processes should be considered as the appropriate mechanism to obtain the necessary information to inform both levels of approval.” SaskPower and Saskatchewan Crown Investments Corporation

Opportunities to improve efficiencies are available. The Fisheries Act (1985) already contains a provision allowing for Equivalency Mechanisms (section 4.1), yet these are rarely used. The Impact Assessment Act (2019) eliminated a similar provision in the 2012 version of the Canadian Environmental Assessment Act that allowed the Governor in Council to exempt a project from the federal process if the provincial assessment was deemed equivalent.

To mitigate these overlapping and sometimes conflicting responsibilities, the Council recommends that the federal government pivot from the role of frontline protection to one of federal backstop in its environmental assessment processes. This pivot should be viewed within the broader context of the federal government seeking to balance its historic concern for local environmental protection with a newer and more urgent concern for global climate change. By harnessing equivalency mechanisms, the federal government can limit its expertise to intervene primarily in cases where provincial or territorial mechanisms may be insufficient.

“Working with municipalities to designate pre-approved areas for development would streamline the approval of future projects.” Pembina Institute

Leverage Crown assets to incentivize development of clean electricity projects

In addition to equivalency mechanisms, the federal government can also leverage its resources to incentivize development, investments, and Indigenous participation. Federal Crown lands, for example, offer an opportunity for the federal government to identify and pre-approve designated zones for the development of electricity infrastructure projects for technologies such as wind, solar, battery storage, and transmission infrastructure. Designating Crown land for development can reduce development risk, reduce upfront costs, allow for early identification of Indigenous rightsholders, and provide more certainty for project timelines. The 2024 federal budget recently proposed measures to develop federal land for housing; which introduces a model for similar action on much-needed electricity infrastructure. Footnote 117

Crown land designation can facilitate building ahead of demand – for example, constructing transmission systems capable of handling substantial capacity additions. This can provide developers with greater certainty regarding the financial viability of adding wind and solar capacity. Footnote 118

“Renewable Energy Zones (REZ), such as those utilized in Texas and Australia, can be instructive on how to streamline development of infrastructure in line with permitting and project development.” Energy Storage Canada

Outside Canada, energy hubs and renewable energy zones have been legislated in international jurisdictions to advance electricity development in a coordinated and collaborative way to achieve economic, social, and environmental outcomes. For instance, sub-national governments in the United States and Australia, including New York Footnote 119 , Texas Footnote 120 and Queensland Footnote 121 have identified “Renewable Energy Zones” to help coordinate development of clean energy infrastructure in areas of high potential, maximizing benefits for local communities. In addition, efforts in Texas have connected wind resources from West Texas and the Panhandle to more populated parts of the state, facilitated by the pre-development of high-voltage transmission. Europe’s large and successful offshore wind industry benefited from similar approaches, such as Germany’s use of Exclusive Economic Zones. Footnote 122

Although not formally designated, several Canadian provinces, including Newfoundland and Labrador, New Brunswick, British Columbia, and Ontario, have policies to promote the use of Crown land for renewable resources, which is generally underpinned by land-use planning criteria. Footnote 123

Development of Crown Lands in Newfoundland and Labrador

In July 2022, the Government of Newfoundland and Labrador initiated a program to use Crown lands for wind energy projects in a manner that “ensures the greatest long-term benefits for residents of the province.”

The first phase of this multi-stage program has allowed proponents to nominate Crown lands for development. 31 land nominations were received and reviewed to determine which sites would be made available for development. Phase 2 brought in a formal procurement process, in which interested parties submitted bids to develop wind energy projects on pre-approved Crown lands.

To ensure the safe and reliable operation of the province’s electricity system, Newfoundland and Labrador Hydro supported the government in its Crown-land nomination and bid process for wind energy projects. To date, 4 bids from 4 separate companies have received wind application recommendation letters and now have exclusive rights to pursue project development through the provincial process. Footnote 124 Prior to the final awarding of development permits on Crown land, an environmental assessment will be required for all wind projects larger than 1 MW in scale.

The Council recommends that the federal government proactively seek to develop equivalency agreements for the permitting, review, and approval of net-zero electricity projects where federal statute(s) and regulation(s) duplicate provincial mechanisms.

To implement this recommendation, the federal government should adopt changes that:

• Define equivalency mechanisms as those that allow the federal authority to deem when provincial processes are broadly equivalent to federal standards
• Require relevant authorities , including ECCC, DFO, and the Impact Assessment Agency of Canada, to proactively seek to negotiate such equivalency agreements with interested provinces, in the interest of eliminating unnecessary costs, delays, and uncertainties in clean electricity infrastructure project development, while ensuring adequate wildlife protections

What can provinces do?

While the federal government can help to reduce duplication, provinces have an important role as well in examining their own review and permitting processes. This would be conducted in the spirit of the above recommendation, with the intention of eliminating unnecessary internal duplications, streamlining processes, and identifying opportunities for alignment with federal regulations.

Recommendation 13: Proactively develop federal Crown lands

The Council recommends that the federal government establish a mechanism to proactively identify federal Crown lands and conduct the relevant assessments for electricity infrastructure projects to expedite future development on these properties, reducing both time and risk for proponents of clean power projects.

To develop such a mechanism, the federal government should explore a framework that:

• Examines federal Crown lands to identify criteria and types of lands subject for development
• Develop a process to identify the types of feasible projects, viable sites, and mechanisms to invite project development proposals, and initiate projects
• Measures to engage and consult with impacted Indigenous Nations and communities
• Processes for consultation with provincial and territorial governments, municipalities, utilities, project developers, and significant other parties to confirm alignment

The Council encourages provincial and territorial governments to engage the federal government to initiate consultation, planning, construction, and commissioning processes for the development of energy hubs, working with provincial and territorial planners, municipal governments, local communities, and Indigenous Nations and communities.

Clarifying Indigenous consultation and engagement

Understanding the origin and framework of Indigenous rights will enable expedited energy project development by ensuring the early inclusion of Indigenous perspectives, alleviating project opposition through increased communications, and maximizing the opportunities for economic reconciliation.

Indigenous rights were enshrined in the Constitution Act revisions in 1982, which recognized and affirmed “the existing aboriginal and treaty rights” of Canada’s Indigenous peoples. Establishing what these rights encompass and how to address constitutional protection took a longer time and can now be found in a growing set of court decisions.

A three-part test, first articulated in a series of Supreme Court of Canada rulings in 2004, was established to determine when Indigenous rights exist and how these rights are to be balanced with the need for development. Footnote 125 This includes the creation of a spectrum of rights and a tool to evaluate the primacy of rights over the need for development. In short, the constitutional protection and the Supreme Court decisions require conversations with Indigenous Nations and communities to understand what rights are going to be impacted and project modifications to minimize the potential impacts to those rights.

The constitutional status of Indigenous rights means that respecting them is not optional, and doing so correctly is part of the critical path necessary for a successful energy transition. Courts have delayed major infrastructure projects over the years to ensure that tangible consideration has been given to the impacts on Indigenous rights and that meaningful modification of project plans are made to minimize these impacts.

Despite this, project proponents often lack ready access to a clear articulation of the Duty to Consult, including who is entitled to these processes for project development purposes. Meanwhile, Indigenous Nations and communities are often provided with insufficient definition of what the projects entail, or the details are provided when changes to projects would be cost-prohibitive.

Greater clarity on how the federal government determines which entities need to be consulted and where they sit on the spectrum of rights will serve to build better relationships, pursue national relationship reconciliation goals, and create the right opportunities for economic reconciliation.

While Indigenous rights have established parameters for evaluation and respect in the Canadian constitution and in jurisprudence, recent discussions have turned to the implementation of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) Footnote 126 in Canada. The distinctions between the current legal regime and the proposed revisions are often conflated, resulting in misunderstandings regarding the best way forward. Specifically, UNDRIP calls for the protection of Indigenous cultures, language, and autonomy over lands and resources, requiring the free, prior, and informed consent (FPIC) of Indigenous Nations and communities before these rights are impacted. Federal legislation is still looking at developing a plan to implement UNDRIP in Canada and working with Indigenous Nations Footnote 127 to do so. While the necessary legislative reforms will take time, it would be beneficial in the near term to have some of the key definitions around FPIC articulated by the federal government.

“Communities, especially Indigenous communities, are much more likely to support electricity infrastructure projects when they can participate in them as partners.” Electricity Canada

“Excluding First Nations from meaningful participation in regional planning and decision-making creates risks for projects, erodes Canada’s investment attractiveness, and is out of step with the federal government’s commitment to ensure federal laws are consistent with the principles of UNDRIP.” Saskatchewan First Nations Natural Resource Centre of Excellence

A clearer understanding of constitutional rights early in the development process will allow developers to build relationships with Indigenous Nations and communities from the very start of a project, leading to better inclusion of Indigenous perspectives, greater respect for Indigenous rights, and fewer delays due to late-stage engagement.

The Council recommends that the federal government develop and publish resources to support project proponents, utilities, and other energy sector participants in meeting the requirements to consult with appropriate rightsholders. The resources must include:

• Public clarity on how Aboriginal Rights Holders are identified and the process by which proponents can identify rightsholders early to ensure pre-consultation engagement can take place
• A clear description of the spectrum of engagement and consultation, along with information regarding what types of project changes qualify as accommodations
• The process by which developers and proponents can apply to have the procedural aspects of the Duty to Consult delegated to them in order to expedite the consultation process and reduce their reliance on government resources

The Council recommends that the federal government:

• Develop a plain-language resource describing the constitutionally protected Aboriginal Rights found in S. 35 of the Constitution Act, 1982, that explains in accessible terms the Duty to Consult test and the spectrum of interest holders to rightsholders, and also clarifies which actions constitute accommodations and how (and when) a developer or proponent can receive a delegation of the procedural aspects of consultation from the Crown
• Share this information through an awareness campaign for business developers, utilities, and all other energy sector participants
• Provide clarity regarding changes to constitutionally protected rights through the implementation of UNDRIP, including the development of legislative definitions to support the interpretation of the UNDRIP with a particular focus on defining FPIC) Footnote 128

Provinces and territories can support the clarity and awareness of Indigenous consultations by developing and disseminating educational resources tailored to local contexts. They can also facilitate engagement by providing platforms for pre-consultation and streamlined processes for identifying rightsholders, thereby ensuring a more effective and inclusive consultation framework.

Canada’s transition investment needs are significant, and the competition to attract capital and labour to enable the growth of its clean electricity systems and remain a world leader is steep and growing

The cost to decarbonize, expand, upgrade, and improve the resiliency of the electricity sector in the transition to net-zero is estimated to be around $1.4 trillion between now and 2050 (see Affordability: Modelling the Impact on Canadian Households ). Attracting the capital investments required will be critical for Canada’s success.

The electricity sector faces intense competition with other jurisdictions that are providing unprecedented incentives and fast-tracked approvals for investment in clean electricity, particularly the U.S., the EU, and China. Footnote 129 And the impact of global competition is not just financial - it includes competition for labour and the supply chain.

To be effective, Canada’s existing finance, tax, trade, and labour policy measures must adjust to this new marketplace. The Council’s interim report urged the federal government to build on other measures to address workforce and supply chain issues for the clean economy more broadly, and to develop a dedicated initiative focused on addressing the electricity sector’s labour and supply chain challenges. The Council reiterates this call, highlighting the significance of these challenges for meeting Canada’s net-zero electricity goals.

