Ontarians footing energy bill for export deals

By Toronto Star


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Ontario electricity customers have subsidized power exports to the tune of $1 billion since 2006 - with most of the money ending up in the pockets of energy traders.

That's the conclusion of research by three experts in North American energy markets, who are preparing an in-depth look at the issue to be published later this year by the C.D. Howe Institute.

The traders are exploiting the fact that exported power doesn't have to pay a substantial fee called the "global adjustment" that is charged to domestic electricity users.

They can buy Ontario power at a price significantly below the one paid by Ontario residents, and sell it into the Quebec or U.S. markets, where it fetches a much higher price.

"It is middlemen that are probably benefiting, and we don't know who these people are," says Jan Carr, former chief executive of the Ontario Power Authority, who is one of the researchers.

Carr has studied the issue with Greg Baden and Lucia Tomson, both of whom spent years as energy traders. Baden and Tomson are now with the energy consulting firm BECL and Associates Ltd.

All three stress that there's nothing illegal or improper with the export transactions, noting that exports can be beneficial.

But they say it's unfair to Ontario ratepayers, who are paying the full cost of electricity produced in the province, while traders in effect buy it below cost and turn a profit by exporting it.

Carr estimates that Ontario electricity customers on average have provided subsidies of $250 each over the past five years to the exporters.

Electricity exports have been increasingly in the public eye, as the growing supply of renewable power entering the market is more frequently creating surpluses available for export.

Ontario has always traded energy with its neighbours, but until a few years ago was generally a net importer, says Tomson.

Recent figures, she notes, show exports running about 3.5 times higher than imports: "That's a huge change."

The trio trace the roots of the issue to about 2005, when the Ontario government increasingly took electricity pricing away from the open market. For example:

• Much of the output from Ontario Power Generation - its nuclear stations and big hydroelectric plants - was regulated.

• The newly created Ontario Power Authority signed fixed price contracts with other generators, including Bruce Power.

• Meanwhile, contracts were made with wind, solar and other renewable power producers at fixed prices.

Some of the contracts were at prices above the market rate. To make up the difference, customers were charged a "global adjustment," which shows up as the "provincial benefit" on retail hydro bills.

In previous years, the global adjustment was quite small - about 0.5 cents a kilowatt hour while the market price was about 5 cents.

But starting about 2008, the balance changed dramatically.

The recession softened demand for power, weakening the market price. Natural gas prices, which also influence the electricity price, also reduced power prices.

Meanwhile, an increasing amount of power was flowing onto the grid at fixed prices higher than market levels.

As a result, for the past two years, the market price and global adjustment have been about equal. The global adjustment, once less than a penny per kwh, now is generally in the three to four cent range.

That means exporters who buy on the market are paying far less for power than domestic customers, but all the costs of contracted power must still be covered by the Ontario ratepayer.

"For every megawatt hour that's exported, the global adjustment is paid for by the Ontario ratepayer," says Tomson.

Baden says there are 20 to 30 firms in Ontario who are active energy traders. Some are associated with private generators, some are in the trading business. Several are affiliated with provincial power firms, including B.C. Hydro, Hydro Quebec and SaskPower.

But Baden says trading details are hidden from view, so it's impossible to tell which firms are taking advantage of the global adjustment wrinkle.

While no one is doing anything wrong, the current rules need to be changed because no one intended the current export anomaly to develop, says Baden. "The solution is simply charging the global adjustment to the exports. You'll be getting fair value for your energy."

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Let’s make post-COVID Canada a manufacturing hub again

Canada Manufacturing Policy prioritizes affordable energy, trims carbon taxes, aligns with Buy America, and supports the resource sector, PPE and plastics supply, nearshoring, and resilient supply chains amid COVID-19, correcting costly green energy policies.

 

Key Points

A policy to boost industry with affordable energy, lower carbon taxes, resource ties, and aligned U.S. trade.

✅ Cuts energy costs and carbon tax burdens for competitiveness

✅ Rebuilds resource-sector linkages and domestic supply chains

✅ Seeks Buy America relief and clarity on plastics regulation

 

By Jocelyn Bamford

Since its inception in 2017, the Coalition of Concerned Manufacturers and Businesses has warned all levels of government that there would be catastrophic effects if policies that drove both the manufacturing and natural resources sectors out of the country were adopted.

