The Energy Futures series explores how possible energy futures might unfold for Canadians over the long term. Canada’s Energy Future 2020: Energy Supply and Demand Projections to 2050 (EF2020) is our latest long-term energy outlook. It is the first outlook in the series to provide projections to 2050. It covers all energy commodities, and all provinces and territories. We use economic and energy models to develop this outlook. We also make assumptions about technology, energy and climate policies, energy markets, human behaviour and the economy.
In the long-term, global and Canadian ambition to reduce greenhouse gas (GHG) emissions will be a critical factor in how energy systems evolve. EF2020 considers two main scenarios, where energy supply and demand projections differ based the level of future action1 to reduce GHG emissions. We complement this analysis with a discussion of what further transformation of the energy system could mean.
The Evolving Energy System Scenario (Evolving Scenario) considers the impact of continuing the historical trend of increasing global action on climate change throughout the projection period. Globally, this implies lower demand for fossil fuels, which reduces international market prices. Advancements in low carbon technologies lead to improved efficiencies and lower costs. Within Canada, we assume a hypothetical suite of future domestic policy developments that build upon current climate and energy policies.
The Reference Energy System Scenario (Reference Scenario) provides an update to what has traditionally been the baseline projection in the Energy Futures series, the Reference Scenario. The scenario considers a future where action to reduce GHG emissions does not develop beyond measures currently in place. Globally, this implies stronger demand for fossil fuels, resulting in higher international market prices compared to the Evolving Scenario. Low carbon technologies with existing momentum continue to improve, but at a slower rate than in the Evolving Scenario.
EF2020 also explores what going beyond an evolving energy system could mean for Canada in the “Towards Net-Zero” section. This section does not provide a projection of the future, but rather a discussion of some of the key issues in transitioning towards a net-zero energy system. It provides an overview of the implications of moving to a net-zero energy system at a high level. It complements this with a more detailed discussion on what moving towards netzero could mean for specific segments of the energy system. These segments are personal passenger transportation, oil sands production, and remote and northern communities.
Figure ES.1 provides a conceptual illustration of the two scenarios included in EF2020, as well as of a net-zero future. Table ES.1 provides an overview of key differences between the Evolving and Reference scenarios.
|% Change in Select Technology Costs (2020 to 2050) (c)|
|Global Crude Oil Price (a)||North American Natural Gas Price (b)||
|Canadian Energy and Climate Policies|
|Evolving Scenario||Continually increasing global and Canadian action to reduce GHG emissions. The pace of increase in future action continues the historical trend||$54||$3.52||-75%||-50%||-50%||Builds on current climate and energy policies with an illustrative suite of future developments. Includes a rising economy-wide carbon price reaching $75 per tonne in 2040 and $125 per tonne in 2050 (d).|
|Reference Scenario||Global and Canadian action to reduce GHG emissions generally stops at current levels.||$75||$3.77||-60%||-11%||-30%||Only policies currently in place are included. Carbon prices remain unchanged from current programs (e).|
1. The COVID-19 pandemic has significantly impacted the Canadian energy system. We estimate that energy use in 2020 will fall by 6% from the year prior, larger than the decrease experienced during the 2009 financial crisis. We estimate that 2020 crude oil production will decrease by 7% or 335 thousand barrels per day (Mb/d) compared to 2019.
The global pandemic and efforts to stop it will evolve over the coming months and years. This creates added uncertainty for Canada’s energy outlook. EF2020 assumes that acute effects of the pandemic slowly dissipate over the next two to three years.
In Canada and around the world, COVID-19 has impacted all facets of daily life. The effect on Canadian energy use and production has been significant and widespread.
Actions to reduce the spread of COVID-19 have changed energy demand patterns in Canada. Actions such as travel restrictions, prevalent working from home, and the broader economic impact of the pandemic all affect the energy system in various ways. We estimate that Canadian end-use energy demand will fall by 6% in 2020 compared to 2019, the biggest annual drop since at least 1990. Energy to move people and goods will fall the most due to less travel and increased remote work and learning. Industrial energy use will also decrease, as many industries scaled back in response to lower demand for their goods. Energy use in the commercial sector will fall because of lower occupancy of buildings like offices, restaurants, and schools, while residential energy use increases as people spend more time in their homes.
