Federal infrastructure bank to build electricity connections between provinces

Federal Environment Minister Catherine McKenna addresses a news conference at the Nova Scotia Community College in Dartmouth, N.S. on Monday, Nov. 21, 2016. (Andrew Vaughan / THE CANADIAN PRESS)

OTTAWA -- The Trudeau government intends to use its new infrastructure bank to finance a "nation-building effort" to build clean electricity systems between provinces and territories.

But does that mean the decades-old dream of a pan-Canadian power grid is finally about to become a reality?

Not likely.

Sergio Marchi, president of the Canadian Electricity Association, says the technological know-how to transmit electricity for vast distances across the country doesn't yet exist and, even if it did, would be prohibitively expensive.

More likely, Marchi believes the bank could be used to develop regional energy "interties" -- connections between two electricity systems -- between provinces.

For instance, he said it could finance the infrastructure needed for British Columbia to transmit its abundant hydro power to Alberta, which is trying to shift off coal-fired electricity, or for Manitoba to transmit its hydro to Saskatchewan, which gets more than 40 per cent of its energy from coal-fired power plants.

Similarly, he said more of Quebec's hydro could be transmitted to Ontario or to the Atlantic provinces.

"I think regionally and picking our spots, I think that's very doable," Marchi, a former federal cabinet minister, said in an interview.

"And so we already think that the federal and provincial governments on some of these interties are looking at that very thing and we're expecting the budget to unveil that."

Creating a national energy grid, enabling some provinces' surplus hydro power to be transmitted across the country instead of south to the United States, has long been touted as a nation-building project, a way to strengthen east-west ties that bind Canada together and to counteract the pull of north-south ties.

The possibility that the federal government might be considering financing a pan-Canadian energy grid was raised Monday by Environment Minister Catherine McKenna when she announced the accelerated phase-out of coal-fired electricity by 2030 as part of the federal strategy to combat climate change.

"The Government of Canada will support this transition by using the Canada Infrastructure Bank to finance projects such as commercially viable clean energy and modern electricity systems between provinces and territories," she said in a news release.

The release included a quote from Dominic Barton, chair of the federal advisory council on economic growth, calling connecting the provinces with a clean energy system "a nation-building effort" that will position Canada to "compete for significant global investments in our power sector." Barton's growth council is one of the biggest champions of the need for an infrastructure bank.

The Trudeau government is planning to launch the bank next year, with $15 billion in direct federal investments and another $20 billion in repayable contributions, loans and loan guarantees. It hopes to leverage up to $5 in private investment for every $1 in government funding.

Government officials say no decisions have yet been made on specific projects to be financed through the bank.

But asked about the possibility of using the bank to finance a national energy grid, a spokeswoman for Infrastructure Minister Amarjeet Sohi, like Marchi, talked instead about interties.

"We see great potential for the Canada Infrastructure Bank to help support green infrastructure such as intertie and commercial scale renewable energy projects," Kate Monfette said in an email.

She added that Natural Resources Canada is "in the process of evaluating strategic grid inter-connections" and that work will "help provinces prioritize their grid infrastructure decisions."

Natural Resources Minister Jim Carr has long been an advocate of an east-west power grid. But Marchi said his association has advised the minister to think instead about regional inter-connections. And in the group's discussions with Carr, McKenna and their advisers, he said it's become clear that high-level discussions on the issue are already well under way between Ottawa and the provinces.

Opposition parties have pounced on the government's plans to use the infrastructure bank to leverage private investment for major projects, predicting that investors' demand for a high rate of return will mean additional costs to build infrastructure and inevitably result in road and bridge tolls and other user fees.

But the president of the Federation of Canadian Municipalities says there are not enough details yet about how the bank will operate to be able to make such predictions.

"I don't know how anybody knows that now until we can see actually what comes out of it," Clark Somerville said in an interview.

The federation has been promised it will be consulted on the details, which are expected to be unveiled in the next federal budget in a few months, he added.

In the meantime, Somerville said municipalities welcome creation of the bank as another tool in their tool box for financing costly infrastructure projects.

Led by the federation, some 100 municipal leaders from across the country are in Ottawa this week to lobby ministers and MPs on the need to rely on municipalities' expertise in designing the second phase of promised infrastructure funding. The government is promising to devote $186 billion over the next 12 years during the second phase, which includes the infrastructure bank.