The very origins of our coalition was in the fight for a competitive landscape in Ontario, a cornerstone of which is affordable energy and sounding the alarm that the Green Energy Policy in Ontario pushed many manufacturers out of the province.


The Green Energy Policy made electricity in Ontario four times the average North American rate. These unjust prices were largely there to subsidize the construction of expensive and inefficient wind and solar energy infrastructure, even as cleaning up Canada's grid is cited as critical to meeting climate pledges.

My company’s November hydro bill was $55,000 and $36,500 of that was the so-called global adjustment charge, the name given to these green energy costs.

Unaffordable electricity, illustrated by higher Alberta power costs in recent years, coupled with ever-more burdensome carbon taxes, have pushed Canadian manufacturing into the open arms of other countries that see the importance of affordable energy to attract business.

One can’t help but ask the question: If Canada had policies that attracted and maintained a robust manufacturing sector, would we be in the same situation with a lack of personal protective equipment and medical supplies for our front-line medical workers and our patients during this pandemic?  If our manufacturing sector wasn’t crippled by taxes and regulation, would it be more nimble and able to respond to a national emergency?

It seems that the federal government’s policies are designed to push manufacturing out, stifle our resource sector, and kill the very plastics industry that is so essential to keeping our front-line medical staff, patients, and citizens safe, even as the net-zero race accelerates federally.

As the federal government chased its obsession with a new green economy – a strange obsession given our country’s small contribution to global GHGs – including proposals for a fully renewable grid by 2030 advocated by some leaders, it has been blinded from the real threats to our country, threats that became very, very real with COVID-19.

After the pandemic has passed, the federal government must work to make Canada manufacturing and resource friendly again, recognizing that the IEA net-zero electricity report projects the need for more power. COVID-19 proves that Canada relies on a robust resource economy and manufacturing sector to survive. We need to ensure that we are prepared for future crises like the one we are facing now.

Here are five things our government can do now to meet that end:

1. End all carbon taxes immediately.

2. Create a mandate to bring manufacturing back to Canada through competitive offerings and favourable tax regimes.

3. Recognize the interconnections between the resource sector and manufacturing, including how fossil-fuel workers support the transition across supply chains. Many manufacturers supply parts and pieces to the resource sector, and they rely on affordable energy to compete globally.

4. Stop the current federal government initiative to label plastic as toxic. At a time when the government is appealing to manufacturers to re-tool and produce needed plastic products for the health care sector, labelling plastics as toxic is counterproductive.

5. Work to secure a Canadian exemption to Buy America. This crisis has clearly shown us that dependency on China is dangerous. We must forge closer ties with America and work as a trading block in order to be more self-sufficient.

These are troubling times. Many businesses will not survive.

We need to take back our manufacturing sector.  We need to take back our resource sector.

We need to understand the interconnected nature of these two important segments of our gross domestic production, and opportunities like an Alberta–B.C. grid link to strengthen reliability.
If we do not, in the next pandemic we may find ourselves not only without ventilators, masks and gowns but also without energy to operate our hospitals.

Jocelyn Bamford is a Toronto business executive and President of the Coalition of Concerned Manufacturers and Businesses of Canada

 

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California Welcomes 70 Volvo VNR Electric Trucks

Switch-On Project Electric Trucks accelerate California freight decarbonization, deploying Volvo VNR Electric rigs with high-capacity charging infrastructure, zero-emissions operations, and connected safety features to cut greenhouse gases and improve urban air quality.

 

Key Points

A California program deploying Volvo VNR Electric trucks and charging to decarbonize freight and improve air quality.

✅ 70 Volvo VNR Electric trucks for regional logistics

✅ Strategic high-capacity charging for heavy-duty fleets

✅ Lower TCO via fuel savings and reduced maintenance

 

In a significant step toward sustainable transportation, the Switch-On project is bringing 70 Volvo VNR Electric trucks to California. This initiative aims to bolster the state's efforts to reduce emissions and transition to greener logistics solutions. The arrival of these electric vehicles marks an important milestone in California's commitment to combating climate change and improving air quality.