“Canadian and global investments will create significant global demand for workers with skills and experience in electrification in all of its applications … Without taking steps to address this shortage, Canada will be unable to meet growing needs for workers in this sector.” Canadian Labour Congress

Securing skilled labour will be fundamental to the success of the electricity system build-out, and Canada is competing with other jurisdictions to attract the necessary workers. Nearly 28,000 new employees will be needed nationwide by 2028, equivalent to a quarter of the current electricity sector workforce and exacerbated by the need to both replace retiring workers and meet expanding growing demand. Footnote 130 These labour requirements cannot be properly addressed without enabling government policies and funding.

Supply chain shortage implications

The market for transmission transformers has seen a drastic increase in both procurement lead times and prices over the past 3 years. For example, SaskPower faced a tripling of timelines for expected delivery of Neutral Grounding Transformers in the fall of 2023, as well as a price increase of more than 50% over the contract they had negotiated in 2020. The utility encountered even higher costs for more complex units. These delays in the production and supply of critical equipment reduce the capacity of the utility to accommodate load increases associated with the transition, indicating a need for federal manufacturing and project development support.

Policy certainty is crucial for project proponents, who need clear information regarding the availability, quantity, and timing of financial supports (see recommendations 1 , 2 and 3 ). The measures must address the full spectrum of projects required for the transition at a scale and pace commensurate with the necessary growth in investments.

Project costs are at risk of increasing under the proposed Excessive Interest and Financing Expenses (EIFEL) rules Footnote 131 and the pending expiry date for the accelerated rates of depreciation for electricity property under the Capital Cost Allowance (CCA). Footnote 132

Other key policies and mechanisms, such as carbon contracts-for-difference (CCfDs) offered through the Canada Growth Fund, Footnote 133 and the green and transition taxonomy Footnote 134 being developed by the Department of Finance, are also important for incentivizing long-term investments in clean energy.

Aligning trade policies with net-zero goals while ensuring respect for human rights and other vital considerations is also important. For example, anti-dumping tariffs have forced some utilities to purchase transformers and other equipment from higher priced vendors when domestic products are unavailable, rather than turning to known and trusted foreign vendors that provide more cost-effective equipment.

The federal government has other mechanisms at its disposal to further support the transition. Codes and standards can level the playing field for technology vendors, developers, and service providers. Greater harmonization of standards can promote global interoperability, facilitate trade, and encourage cross-border investment in clean electricity infrastructure. Footnote 135 Footnote 136 The reactive nature of the Canadian Electrical Code (CEC), while safety-focused, contributes to the adoption of non-harmonized codes and standards across Canada. Furthermore, its lack of alignment with net-zero goals limits the pace, scale, and benefits of emerging and existing net-zero-aligned electricity technologies and construction standards projects.

The Council recommends that the federal government review and revise its finance, tax, trade, and labour policy measures in a timely manner to reduce investment costs and risks, attract capital at the pace needed, and improve competitiveness. It can do so by: (i) aligning measures with net-zero goals and priorities in terms of breadth of coverage, scale, timing, and proponent eligibility; (ii) supporting labour planning, training, and allocation; (iii) considering the evolving economic, technological, and market landscape; and (iv) minimizing duplication and funding gaps. Specific examples that are known impediments to power sector investment that must be urgently addressed, including CCA rates and EIFEL rules, are outlined below.

The government should:

• Expediently amend CCA Classes 43.1 and 43.2 of Schedule II to the Income Tax Regulations, which allow companies to reduce their taxable income by a greater proportion of their investment, in order to: (i) extend until 2035 the (50%) accelerated rates and the (100%) first-year enhanced allowances;, and (ii) expand the list of systems that qualify as “clean energy property” to include other equipment important to the energy transition.
• Expand the list of clean energy projects beyond CCA Class 43.1 and 43.2 projects to include projects whose costs are eligible for the Canadian renewable and conservation expense under the Income Tax Act, so that they may accrue the tax deduction and flow-through share benefits.
• Expediently amend the proposed EIFEL rule Footnote 137 in Bill 59 Footnote 138 to exclude all tax-paying clean energy entities and their holding companies and clean energy investments and allow them to reduce their taxable income by 100% of their interest and other expenses.
• Review and revise the list of goods subject to the anti-dumping and countervailing measures rules under the Special Import Measures Act (SIMA) Footnote 139 to exclude those that are critical to the energy transition.
• Encourage provincial and territorial governments to explore long-term contracts (e.g. power purchase agreements) as part of their resource planning processes to provide investment certainty.
• Build on the work of the Sustainable Finance Action Council and the commitments in the 2023 Fall Economic Statement and the 2024 federal budget to develop a taxonomy framework that will provide a standardized approach for benchmarking “green” and “transition” economic activities aligned with 2050 net-zero objectives.
• Expand eligibility under the federal CCfD program and Clean Growth Fund as promised in the 2024 federal budget, as well as the CIB. Project eligibility and funding should be expanded to better support the full suite of energy transition projects, including distribution investments and DSM solutions. Allocating funds through the CGF is a prudent, low-cost and risk-averse mechanism to incentivize new technologies. The CCfDs awarded through the CGF should seek to maintain a healthy balance between investment returns and supporting new projects coming to market, recognizing that the investment return adds to project costs.
• In accordance with other Council recommendations regarding data and modelling, support national, provincial, territorial, and regional planning by collecting and disseminating labour market data and identifying ways to include labour unions in planning for major federally involved projects
• Collaborate with industry, unions, and academic institutions on training, updated curricula, skill development, and certification
• Expand programming, investments and equitable access for Indigenous Peoples and others, for federal training programs such as the Union Training and Innovation Program and Apprenticeship Services Program, and collaborate with key parties on other training and education programs
• Explore implementation of federal and regional Project Labour Agreements and Community Benefit Agreements to increase investor certainty, labour availability, and local economic benefits

Provinces and territories and other key stakeholders are vital for enabling the federal government’s review of its financial, tax, and labour policies. For example, regional authorities can engage in the development of Canada’s green and transition taxonomy implementation plan and the rollout of the framework. Similarly, provincial and territorial energy agencies can incorporate power purchase agreements into their resource planning and system operations.

Provinces, territories, education and training agencies, and other stakeholders can also collaborate with the federal government to determine their specific needs and how best to address them.

The Council recommends that the federal government consolidate and enhance its financial information services into a single “one-stop shop” focused on providing project proponents of all sizes with relevant information and concierge advisory services to support and de-risk clean energy projects (including DSM and grid modernization).

• Consolidate the Clean Growth Hub, the Industry Decarbonization group, and other federal financial information services into a single one-stop shop for financial supports. This one-stop shop should include a web-based information clearing house for information, resources, and tools, and it should offer advisory (concierge) services on a one-on-one basis to guide and support project proponents’ search and applications.
• Locate the service in a federal government agency engaged in funding and permitting with strong ties to other key agencies, and/or in an agency where key funds originate.
• Revise the information and services offered to enhance and prioritize services for significant projects and expand outreach and service depth for a broader spectrum of projects, including energy efficiency, DSM, and electricity transmission and distribution projects.
• Develop and regularly update a single, comprehensive tracking mechanism for energy financing to ensure the one-stop shop has access to current federal, provincial, and territorial financial programming information across the country.
• Conduct a thorough review (with follow-up annual reviews and reporting) of federal measures in energy financing with respect to breadth of coverage, overlaps and gaps, financial value, time frames, and other key variables.
• Develop and implement a communications plan that clearly identifies the one-stop shop as the single portal for proponents to access financial support information and services and includes an outreach program for targeted potential proponents.
• Provide clear direction on priorities and a formalized process for inter-departmental collaboration and program support.

Provinces and territories can support the federal government in implementing this initiative by establishing partnerships with this new office and providing regular input on their own financial measures, helping to enhance the accuracy of the office’s services with respect to financial measure coverage.

The federal government should fund a collaborative advisory body, working with the Standards Council of Canada and related standard-setting bodies (such as the Canadian Standards Association), to identify and draft minimum and aspirational codes and standards for anticipated electricity grid technologies that could be deployed in Canada, in order to (i) inform and assist Canadian standard-setting bodies to develop and adopt relevant codes and standards; and (ii) inform Canada’s work to align Canadian codes and standards with international bodies. The federal government should also evaluate governance mechanisms to speed up the development and adoption of codes and standards to enable the safe and reliable deployment of climate-resilient, innovative, and net-zero-aligned grid technologies.

For the federal government, implementing this recommendation should include:

• Collaborating with the Standards Council of Canada and related standards bodies to establish this new office and ensure that it is comprised of dedicated representatives from federal, provincial, and territorial governments, electric utilities, system operators, and standard setting bodies
• Investigating a governance mechanism of national codes and standard setting for the Canada Electrical Code, in line with similar national efforts (such as the Canadian Board for Harmonized Construction Codes)
• Introducing 5-year renewable mandates requiring a systems approach rather than a product approach to identify and establish draft model codes and standards and other technical requirements for electrical equipment and installations to ensure safety, climate resiliency, and interoperability of new distributed energy technologies
• Coordinating and feeding into Canada’s national strategic engagement with international standards setting bodies and processes (for example, the Institute of Electrical and Electronics Engineers) to represent Canada’s interests in international standard development and harmonization efforts
• Identifying financial resources required to support codes and standard-setting processes in codes and standards setting organizations
• Taking a future orientation regarding the incorporation of new and evolving technologies into electricity grids
• Providing dedicated funding support for codes and standards development (for example, NRCan's Codes Acceleration Fund), with special consideration of codes and standards for the North

Provincial and territorial representatives can provide their unique jurisdictional perspectives and priorities in the development of codes and standards (for example, a set of Northern-specific codes and standards for heat pumps).

Code- and standard-setting bodies would need to participate in this effort to provide legitimacy, sectoral and technical awareness, and guidance as to how best to structure model codes and standard development.

Utilities and system operators can make technical experts available, in a dedicated manner, to participate in this committee on an ongoing basis.

The bulk of the Council’s recommendations are focused largely on reducing overall costs – through better planning, speedier project review and approval processes, and reduced energy waste, among other measures.

But reducing total costs is not enough. The federal government also has an important role to play in addressing fairness and sharing the costs of the transition.

Although the switch to clean power will likely be affordable for the average Canadian, these averages can hide unevenly distributed costs. For many Canadians – particularly in fossil fuel-reliant provinces and territories, lower-income households, and Indigenous and remote communities – the challenge will be greater.

The federal government can help manage uneven distribution of costs and benefits and ensure a successful transition for all Canadians by providing additional targeted support where it is most needed . These targets should include:

• Expanding and optimizing ITC programming , to shift a part of costs from the rate-base to the (more equitably sourced) tax-base
• Inter-regional electricity transmission projects , to leverage complementary strengths and ease the decarbonization path for fossil fuel-reliant provinces and territories in particular
• Indigenous, Northern, and remote communities , to advance economic reconciliation, notably by enabling financial participation in new energy projects
• Lower-income households , to ensure that all Canadians can access-energy saving opportunities that improve affordability outcomes.

