ARCHIVED – Chapter 4. Technology Case Results

EF2018’s Technology Case explores how a global shift towards low carbon energy technologies could impact future Canadian energy supply and demand trends. Canada is a relatively energy intensive economy^Footnote 18, and a major producer of many forms of energy. This potential shift is an important uncertainty for Canadian energy projections.

The Technology Case assumes that countries across the world increasingly adopt new technologies and increase their actions to combat climate change, as outlined in the IEA’s World Energy Outlook 2017 “Sustainable Development Scenario”. This global shift has implications for energy markets such as crude oil and natural gas. Canadian energy supply and demand trends are influenced by this global context, as well as specific assumptions on cost reductions and adoption for new technologies in Canada. The Technology Case is designed to explore a key uncertainty for the future of Canada’s energy system, a faster transition to a lower carbon economy driven by increasing global climate action and faster technological progress than assumed in the Reference Case. It is important to note that it is unclear which technologies will gain wider adoption in the future, and this case is just one example among many possible pathways. This Case analysis is not a prediction or recommendation of certain policies, technologies, or outcomes.

Recent Context

Various technology, policy, and social trends over the past decade point to the potential for a global shift towards a lower carbon economy. This section outlines several examples of these trends.

Falling costs and increased deployment of renewable electricity sources, like wind and solar, have been an important technology change. Figure 4.1 shows global wind and solar generation. Over the last decade, wind and solar power have increased substantially, initially led by the European Union and the U.S., with recent growth in China and Japan. Many global forecasting agencies see this trend continuing^Footnote 19.

Figure 4.1: Global Solar and Wind Generation by Country, 2007-2017

Technology and policy changes are transforming the transportation sector. Many forecasting agencies expect growth in refined oil products demand (gasoline) to slow or decline compared to historical trends. These changes are a key reason the concept of "peak demand"–the year at which global demand for oil will reach its maximum–is currently a key discussion point in oil markets. Reasons for this trend include increasing fuel economy, increased biofuel blending, and possible increase of EV adoption.

Emerging climate policies and future low carbon energy technologies are highly integrated. As an example of increasing momentum for policy action to reduce carbon emissions, Figure 4.2 shows that over the last decade the number of carbon pricing systems in the world increased from 10 to 46, while the coverage of those systems increased from 4% of global CO₂ emissions to 14%. Carbon pricing systems scheduled to come into effect soon, led by China’s planned emission trading system, will bring this to over 50 systems covering nearly 20% of emissions by 2020^Footnote 20.

Figure 4.2: Global Carbon Pricing Initiatives

In the Canadian context, Natural Resources Canada's "Generation Energy" initiative highlights the integration of technology and policy factors, as well as the many broad social issues involved in transforming energy systems. The Generation Energy Council Report distills possible initiatives into four key pathways: wasting less energy, switching to cleaner power, using more renewable fuels, and producing cleaner oil and gas. The milestones outlined in these pathways will have significant implications for how energy is produced and consumed in Canada.

These trends suggest momentum towards a low carbon energy system.  The Technology Case explores what continued momentum on this front might mean for future energy supply and demand in Canada.

Assumptions

The Technology Case is based on a set of global and Canadian assumptions around energy markets, energy and climate policy, and adoption of low carbon technologies. Figure 4.3 illustrates the overall approach to the Technology Case.

• Global Assumptions: Includes energy market price assumptions for global crude oil and North American natural gas, economy-wide carbon pricing, and other general policy trends. These global assumptions are aligned with the IEA’s World Energy Outlook 2017 “Sustainable Development Scenario”. This scenario, consistent with the Paris climate a greement targets, shows a steep decline in emissions from 2020 to 2040, putting the world on track to hold the increase of global average temperatures to below 2 degrees. It does so while also balancing other sustainable development goals, in particular, increasing access to modern energy sources and reducing local air pollution.
• Canadian Assumptions: Includes new technology cost reductions and adoption, energy efficiency improvements, use of alternative fuels, and Canadian benchmark oil and gas prices. These Canadian-specific assumptions are chosen to be consistent with the global context, but also reflect the specific nature of the Canadian energy system.