The Switch-On Project: Overview and Goals

The Switch-On project is a collaborative effort designed to enhance electric truck adoption in California. It focuses on developing the necessary infrastructure and technology to support electric vehicles (EVs) in the freight and logistics sectors, building on recent nonprofit investments at California ports. The project not only seeks to increase the availability of electric trucks but also aims to demonstrate their effectiveness in real-world applications.

California has set ambitious goals for reducing greenhouse gas emissions, particularly from the transportation sector, which is one of the largest contributors to air pollution. By introducing electric trucks into freight operations, the state aims to significantly cut emissions, improve public health, and pave the way for a more sustainable future.

The Volvo VNR Electric Trucks

The Volvo VNR Electric trucks are specifically designed for regional distribution and urban transport, aligning with Volvo's broader electric lineup as the company expands offerings, making them ideal for the needs of California’s freight industry. With a range of approximately 250 miles on a single charge, these trucks can efficiently handle most regional routes. Equipped with advanced technology, including regenerative braking and connectivity features, the VNR Electric models enhance operational efficiency and safety.

These trucks not only provide a cleaner alternative to traditional diesel vehicles but also promise lower operational costs over time. With reduced fuel expenses and lower maintenance needs, and emerging vehicle-to-grid pilots that can create new value streams, businesses can benefit from significant savings while contributing to environmental sustainability.

Infrastructure Development

A crucial aspect of the Switch-On project is the development of charging infrastructure to support the new fleet of electric trucks. The project partners are working on installing high-capacity charging stations strategically located throughout California while addressing utility planning challenges that large fleets will pose to the power system. This infrastructure is essential to ensure that electric trucks can be charged efficiently, minimizing downtime and maximizing productivity.

The charging stations are designed to accommodate the specific needs of heavy-duty vehicles, and corridor models like BC's Electric Highway provide useful precedents for network design, allowing for rapid charging that aligns with operational schedules. This development not only supports the new fleet but also encourages other logistics companies to consider electric trucks as a viable option for their operations.

Benefits to California

The introduction of 70 Volvo VNR Electric trucks will have several positive impacts on California. Firstly, it will significantly reduce greenhouse gas emissions from the freight sector, contributing to the state’s ambitious climate goals even as grid expansion will be needed to support widespread electrification across sectors. The transition to electric trucks is expected to improve air quality, particularly in urban areas that struggle with high pollution levels.

Moreover, the project serves as a model for other regions considering similar initiatives. By showcasing the practicality and benefits of electric trucks, California hopes to inspire widespread adoption across the nation. As the market for electric vehicles continues to grow, this project can play a pivotal role in accelerating the transition to sustainable transportation solutions.

Industry and Community Reactions

The arrival of the Volvo VNR Electric trucks has been met with enthusiasm from both industry stakeholders and community members. Logistics companies are excited about the opportunity to reduce their carbon footprints and operational costs. Meanwhile, environmental advocates applaud the project as a crucial step toward cleaner air and healthier communities.

California’s commitment to sustainable transportation has positioned it as a leader in the shift to electric vehicles amid an ongoing biofuels vs. EVs debate over the best path forward, setting an example for other states and countries.

Conclusion

The Switch-On project represents a major advancement in California's efforts to transition to electric transportation. With the deployment of 70 Volvo VNR Electric trucks, the state is not only taking a significant step toward reducing emissions but also demonstrating the feasibility of electric logistics solutions.

As infrastructure develops and more electric trucks hit the roads, California is paving the way for a greener, more sustainable future in transportation. The success of this project could have far-reaching implications, influencing policies and practices in the broader freight industry and beyond.

 

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Freezing Rain Causes Widespread Power Outages in Quebec

Quebec Ice Storm 2025 disrupted power across Laurentians and Lanaudiere as freezing rain downed lines; Hydro-QuE9bec crews accelerated grid restoration, emergency response, and infrastructure resilience amid ongoing outages and severe weather alerts.

 

Key Points

Quebec Ice Storm 2025 brought freezing rain, outages, and grid damage, hitting Laurentians and Lanaudiere hardest.