The Council notes that these priorities overlap with key measures in the 2023 and 2024 federal budgets. Yet as significant as those are, more is needed to ensure all Canadians can partake in this unprecedented endeavour.

Announced federal ITCs can lower costs and address uneven cost distributions

Over the past year, the federal government has announced significant financial supports for a broad array of clean electricity infrastructure investments using ITCs. Totaling over $60 billion in value over the next 10 years, these include ITCs for: carbon capture, utilization and storage; clean hydrogen; clean technology; clean electricity; and manufacturing. Footnote 140 A primary motivation for these ITCs is to support industry competitiveness by aligning with financial supports introduced by the Inflation Reduction Act in the United States. Footnote 141

These supports can be expected to lower the cost of building new electricity infrastructure across Canada, and by their nature they are designed to flow proportionately to investment needs, which are likely greatest in fossil fuel-reliant provinces and territories. Footnote 142

The Council supports this wholeheartedly, noting that it is appropriate that fossil fuel-reliant provinces and territories are more heavily supported, given the added cost burdens they face as they seek to decarbonize most of their existing electricity generation, while growing the size of their systems overall.

These ITCs can also be expected to shift some of the financial burden of the transition from ratepayers to taxpayers. The Council supports this as well, for several reasons: the societal-wide benefits of the clean energy transition, the more equitable distribution of costs facilitated by taxpayer funding, and the crucial support this provides to areas where ratepayer funds are scarce, such as in early-stage innovation. Footnote 143

ITCs should be aligned with net-zero goals to spur investment in clean electricity projects

Concerns remain that the proposed ITCs could deter investment, owing to: delayed implementation and lack of policy certainty; the ineligibility of certain technologies and investments such as intra-provincial transmission and distribution; misalignments between the scale and timelines of the ITCs and the projects they are designed to support; and differences in the levels of incentives offered to tax-paying and non-tax-paying project proponents (including Indigenous applicants).

“Given the massive incentives being provided in the United States Inflation Reduction Act, governments in Canada must be mindful of staying competitive and reducing customer costs by maintaining predictable investments and funding in the energy sector through a variety of tools including grants, tax credits, financing tools and partnerships.” Emera (Nova Scotia Power)

The Council recommends that the federal government design and implement the clean-energy-related ITCs as soon as possible, such that the scale, scope, timelines, and project eligibility are sufficient to attract investment and align with net-zero and carbon-neutral objectives. The proposed ITCs should be revised to: (i) equalize eligibility and credit limits between non-taxable and taxable entities; (ii) expand eligibility to include intra-provincial and intra-territorial transmission; and (iii) increase the scale of the inter-regional (or inter-provincial) transmission credit.

Implementation details:

• Expedite legislative and implementation processes to facilitate timely project investment (see Recommendation 1 )
• Extend the ITCs to align with the reality of project timelines (extending the credits to 2040 so they do not expire before the projects become operational) and investment needs (to be sufficient to incentivize investment for large projects such as transmission infrastructure)
• Expand the Clean Electricity ITC project eligibility to include high-voltage intra-provincial and intra-territorial transmission infrastructure
• Equalize the ITC eligibility and credit limits between non-taxpaying (including Indigenous groups and Crown utilities) and tax-paying entities and partnerships to level the playing field
• Permit proponents to stack the ITCs with other financial measures;
• Allow small communities to aggregate projects and collectively apply to the ITCs where these projects might not be individually eligible
• Consider increasing the Clean Electricity ITC from 15 to 50% for electricity transmission projects connecting Canadian provinces or territories, contingent on the conclusion of a framework to support inter-jurisdictional transmission projects, in recognition of the significant challenges of pace and scale

Refer to recommendations 6 and 19 for related supports.

As indicated in relation to Recommendation 6 , provinces and territories can significantly assist the federal government in administering ITC programming more effectively by developing formal energy roadmaps and strategies toward a net-zero or carbon-neutral economy by 2050. In doing so, provincial and territorial governments can significantly enhance the effectiveness of ITCs while also enabling other project-specific supports (see Recommendation 9 ).

Enhanced electricity interconnections between Canadian jurisdictions can support fossil fuel-reliant regions in their energy transitions

Greater inter-regional and international coordination on transmission system development is a critical strategy for lowering costs, as it can help deliver long-term economic and system-wide benefits. Footnote 144

Inter-regional transmission reduces costs by unlocking beneficial synergies between systems – particularly by enabling the large-scale build-out of variable resources (such as wind and solar, where they are most abundant) and connecting them with dispatchable sources of energy such as hydroelectric generation facilities. Increased inter-regional transmission can also link regions with complementary demand profiles, leveraging diverse weather patterns and non-coincident peak electricity demand. Footnote 145

In addition to lowering costs, inter-regional transmission enhances reliability, decreases the need for electricity storage, and mitigates risks that could arise from relying on international imports. Interconnections further help as a hedge against extreme weather events or periods of under-production from renewable sources, including hydroelectricity, that may impact one jurisdiction but not others. Footnote 146

Inter-regional transmission build-out has been slow and uneven despite increased federal efforts

Electricity transmission interconnections and trade between Canadian jurisdictions have been slow and uneven to develop, Footnote 147 with much more volume flowing instead to the U.S. Footnote 148 While Quebec and Ontario can transfer relatively large volumes of electricity in both directions (the current combined transfer capacity is 2,775 MW), Footnote 149 Saskatchewan and the three territories have little or no intertie capacity. Footnote 150 The tendency for trade to be easier with the U.S. compared to neighbouring provinces Footnote 151 is further exacerbated by the greater monetary returns available in American markets and the difficulty in valuing the non-monetary benefits of increased trade between Canadian provinces and territories. Footnote 152

Despite an increased focus on the issue, Footnote 153 the federal government has had limited success in spurring inter-regional transmission projects to date. Canada remains a net exporter of electricity by a wide margin, despite recently importing increased amounts of electricity from the U.S. during drought periods in the western provinces. Footnote 154

Supporting inter-regional transmission development calls for a common framework

One of the most significant barriers to transmission development has been the lack of a common cost-allocation and benefit-accrual framework. Footnote 155 An Energy and Environmental Economics (E3) report commissioned by Electricity Canada found that the federal government could play a pivotal role in developing and implementing such a framework for Canada’s inter-regional transmission planning – either as a funder of specific transmission projects or as a convening body to ensure the framework is implemented fairly. Footnote 156

“We urge the federal government to use its convening powers to bring provinces together in an ongoing collaborative forum, where ideas and knowledge can be exchanged among federal and provincial policy-makers and regulators, and where inter-provincial cooperation and trade can be fostered.” Fortis Inc.

A potential model that could be adapted to the Canadian context is the EU’s Projects of Common Interest (PCI). Footnote 157 Analogous to Canada in some ways, the EU is a federation of member states, each with jurisdiction over their own electricity systems. The PCI model is designed to facilitate cooperation on inter-regional energy projects between member nations by providing a centralized and agreed-upon methodology for identifying, allocating, and arbitrating costs and benefits, and by providing a mechanism to bridge cost asymmetries.

The Council recommends that the Minister of Energy and Natural Resources engage counterparts at the 2024 Energy and Mines Ministers’ Conference (EMMC) to jointly develop, and table in time for the EMMC in 2025, a policy framework to identify and financially support inter-regional electricity transmission projects. Using the EU’s PCI framework as a starting model, it should outline governance, cost allocation, and funding components.

The Minister of Energy and Natural Resources should launch the development of a framework for the identification and construction of inter-regional electricity transmission with provincial and territorial officials at the EMMC in 2024.

Given their jurisdictional authority over the electricity systems, provincial and territorial participation in this program will ultimately be voluntary. The Council strongly encourages officials from federal, provincial, and territorial levels of government to commit to producing implementation plans that accommodate appropriate authorities and jurisdictions. The plan may include detailed recommendations for approval at the EMMC in 2025, outlining governance and any funding measures or other actions required to support the identification, assessment, cost allocation, and construction of beneficial, inter-regional transmission.

The framework, drawing inspiration from the EU’s PCI mechanism, Footnote 158 should outline necessary governance and cost-allocation mechanisms , including:

• Planning and coordination mechanisms, funded and facilitated through new or existing intergovernmental bodies, in order to undertake regional planning exercises and identify and prioritize projects of interest. To support this, the federal government may request that the CER explore how it could use its existing authorities to play a facilitating role for greater inter-regional collaboration, focused on electricity transmission.
• Criteria and processes for identifying and initiating inter-regional transmission projects, and mechanisms to accelerate project approval and permitting processes and financial support.
• A standardized, transparent Cross-Border Cost Allocation Footnote 159 (CBCA) mechanism to guide distribution of costs among project participants, including guidelines and authorities for sole or joint decisions and arbitration on project cost allocation.

The framework would also outline a comprehensive suite of federal funding and support measures specific to inter-regional transmission, guided by CBCA decisions, including:

• De-risk demand by reserving transmission capacity rights, where doing so is deemed useful to allow anticipatory investments; or
• Provide financial support through a direct subsidy or increase in Clean Electricity ITC for transmission projects (see Recommendation 18 ).

International examples of successful models include the Connecting Europe Facility – Energy, Footnote 160 focused on addressing project cost and benefit asymmetries identified during the CBCA process, and the Capacity Contracts mechanism in the U.S. Department of Energy‘s Transmission Facilitation Program. Footnote 161

Provinces and territories have jurisdiction over their electricity systems and natural resources, making their support and collaboration essential in these efforts. In particular, the Council encourages provinces and territories to officially participate in such a framework and in its development. Processes related to the framework will likely vary from one jurisdiction and region to another, making participation crucial to define the criteria and procedures that best meet each jurisdiction’s needs and expectations.

By actively taking part in shaping the framework, provinces and territories would benefit from ensuring that it suits their regional needs and priorities and facilitates access for their jurisdictional stakeholders to incentives and support programming, such as ITCs, direct subsidies, and other funding programs.

Support for Indigenous, northern, and remote communities

The federal government can provide a coordinated approach to economic reconciliation with indigenous nations and communities across the country.

Canada has benefited from a land rich with resources, while Indigenous Nations and communities have been systematically limited from sharing this prosperity. With the growing recognition that innovative, lasting approaches are needed to improve this situation, the federal government can expand upon Canada’s economic reconciliation goals by introducing institutional solutions with sufficient resources to support the meaningful participation of Indigenous Nations and communities in the energy transition.

Capacity and resource issues have long limited Indigenous Nations and communities from participation in economic markets and opportunities. For example, the Indian Act (1985) prohibits Indigenous Nations from taxing their residents, selling lumber on Reserve lands, and leveraging owned assets on Reserve lands. Footnote 162 This in turn limits the capacity of Indigenous Nations and communities to finance and build equity for investments.

Furthermore, where requirements exist for consultation with Indigenous Nations and communities, these nations and communities may not possess the resources to appropriately assess the benefits and risks. The result is a limited capacity to appropriately respond to consultation requests, evaluate business cases, and secure loans to participate in large-scale energy projects.

To ensure the success of the electricity transition, the energy industry must ensure that Indigenous Nations and communities have the resources to be responsive to consultation requests. Front-end investment in Indigenous capacity will ensure that development proceeds at the necessary pace.