Figure 4.3: Technology Case Overview

The Technology Case Assumptions are also summarized in Appendix B.

Global Assumptions

Global Policy and Technology Trends

• Carbon Pricing: The IEA Sustainable Development Scenario shows a shift to a low carbon future that is driven by a broad set of policy assumptions, as well as the integration of a higher share of low carbon energy sources and technologies into the global energy mix. Carbon pricing provides a key driver for change across the economy. A rising carbon price is assumed for both OECD and non-OECD economies. Figure 4.4 shows the Technology Case assumption for Canada, aligned to the IEA’s OECD carbon price increase.
• Other actions: In addition to carbon pricing, the IEA outlines several high-level policy initiatives by sector, including efficiency regulations, support for alternative fuels, emission standards and limits, and reduction of fossil fuel subsidies^Footnote 21

Figure 4.4: Economy-Wide Carbon Price, Reference and Technology Cases, 2022-2040

Global Crude Oil and Natural Gas Markets

• Crude Oil Price: The Technology Case Brent price assumption aligns to the IEA Sustainable Development Scenario global crude oil price. It begins to trend downward after 2025, consistent with a declining demand for global crude oil. It falls to US$69/bbl in 2030, $6 lower than the Reference Case, and US$64/bbl by 2040, $11/bbl lower than the Reference Case (Figure 4.5).

Figure 4.5: Brent Price Assumptions, Reference and Technology Cases

• Natural Gas Price: The natural gas price in the Technology Case aligns to the IEA Sustainable Development Scenario U.S. natural gas price. It increases from $3.25/MMbtu in 2030 to $3.66/MMbtu in 2040. This reflects growing demand for natural gas to replace coal for power generation. However, the IEA projects that global natural gas demand will grow at a slower rate in this case compared to other scenarios. The Technology Case reflects this dynamic; in 2030 it is $0.30/MMBtu lower than the Reference Case and in 2040 is $0.50/MMbtu lower than the Reference Case (Figure 4.6).

Figure 4.6: Henry Hub Price Assumptions, Reference and Technology Cases

Canadian Assumptions

Canadian Energy Markets

• End-use Fuel Prices: Canadian end-use prices are affected by the carbon price and benchmark crude oil and natural gas price trends. Lower crude oil and natural gas prices put downward pressure on prices for refined products and delivered natural gas. Increased carbon pricing puts upward pressure on prices, based on the relative carbon intensity of fuels. Table 4.1 provides example carbon prices of various fuels in energy equivalent and volumetric terms.

• Canadian Benchmark Prices: The Technology Case assumes that the differentials between benchmark prices shown in Chapter 2 for the Reference Case are the same in the Technology Case. This implies a Technology WCS and CLS price $11/bbl lower than the Reference Case in 2040, and a NIT price $0.50/MMBtu lower in 2040. Given the global context, this is a very uncertain assumption. As the globe shifts towards a low carbon economy, market dynamics may evolve differently and lead to different relationships between the various benchmark prices in the short or long term.
• LNG Export Assumptions: The Technology Case assumes LNG export volumes are the same as the Reference Case. This is an area of uncertainty as well. Many dynamics will influence potential Canadian LNG exports, including economics, individual company investment decisions, and the role of natural gas globally in switching away from more carbon-intensive fuels like coal. LNG export assumptions are a key uncertainty in all EF2018 cases, and could be higher or lower than assumed both compared to the assumptions, and relative to each other.

Electricity Generation

• Solar and Wind Capital Cost Reductions: Figure 4.7 compares wind and utility solar capital cost assumptions in the Reference and Technology Cases. In the Technology Case, wind costs decline nearly 40% compared to 2017 levels, while solar costs decline over 60%.

