Notice: On 2 December 2020, a note for additional clarity was added to Figures ES.8 and R.12 in this report.
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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.
This figure illustrates the key differences between the Evolving and References scenarios, and the Towards Net-Zero discussion. The vertical axis is a notional representation of the degree of action in GHG emission reduction. The horizontal axis is time, with the projection period starting in 2020. In the historical period, action is increasing, and in the projection period, the Evolving Scenario continues this increase at the historical rate. In the projection period, the Reference Scenario maintains action at 2020 levels, while in the Towards Net-Zero discussion, the pace of increase of action increases relative to history.
| KEY ASSUMPTIONS | ||||||||
|---|---|---|---|---|---|---|---|---|
| % Change in Select Technology Costs (2020 to 2050) (c) | ||||||||
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SCENARIO PREMISE |
Global Crude Oil Price (a) | North American Natural Gas Price (b) |
Solar Power |
Onshore Wind |
EV Batteries |
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). | |
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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.
This figure is comprised of several charts and text boxes that communicate various impacts of the COVID-19 pandemic on Canada’s energy system.
The first chart gives an estimation of percentage change from 2020 to 2019 in energy end-use demand for six fuels. Relative to 2019, demand for gasoline in 2020 decreased by 9%, diesel fuel by 7%, aviation fuels by 46%, commercial and industrial electricity by 12%, and natural gas by 4%. Conversely, we estimate that demand for residential electricity increased by 9%.
The next three charts compare 2019 and 2020 production for crude oil, natural gas, and electricity. In 2020, crude oil production decreases by 7%, or 335 Mb/d, compared to 2019. Natural gas production remains relatively stable at about 15.2 Bcf/d in 2019, and 15.3 Bcf/d in 2020. Electricity falls by about 3% in 2020, or 19 Tw/h compared to 2019.
The next chart shows prices for gasoline, diesel fuel, and crude oil for the period of January to October, 2020. The price of gasoline was $1.19 C$ per liter at the beginning of January, and declined to about 75 cents per liter in late April, before leveling out at about $1.00 C$ per liter from June to October. The price of diesel was $1.29 C$ per liter at the beginning of January, and declined to about 89 cents C$ per liter in early May, before leveling out at about $1.00 C$ per liter from August to October. The price of crude oil rapidly declined from about $63 US$ per barrel to about $20 US$ per barrel mid-April before recovering to about $40 US$ per barrel from July to October. The price of crude oil was trading at -$37 US$ per barrel on April 20th.
The next chart shows a comparison between active drilling rigs for 2020 and 2019. In both years drilling activity declines sharply from a peak of about 250 rigs in March and April. In 2020 the decline was sharper, leveling out at about 25 active drilling rigs from May to July, and increasing slightly to about 50 by September. In 2019, there were about 60 active rigs from April to May. This number increased steadily from June to between 100 and 150 in September.
The last chart in the figure compares 2019 and 2020 Canadian crude oil refining volumes. Volumes were similar from January to March at about 1.7 MMb/d in both 2019 and 2020. In 2019, refining decreased slightly to 1.4 MMb/d from March to May, before returning to 1.7 MMb/d. In 2020, refineries significantly reduced output in March and April, decreasing volumes to about 1.1 MMb/d. In 2020, refining volumes recovered slightly to 1.4 MMb/d by August.
Demand for road transportation fuels decreased, driven by restrictions and actions related to COVID-19.
Demand for jet fuel declined to historic lows because of reduced commercial air travel.
Public health measures led to more people working from home, which resulted in flattening of daytime electricity demand profiles, and increasing residential consumption.
The increase in residential electricity demand partly offsets reduced demand in the commercial and industrial sectors. We estimate total electricity demand declines 5%.
Demand for natural gas fell, particularly in the oil and gas sector, which is the largest consumer in Canada.
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.
This chart compares primary energy use from 2005 to 2050, by fuel. Renewables’ and nuclear’s share of total energy use increases from 24% in 2018, to 38% in 2050, or an increase from 3,305 PJ in 2018 to 4346 by 2050, in the Evolving Scenario.
RPP’s and natural gas liquids share of total energy use decreases from 36% in 2018, to 29% in 2050, or a decrease from 4,983 PJ in 2018 to 3310 by 2050, in the Evolving Scenario.