In its 2024 budget Footnote 163 , the federal government announced its intent to establish a Crown Consultation Coordinator to ensure efficient and meaningful Crown consultation with Indigenous peoples on the issuance of federal regulatory permits to projects that do not undergo federal impact assessments. This is an encouraging move, but Indigenous Nations and communities still require resources and expertise to respond to all types of consultations. Economic reconciliation will benefit greatly from a coordinated approach, from initial Indigenous consultations through to supporting equity participation in new energy projects. Adequately funding these initiatives is critical and should include longer-term, sustainable consultation funding for Indigenous Nations and communities, as well as the development and funding of the national Indigenous Loan Guarantee Program (ILGP).

The Council welcomed the announcements regarding the ILGP in the 2024 federal budget, while also noting that the anticipated need for guarantees in the electricity sector far exceeds the total amount available. The Council estimates that the required level of guarantees for Indigenous equity in electricity sector projects could average up to $2 billion per year until 2035.

The net-zero transition in the North and in remote communities is significantly deterred by insufficient policy certainty and support

Though a very small portion of Canada’s overall emissions come from Northern and remote communities (the total for the territories combined is less than 1%), Footnote 164 the net-zero transition is an important development in these regions for reasons of economic reconciliation and social and environmental well-being. Net-zero mandates are needed in the North (including from territorial governments) to encourage the updating of utility and regulator mandates and align factors such as access to capital. Without proactive inclusion and careful consideration alongside broader federal net-zero policies, these communities could be left further disadvantaged.

In particular, the retail price of diesel fuel in remote and northern regions does not capture its true costs, which include high transport costs and health and environmental damages, masking the benefits of deploying cleaner energy sources. Footnote 165

The net-zero transition has deep ramifications in the more than 280 Canadian communities not connected to larger grids and forced to rely primarily on diesel-fired electricity generation. Footnote 166 Footnote 167 Many of these communities face exorbitant energy costs, and Northern ratepayers currently face the highest electricity costs in Canada. These regions often cannot fully cover the costs of either the existing system or new projects without federal financial support, and they also face capacity challenges, including training and retaining the workforce needed to support electricity projects and infrastructure. Footnote 168

Kivalliq Hydro-Fibre Link

The Kivalliq Hydro-Fibre Link Footnote 169 is a 150 MW transmission project led by the Inuit-owned Nukik Corporation to reduce emissions and environmental risks from diesel spills and spur future socio-economic benefits. Footnote 170 Spanning 1,200 km from Manitoba to the Kivalliq region of Nunavut, the proposed project aims to benefit 5 diesel-dependent communities by providing clean power and reliable internet access, while supporting mining operations and other economic activities.

The federal government has an array of programs and policies in place to support Northern and remote regions, including various funding programs to shift communities from reliance on diesel fuel and to enable Northern-focused energy research. Footnote 171 But Northern communities require more innovative and tailored approaches and investments. Footnote 172 There is a risk that more remote regions could be left behind compared to areas closer to transmission.

“Too often federal policy and regulations are developed on a one-size-fits-all model. As such, remote, isolated northern communities are too often simply excluded or exempted from net-zero energy planning.” Nukik Corporation

Existing federal funding, such as that provided by the CIB, and potential future funding sources that may be facilitated by the ILGP and ITCs, can be difficult to access in the North due to the smaller scale of many projects, the lack of major investors, limited available capital, and the fact that many projects are in the early development stages. Despite these barriers, Indigenous Nations, communities, and Indigenous-led economic development corporations are leading clean electricity project development in the North. Footnote 173 Getting these projects off the ground is uniquely challenging, as communities often lack sufficient resources to advance projects due to much smaller tax and rate bases, lower household incomes, and broader challenges to project economics. Footnote 174

The relationship between the federal government and the territories is constitutionally distinct compared to the provinces. Under the Constitution, provinces exercise powers in their own right, whereas the territories exercise delegated powers. Over the past few decades, significant changes in governance have taken place in the territories as the federal government has begun transferring certain powers to the territories, enabling greater local decision-making and accountability—most recently with the Nunavut Lands and Resources Devolution Agreement. Footnote 175 The federal government has a unique role to play in the North to enable its energy transition due to current fiscal relationships, where a large portion of territories’ resources are received through territorial transfers. Footnote 176

The Council recommends a coordinated approach to economic reconciliation that supports equity participation in new clean electricity projects. This coordinated approach must ensure sufficient capacity to span from initial consultation conversations through to the final stage of supporting equity participation in new energy projects.

The approach should include:

• Adequate long-term, sustained capacity funding for Indigenous Nations and communities to develop and retain the resources needed for consultation and evaluation of rights impacts
• Advisory resources and support for the business-case development process, including project evaluation and business analysis
• Annual expansion of the newly created ILGP in partnership with Indigenous leaders and other experts
• The federal government should provide sufficient resources on a permanent basis to ensure Indigenous Nations and communities have the human resources available to be responsive to consultation requests, learning from existing programs in Ontario and British Columbia. Footnote 177 The mechanism should include a dedicated advisory position to support Indigenous Nations and communities in assessing project impacts on Indigenous rights. Funding for these resources must be proportional to the volume of consultation requests that Nations and communities receive.
• The federal government should provide financial support, directly or through existing bodies, to support the economic analysis and viability of opportunities available to support Indigenous Nations in their retention of economic and legal expertise on projects that advance the energy transition.
• The federal government should implement the ILGP announced in the 2024 federal budget as soon as possible, while also considering longer-term requirements beyond the initial $5 billion, particularly with respect to equity ownership of electricity sector projects. The ILGP must be designed to enable flexibility in (1) the allocation of risk between Indigenous Nations and communities and the project proponent; (2) the level of Indigenous equity participation (including up to 100%); and (3) the type of project (for example, clean generation, transmission, storage).

Please refer to Recommendation 18-D for related supports.

Indigenous Loan Guarantee Programs in Canada

Beyond the recently announced launch of the ILGP outlined in the 2024 federal budget, there are 3 other Indigenous loan guarantee programs in Canada, each with its own terms and sector focus:

• The Alberta Indigenous Opportunities Corporation is supplying up to $3 billion in loan guarantees to support Indigenous groups and communities across the province in natural resources, agriculture, telecommunication, and transportation projects
• The Saskatchewan Indigenous Investment Finance Corporation is providing loan guarantees of at least $5 million each to Indigenous communities and entities for equity investments in eligible natural resource development and value-added agriculture projects
• The Ontario Indigenous Loan Guarantee Program is supporting new renewable energy infrastructure and other electricity infrastructure projects, providing funding of $5 to $50 million per project

These programs are helping to deploy much-needed capital supporting Indigenous Nations and communities. For example, as of March 31, 2020, 10 loan guarantees have been approved under the Ontario program, and the aggregate principal of loans guaranteed stands at $470 million. Footnote 178

The Council recognizes the commitment of provincial and territorial governments to reconciliation and their acknowledgement of the challenges that Indigenous Nations and communities face. In implementing their own programs, provincial and territorial governments can work with the federal government to ensure complementary measures and implement programs that support the same objectives of capacity building, project and business case evaluation, and equity participation.

The Council recommends that the federal government accelerate and substantively scale up its support for net-zero energy systems and clean electricity projects in Northern and remote communities, particularly those that are Indigenous.

Building on current programs, the federal government should:

• Facilitate net-zero pathways and mandates in provinces and territories for Northern and remote regions
• Ensure that national net-zero electricity policies include provisions for the North that advance similar net-zero objectives
• Convene and facilitate partnership opportunities between governments, utilities and communities, particularly Indigenous communities, including inter-regional initiatives
• Scale up funding and target it better by considering equity factors, including support for technology research and all project life cycle phases, particularly development, operations and maintenance, and end-of-life
• Provide transparent data and guidance to quantify the true cost of diesel and assist in shifting subsidies to clean energy projects
• The federal government should ensure that policies developed to guide and support Canada’s net-zero transition specifically address the unique circumstances of Northern and remote communities, particularly Indigenous communities, and outline measures that meet those circumstances. The federal government must define clear mandates and support mechanisms to enable the transition in these regions. It should also provide support to territorial governments and utilities for the development of net-zero mandates and pathways, including: convening and funding regional discussions; broader regional planning and cooperation activities; increased support for Community Energy Plans in the transition to a net-zero future, with emergency planning for enhanced resiliency and reliability; and best practices for provinces, territories, utilities and regulators regarding net-zero mandates and pathways that address the unique northern and remote community context.
• Enhancing funding accessibility and stacking for Northern and remote communities
• Expanding funding to tailored feasibility studies, research and development, and clean electricity infrastructure projects in the North, including community-scale projects
• Accounting for specific barriers and the full life cycle of Northern and remote projects in program design

Provincial and territorial governments adjacent to areas facing these challenges can collaborate with other governments and partners to identify opportunities to address some of the challenges describe in this report, including exploring inter-regional transmission opportunities and incentivizing investment opportunities where possible to promote clean electricity industry development and planning in these regions.

The federal government needs a comprehensive, national approach to address energy poverty in Canada

Depending on how it is measured, energy poverty is reality for between 6 and 19% of Canadian households. Footnote 179 Many people living in energy poverty are renters, who have less control over energy use and the implementation of efficiency measures in their homes.

Energy poverty varies dramatically between and within provinces and territories. For example, the rate of energy spending as a proportion of income is almost triple the national average in the Atlantic provinces and double the average in Saskatchewan. Footnote 180

While electrification is poised to lower energy costs for the average Canadian household, the proportion of lower-income households that will face higher net energy costs is expected to be higher than the population average in the absence of supportive policies.

The 2024 federal budget recently announced $800 million to be directed to energy efficiency retrofits for households with low to medium incomes. Footnote 181 This is an important step, although significantly below estimates of the overall need. Footnote 182

“As end uses increasingly switch to the electricity sector, more energy poverty considerations will fall under the electricity sector’s umbrella. Focused programming for low- and moderate-income and equity-seeking households must be a priority.” David Suzuki Foundation

Canada lacks an established definition for energy poverty, standardized indicators for measuring it, and the data collection and analytical tools needed to use the information for effective program development and delivery. These deficiencies present a significant challenge for consistently addressing the prevalence and impact of energy poverty and for addressing the unique challenges faced by vulnerable groups across the country, including low-income individuals, newcomers, seniors, and people with disabilities and other health challenges.

The federal government can play a key role in supporting provincial and territorial energy poverty programming through direct funding, collaborative development of a framework for data collection and dissemination, and other guidelines and tools to support jurisdictions in monitoring progress on this issue.

Establishing a structured framework will be crucial for a more nuanced understanding of the problem and better targeting of resources to address it. A comprehensive framework can help provinces and territories to identify areas in need of support and tailor their energy poverty programs accordingly, leading to more efficient interventions and strategic resource allocation.

Collaboration with provinces, territories and relevant agencies is needed, as these entities are best positioned to develop and deliver programs tailored to the unique needs and cultural considerations of their customers and to leverage local delivery infrastructure. But some provinces and territories have insufficient capacity to develop and deliver such energy poverty initiatives, so direct funding from the federal government to these agencies is critical to ensure that the issue is addressed consistently across the country.