Figure 4.7: Wind and Solar Costs, Reference and Technology Cases, 2017-2040

• Solar and Wind Levelized Cost Reductions: Figure 4.8 compares levelized costs of wind and solar power, which is the cost per MW.h of generation. It shows that falling capital costs drive generation costs for these resources. Levelized costs include the amount of generation each kW of capacity produces, or the capacity factor. In Canada, wind power generally operates at a higher capacity factor than solar. This implies that wind, on average, has a lower cost per MW.h generated than solar, even with a higher capital cost.^Footnote 22

Figure 4.8: Wind vs Solar Levelized Cost, Reference and Technology Cases, 2017-2040

• Integrating Variable Renewables: The Technology Case assumes enhanced integration of wind and solar power into electricity grids. This includes additional electricity transmission between Canadian provinces, and a greater use of demand management to match electricity demand loads to variable renewable generation.

Oil and Gas Production

• Global competition: The global context of the Technology Case includes higher carbon prices and lower crude oil and natural gas prices compared to the Reference Case. This implies increased competitive pressures for producing these resources at a lower cost, as well as at reduced emission levels. Since this Case assumes the world is moving towards widespread action on climate change, current Canadian measures to avoid adverse competitiveness issues, or carbon leakage, are phased out by 2035. This includes the output based allocations (OBAs) used in the Alberta Carbon Competitiveness Incentive Regulation, as well as the federal backstop.
• Solvent Technology for In Situ Production: The Technology Case assumes widespread adoption of solvent technology for oil sands in situ production. Steam solvent technology is applied to all new production by 2025, as well as some existing reservoirs, resulting in a 25% reduction in SOR. By 2030, pure solvent technology reaches wide-scale commercial adoption, and all new production employs this technology, leading to an 80% reduction in SOR.
  Figure 4.9 illustrates this incentive to reduce the carbon emissions in the Technology Case. The first chart shows the theoretical carbon cost per barrel in the Technology Case assuming OBAs are phased out, carbon price rises, and emission intensity of production remains at 2016 levels. Given the oil prices shown earlier, these costs would become a major impediment to production economics. The second chart shows that 25% and 80% SOR reductions from steam and pure solvent technology, respectively, can reduce those costs significantly.

Figure 4.9: Emission Cost Per Barrel Under Business As Usual, 25% Reduction, and 80% Reduction In Emission Intensities, Given Technology Case Carbon Costs

Residential and Commercial Energy Efficiency

• Energy Efficiency Improvements: The Technology Case assumes significant efficiency improvements across the buildings sector. Reducing energy and emissions intensity for buildings is an important part of many climate action plans, including the Pan-Canadian framework. The Technology Case assumes improvements to windows, building shells, and insulation reduce the energy required for heating and cooling. For remaining energy requirements, energy using devices (space and water heating, cooling, and appliances) become more efficient.
• Increased Heat Pump Adoption: Figure 4.10 illustrates the range of heat pump adoption across provinces in the Technology Case. Adoption of heat pumps increases from 10 to 20% of new, and replacement systems, by 2030; then it rapidly increases from 40 to 70% by 2040. The Technology Case assumes that technology improves for cold climate heat pumps, as well as reduced upfront costs. Analysis for the U.S. suggests heat pump costs could fall 10 to 20% by 2025-2030, and 20 to 30% by 2040. For areas that rely heavily on natural gas for heating, hybrid natural gas heat pump systems are an option. These systems rely on electric heat pumps producing heat when electricity prices are low, and high-efficiency natural gas during peak times when electricity prices are high.

Figure 4.10: Range of Heat Pump Adoption Across Provinces, Technology Case

• Process improvements and digitization: Increased levels of digitization allow for less energy waste, optimizing energy use and energy costs (for example, load shifting when excess solar and/or wind power is available), and integration with other forms of energy demand, such as EV charging.

Transportation

• Electric Vehicles: Figure 4.11 shows the assumed average cost for an EV in the Reference Case compared to a representative internal combustion engine (ICE) car and truck. On an average cost basis, EV purchase price reaches ICE levels by 2030 for cars and 2040 for trucks. Given the impact of end-use prices, and that the per-unit driving cost and maintenance cost of EVs are assumed to be lower than ICE, the economics begin to favour electricity in this time frame. In the 2030s, the Technology Case assumes charging infrastructure is well developed, leading to a rapid increase in the share of EVs in that decade. Increased ride sharing, mobility as a service, and potential autonomous vehicle technology could also favour electric vehicle adoption. Figure 4.12 shows average new sales of EVs in the Reference Case compared to the Technology Case.