COVID-19 is also impacting Canadian energy producers, although the effects vary across commodities. We estimate crude oil production in Canada will fall by 335 Mb/d in response to lower crude oil prices. We estimate natural gas production will remain relatively stable through 2020 as western Canadian natural gas prices are higher than last year. In response to overall lower electricity use in Canada, we estimate that electricity generation will fall by 3% in 2020.
2. Canada’s domestic fossil fuel consumption peaked in 2019 in the Evolving Scenario. By 2030, it is 12% lower, and 35% lower by 2050. At the same time, renewables and nuclear grow by 31% by 2050 and become a larger share of the energy mix.
Increased climate action in the Evolving Scenario impacts future Canadian energy use. In 2018, over 82% of Canada’s total GHG emissions were energy related. The vast majority of these came from fossil fuel combustion.
In the Evolving Scenario, consumption of fossil fuels in Canada remains below its 2019 peak. By 2030 it is 12% lower, and 35% lower by 2050. Coal declines in the 2020s as it is phased out of electric generation. Refined petroleum product (RPP) use gradually declines due to energy efficiency improvements and increasing use of renewable fuels and electricity. Natural gas use increases in the early part of the projection, driven by increasing demands in electricity generation, and upstream crude oil and natural gas production. Natural gas use falls in the latter parts of the projection, as renewables play a bigger role in electricity generation, and energy needs to produce fossil fuels decrease.
In contrast, fossil fuel consumption is relatively unchanged throughout the projection period in the Reference Scenario. This is due to steady improvements in energy efficiency offsetting population growth and increasing industrial output, particularly in the oil sands.
At the same time, demand for renewable energy sources such as hydroelectricity, wind, solar, and biofuels increases by 45% from 2019 to 2050 in the Evolving Scenario. Nuclear demand increases by 2%. Combined with declining fossil fuel use, the share of these low and non-emitting sources increases from 23% of the energy mix in 2019, to 38% by 2050.
3. Electricity becomes increasingly competitive with fossil fuels in many parts of the energy system, including for passenger vehicles. Electricity’s share of end-use demand increases from approximately 16% currently to over 27% in 2050 in the Evolving Scenario, when half of all passenger vehicles sales are electric vehicles. Renewable sources will also account for a larger share of electricity generation.
Many energy modeling studies2 indicate that increased electrification will likely be a key part of energy system transitions. In the Evolving Scenario, assumed declining battery costs and increasingly stringent climate policies result in steady increases in electricity use in all sectors of the economy. Electricity use increases by an average of 1% per year from 2019 to 2050. Its share of end-use demand increases from approximately 16% currently to over 27% in 2050.
Notably, electricity gains a strong share of the transportation sector, where gasoline and diesel currently dominate. As they become more cost competitive, passenger electric vehicles (EVs) make considerable inroads over the projection period. By 2050 in the Evolving Scenario, EVs account for half of all new passenger vehicle purchases. In the longer term, the Evolving Scenario also includes some adoption of EVs and hydrogen fuel cells in the freight sector.
To meet these rising demands, Canada relies more on renewable generation. Wind, solar, and hydro electricity generation grow in the projections. In the Evolving Scenario, 90% of electricity generation comes from renewable and nuclear generation in 2050. This compares to 81% today.
Electricity's share of end-use demand grows more slowly in the Reference Scenario. It reaches 20% in 2050, when 20% of passenger vehicles sold are EVs. Renewable generation also grows in the Reference Scenario, although at a slower pace. In 2050, natural gas plays a larger role in the electricity mix, and renewable and nuclear generation account for 81% of generation.
