Canada's fragmented electricity market is extremely unusual among developed nations.Jeff McIntosh/The Canadian Press
Bruce Lourie, C.M., is president of the Ivey Foundation and a professor of practice at the Trottier Institute for Sustainability in Engineering and Design at McGill University.
Prime Minister Mark Carney’s projects of “national interest” represent the transformational thinking Canada needs to unlock economic success and clean energy potential. But without fixing our outdated electricity governance, even the most ambitious federal investments in offshore wind and regional transmission will fall far short of their potential.
The federal government’s commitment to reducing interprovincial trade barriers must extend to electricity markets.
The numbers tell a stark story. Atlantic Canada imports billions of dollars of foreign fossil fuels annually for electricity generation. Atlantic Canada also has the highest rates of energy poverty in Canada. Meanwhile world-class offshore and onshore wind resources in Nova Scotia and Newfoundland – up to 40 gigawatts of long-term potential – remain undeveloped because of market access barriers, transmission bottlenecks and parochial politics.
Quebec and Newfoundland sit with massive hydroelectric capacity acting as giant batteries to balance intermittent wind resources. Larger transmission connections to Ontario and the United States would further enhance the physics and economics of a large interconnected system, as larger integrated systems are more stable, more reliable and use system resources more efficiently.
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The status quo isn’t just inefficient – it’s economically catastrophic in an era when energy advantage determines industrial competitiveness; and energy affordability is table stakes. Federal investments in offshore wind and regional transmission – however well-intentioned – will fail to achieve their potential without addressing market access and co-ordination. Canada’s constitutional division of powers made sense in 1867. It makes no sense in 2025. You can’t build a 21st-century clean energy superpower on 19th-century governance structures.
The collapse of the Atlantic Loop project perfectly illustrates this governance failure. Here was a project of clear national interest but with no supraprovincial authority to co-ordinate planning, approve cost-sharing or override parochial objections, the project died under the weight of interprovincial squabbling and federal feebleness. So Atlantic Canada stumbles along with a patchwork of provincial utilities operating tiny fiefdoms.
Canada is virtually alone among developed nations in maintaining such fragmented electricity markets. Even the United States, with strong state rights, has created regional transmission organizations that co-ordinate planning and operations across multiple states – the smallest planning jurisdiction includes 30 million people – in Canada it’s half a million. Australia, with a federal constitution similar to ours, created the Australian Electricity Market Operator spanning five states and more than 20 million people.
In October, 2024, the British government created the National Energy System Operator (NESO), responsible for strategic planning of both electricity and gas systems, with the explicit mandate to co-ordinate the transition to clean energy by 2030. The British government paid £630-million ($1.17 billion) to acquire this capability, recognizing that independent, system-wide co-ordination transcends commercial interests.
As global supply chains reorganize around clean energy and countries compete to attract investment, Canada’s fragmented approach to electricity governance puts us at a severe disadvantage.
The critical piece to unlocking private investment in Atlantic Canada is opening up electricity markets to co-ordinated planning and electricity trade – including exports to New York and New England, where clean electricity commands premium prices. Nova Scotia Premier Tim Houston’s Wind West concept provides a glimpse of the big-picture thinking needed: envisioning Nova Scotia as a clean energy export province.
This vision requires institutional innovation. Private investors need confidence that they can access markets, that transmission will be planned regionally, that utility planning bodies be independent, and that regulatory processes be co-ordinated rather than duplicated. A provincial patchwork cannot provide these assurances.
Compare this to energy transition successes elsewhere. Scotland transformed from coal dependence to renewable energy by ensuring developers could access integrated British and European electricity markets. Denmark became a wind energy superpower through market integration that allowed exports across northern Europe. Atlantic Canada has better offshore wind resources than either Scotland or Denmark. What it lacks is the governance structure to capitalize on this advantage.
With the Carney team in place, the federal government now has exceptional institutional capability to drive this transformation. Michael Sabia, former CEO of Hydro-Québec, and one of the country’s most sophisticated operators, now runs the federal civil service. His deep understanding of electricity markets, government and finance make him perfectly suited to the task. The federal government’s commitment to reducing interprovincial trade barriers should logically extend to electricity markets. Constitutional trade and commerce powers provide a clear legal foundation.
Canada needs its own version of the British National Energy System Operator or Australia’s Electricity Market Operator – a Canadian grid operator with authority over interprovincial electricity transmission planning, trade and market co-ordination starting with Atlantic Canada and Quebec. It would need independent governance, like the Bank of Canada, insulated from day-to-day political interference but accountable to both federal and provincial governments to provide the regulatory certainty that private investors demand.