Figure 4.11: Average Vehicle Purchase Price, Battery Electric Cars and Light Duty Trucks, Reference and Technology Cases

Figure 4.12: Share of EVs in New Passenger Vehicles, Reference vs Technology Case, 2025-2040

• Fuel Economy Improvements: The Technology Case assumes ICE vehicles continue to improve and reduce their own variable costs, building upon the efficiency improvements from current vehicle emission standards. The Technology Case assumes fuel economy of gasoline and diesel cars and trucks improves by 1.5% per year in the longer term, beyond the expiration of current emission standards for light duty vehicles (2025) and heavy-duty trucks (2028).
• Alternative Fuels: Biofuel blending continues to grow, with ethanol and biodiesel blending reaching 10% by 2025. By 2040, gasoline and diesel are blended with 15% renewable fuels on average^Footnote 23.
• Aviation: Biofuels are currently being used for some air travel^Footnote 24, and this increases in the Technology Case. Improved efficiency, as well as biofuel blending to 15% of jet fuel by 2040, reduce the emissions intensity of air travel.

Industrial (Excluding Oil and Gas Production)

• Options for Emission Reductions: Canada’s industrial sector is composed of many different industries that all have unique energy issues, varying energy mixes, and different technological options for reducing or eliminating GHG emissions. Figure 4.13 provides a high-level view of options for industrial decarbonization summarized by a recent study^Footnote 25. The future energy mix for industry will depend on factors such as ability to recycle raw materials, change process or fuels, or adopt new technologies such as CCS and carbon capture, use and storage (CCUS). The various economics involved in these decisions depend on the circumstances of the individual operation, company, and industry. For example, industries in western Canada have easier access to suitable locations for CCS based on storage availability, while abundant hydropower in Quebec could make it an attractive location to explore electrification of processes.

Figure 4.13: Energy-intensive Industry Decarbonisation Options

Source: Bataille, et al

• Improved Energy Efficiency: Energy efficiency and adopting best available technologies will also play a key role. Figure 4.14 shows recent IEA analysis for Canada, comparing energy intensity in 2016, 2030 and 2050. The IEA suggests in a high efficiency scenario, energy intensity of various industries could fall relative to 2016 levels, showing some variation depending on the industry. The Technology Case assumes that average process and device efficiency increases by 5 to 10% relative to the Reference Case in 2025, and 15 to 30% by 2040. Process changes, such as increased material recycling, are assumed to reduce energy demands.

Figure 4.14: Canadian Industry Energy Intensity Reductions Relative to 2016, IEA Energy Efficiency Scenario, 2030 and 2050

Source: IEA

Multi-sector Technologies

• Renewable Natural Gas (RNG) Blending: Costs of RNG vary by production type, and typically range between $8 and $20 per GJ. Although the lower end of that range is still higher than benchmark natural gas prices, as carbon costs rise and technology improves in the longer run, the relative economics of RNG could improve. The Technology Case assumes an average blending of RNG in Canada’s marketable gas mix of nearly 2% by 2025, 3% by 2030, and 10% by 2040. Figure 4.15 shows the rate of RNG blending in the Technology Case.

Figure 4.15: Renewable Natural Gas Blending Rate, Technology Case

Carbon Capture Technology: CCS and CCUS is another technology group that could gain significant momentum in a global shift towards a low carbon future. CCS and CCUS is often a critical component of energy scenarios that achieve low carbon futures. The Technology Case assumes technological progress and cost reductions for CCUS technology, with an additional 10 megatonne (MT) captured by 2030, and 45 MT by 2040.