✅ Peak: 62,000 Hydro-QuE9bec customers without electricity

✅ Most outages in Laurentians and Lanaudiere regions

✅ Crews repairing lines; restoration updates ongoing

 

A significant weather event struck Quebec in late March 2025, as a powerful ice storm caused widespread power outages across the province. The storm led to extensive power outages, affecting tens of thousands of residents, particularly in the Lanaudière and Laurentians regions. ​

Impact on Power Infrastructure

The freezing rain accumulated on power lines and vegetation, leading to numerous power outages across the network. Hydro-Québec reported that at its peak, over 62,000 customers were without electricity, with the majority of outages concentrated in the Laurentians and Lanaudière regions. By the afternoon, the number decreased to approximately 30,000, and further to just under 18,500 by late afternoon. 

Comparison with Previous Storms

While the March 2025 ice storm caused significant disruptions, it was less severe compared to the catastrophic ice storm of April 2023, which left 1.1 million Hydro-Québec customers without power. Nonetheless, the 2025 storm's impact was considerable, leading to the closure of municipal facilities and posing challenges for local economies, a pattern echoed when Toronto outages persisted for hundreds after a spring storm.

Ongoing Challenges

As of April 1, 2025, some areas continued to experience power outages, and incidents such as a manhole fire left thousands without service in separate cases. Hydro-Québec and municipal authorities worked diligently to restore services and address the aftermath of the storm, while Hydro One crews restored power to more than 277,000 customers after damaging storms in Ontario. Residents were advised to stay updated through official channels for restoration timelines and safety information.

Future Preparedness

The recurrence of such severe weather events highlights the importance of robust infrastructure and emergency preparedness, as seen in BC Hydro's storm response to an 'atypical' event that demanded extensive coordination. Both utility companies and residents must remain vigilant, especially during seasons prone to unpredictable weather patterns, with local utilities like Sudbury Hydro crews working to reconnect service after regional storms.

 

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Iran, Iraq Discuss Further Cooperation in Energy Sector

Iran-Iraq Electricity Cooperation advances with power grid synchronization, cross-border energy trade, 400-kV transmission lines, and education partnerships, boosting grid reliability, infrastructure investment, and electricity exports between Tehran and Baghdad for improved supply and stability.

 

Key Points

A bilateral initiative to synchronize grids, expand networks, and sustain electricity exports, improving reliability.

✅ 400-kV Amarah-Karkheh line enables synchronized operations.

✅ Extends electricity export contracts to meet Iraq demand.

✅ Enhances grid reliability, training, and infrastructure investment.

 

Aradakanian has focused his one-day visit to Iraq on discussions pertaining to promoting bilateral collaboration between the two neighboring nations in the field of electricity, grid development deals and synchronizing power grid between Tehran and Baghdad, cooperating in education, and expansion of power networks.

He is also scheduled to meet with Iraqi top officials in a bid to boost cooperation in the relevant fields.

Back in December 2019, Ardakanian announced that Iran will continue exports of electricity to Iraq by renewing earlier contract as it is supplying about 40% of Iraq's power today.

"Iran has signed a 3-year-long cooperation agreement with Iraq to help the country's power industry in different aspects. The documents states at its end that we will export electricity to Iraq as far as they need," Ardakanian told FNA on December 9, 2019.

The contract to "export Iran's electricity" to Iraq will be extended, he added.

Ardakanian also said that Iran and Iraq's power grids have become synchronized in a move that supports Iran's regional power hub plans since a month ago.

In 2004 Iran started selling electricity to Iraq. Iran electricity exports to the western neighbor are at its highest level of 1,361 megawatts per day now, as the country weighs summer power sufficiency ahead of peak demand.

The new Amarah-Karkheh 400-KV transmission line stretching over 73 kilometers, is now synchronized to provide electricity to both countries, reflecting regional power export trends as well. It also paves the way for increasing export to power-hungry Iraq in the near future.

With synchronization of the two grids, the quality of electricity in Iraq will improve as the country explores nuclear power options to tackle shortages.

According to official data, 82% of Iraq's electricity is generated by thermal power plants that use gas as feedstock, while Iran is converting thermal plants to combined cycle to save energy. This is expected to reach 84% by 2027.

 

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On the road to 100 per cent renewables

US Climate Alliance 100% Renewables 2035 accelerates clean energy, electrification, and decarbonization, replacing coal and gas with wind, solar, and storage to cut air pollution, lower energy bills, create jobs, and advance environmental justice.

