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Breaking Canada's Fossil Fuel Habit Would Entail 'Unintended Consequences,' CERI Says

Canadian motorists, homes and commercial buildings can break the fossil fuel habit -- but only by paying a high price in "unintended consequences" of increased living costs and lost assets, jobs and tax revenues, according to the Canadian Energy Research Institute (CERI).

The industry, government and university-supported agency sounds the warning in a foray into the practical economics of "energy transition" to replace natural gas and oil products with renewable electricity from wind, solar, hydro, geothermal and nuclear generation.

CERI counts the costs of the Liberal federal government's United Nations commitment to carbon exhaust cuts -- 30% by 2030, 80% by 2050 -- in a new study: Greenhouse Gas Emissions Reductions in Canada through Electrification of Energy Services.

"Higher investment and operating costs will inevitably lead to higher average costs of electricity," CERI predicts. The study points out that distribution of price hikes will be highly uneven because of the wide variation in natural resources and power facilities.

"We estimated the increase in average cost to be 16-77% in 2050 depending on the province," CERI said. Forecast expenses per ton of carbon emissions cuts range from C$13 (US$9.75) in British Columbia to C$114 (US$86) in Ontario and C$176 (US$132) in Alberta.

Allowing power companies to continue using natural gas-fired generation, provided they add carbon capture and storage systems, would reduce clean power conversion price tags by C$8-18 (US$6-13.50) per ton.

"Transitioning to an energy system with electricity as the dominant end-use energy source requires changing the existing infrastructure stock -- vehicle fleets, buildings, and equipment -- across all sectors of the economy," CERI said.

"Furthermore, it requires much larger electricity generation and transmission infrastructure than today. That would inevitably have significant economic impacts resulting from new investments, stranded assets, and changes to energy markets."

CERI estimates for total costs per ton of cutting greenhouse gas emissions from Canadian homes, personal vehicles and commercial premises by converting to renewable power range from C$8 (US$6) in Manitoba to C$216 (US$162) in Alberta.

But CERI's energy transition forecast stops far short of counting the full costs. Expenses of taking carbon emissions out of long-distance freight delivery, agriculture and industrial sites, such as cement and oilsands plants, cannot be estimated reliably because of the gaps in conversion technology, performance and consumption data, according to the research agency.

Natural gas utilities, the motor vehicle fuel network and federal and provincial government treasuries stand out as big potential losers in the Canadian version of energy transition.

"With electrification in the residential and commercial sectors, the main fuel that gets replaced by electricity is natural gas," CERI said. "Natural gas is delivered to over 6.6 million residential, commercial and institutional customers across Canada."

Over the past 10 years, annual spending by gas utilities to satisfy demand growth and change has been C$1.2-3 billion (US$900 million to $2.2 billion), CERI said.

"The gas delivery system consists of over 450,000 kilometers [270,000 miles] of transmission and distribution pipelines as well as above-ground and underground storage facilities. The investment in this infrastructure will be stranded with electrification."

Service stations are also a Canadian economic mainstay that energy transition visions of replacing the country's 22 million gasoline and diesel vehicles with electric machines put in jeopardy: "As of December 2014, there were approximately 17,200 gasoline stations in Canada," CERI said.

"About 29% of these stations had one to five employees and 70.9% had more than five employees. These filling stations primarily serve personal transportation fuel demands. Under electrification of passenger transportation, these stations may lose the primary market they serve, depending on how the charging station infrastructure is developed."

Canadian governments have relied on gasoline taxes for generations to build and maintain roads, and increasingly to finance public transit, CERI said. Combined federal and provincial gas taxes raise about C$11 billion (US$8.2 billion) per year.

CERI added a warning that environmental concerns, currently focused on fossil fuel supply development and pipelines, are bound to spill over into the electricity sector if renewable power grows into a large-scale industry.

"The land use required to provide the additional electricity supply will mean an expanded grid in all provinces. Renewable electricity generation options are at a lower energy density than fossil-based generation," according to the research agency.

"Given current citizen concerns related to siting of energy infrastructure projects, electrification of end-use services will see a heightened challenge for building the corresponding electricity supply requirements."

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