Results

The various energy market, policy, and technology assumptions that make up the Technology Case impact the energy supply and demand outlook in many ways. Figure 4.16 highlights four key shifts in the energy system:

1. Total energy use declines: Compared to 2017 levels, total Canadian energy consumption is nearly 20% lower in 2040 despite similar total GDP and population trends.
2. The share of renewable and non-emitting energy increases: Fossil fuel use falls faster than total energy demand, and by 2040 fossil fuel demand is 30% lower than 2017 levels. More efficient processes and technologies, as well as switching to renewable energy, cause this trend.
3. By 2040, energy use per capita is reduced by one third, energy use per $ of GDP is nearly cut in half: Economic and population growth become further decoupled from energy use, as Canadian homes and businesses use energy more efficiently.
4. Prices and technologies will shape Canada’s role in supplying oil and gas in a transitioning world: Canadian oil and gas production will be influenced by their ability to reduce costs and emissions. Technologies such as solvent-based injection for oil sands production provide an opportunity to maintain production, while market prices are a key uncertainty.

Figure 4.16: Technology Case Key Results

Macroeconomic Drivers

Most macroeconomic drivers are similar between the Reference and Technology Case (Table 4.2). This is driven by improved technologies reducing energy use costs, but also several important assumptions. The Technology Case assumes global growth is the same as the Reference Case, including that of key trading partners. Revenues from the higher degree of carbon pricing in the case is recycled back into the economy through personal and corporate tax cuts. These factors result in small differences between macroeconomic trends between the Reference and Technology cases at the national level.

End Use Energy Demand

Figure 4.17 compares Technology Case demands in 2040 to 2017 levels, as well as the Reference Case projections for 2040. In the Technology Case, end-use energy demand declines relative to 2017 levels in all sectors. Demands are also below Reference Case levels.

Figure 4.17: Demands by Sector, Reference vs Technology Case

Residential and Commercial

Improving efficiency and increased electrification via high efficiency heat pumps leads to residential and commercial demands being 15% and 11% lower in 2040 than their 2017 levels, respectively. Figure 4.18 shows residential and commercial demand by energy source in the Technology Case.

When heat pumps replace natural gas heating, they lead to higher electricity use, although at lower levels than the natural gas they are displacing. However, when heat pumps replace electric baseboard heating or conventional air conditioning, this reduces electricity demand. Appliance efficiency improvements put further downward pressure on electricity requirements. Overall, despite electrification, annual electricity demands are similar to Reference Case levels. Given that demands for other heating fuels fall faster than electricity in the Technology Case, electricity makes up a growing share of residential and commercial building demands .

Figure 4.18: Residential and Commercial Demands by Energy Source, Technology Case

Transportation

In the transportation sector, increased use of biofuels and electricity diversifies the fuel mix of the sector that has long been dominated by oil-based petroleum products. Energy efficiency improvements for all forms of travel also reduce energy requirements. Figure 4.19 illustrates the transportation sector energy mix in the Technology Case.

Figure 4.19: Transportation Demands by Fuel, Technology Case

Increased EV penetration adds approximately 120 PJ, or over 30 TW.h, of annual electricity use by 2040. This reduces a relatively higher amount of gasoline and diesel, as EVs typically use less energy per km travelled compared to conventional vehicles. Improved vehicle efficiency and biofuel blending further reduces demand for these fuels. Relative to the Reference Case by 2040, Figure 4.20 shows that the Technology Case adds nearly 230 PJ of electricity and biofuels, which is more than offset by a 570 PJ decrease in petroleum product demand.

Figures 4.20: Difference in Transportation Demands by Fuels, Technology and Reference Cases

Industrial

Figure 4.21 shows industrial demand in the Technology Case by fuel. This reflects changes in energy use in both the oil and gas production sector as well as other industrial sectors. By 2040, industrial energy use is nearly 15% lower than 2017 levels, and 20% lower than the Reference Case. This is due to lower oil and gas production that is produced using less energy, as well as improved processes in other energy intensive industrial sectors.

Figure 4.21: Industrial Demands by Fuel, Technology Case

Crude Oil and Natural Gas Production

In the Technology Case, oil and natural gas producers face lower prices than in the Reference Case, reflecting slower growth in gas and declining demand for oil. Markets and infrastructure uncertainty are reflected in Canadian price discounts, which are the same as the Reference Case. In this smaller, and therefore increasingly competitive, global market for oil and gas, crude oil and natural gas production are lower than the Reference Case. By 2040, Technology Case crude oil production is 15% lower than Reference Case levels, and natural gas production is over 30% lower. However, production in the Technology Case is higher than the Low Price Case, highlighting the importance of market dynamics in future production trends.