Building on its 2024 budget announcement, the Council recommends that the federal government expand its funding commitment to include: (i) additional funding for provincial and territorial energy efficiency programs directed to the needs of lower-income Canadians; (ii) a mechanism to develop and publish guidelines and tools to support provincial and territorial programming and address deficiencies in federal data; and (iii) guidelines for the collection, analysis and dissemination of data relevant to the development of energy poverty programming.

• Development of a definition of energy poverty in Canada to support consistent and effective programming
• Development of consistent and robust guidelines and tools to improve data collection, analysis, and dissemination, for better identification of those in need and more targeted program delivery
• Implementation of tools similar to the Energy Dashboard operated by Nova Scotia’s EfficiencyOne, providing examples of effective data collection and analysis tools for targeted energy efficiency programs
• Establishment of critical indicators for measuring energy poverty to improve energy efficiency program access and optimize program delivery
• Developing a funding mechanism to meet federal targets that focuses efforts towards maximizing long term benefits; and
• Continuing to enable no-cost retrofits for low-income and energy-poor households, with assurances to include and protect renters beyond the 2024 federal budget announcements. These retrofits should ensure that specific mechanisms are put in place for rental buildings and non-market and social housing, and include energy efficiency and climate adaptation measures that both reduce heating energy demand and address cooling for extreme heat conditions. Footnote 183 The federal government should also provide increased, targeted support for energy efficiency upgrades and climate-aligned housing development in Indigenous Nations and communities. Footnote 184
• Enhance collaboration among provinces, territories, and relevant agencies in order to develop, maintain, and share data to support best practices in energy poverty programming.

Utilities can play a crucial role in mitigating energy poverty. To enhance the understanding of household-level issues and effectively reach vulnerable groups such as Indigenous peoples, newcomers, and seniors, it is imperative to establish guidelines for sharing utility data with Statistics Canada.

This collaboration will help fill data gaps, identify energy-poor households, and ensure that the value of resources is effectively delivered to those in need. By leveraging utility data and collaborating with Statistics Canada, better targeted and effective energy poverty programs can be delivered to address the unique challenges faced by vulnerable communities across Canada.

Driving energy efficiency and DSM is critical to:

• Reduce the need for costly electricity infrastructure , making both the scale and speed of the clean power build-out more achievable and affordable
• Increase electric system reliability , by reducing stress on power grids and enabling utilities and system operators to manage peak demands through flexible loads
• Protect consumers of all sectors , by lowering their energy bills and improving both housing affordability and business competitiveness
• Protect households , by increasing their resiliency against extreme weather events and power outages, in particular by reducing heat loss through improved building shells

In December 2023, the federal government joined 123 other nations in committing to “the principle of energy efficiency as the’first fuel’ at the core of policy-making, planning, and major investment decisions”. Footnote 185

At the same meeting, the federal government committed to taking comprehensive domestic actions to contribute to a doubling of the annual rate of global energy efficiency improvements.

Canada has no concrete plan at present to achieve this efficiency commitment . Footnote 186 Furthermore, while the 2023 federal budget provided significant incentives to encourage growth of clean power, it was largely silent on the demand side of the equation. This needs to change.

In Canada, provinces, territories, and utilities do most of the heavy lifting on demand-side solutions, providing their own funding, financing, program delivery and regulatory powers. The federal government has 3 important roles to play:

• Accountability and consistency in measuring and reporting on progress toward commitments
• Codes, standards, and procurement to drive broad, structural, and long-lasting change
• Targeted funding to supplement provincial and territorial investments, much as it does with power generation

The Council believes that these are the appropriate tasks for the federal government to take on in order to catalyze substantive improvements in DSM, improve affordability, reliability, and resiliency, and limit the growth of electricity investment requirements.

The federal government made national and international commitments on energy efficiency but lacks adequate measures for accountability

The federal government has made a series of commitments on energy efficiency over the years, including commitments under past Federal Sustainable Development strategies in line with the UN Sustainable Development Goals, and in national climate plans. The federal government has committed, along with other nations, to take domestic actions that will contribute to a doubling of the pace of global energy efficiency improvements by 2030, from the current 2.2% to 4% per year. Footnote 187

In Quebec, Hydro-Québec’s Action Plan expects efficiency and demand response to provide 3,500 MW of equivalent demand reductions by 2032. Footnote 188 Similarly, Ontario has increased funding for its energy-efficiency programs, bringing total funding to more than $1 billion over the current 2021-2024 Conservation and Demand Management framework period. Footnote 189

The Council supports these commitments, as their achievement will significantly lower both the costs and risks of the clean energy transition. Still, the federal government needs to update its policies to better reflect these commitments. For example, Canada’s 2030 Emissions Reduction Plan, which was signed into law through the Net-Zero Emissions Accountability Act (2022), features energy efficiency prominently, but it does not reflect recent commitments and program announcements, nor does it establish a robust framework for action.

Canada is facing a housing crisis – addressing this crisis is a generational opportunity to improve building efficiency for health, climate, and affordability

To address Canada’s housing crisis, 5.8 million new homes will need to be constructed nationwide by 2030. Footnote 190 The drive to reduce the housing deficit, if not done thoughtfully, could perpetuate and exacerbate the country’s energy challenge, while also leading to unnecessarily high heating bills for homeowners. On the other hand, if new housing initiatives are designed to encourage high efficiency building practices, this may lead to a standardization of energy efficiency building practices that can enhance Canada’s performance toward its international efficiency commitments.

The affordability crisis and climate crisis cannot be tackled in isolation, nor do Canadians expect them to be. According to public opinion research, nearly 9 in 10 Canadians are concerned about affordability of housing, while more than three-quarters believe it is important that new housing construction minimize emissions and enhance climate resiliency. Footnote 191 Meanwhile, demand continues to outweigh supply even in the rental market after recent surges in apartment construction. Footnote 192

The federal government has announced new measures to increase the pace of construction, including a top-up of $15 billion for the Apartment Construction Loan Program and the new $6-billion Canada Housing Infrastructure Fund. Footnote 193 The Council acknowledges this progress and approves of the $6-billion commitment being tied to provincial and territorial recipients adopting forthcoming changes to the National Building Code. Canada has a generational opportunity to further leverage these new investments to align affordability, energy, and climate goals.

“Saving electricity not only improves system reliability and affordability … it also frees up more electricity to be used for the purpose of electrification.” Efficiency Canada

Federal, provincial, territorial, and municipal governments have critical roles to play to encourage low-carbon construction and densification and thus avoid locking in further emissions in the building sector, maximize the benefits of electrification, and ensure affordability. The Council broadly concurs with the spirit of the recommendations of the Task Force on Housing and Climate Footnote 194 , which advocate for the federal government harnessing”the power of the purse” to support affordable housing and energy efficiency in tandem.

Energy efficiency drives down home energy costs

Comparing the average annual home energy costs of different housing types reveals significant savings to be generated through energy efficiency. Older homes, which tend to be less efficient, face 29% higher annual home energy costs relative to the average, and 76% higher relative to newly constructed homes of the same size. Renovating older houses to the level of an average house can reduce home energy bills by nearly $800 per year. Building to Passive House standards can similarly cut bills by more than $900 per year compared to a typical new construction, resulting in average annual home energy costs of only $1,010 for a 1,500-square-foot house. Put differently, not building to Passive House standards can add nearly $50,000 to the long-term operating cost of a home, largely due to heating inefficiencies. Footnote 195

Costs are representative of a 1,500 square foot house. Includes heating and cooling, water heating, appliances and equipment, and lighting, but does not include transportation energy costs. 'Old House' refers to homes built before 1946, while 'New Build' denotes homes constructed after 2019. Footnote 196

Bar chart comparing average annual home energy costs between different housing types in Canada. The four housing types depicted are ‘Old House (built before 1946)’, ‘Average’, ‘New Build (built after 2019)’, and ‘Passive House’. Each type is representative of a 1,500 square foot house and includes heating and cooling, water heating, appliances and equipment, and lighting energy costs. Transportation costs are not included. Annual energy costs range from the ‘Old House’ at $3,420 at the high end, to the ‘Passive House’ at $1,010 at the low end.

The federal government should, within the next year, adopt a formal accountability framework for energy efficiency and related DSM goals. The framework must account for existing programs at the provincial and territorial levels to avoid duplication.

An accountability framework should include the following:

• Identify the entity ultimately responsible for ensuring success (for example, NRCan) and clarify reporting requirements to Parliament regarding Canada’s progress toward its commitments
• Establish a methodology to systematically measure success on the goal of doubling the rate of energy efficiency improvements by 2030, while simultaneously adopting a related goal for load flexibility
• Delineate second-tier progress indicators (for example, the rate of home retrofits, the average design efficiency of new housing starts) that together would achieve the goal
• Define a broad strategy, including but not limited to the components discussed in other recommendations, including the application of the Efficiency First principle, designed to achieve these goals

Provinces and territories have the tools needed to create their own efficiency and DSM frameworks and plans, including the ability to set high-performance targets for new construction (as British Columbia has done). Similarly, municipalities have the tools to mandate staged performance requirements for existing buildings (for example, Vancouver Footnote 197 and Montreal Footnote 198 ) and to adopt pro-density reforms to enable more housing with less sprawl.

Similar to recent 2024 federal budget announcements for transit funding that encourage density planning, the Council recommends that the federal government ensure new housing developments that it subsidizes (or otherwise supports) meet the highest tiers of Canada’s National Model Building Code (NMBC), while also incentivizing the adoption of pro-density reforms. Both are essential for ensuring that solutions to the housing crisis do not spill over, directly or through power rates, into unaffordable energy bills for new and existing households.

Ensure that federal funding for new housing:

• Either requires or strongly incentivizes construction to the highest tiers of the NMBC
• Recognizes the achievements of municipalities with strong pro-density regulations that minimize the energy demands for housing and transportation

The Task Force on Housing and Climate has outlined a list of actions for provincial, territorial and municipal governments. For example, provincial and territorial governments can adopt highest- tier building codes and allow municipalities to exceed building code provisions for climate resilience and energy efficiency, as long as they can show rapid permitting and cost savings to the building occupant. Municipalities can amend local zoning and develop and implement local clean energy incentive programs.

The federal government has announced significant funding for growing clean electricity capacity, but support for DSM is lagging

The 2023 federal budget announced significant funding for clean energy with an emphasis on growing the supply of renewable electricity, in particular via the clean electricity ITC and clean technology ITC . Footnote 199 Additionally, the Smart Renewables and Electrification Pathways Program (SREPs) was recapitalized in the 2023 federal budget with an increase of $3 billion, allocated over 13 years, to support critical regional priorities and Indigenous-led projects. Footnote 200 This recapitalization builds on the first round of SREPs funding announced as part of the 2021 and 2022 federal budgets, which allocated over more than $1 billion toward 106 approved projects that focused on the deployment and capacity-building of renewable energy and grid modernization initiatives. Footnote 201

The Council fully supports these measures, as well as other ongoing federal supports for renewable energy and the broader energy transition. However, the Council notes that relative to growing capacity for renewable electricity, there has been disproportionately less federal focus on DSM and grid modernization initiatives, which are essential for managing demand, optimizing energy savings, and minimizing investment needs.

Given that federal resources are limited, the Council has identified a need to prioritize DSM in federal supports.

Given current budget constraints, the Council recommends that the federal government transition the SREPs program towards supporting demand-side solutions, notably energy efficiency, demand flexibility and related grid modernization initiatives. Alternatively, or in addition, the federal government could allocate additional funding specifically for grid modernization and DSM initiatives, supplementing existing programs.