Coal’s share of total energy use decreases from 5% in 2018, to 0.5% in 2050, or a decrease from 660 PJ in 2018 to 60 by 2050, in the Evolving Scenario.
Lastly, Natural gas’s share of total energy use decreases from 36% in 2018, to 33% in 2050, or a decrease from 5,016 PJ in 2018 to 3,732 by 2050, in the Evolving Scenario. Total primary demand in the Evolving Scenario declines from 13,964 PJ in 2018 to 11465 by 2050, compared to an increase in the Reference Scenario to 15,273.
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.
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.
This graph shows crude oil production by type from 2005 to 2050 in the Evolving Scenario, and total production for the Reference Scenario. Canadian crude oil production in the Evolving Scenario peaks at 5.8 MMb/d in 2039 and declines to 5.3 MMb/d in 2050, an increase of 7% from 2019. For comparison, production peaks at 7.2 MMb/d in 2045 in the Reference Scenario.
This graph shows natural gas production by type from 2005 to 2050 in the Evolving Scenario, and total production for the Reference Scenario. Total production in 2005 was 17.0 Bcf/d, with tight and shale gas production at 4.7 Bcf/d. In 2050, total gas production is 16.8 Bcf/d in the Evolving Scenario, with tight and shale gas making up the majority of production at 15.1 Bcf/d. In the Reference Scenario, total gas production reaches 23.2 Bcf/d in 2050.
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.
This chart shows the current and announced crude oil export pipeline capacity versus the projected crude oil supply available for export. Pipeline capacity grows from 2.9 MMb/d in 2010 to 6.2 MMb/d in 2050. Crude oil exports by rail grow from 0 MMb/d in 2010 to 0.2 MMb/d in 2050. Crude oil available for export grows from 4.2 MMb/d in 2019 to a projected 4.9 MMb/d in 2035 before declining to 4.6 MMb/d by 2050.
Note: While the Evolving Scenario does project that, in some years, crude oil available for export is significantly lower than total pipeline capacity, this should not be interpreted as the Energy Futures Report concluding that any pipeline should or should not be built. The report does not assess the many factors that go into whether a pipeline is needed, including the value of access to new markets and the role of spare pipeline capacity in responding to temporary or lasting changes in markets.
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.
This graph shows a conceptual illustration of a net-zero greenhouse gas transition from 2010 to 2050. These years are shown on the horizontal axis, while the vertical axis shows greenhouse gas emissions with positive emissions above the horizontal axis and negative emissions below. There are three areas, and two lines on the chart, each representing greenhouse gas emissions trajectories over time. First, the chart shows a line representing business-as-usual emissions from 2020 onward maintaining historic levels. Second, it shows two areas representing GHG mitigation and remaining emissions, respectively. The graph shows a third area below the horizontal axis representing emissions removals increasing into the future. Finally, the graph shows a net emissions line that declines from present levels to zero GHGs by 2050.
Continued low carbon technology development will be essential to achieving 2050 goals. In a net-zero energy system, the equipment and processes used to provide energy will look much different than today.
Policies will be a key driver of change. Government policies will play a key role in providing incentives for these necessary technology developments and adoptions to occur.
The energy system is highly integrated. The evolution of each segment of the energy system will depend on its specific circumstances, as well as broader domestic and international trends.
“Net-zero” GHG emissions, or “carbon neutrality”, refers to the balance of emitting and removing human-caused GHGs from the atmosphere. Reaching net-zero emissions does not necessarily require eliminating all emissions everywhere. Instead, residual emissions can be balanced by enhancing biological sinks and negative emission technologies.
Business-As-Usual Emissions Trend. Represents a hypothetical GHG emissions trajectory where future GHG reductions are not pursued.
Mitigation. Represents GHG emissions reductions relative to the business-as-usual trajectory.
Remaining Emissions. GHG emissions remaining after mitigation.
Emission Removals. GHGs removed via negative emission technologies or enhanced biological sinks.
Net Emissions. The balance of remaining emissions and emission removals.
Notice: On 2 December 2020, a note for additional clarity was added to Figures ES.8 and R.12 in this PDF.
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