Figure 4.22: Total Oil and Gas Production, All Cases

The key technology assumption of steam solvents being widely deployed by 2025 and pure solvents by 2030 has two main effects on oil sand producers. First, the technology creates a production uplift, so more oil is produced using the technology than standard steam injection, possibly up to 30%. Second, the technology reduces SORs. Figure 4.23 shows in situ production and SOR trends. In the medium term, technology improvements dominate market impacts, and Technology Case production is higher than the Reference Case until 2030. Over the longer term, lower prices and higher costs of carbon emissions cause Technology Case in situ production trends to flatten out. By 2040, in situ production in the Technology Case is nearly 10% lower than the Reference Case, but still higher than current levels.

Figure 4.23: In Situ Production and SOR Trends, Reference vs Technology

Another key factor is the relative lifetimes of oil sands projects versus other production types. Figure 4.24 shows production broken down by oil sands mining, in situ, and other production. Because of their long lifetimes, extremely low decline rates, and low per-barrel marginal costs of production, oil sands facilities continue to produce near current levels, with solvent-fueled technology leading to increases in production. Other forms of production, such as conventional and tight light oil, have shorter capital investment cycles, and are projected to be more responsive to global shifts in demand.

Figure 4.24: Oil Production by Type, Technology Case

Electricity Generation

In the Technology Case, electricity generation is moderately higher than the Reference Case, reflecting improvements to energy efficiency roughly balancing additional electric demands from uses such as electric vehicles. In this case, Canada’s already low-emitting grid reduces its emission intensity even further.

In the Technology Case, electric generating capacity is 26% higher than 2017 levels. Hydro still dominates Canada’s capacity mix, and the combined capacity of wind and solar more than triples in the Technology Case, due to assumed lower costs and improved integration. In the Technology Case, wind and solar make up over 25% of Canada’s capacity mix in 2040, compared to just over 10% in 2017. Figure 4.25 shows total electric capacity by fuel in 2005 and 2017 and in the Technology Case for 2030 and 2040.

Figure 4.25: Capacity 2005, 2017, Technology Case 2030 and 2040

Electric generation is 12% higher than 2017 levels by 2040. Relative to the Reference Case, capacity grows more than generation in the Technology Case because most of the additions are wind and solar. Wind and solar tend to generate less per MW of capacity compared to other sources of electricity. While wind and solar make up 25% of capacity in 2040, these resources account for 17% of generation. Figure 4.26 shows electricity generation by source in the Technology Case.

Electricity generation varies significantly by province. For hydro generating provinces, the electricity mix is relatively similar to the Reference Case, with small levels of wind and solar added due to lower costs. For other provinces, wind and solar become an increasingly large part of the mix. These resources are backed up with natural gas as well as increased interchange and demand side management.

Figure 4.26: Electricity Generation by Fuel Type, Technology Case 2040

Canada wide, the share of renewables and nuclear electricity generation reaches 90% by 2040. This compares to 84% in the Reference Case, and 82% in 2017. These annual figures can be misleading, as electric loads vary significantly during the day, as does available energy from variable sources like wind and solar. How these sources are matched with changes in electricity demands from end-users is an important uncertainty.

Primary Demand and GHG Emissions

The Technology Case implies a significant reduction in total primary energy demand, as well as a shift towards relatively more non-emitting energy. These changes will reduce Canada’s GHG emission trajectory, as less fossil fuels are combusted and more carbon is captured and sequestered. Figure 4.27 shows total primary energy demand by fuel. In the near term, energy use peaks and then begins to decline, with energy demand in 2025 2 to 3% lower than 2017 levels. Post 2025, end-use electrification reduces direct fossil fuel use, improved efficiency reduces demands for all types of energy, and the electricity mix includes a greater share of renewable energy. Total primary energy use declines by over 1% per year from 2025 to 2040. By 2040, total demand is over 15% lower than 2017 levels, while fossil fuel use drops even faster to 30% below 2017 levels.