To achieve this, the federal government should:

• Ensure that the update of the SREPs after recapitalization in the 2023 budget includes a phased reduction in support for established renewable energy projects, gradually repurposing those funds for DSM solutions (including distribution-system energy efficiency, demand flexibility, and related distribution-grid modernization technologies), and ensure that electricity-consuming entities and project aggregation entities are eligible proponents;
• Include requirements for proponents to share data and results from project implementation, including public dissemination in a standardized data format, to enable broad adoption of proven and innovative technologies that enhance distribution-system energy efficiency and demand flexibility, following completion of federally supported demonstration, deployment, and pilot projects; and
• When prioritizing the evaluation of project applications, consider alignment with provincial and territorial DSM-related energy roadmap priorities.

See Recommendation 22 for related supports.

Most provinces and territories have already taken the lead on DSM to varying degrees. Going forward, they can support demand-side prioritization by ensuring they are fully assessed and integrated in their published energy roadmaps and plans, and by ensuring sufficient funding – directly or through regulated utilities – to ensure all cost-effective DSM is pursued.

To enable the federal government’s ongoing evaluation of its programs, provincial and territorial governments can also facilitate the sharing of results in standardized data formats from projects supported by their programs. This can assist in the assessment of the effectiveness of the program, which informs program design evaluation, particularly with respect to the impact of public funding and support to the electricity sector.

Market-wide structural changes are needed to enable long-term savings in actions promoting demand-side solutions

Utilities, system operators, and provincial and territorial agencies have long delivered customer-facing programs designed to encourage the adoption of demand-side energy solutions. Many utilities have been tasked with investing in DSM programs, where these investments can create savings at a lower cost than supply-side investments. Federal policy can augment such initiatives with the market-wide structural changes needed to enable long-term savings, including: efficiency standards for energy-using equipment; building codes that provinces and territories can adapt and adopt; procurement rules that use the federal government’s purchasing power to encourage the development of supply chains, which are then able to scale into private sector markets; and targeted efforts at addressing common supply chain challenges.

Energy-efficiency standards for equipment can support energy savings for Canadians and improve economic competitiveness

Improving the efficiency of energy-using products, such as heating equipment, electric motors, and other appliances, can significantly reduce greenhouse gas emissions and other pollutants. For example, high-performance cold-climate heat pumps create a unique opportunity to ensure that packaged central air conditioning systems are adjusted to enable heating as well, thus offering highly efficient heating at low incremental costs. Footnote 202

Differences in the energy efficiency or testing standards of these products, however, can hinder cross-border trade and investment, Footnote 203 increasing costs for Canadians. Canada's standards are generally aligned with those of the U.S., its largest trading partner, but sometimes lag behind. Overall, there is a need to better track technology and market developments so that they are properly reflected in consumer standards for energy-using products.

Addressing building emissions is also a critical measure for meeting Canada’s climate and affordability targets. (Canada’s buildings account for 13% of national greenhouse gas emissions – 18% if electricity-related emissions are included. Footnote 204 )

The required actions range from upgrading building envelopes and heating and cooling systems to replacing fossil fuels (heating oil, diesel, and natural gas) with clean electricity. The federal government can significantly assist in improving energy efficiency through the development of the National Building Codes. Encouraging the adoption of these codes by the provinces and territories helps to enable electrification and generate cost savings and emissions reductions. Footnote 205

British Columbia’s building codes

British Columbia's Energy Step Code leads Canada with an innovative tiered approach to energy efficiency in buildings.

The new code is structured into "steps" that set increasingly stringent performance requirements for buildings, with the ultimate goal of making all new constructions net-zero ready by 2032. Footnote 206 This approach not only promotes higher energy efficiency but also encourages innovation and the use of advanced technologies in construction. Local governments in British Columbia have the authority to incentivize or mandate adherence to these steps, providing flexibility and supporting widespread adoption.

Developed collaboratively by local governments, industry stakeholders, utilities, and the provincial government, British Columbia's Energy Step Code sets the gold standard for progressive building codes that drive substantial energy savings and climate leadership, serving as a model for other regions aiming to boost energy performance and achieve decarbonization.

The federal government can lead by example through the Greening Government Strategy

The federal government has the largest holdings of real property in Canada, including 38,870 buildings totalling 27.6 million square metres of floor space. Footnote 207 With these substantial holdings, the federal government is in an excellent position to lead by example. The Federal Greening Government Strategy has already been put in place to initiate that effort and to position the federal government as a global leader in net-zero property management and operations.

Although the strategy identifies key objectives for improving the environmental performance of real property assets and operations, it exhibits important deficiencies in terms of coverage, reporting, and the sharing of best practices. For example, the strategy does not outline a reporting framework to assess performance. And although it applies to the most relevant federal departments, it does not apply to federal Crown corporations (including ports and airports), which represent 13% of federal real property holdings.

The Council recommends that the federal government expedite the development and adoption of energy efficient products by: 1) modernizing Canada’s Energy Efficiency Act and regulations, to enable include “smart” appliances and equipment that enable peak demand management, as well as aligning with the United States and including the avoided system costs associated with energy savings in standard decision-making; and (2) supporting the updating, expansion and adoption of voluntary product performance standards, including the ENERGY STAR Canada program.

• Enable flexible loads by standardizing requirements for inter-operability of key equipment and appliances with smart devices and controls
• Expand the reach of the regulations to enable the requirement of heating functions in central air-conditioning units where cost-effective
• Minimally align with U.S. standards on most appliances, except on heating and related equipment where Canada’s specifications merit enhancements
• Amend the Energy Efficiency Act to create the tools to integrate the value of avoided long-term investment costs under a net-zero scenario into standard-setting and cost-benefit analyses.
• Maximize the use of energy efficiency standards above regulatory requirements in appliances and other energy-using products. This can be done by updating and expanding voluntary product performance standards, including the ENERGY STAR Canada program. To spur adoption, the federal government could also provide guidance or financial support to Canadian manufacturers to become ENERGY STAR-certified for products that achieve higher efficiency standards than those required by regulation, giving them a competitive advantage.

Provincial and territorial governments and other users can adopt policies to promote the purchase of ENERGY STAR-certified products. Provinces, manufacturers, and standard-setting agencies can collaborate on the development of the Energy Efficiency Act legislation and regulatory changes.

The private sector also has an important role to play. Manufacturers can improve the energy efficiency of their products beyond the Energy Efficiency Act Regulatory requirements and have them ENERGY STAR-certified to improve competitiveness and electricity performance.

Noting that the 2024 federal budget proposes funding for building code modernization, the Council recommends that the federal government modernize the National Building Codes under the Green Building Strategy to incorporate more ambitious requirements for existing technology, energy efficiency, and climate resiliency, while providing increased financial and other support to provinces and territories for code adoption.

• Value the emissions-reduction benefits of efficient electric equipment in new buildings
• Value the full stack of benefits to power systems, customers, and emissions reduction goals from grid-interactive energy efficient buildings, especially for reducing peak demands, integrating variable renewable power, and improving grid reliability
• Enhance the Codes Acceleration Fund program to provide increased financial and other support to provinces and territories to encourage adoption of the codes or high-level code tiers by expanding program content and expanding available funding.
• Expand the capacity of the Canadian Board for Harmonized Construction Codes to develop new climate mitigation and adaptation provisions for the 2030 code cycle. Footnote 208
• Leverage investments made by the CIB to provide support for more stringent codes and ensure future-proof developments and retrofits meet net-zero and climate-resilient codes and standards. Footnote 209

Provinces and territories can adopt the regulatory standards of robust building codes to ensure new housing is built to be net-zero, climate-resilient and future-proof. Municipalities can support building decarbonization through implementation and other policies such as land-use planning.

The Council recommends that the federal government: i) enhance its Greening Government Strategy to mandate participation by Crown corporations and other agencies and properties not currently covered; ii) integrate Mandatory Building Performance Standards and accelerate implementation of green procurement; and iii) improve progress reporting and sharing of best practices.

• Mandate federal Crown corporations and other government entities to participate in the program if not currently covered and provide additional financial support for implementation if required
• Integrate Building Performance Standards into the Greening Government Strategy to lead by example, while proactively mitigating risks Footnote 210
• Improve progress reporting, including for regional-level data and for emissions from Crown corporations and procurement, in order to better communicate results to Canadians. Share best practices with subnational governments and other institutions across the country
• Adopt a systemic approach to set milestones for performance and progress monitoring

Provinces, territories, and municipalities can enact, implement, and accelerate similar strategies in their own jurisdictions (as some already have) to lead by example and leverage operational spending, procurement, and other activities to maximize environmental performance and energy efficiency. This can include Crown corporations and other government agencies as appropriate.

Appendix A: Energy planning

The following appendix outlines suggested features of energy agency mandates and instruments such as pathway assessments and energy roadmaps. As noted in this report, clarity on vision can guide sector stakeholders in the administration of their duties and support their access to support mechanisms.

For many key public institutions in the electricity sector, it is their provincial or territorial governments that would be making use of these suggested features. The features do not constitute official or mandatory requirements and are meant as suggestions to support the development of these instruments. The Council is providing this as a working aid, while strongly acknowledging the authority and jurisdiction of provinces and territories to administer their agencies according to their constitutional rights.

Energy roadmaps

Suggested features for energy roadmaps.

Definition: An energy roadmap can be defined as a comprehensive strategy or high-level plan authored by a provincial or territorial government that guides the development of a net-zero energy system. It should provide a clear articulation of the overall vision and objectives that the government is planning for the energy transition, while putting a focus on the priority actions required in the near term. Footnote 211

Core principles of energy roadmaps

The Council recommends the following guidelines on scoping for a successful roadmap:

• Centre net-zero . Clearly articulate a 2050 net-zero or carbon-neutral objective in the energy roadmap. This objective should also be reflected in the legislation and directives that articulate the mandate for regulators, system operators, permitting and approvals authorities, and Crown utilities (See Recommendation 4 ).
• Clearly articulate the government's vision, objectives and actions . Set out a clear picture of the objectives that inform the roadmap, outcomes that the roadmap is trying to achieve by 2050, five-year milestones along the way, and regulated near-term actions.
• Provide regular updates . Ensure the roadmap, and the priorities it sets out, are updated at least every 5 years. (Where new solutions or options emerge between updates, governments should retain the ability to issue related directives or targeted changes to roadmaps.) This will be critical to ensure roadmaps stay action-oriented, drive specific needed changes, and remain relevant to the evolution of the energy system.
• Ensure alignment across energy system actors . Require responsible entities or agencies to publicly report no less than biannually to the provincial or territorial government to outline how they are supporting the jurisdiction’s net-zero energy vision and identify both progress and barriers to inform ongoing policy-making from provincial governments.
• Modernize energy governance and regulation . Identify and provide direction on key reforms necessary to evolve existing energy governance and regulatory frameworks to align with the achievement of a net-zero energy system.
• Scope to include all energy systems . Provide direction on the necessary action and reforms for the full energy system (for example, both electricity and gas systems), promoting integrated planning and resource deployment and tackling the full domestic energy mix that will be required in 2050. Energy exports to other countries can be considered out of scope for a roadmap.
• Develop a participatory engagement process . Ensure that Indigenous rightsholders, key stakeholders, and the broader public have the support and resources to meaningfully participate in developing the energy roadmap, and the opportunity to inform the regular updates that take place.
• Conduct regular evaluations of actions . In addition to five-year milestones and periodic updates to the roadmap, the government should commit to transparently reporting back no less than biannually to transparently review the actions outlined in the roadmap and provide updates on progress.
• Identify and plan for labour market needs . Outline the expected scale of labour requirements to support the energy roadmap, including specific measures, funding and collaboration with labour organizations that will help ensure adequate training and availability of the required skill sets.