 

Key Points

A state-level target for alliance members to meet all electricity demand with renewable energy by 2035.

✅ 100% RES can meet rising demand from electrification

✅ Major health gains from reduced SO2, NOx, and particulates

✅ Jobs grow, energy burdens fall, climate resilience improves

 

The Union of Concerned Scientists joined with COPAL (Minnesota), GreenRoots (Massachusetts), and the Michigan Environmental Justice Coalition, to better understand the feasibility and implications of leadership states meeting 100 percent of their electricity needs with renewable energy by 2035, a target reflected in federal clean electricity goals under discussion today.

We focused on 24 member states of the United States Climate Alliance, a bipartisan coalition of governors committed to the goals of the 2015 Paris Climate Agreement. We analyzed two main scenarios: business as usual versus 100 percent renewable electricity standards, in line with many state clean energy targets now in place.

Our analysis shows that:

Climate Alliance states can meet 100 percent of their electricity consumption with renewable energy by 2035, as independent assessments of zero-emissions feasibility suggest. This holds true even with strong increases in demand due to the electrification of transportation and heating.

A transition to renewables yields strong benefits in terms of health, climate, economies, and energy affordability.

To ensure an equitable transition, states should broaden access to clean energy technologies and decision making to include environmental justice and fossil fuel-dependent communitieswhile directly phasing out coal and gas plants.

Demands for climate action surround us. Every day brings news of devastating "this is not normal" extreme weather: record-breaking heat waves, precipitation, flooding, wildfires. To build resilience and mitigate the worst impacts of the climate crisis requires immediate action to reduce heat-trapping emissions and transition to renewable energy, including practical decarbonization strategies adopted by states.

On the Road to 100 Percent Renewables explores actions at one critical level: how leadership states can address climate change by reducing heat-trapping emissions in key sectors of the economy as well as by considering the impacts of our energy choices. A collaboration of the Union of Concerned Scientists and local environmental justice groups COPAL (Minnesota), GreenRoots (Massachusetts), and the Michigan Environmental Justice Coalition, with contributions from the national Initiative for Energy Justice, assessed the potential to accelerate the use of renewable energy dramatically through state-level renewable electricity standards (RESs), major drivers of clean energy in recent decades. In addition, the partners worked with Greenlink Analytics, an energy research organization, to assess how RESs most directly affect people's lives, such as changes in public health, jobs, and energy bills for households.

Focusing on 24 members of the United States Climate Alliance (USCA), the study assesses the implications of meeting 100 percent of electricity consumption in these states, including examples like Rhode Island's 100% by 2030 plan that inform policy design, with renewable energy in the near term. The alliance is a bipartisan coalition of governors committed to reducing heat-trapping emissions consistent with the goals of the 2015 Paris climate agreement.[1]

On the Road to 100 Percent Renewables looks at three types of results from a transition to 100 percent RES policies: improvements in public health from decreasing the use of coal and gas2 power plants; net job creation from switching to more labor-oriented clean energy; and reduced household energy bills from using cleaner sources of energy. The study assumes a strong push to electrify transportation and heating to address harmful emissions from the current use of fossil fuels in these sectors. Our core policy scenario does not focus on electricity generation itself, nor does it mandate retiring coal, gas, and nuclear power plants or assess new policies to drive renewable energy in non-USCA states.

Our analysis shows that:

USCA states can meet 100 percent of their electricity consumption with renewable energy by 2035 even with strong increases in demand due to electrifying transportation and heating.

A transition to renewables yields strong benefits in terms of health, climate, economies, and energy affordability.

Renewable electricity standards must be paired with policies that address not only electricity consumption but also electricity generation, including modern grid infrastructure upgrades that enable higher renewable shares, both to transition away from fossil fuels more quickly and to ensure an equitable transition in which all communities experience the benefits of a clean energy economy.

Currently, the states in this analysis meet their electricity needs with differing mixes of electricity sourcesfossil fuels, nuclear, and renewables. Yet across the states, the study shows significant declines in fossil fuel use from transitioning to clean electricity; the use of solar and wind powerthe dominant renewablesgrows substantially:

In the study's "No New Policy" scenario"business as usual"coal and gas generation stay largely at current levels over the next two decades. Electricity generation from wind and solar grows due to both current policies and lowest costs.