Figure 4.27: Primary Demand by Fuel

Figure 4.28 compares the total energy intensity of the economy between the Reference and Technology Cases, for both energy use per $ GDP and energy use per person. Energy use per $ GDP has generally declined in the last few decades, as economic growth has outpaced energy demand growth. Energy use per capita, on the other hand, has remained relatively flat. The Technology Case represents a further decoupling of energy use from GDP and population growth. This results in energy use per $ GDP declining 2.5% per year in the Technology Case, to be 45% lower than 2017 in 2040. Energy use per capita falls 1.6% per year in the Technology Case to be 30% lower than 2017 in 2040.

Figure 4.28: Energy Intensity Trends, Reference and Technology Cases, % of 2017 Level

Compared to the Reference Case, the Technology Case uses more renewable energy and less fossil fuels (Figure 4.29). Renewable additions include wind and solar for electricity generation, increased biofuel blending in transportation, and increased use of RNG in the natural gas mix. Fossil fuel reductions are due to fuel switching towards biofuels or electricity at the end use level, relatively less natural gas used to generate electricity, and efficiency and process changes that require less energy, such as the adoption of solvent technology in the oil sands or heat pumps in buildings.

Figure 4.29: Change in Primary Energy Demand by Fuel Type, Reference vs Technology

The Technology Case shows that in a transitioning global energy context, Canada’s energy mix will transition as well. Figure 4.30 illustrates the change in coal, oil product, and natural gas demand in five year increments over the projection. The near term shows trends for increasing fossil fuel use in Canada reversing, largely driven by coal retirements and improved vehicle efficiency reducing oil product demand. Natural gas increases in the near term due to its role in oil production, heating, and replacing some of the initial coal retirements. In the longer term, new technologies and strengthening policies reduce demand for all three, such that every five years fossil fuel demand drops by about 10%.

Figure 4.30: Change in Fossil Fuel Demand Over Five Year Increments, Technology Case

The combination of reduced coal, as well as increased CCS, reduces the GHG intensity of the fossil fuel mix, putting further downward pressure on Canadian GHG emissions. Figure 4.31 compares estimated fossil fuel GHG emissions intensity for the Reference and Technology case.

Figure 4.31: Estimated Fossil Fuel GHG Emissions Intensity, Reference and Technology Cases

Key Uncertainties

The Technology Case provides one snapshot of what a global shift towards a low carbon economy might mean for Canada. Future development of both policies and technologies could lead to different outcomes than those presented in this analysis.

• Global context: How the global context affects global energy markets and investment is a key uncertainty that is important for the oil and gas projections. In the case of oil, others have suggested that falling global oil demand would mean a lower price than the Technology Case assumes. This could bring Canadian production trends closer to the Low Price Case.
• Differentials and infrastructure: Regional price differentials and infrastructure developments are generally assumed to be similar to Reference Case levels in the Technology Case. These are all highly uncertain areas however. Both oil and gas differentials could be different than assumed here, as could impact future project developments like LNG.
• Lower technology costs: The Technology Case assumes that costs of new technologies such as wind, solar, and batteries will continue to fall in the longer term. If these reductions do not occur, it is likely the adoption of these technologies will be lower.
• Increased end-use electricity: As part of the Technology Case, many end-use applications switch to electricity. Although the overall results of the Technology Case show similar electricity demand with the Reference Case as improved efficiency balances additional demand sources, there are many uncertainties with this result. First, depending on the distribution of electric loads throughout the day, or season, there may be additional challenges for the electric grid. Second, other scenarios see electricity increasing^Footnote 26 as additional load requirements may not be offset by improved efficiency.
• Technological innovation: There are many details that are not covered in this analysis, which is based on relatively high level trends. As new technologies are adopted, the integration of energy supply and demand will likely become more and more important. Innovation will be necessary across the entire spectrum of the energy system–consuming and producing technologies, market and policy design, and public involvement in energy system issues– to ensure Canadians’ energy needs are met in a reliable and affordable way.
• Disruptive technologies: The EF2018 Technology Case generally assumes gradual adoption of new technologies. Faster changes and disruptive technologies could alter the way Canadians use and produce energy, resulting in primary energy demand that is lower or higher in any of the cases presented in this report.

Date modified:

2023-11-29