Advice on objectives and actions

The following advice identifies some of the core issues that should be addressed within an energy roadmap to provide the necessary certainty to energy-system actors and other stakeholders. While energy roadmaps should be specific, they are intended to guide - not substitute for - the more detailed work of system planners, utilities, and regulators.

• Provide direction on the extent and timeline of electrification in sectors including transport, industry, and buildings, reflecting the best available information about cost-effective decarbonization pathways, and leveraging pathway assessment and other modelling insights where possible.
• Provide clarity on the desired pace of electricity system decarbonization, the anticipated scale of load growth, and guidance, where possible, on specific sectors that will require non-electrification pathways (for example, industries or transportation end-uses that may emphasize consumption of hydrogen or renewable natural gas).
• Where applicable, provide broad intentions around generation mix and clarity around which generation technologies the government wants to play a role (and which it wants to avoid). (In some jurisdictions, this clarity may relate more to how market or procurement design should harness market forces to drive the generation mix.)
• Identify priority geographies for specific infrastructure investments, including high-level timelines.
• Prioritize and scale up the integration of energy storage, DSM, and DERs, outlining strategies to address the regulatory and policy barriers and ensure their inclusion as a resource class.
• Signal intentions around inter-regional collaboration and integration, including establishing processes to explore and expand inter-regional transmission.
• Define and use metrics and targets to measure progress (for example, emissions, emission intensity, electricity as a share of end-use capacity expansion potential).
• Where pathway details remain uncertain or absent, detail when more specific decisions can expect to be taken and the conditions and outcomes that will guide decision-making.
• Where appropriate, provide guidance on how utilities and regulators should ensure affordability and fairness (especially for low-income, marginalized, and rural communities), and outline the role that government policy will play. Provincial and territorial energy roadmaps can articulate a range of acceptable rate impacts. This range does not represent presumptive approval but signals to regulators that, if all other aspects of a proposal serve the public interest, bill impacts within the range should not solely justify the rejection of an application.
• Public participation in the government's energy roadmap development
• Proactive Indigenous engagement and commitments to advancing reconciliation and equity
• Details regarding how community participation should fit into utility planning and regulator decision-making
• Include direction to address climate change impacts, for example by enhancing the adaptation and resiliency of electricity infrastructure and operations, for example.
• Provide direction to share data and information with counterparts in other provinces and territories.
• Provide an assessment of labour market implications, including projections for labour requirements needed to undertake the building of infrastructure and other actions described in the roadmap. Provide clear guidance, funding commitments, and actions for collaboration with unions, industry, and training institutions to ensure workforce availability, retention and expansion. Also consider developing specific mechanisms to ensure labour availability, such as Project Labour Agreements.

Pathway assessments

Suggested features of a pathway assessment.

Definition: Pathway assessments can be defined as studies of the available and credible pathways for achieving a net-zero economy by 2050. Their development is fundamental for achieving an orderly energy transition, helping to evaluate choices and trade-offs, identifying priority actions, and bringing key stakeholders together to have evidence-based discussions and build a shared understanding about the future of a jurisdiction’s energy mix. Footnote 212

Best practices

Governments looking to establish pathway assessments as a core piece of their strategy for navigating the energy transition should consider the following best practices:

• Exhaustive: A pathway assessment should consider all credible net-zero pathways as scenarios, regardless of established technology or pathway preferences, accounting for the inherent uncertainty of the transition. This could be accomplished by commissioning a pathway assessment from independent experts or by undertaking a government-led effort that is inclusive of all potential scenarios and considers uncertainties such as technology costs and availability as well as global climate action and oil prices.
• Comprehensive: The assessment’s modelling should include an evaluation of the greenhouse gas emissions associated with all aspects of the economy, including the interactions between all types of energy (not exclusive to electricity).
• Transparent: Model selection, scenario design, and the selection of inputs and assumptions should be done transparently, with the outputs from all considered scenarios available for public scrutiny.
• High-level: A pathway assessment should not seek to replace more detailed electricity system planning and modelling conducted by system operators and utilities (which, for example, will have more detailed representation of resource adequacy, operability, and transmission requirements). For example, an economy-wide pathway assessment can use the more detailed modelling specific to a given power system, region, or sector to enhance the inputs and assumptions it makes in consideration of different scenarios.
• Recurring: To ensure a jurisdiction’s energy strategy remains relevant, a pathway assessment should be recommissioned on a regular schedule (most likely in the range of every 2.5 to 5 years). This allows for the inclusion of new scenarios and the consideration of changes in technology costs and availability, macroeconomic changes, and evolving insights from more detailed modelling that looks at specific sectors, technologies, and regions.
• Consultative: It is critical to be thoughtful about the data inputs, scenario design and assumptions employed in a modelling exercise. Many choices or assumptions are highly subjective and should be determined in consultation with local subject matter experts and stakeholders (including electricity system regulators, energy utilities, government officials, labour and civil society organizations, consumer interest organizations, and municipal and external policy experts), as well as Indigenous rightsholders.

Advice on modelling scope

The Council advises the following when commissioning or undertaking a pathway assessment.

• Be defined by an economy-wide modelling exercise, which assesses potential energy demand from all sectors across a set of established and credible scenarios that explore all the credible pathways to reaching net-zero
• Provide sufficient evidence to inform decisions and evaluate solutions that achieve emissions targets while prioritizing cost-effectiveness
• Be conducted with sufficient consideration, granularity, and treatment of the electricity sector, whether in the assessment itself or though separate utility modelling (and ideally both), to inform future iterations of the assessment. This involves facilitating an understanding of peak demand impacts, distribution and transmission impacts, operability, and resource adequacy needs
• Include a representation of energy trade with extra-provincial jurisdictions (assumptions used to determine this representation should be determined in consultation with trade partners). This may be accounted for in scenario design and assumptions to represent the availability of imports and demand for exports
• Include a representation of key macroeconomic influences, such as assumptions on global energy prices, population growth, stringency of global climate policy, interest rates, etc.
• Consider financial decision-making and behaviourally realistic choices, such as accounting for market heterogeneity and consumer preferences
• Be capable of representing current and emerging abatement pathways, including fuel switching and fuel blending, energy efficiency, DSM, DERs, energy storage, carbon capture and storage, process emission management, and low-carbon industrial processes. The model should also account for declining technology capital costs through learning-by-doing and economies of scale;
• Provide results on an annual basis through 2050
• Account for the impacts that a changing climate has upon the availability of different resources and the cost implications of weather events (and the corresponding spending on enhancing energy system reliability and resiliency)

Advice on scenario creation and analysis

The Council advises the following in the design and analysis of scenarios for pathway assessment:

• Use a combination of descriptive and normative scenarios to explore pathways to achieving net-zero emissions.
• Model a baseline scenario that includes existing federal and provincial/territorial policies
• Compare the baseline scenario to one that builds on and increases the ambition of existing policies in order to achieve net-zero emissions by 2050
• Continue adjusting the policy and technology assumptions of the ambitious scenario until it achieves net-zero emissions in 2050
• Apply emissions constraints (i.e. net-zero by 2040, 2045, or 2050) and observe how each economic sector evolves in response
• Assumptions to inform scenario design should be internally consistent within each scenario. For example, in a scenario where it is assumed that net-zero targets will be achieved at a global level, demand for fossil fuels should be low and commodity prices should reflect this.
• Costs and timing of market availability for emerging technologies such as hydrogen end-use technologies, small modular reactors, and direct air capture
• Technology adoption rates, including co-generation and other distributed supply
• Constraints on biomass supply and other fuel supplies, and limits related to labour supply or supply chains and related to specific technologies, as relevant (direct air capture, carbon capture and storage, etc.)
• Demand for exports by the United States and other countries for energy and products, including electricity, oil, liquid natural gas, hydrogen, metals, and minerals, especially as production processes become increasingly electrified
• Domestic policy, including announced federal policies and announced policies in other provinces and territories
• Global climate action and global oil prices, as they have an important impact on Canada’s oil and gas sector

Advice on outputs and metrics

To be useful for informing policy decisions and providing information to key stakeholders such as system operators, the following metrics should be included in the reporting of model outputs in each scenario examined:

• Final energy consumption by fuel type in each economic sector
• Annual and cumulative greenhouse gas emissions by sector
• Total discounted system costs for energy systems
• Economic impacts (such as GDP)
• End-use technology market shares in each economic sector (for example, percentage of electric vehicles in the transport sector or heat pumps in the building sector)
• Timing, scale and mix of capacity additions (including generation, transmission, and storage) in the electricity sector
• Electricity generation by type
• High-quality representation of different load profiles and implications for system needs (for example, archetypal days)

Updated and clarified mandate reforms

Suggested features of updated and clarified mandates.

Definition: The modernization of the regulatory and governance frameworks that oversee the operation of energy regulators, utilities and system planners is an important measure for achieving the pace, scale and innovation required to cost-effectively navigate the energy transition while achieving climate targets.

Core principles

Governments can consider the following core principles when looking to modernize the regulatory and governance frameworks that oversee their energy systems Footnote 213 :

• Net-zero energy objective: Build new objectives into the enabling legislation and directives for regulators, Crown utilities system operators, and permitting and approvals authorities that require the consideration of climate targets in the regulation, management, and operation of the energy system.
• Comprehensive energy regulation: Ensure the coordination of energy system planning across different energy sources (including electricity and natural gas, as well as emerging sources like hydrogen). This may require a single regulator to have purview over all regulated energy sources.
• Enable responsible and flexible regulatory frameworks: Ensure regulators, system operators and utilities can embrace innovative approaches and technologies to deal with uncertainty and deploy the necessary resources at the pace and scale required. Regulators will need to articulate innovative frameworks that can be relied upon by regulated entities to submit proposals for the above-average investments required for net-zero energy (e.g. the Ontario Energy Board’s Custom Incentive Rate-setting, multi-year cost of service applications), supporting the deployment of new technology, and building out supply and supporting infrastructure in advance of demand.
• Reporting: Require regulators to publicly report no less than biannually to the provincial or territorial government to explain how their decisions and processes are aligning with the province’s net-zero energy roadmap. Regulators should also report on challenges or barriers to implementation, which can support improved policy-making from governments.
• Facilitate deployment of demand-side solutions and non-wire alternatives: Direct regulators, system operators, Crown utilities, and permitting and approvals authorities to embrace new market instruments, regulatory frameworks, and approaches to cost-benefit analyses that facilitate cost-effective deployment of demand-side solutions and non-wire alternatives.