In a "100% RES" scenario, each USCA state puts in place a 100 percent renewable electricity standard. Gas generation falls, although some continues for export to non-USCA states. Coal generation essentially disappears by 2040. Wind and solar generation combined grow to seven times current levels, and three times as much as in the No New Policy scenario.

A focus on meeting in-state electricity consumption in the 100% RES scenario yields important outcomes. Reductions in electricity from coal and gas plants in the USCA states reduce power plant pollution, including emissions of sulfur dioxide and nitrogen oxides. By 2040, this leads to 6,000 to 13,000 fewer premature deaths than in the No New Policy scenario, as well as 140,000 fewer cases of asthma exacerbation and 700,000 fewer lost workdays. The value of the additional public health benefits in the USCA states totals almost $280 billion over the two decades. In a more detailed analysis of three USCA statesMassachusetts, Michigan, and Minnesotathe 100% RES scenario leads to almost 200,000 more added jobs in building and installing new electric generation capacity than the No New Policy scenario.

The 100% RES scenario also reduces average energy burdens, the portion of household income spent on energy. Even considering household costs solely for electricity and gas, energy burdens in the 100% RES scenario are at or below those in the No New Policy scenario in each USCA state in most or all years. The average energy burden across those states declines from 3.7 percent of income in 2020 to 3.0 percent in 2040 in the 100% RES scenario, compared with 3.3 percent in 2040 in the No New Policy scenario.

Decreasing the use of fossil fuels through increasing the use of renewables and accelerating electrification reduces emissions of carbon dioxide (CO2), with implications for climate, public health, and economies. Annual CO2 emissions from power plants in USCA states decrease 58 percent from 2020 to 2040 in the 100% RES scenario compared with 12 percent in the No New Policy scenario.

The study also reveals gaps to be filled beyond eliminating fossil fuel pollution from communities, such as the persistence of gas generation to sell power to neighboring states, reflecting barriers to a fully renewable grid that policy must address. Further, it stresses the importance of policies targeting just and equitable outcomes in the move to renewable energy.

Moving away from fossil fuels in communities most affected by harmful air pollution should be a top priority in comprehensive energy policies. Many communities continue to bear far too large a share of the negative impacts from decades of siting the infrastructure for the nation's fossil fuel power sector in or near marginalized neighborhoods. This pattern will likely persist if the issue is not acknowledged and addressed. State policies should mandate a priority on reducing emissions in communities overburdened by pollution and avoiding investments inconsistent with the need to remove heat-trapping emissions and air pollution at an accelerated rate. And communities must be centrally involved in decisionmaking around any policies and rules that affect them directly, including proposals to change electricity generation, both to retire fossil fuel plants and to build the renewable energy infrastructure.

Key recommendations in On the Road to 100 Percent Renewables address moving away from fossil fuels, increasing investment in renewable energy, and reducing CO2 emissions. They aim to ensure that communities most affected by a history of environmental racism and pollution share in the benefits of the transition: cleaner air, equitable access to good-paying jobs and entrepreneurship alternatives, affordable energy, and the resilience that renewable energy, electrification, energy efficiency, and energy storage can provide. While many communities can benefit from the transition, strong justice and equity policies will avoid perpetuating inequities in the electricity system. State support to historically underserved communities for investing in solar, energy efficiency, energy storage, and electrification will encourage local investment, community wealth-building, and the resilience benefits the transition to renewable energy can provide.

A national clean electricity standard and strong pollution standards should complement state action to drive swift decarbonization and pollution reduction across the United States. Even so, states are well positioned to simultaneously address climate change and decades of inequities in the power system. While it does not substitute for much-needed national and international leadership, strong state action is crucial to achieving an equitable clean energy future.

 

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Six key trends that shaped Europe's electricity markets in 2020

European Electricity Market Trends 2020 highlight decarbonisation, rising renewables, EV adoption, shifting energy mix, COVID-19 impacts, fuel switching, hydro, wind and solar growth, gas price dynamics, and wholesale electricity price increases.

 

Key Points

EU power in 2020 saw lower emissions, more renewables, EV growth, demand shifts, and higher wholesale prices.