4. Under the assumptions of the Evolving Scenario, Canadian crude oil production increases steadily until peaking in 2039 at 5.8 million barrels per day (MMb/d). Driven by growing exports of liquefied natural gas (LNG), Canadian natural gas production increases and peaks at 18.4 billion cubic feet per day (Bcf/d) by 2040. Both crude oil and natural gas production decline slowly over the last decade of the projection period.
Crude oil production in the Evolving Scenario grows from 4.9 MMb/d in 2019 to 5.8 MMb/d in 2039. In the last decade of the projection, production begins to decline, reaching 5.3 MMb/d by 2050. Growth is largely due to expansions of existing in situ oil sands projects. The price assumptions in EF2020 underpin this growth. The Evolving Scenario assumes that the Brent crude oil price increases from 2019 US$37/bbl in 2020 and plateaus at the 2019 US$55/bbl level from 2026 to 2038, before declining slowly to 2019 US$50/bbl by 2050.
Natural gas production increases in the Evolving Scenario from 15.7 Bcf/d in 2019 to 18.4 Bcf/d in 2040. This growth is driven by increasing LNG exports, which we assume increase to 4.9 Bcf/d by 2039. Most of this production growth comes from the Montney tight gas resource, especially in British Columbia (B.C.). After 2040, natural gas production slowly declines to 16.8 Bcf/d by 2050.
The Reference Scenario shows higher future production for both crude oil and natural gas. Drivers of this higher production include significantly higher assumed crude oil prices, greater volumes of assumed LNG exports, moderately higher natural gas prices, and a lack of additional domestic climate policies beyond those currently in place.
5. Major crude oil pipeline projects under construction will be able to accommodate all future production growth in both the Evolving and Reference Scenarios.
A key issue for Canada’s energy system is the availability of crude oil export pipeline and rail capacity. This has implications for Canadian oil pricing and production trends. We assume that additional pipeline capacity is added according to announced completion dates of the Keystone XL pipeline, Line 3 Replacement Project, and the Trans Mountain Expansion. This assumption is not an endorsement of, or prediction about, any particular project. The “Scenarios and Assumptions” section provides further details on the infrastructure assumptions in EF2020.
With these announced pipeline projects assumed to proceed as proposed, crude available for export from western Canada remains below total pipeline capacity over the next 30 years in both scenarios.
6. While fossil fuel consumption declines in the Evolving Scenario, it still makes up over 60% of Canada’s fuel mix in 2050. Achieving net-zero GHG emissions by 2050 will require an accelerated pace of transition away from fossil fuels.
EF2020 shows a range of outcomes in Canadian fossil fuel consumption trends, which will drive Canada’s GHG emissions. In the Reference Case, there is limited growth in Canada’s domestic fossil fuel use. In the Evolving Scenario, fossil fuel use declines steadily to 2050. At the same time, fossil fuels are still a large part of the Evolving Scenario energy mix in 2050.
Clearly, a low carbon economy will require an even greater shift in Canada’s energy system. EF2020 includes a “Towards Net-Zero” section, which explores the unique challenges and opportunities in pursuing deep decarbonization. It discusses what net-zero could mean in Canada, and focuses on three segments of the Canadian energy system for more detailed analysis: personal passenger transportation, oil sands production, and remote and northern communities. What the exact 2050 balance might be between removing and emitting GHGs into the atmosphere is not yet clear. What is clear is Canada’s likelihood of achieving our ambitious net-zero target increases as our energy system emissions fall. Figure ES.9 provides highlights from this analysis and further details are available in the “Towards Net-Zero” section.
-  "Action” in this context is led by increasing policies, while also considering behavioural decisions by consumers and firms.
-  Bataille, C., Sawyer, D., & Melton, N. (2015). Pathways to deep decarbonization in Canada. SDSN-IDDRI. Trottier Energy Futures Project. (2016). Canada's Challenge & Opportunity: Transformations for major reductions in GHG emissions; Trottier Energy Futures Project; Vaillancourt, K., Bahn, O., Frenette, E., & Sigvaldason, O. (2017). Exploring deep decarbonization pathways to 2050 for Canada using an optimization energy model framework. Applied Energy, 195, 774-785.