Advice on regulatory and governance reforms

Governments can undertake the following actions to help ensure their energy governance and regulatory frameworks are aligned with the achievement of a net-zero energy system by 2050:

• Working with regulators, system operators and Crown utilities, ensure mandates clearly reflect the achievement of net-zero planning objectives, and advance directives or legislation where required to ensure their actions, decisions, and policies are consistent with achieving emissions targets.
• Ensure the distinct roles and responsibilities of regulators, system operators, utilities and the government are clearly defined and that they are properly empowered and resourced to undertake this work.
• Review regulator mandates and governance structures to ensure regulator purview is extended to include emerging energy types (renewable natural gas, hydrogen, district heating, compressed air, etc.).
• Provide guidance on how regulators should manage planning and regulation of gas and electric utilities (and their integration and/or competition).
• Instruct regulators to undertake integrated reviews and approvals that consider overall infrastructure development needs, in order to provide a coordinating and integrating function.
• Require regulators to articulate the responsive regulatory frameworks that can be relied upon by regulated entities to submit proposals for the above-average investments required for net-zero energy.
• Direct regulators to establish processes and provide guidance for non-standard submissions, the types of applications to be used with each process, and the processes for applications outside of regular submission cycles, where appropriate.
• Require regulators to publicly share core assumptions used in submissions (e.g. assumed economic and population growth) and in application reviews and decisions, to support transparency and standardization.
• Provide direction to liaise with concierge services that facilitate other aspects of project reviews and assist with the identification of priority projects that require immediate review.
• Direct regulators and utilities to enact rate structures that incentivize electrification (and at a minimum do not discourage it).
• Direct the identification, consideration, and pursuit of market design reforms (in jurisdictions where applicable) to support net-zero-aligned resource deployment.
• Direct regulators to consider all available resource options, including DSM, DERs, energy storage, emerging technologies, and hybrid options and to capture the full value they bring to the system.
• Providing guidance and rules on cost-benefit analysis
• Requiring that submissions use them
• Having regulators scrutinize the findings for themselves
• Provide resources for regulators to proactively and continuously reconcile outputs from pathway assessments to more spatial and technical models used by system operators and utilities.
• To facilitate data sharing across jurisdictions and manage the widespread deployment of distributed resources, governments should direct regulators to require utilities and system operators to prioritize investments in digitalization of their systems and provide support for collaborative and secure data-sharing frameworks.

Appendix B: What the council heard

This appendix summarizes the input that the Council received in the written submission process and supplementary virtual roundtables conducted during its external engagement process. Stakeholder and partner feedback provided useful insight to inform the Council’s recommendations for the development of electricity policy. The written submission process took place from December 2023 to January 2024 and solicited submissions through a Discussion Guide sent to 350 organizations and posted publicly. The Discussion Guide consisted of 28 questions that aligned with the Council’s five working groups:

• Improving planning and oversight of electricity systems to support net-zero
• Building electricity infrastructure in a timely manner, while creating benefits for Indigenous partners
• Attracting capital investments and maintaining electricity affordability through the transition
• Enhancing regional cooperation to take advantage of efficient, low-cost pathways to net-zero
• Enabling electricity sector innovations while maintaining grid reliability and resiliency

Stakeholders were able to choose which questions to respond to. To avoid engagement fatigue, the Council analyzed and incorporated previous and ongoing engagements that NRCan has conducted and evaluated using the parameters of the Council’s engagement process. Initiatives reviewed included Regional Energy and Resource Tables (2023), National Benefits-Sharing Framework with Indigenous Peoples (2022 to 2023), Green Buildings strategy consultation (2022), Innovation in Electricity Regulation Initiative (2022 to 2023), Generation Energy (2017), and Utility Advisory Committee and related engagement for Northern and remote communities (2020 to 2022).

In additional to 66 virtual and in-person meetings with stakeholders, the Council received 72 written submissions from electricity stakeholders representing every province and territory across Canada. Given the complexity of some of the questions that the Council asked as part of the Discussion Guide, 1 stakeholder was invited to supplement its submission, and 2 others were invited to discuss their perspectives at a virtual session (in lieu of a supplementary submission) to deepen the Council’s understanding of their perspectives.

At a high level, the majority of feedback indicated general alignment with the Council’s discussions on its major lines of inquiry. Since not all respondents answered all questions, the numbers below indicate a high level of mention by respondents. Key areas emphasized included:

• Net-zero mandates for regulators: Nearly 40% of respondents noted the need for updated mandates for utilities and regulators, emphasizing the importance of including net-zero goals and often highlighting the need for additional mandate changes (for example, DSM and DER integration, such as adoption of a Total Distribution Operator model; adopting performance-based regulation and alternative models to cost-of-service). Only 7 respondents, notably some governments and utilities, opposed changes; of these, most stated that current mandates were sufficiently flexible.
• Net-zero roadmaps and pathway assessments: More than 30% of respondents mentioned the need for provincial and territorial net-zero roadmaps and pathway assessments; many suggestions were made on elements they should include. Some respondents also stressed the need for policies to align with internationally determined and science-based emissions targets. A strong theme, particularly from governments, utilities, and regulators, was that the federal government will need to be mindful that pathways will differ significantly between jurisdictions.
• Accelerating project approvals: More than 30% of respondents emphasized that current approval times are too long and provided suggestions for acceleration. At least 10 respondents noted concerns about unintended consequences with accelerated approvals for Indigenous inclusion, social license, and public engagement.
• Prioritizing energy efficiency and DSM: Many respondents noted the need to manage affordability during the transition. Around one-quarter of respondents cited energy efficiency and DSM as areas needing increased support; several respondents expressed a desire for this to be embedded in regulator and utility mandates.
• Easing the cost impact on ratepayers: The majority of respondents were in favour of a publicly funded approach to help shift a portion of electricity transition costs away from ratepayers. Many reasons were cited, including the observations that the benefits would be society-wide and that taxpayer support can help more equitably distribute costs and is critical for areas where ratepayer funds are less common (such as supporting early-stage innovation). At least 13 respondents made specific recommendations on expanding the recently announced ITCs, although policy requests varied. Several respondents called for higher thresholds for government funding programs and more open-ended or multi-year options.
• Improving regional cooperation and planning: Nearly half of respondents expressed support for increased regional cooperation and a role for the federal government to facilitate it. Only 3 respondents opposed increased regional cooperation or a role for the federal government.
• Conditionalities on federal funding: At least 16 respondents indicated a strong desire for conditionalities to be applied to federal funding for electricity, not necessarily exclusive to the ITCs. Suggested conditionalities focused on the provinces and territories and varied significantly (commonly cited conditionalities included requiring DSM plans and all cost-effective energy efficiency solutions, full participation of Indigenous peoples in planning, and accelerating approvals processes). Some suggested conditionalities focused on project proponents (such as partnering with Indigenous partners or committing to best-practice public engagement). A smaller number of respondents (7) opposed conditions on funding, primarily from utilities and industry.

Other topics that were consistently mentioned for federal policy action included: convening provincial/territorial and electricity sector actors; providing guidance on best practices (for example, for mandates, data, and modelling); improving federal data collection and modelling; supporting regulatory and technology innovation through mechanisms such as innovation sandboxes, support for research and development, and knowledge-sharing; providing additional support for DERs; supporting customer participation in the electricity grid, including local and community ownership of projects, funding for technical and planning support for communities, and customer education; and prioritizing certain types of net-zero-aligned projects for approvals (such as proven low-risk technologies).

Feedback on Indigenous inclusion and benefits

Many respondents – including utilities, electricity producers and Indigenous organizations – commented on Indigenous-related electricity issues. Most submissions expressed support for an ILGP, but also emphasized that such a program on its own would be insufficient to ensure Indigenous economic participation, since many communities may not currently have the fiscal or human-resource capacity to advance projects under such a mechanism. There were strong calls for additional forms of federal support, including grants, low-interest debt financing, direct investments into capital costs, discretionary funds to leverage third-party expertise, and support for feed-in-tariffs. Indigenous respondents emphasized that current funding mechanisms could be more accessible through stackable funding, more flexible funding outcomes, and the ability to use project funding for capacity-building, training, and project development. As one respondent noted, “It is important to recognize that Indigenous communities’ full participation in electricity projects is often hampered by the slow and iterative processes used by governments and financial institutions to deploy capital.”

Feedback on the electricity transition in the North

Northern respondents emphasized that net-zero and related technology and planning decisions in the rest of Canada have deep ramifications in the North. As one respondent noted, “The transition is not just a dollars-for-carbon calculation. The cost of not participating in the changing economy, and not being included in the transition, despite the North suffering disproportionately from climate change, needs to be recognized.” Northern respondents expressed concerns about keeping up with the transition and noted that policy exemptions for the North at both federal and provincial levels are not helpful signals, especially if alternative measures to meet similar goals are not put in place. While acknowledging progress on existing programs, respondents stated that, overall, little movement has been made to make sufficient funds available for the North to align with the 2035 goal for net-zero electricity. They emphasized that decision-makers (including governments, utilities, and regulators) are not currently considering the “true” cost of diesel fuel in decision-making. Respondents also emphasized the vital role of the federal government in supporting financing, as project development is currently led by organizations that are limited in capacity and fiscal resources. Regional collaboration was mentioned as a clear opportunity for the federal government to facilitate, whether for interties, planning and knowledge-sharing, bulk materials procurement, or otherwise.

Respondents also raised issues that they felt were critical for the Council to consider but were outside the scope of their recommendations. They are listed here to reflect responses and emphasize the importance of these topics receiving policy support to advance the electricity transition.

Social license

Social license was a strong theme raised in response to the Council’s questions on project approvals. Nearly half of respondents, across stakeholder types, noted that community engagement, participation, and buy-in are fundamental to the electricity transition. Respondents stressed that public support is critical for project approvals and reducing delays, but also noted opportunities for local economic benefits. Commonly cited policy actions included: 1) providing fiscal support and guidance for communities to engage in and understand approvals; 2) providing guidance to proponents on best-practice engagement and benefit agreements; 3) incentivizing or requiring Community Benefit Agreements (as implemented in British Columbia, Nova Scotia, and New York); 4) embedding public participation in net-zero planning, project approvals and siting; 5) supporting community-level projects and planning (for example, Community Energy Plans); and 6) working with municipalities on system planning, project development and siting.

About one-third of respondents, across stakeholder types, stressed the urgency of addressing workforce issues. Respondents noted that without proactive action focused on good quality jobs, Canada will face difficulty retaining and attracting workers in a globally competitive market. They also observed that the construction workforce is highly mobile, that advance planning is key to ensure successful projects, and that actions to support labour can increase investor confidence, social license, and diversity, equity, and inclusion outcomes. The 3 most cited policy actions were: 1) labour planning with unions to ensure availability and qualifications; 2) scaled-up investments in training and collaboration between industry, academic institutions, and unions on certification, with special attention to equity-deserving groups; and 3) encouraging adoption of Project Labour Agreements (similar to the U.S. Executive Order for PLAs).

Supply chain

At least 13 respondents cited the need to address supply chain issues by both supporting domestic action and leveraging global supply chains, although recommended policy actions varied significantly. The majority focused on supporting domestic supply chains and the commercialization of home-grown technologies, including providing grants, incentives, and support for business development of Canadian manufacturing capacity. Respondents noted that supply chains are a key bottleneck to electricity buildout, but if addressed correctly, could become a driver of economic growth.

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