✅ Power sector CO2 down 14% on higher renewables, lower coal

✅ Renewables 39% vs fossil 36%; hydro, wind, solar expanded

✅ EV share hit 17%; wholesale prices rose with gas, ETS costs

 

According to the Market Observatory for Energy DG Energy report, the COVID-19 pandemic and favorable weather conditions are the two key drivers of the trends experienced within the European electricity market in 2020. However, the two drivers were exceptional or seasonal.

The key trends within Europe’s electricity market include:


1. Decrease in power sector’s carbon emissions

As a result of the increase in renewables generation and decrease in fossil-fueled power generation in 2020, the power sector was able to reduce its carbon footprint by 14% in 2020. The decrease in the sector’s carbon footprint in 2020 is similar to trends witnessed in 2019 when fuel switching was the main factor behind the decarbonisation trend.

However, most of the drivers in 2020 were exceptional or seasonal (the pandemic, warm winter, high
hydro generation). However, the opposite is expected in 2021, with the first months of 2021 having relatively cold weather, lower wind speeds and higher gas prices, with stunted hydro and nuclear output also cited, developments which suggest that the carbon emissions and intensity of the power sector could rise.

The European Union is targeting to completely decarbonise its power sector by 2050 through the introduction of supporting policies such as the EU Emissions Trading Scheme, the Renewable Energy Directive and legislation addressing air pollutant emissions from industrial installations, with expectations that low-emissions sources will cover most demand growth in the coming years.

According to the European Environment Agency, Europe halved its power sector’s carbon emissions in 2019 from 1990 levels.


2. Changes in energy consumption

EU consumption of electricity fell by -4% as majority of industries did not operate at full level during the first half of 2020. Although majority of EU residents stayed at home, meaning an increase in residential energy use, rising demand by households could not reverse falls in other sectors of the economy.

However, as countries renewed COVID-19 restrictions, energy consumption during the 4th quarter was closer to the “normal levels” than in the first three quarters of 2020. 

The increase in energy consumption in the fourth quarter of 2020 was also partly due to colder temperatures compared to 2019 and signs of surging electricity demand in global markets.


3. Increase in demand for EVs

As the electrification of the transport system intensifies, the demand for electric vehicles increased in 2020 with almost half a million new registrations in the fourth quarter of 2020. This was the highest figure on record and translated into an unprecedented 17% market share, more than two times higher than in China and six times higher than in the United States.

However, the European Environment Agency (EEA)argues that the EV registrations were lower in 2020 compared to 2019. EEA states that in 2019, electric car registrations were close to 550 000 units, having reached 300 000 units in 2018.


4. Changes in the region’s energy mix and increase in renewable energy generation

The structure of the region’s energy mix changed in 2020, according to the report.

Owing to favorable weather conditions, hydro energy generation was very high and Europe was able to expand its portfolio of renewable energy generation such that renewables (39%) exceeded the share of fossil fuels (36%) for the first time ever in the EU energy mix.

Rising renewable generation was greatly assisted by 29 GW of wind and solar capacity additions in 2020, which is comparable to 2019 levels. Despite disrupting the supply chains of wind and solar resulting in project delays, the pandemic did not significantly slow down renewables’ expansion.

In fact, coal and lignite energy generation fell by 22% (-87 TWh) and nuclear output dropped by 11% (-79 TWh). On the other hand, gas energy generation was not significantly impacted owing to favorable prices which intensified coal-to-gas and lignite-to-gas switching, even as renewables crowd out gas in parts of the market.


5. Retirement of coal energy generation intensify

 As the outlook for emission-intensive technologies worsens and carbon prices rise, more and more early coal retirements have been announced. Utilities in Europe are expected to continue transitioning from coal energy generation under efforts to meet stringent carbon emissions reduction targets and as they try to prepare themselves for future business models that they anticipate to be entirely low-carbon reliant.

6. Increase in wholesale electricity prices

In recent months, more expensive emission allowances, along with rising gas prices, have driven up wholesale electricity prices on many European markets to levels last seen at the beginning of 2019. The effect was most pronounced in countries that are dependent on coal and lignite. The wholesale electricity prices dynamic is expected to filter through to retail prices.

The rapid sales growth in the EVs sector was accompanied by expanding charging infrastructure. The number of high-power charging points per 100 km of highways rose from 12 to 20 in 2020.

 

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