The presence or absence of electricity transmission lines can enable or hinder multi-billion dollar investments along their length, influencing the competitiveness of Canada’s regions and industries. Yet building transmission lines can take as long as a decade from planning to completion. That’s a problem because industrial expansion and community growth often depend on having access to power when opportunity knocks, not years later.
How can policymakers overcome this challenge?
This blog outlines how the federal government can help accelerate these investments across Canada, and highlights some of the biggest risks and benefits for decisionmakers. It also shows that Canada is not unique in facing this challenge; global peers offer useful lessons for how national fiscal tools can help close the investment gap.
Electricity transmission infrastructure is a national priority
The need to accelerate investments in transmission infrastructure has never been more urgent. Governments across the country have prioritized the search for “nation-building projects” alongside strengthened inter-provincial trade, in response to threats from south of the border.
The federal government is developing an updated electricity strategy with the aim of doubling the size of Canada’s electricity grids, increasing interconnections, and ensuring power remains affordable. Likewise, the Canada-Alberta Memorandum of Understanding includes commitments to build large interties between Western provinces in support of broader electrification.
All these factors are working together to make building transmission lines, alongside more clean power, a top national priority.
The federal government has a role in accelerating transmission build-out
The current approach to building transmission lines in Canada has been unable to overcome a number of structural problems. While electricity generation falls primarily under provincial jurisdiction, these persistent barriers to expanding transmission infrastructure show the need for more active involvement from the federal government.
Transmission lines offer significant benefits that go beyond the province, territory, or current customer base that funds the asset. Yet decisions to approve investments in transmission are made at the provincial level, and must be justified primarily on local needs and benefits because the costs are borne by local ratepayers. As a result, national benefits aren’t fully captured in provincially based decision-making that ultimately give the go-ahead to these large investments.
The result is a typically conservative approach to investment, even when building ahead would produce higher national value and unlock industrial competitiveness, grid reliability and resilience, emissions reductions, and energy security benefits.
As noted earlier, building transmission lines ahead of customer demand is necessary for big private investments, but remains difficult because the risks and benefits of doing so arrive on different timelines.
Investing in large transmission infrastructure means higher upfront costs for utilities, which can put pressure on electricity rates before new customers arrive. Utility regulators closely examine this rate pressure in their tests that focus on prudence, rate impacts, and fairness. Fairness comes into play when current customers bear the costs and risk but future industrial users see most of the benefits, which often materialize over decades.
In addition to these risks, customers can arrive later than forecast, or not at all. Provinces and regulators can (and do) mitigate some of this with contracts, security deposits, and innovative rate designs, to reduce the risks outlined above. They can also improve energy planning to better anticipate load, but they cannot eliminate broader national economic and trade uncertainty, which ultimately drives many decisions on industrial investment.
Large transmission projects also strain Crown utility and provincial balance sheets. These projects require large capital investments, and it takes years to fully recover costs from ratepayers. That increases a utility’s debt relative to its assets and puts pressure on its credit rating. Lower credit ratings raise borrowing costs for all projects and higher costs require utilities to either raise rates or borrow more, creating a cycle of debt and rate pressures. Crown corporation debt can also impact the provincial books.
Together, these issues combine to make the case for federal fiscal involvement.
What targeted federal fiscal involvement in transmission should achieve
How should the federal government approach this issue? Different mechanisms for federal support can make sense in different contexts.
The point of federal involvement is not to replace provincial responsibility for electricity, but to use the federal balance sheet selectively where it supports national economic growth. That means being fiscally prudent with federal support for projects that offer national benefits and have well-defined risks.
A national cost-benefit test should be the starting point. If the project delivers net benefits for Canada as a whole then it is reasonable for a portion of the risk to be borne by the broader tax base rather than provincial ratepayers alone. This logic applies to intra-provincial build-out, as well as to inter-provincial transmission. Both link electricity supply to new demand, including for projects of national significance.
The next priority is to ensure the federal government is using the appropriate financial tool based on the risk and expected returns.
Blended finance is useful for lower-risk projects with a private or Indigenous proponent. These projects can ultimately pay for themselves, but require support from the public sector to accelerate project timelines, to encourage private capital investment, or to enable access to competitive financing, particularly for Indigenous partners that otherwise face structural barriers. Blended finance instruments include concessional loans, guarantees, and credit enhancements that reduce financing costs or reallocate specific risks. They typically mean less risk-exposure to the taxpayer and they help level the investment playing field for provinces with investor-owned utilities (Nova Scotia, Alberta, Prince Edward Island, Newfoundland and Labrador) whose borrowing costs are typically higher.
Canada already has a strong blended finance base to build on, including via the Canada Infrastructure Bank’s (CIB) $10 billion Clean Power portfolio and $ 1 billion Indigenous Infrastructure program. Since transmission lines with 50 per cent Indigenous equity stakes are increasingly the norm across Canada, the CIB’s Indigenous Infrastructure program has a unique role to play across allelectricity market types.
Blended finance can help with timing, shifting risk off the utility balance sheets and smoothing near-term bill impacts. It is less helpful where there is significant impact on medium‑ to long‑term electricity rates because the capital must still be repaid to the lender (for example, the CIB), with a return.
That means more direct government support can also have a role to play. Federal contributions (including tax credits or other non‑repayable support) are most justified when national benefits are high, but recovering the cost of the investment from customers would push electricity rates or utility debt to an unacceptable level or undermine the competitiveness of the very investments the transmission is meant to unlock. As long as the line passes a national cost-benefit test, federal funding can reduce pressure on rates and provide an equalizing function, ensuring that costs are aligned with benefits across regions.
Canada already has tools to build transmission faster—and lessons to follow
Peer jurisdictions show how national governments can support earlier build-out of transmission, even when electricity remains primarily a state or provincial responsibility.
Across the U.S. and Australia—where electricity is likewise led by states—lagging transmission investment has prompted national governments to develop financing tools to share risk and enable earlier build‑out, offering useful lessons for how Canada can strengthen its own approach. We also draw additional lessons from the EU and U.K. experience.
For projects likely to recover their costs in the long term, there is a strong case for scaling the CIB’s success, including the budget for Indigenous Infrastructure. CIB has been successful enough to generate sufficient returns to cover its own operating costs. Other countries run similar finance programs at a relatively larger scale. Australia’s $18.6 billion Rewiring the Nation Fund, delivered by a Crown corporation like the CIB, has twice Canada’s budget for a system generating less than a third of the power and with fewer kilometers of lines1. Australia’s National Electricity Law also requires that the cost savings from federal financing be passed through to ratepayers.
There is also potential for government entities to step in more directly to address timing risks. In the U.S., the federal government plays a much stronger role in transmission planning and investment. Under the $US2.5 billion Transmission Facilitation Program (TFP), the Department of Energy (DOE) uses tools such as capacity contracts, alongside loans for such purposes. It purchases up to 50 per cent capacity on a line for up to 40 years as an anchor tenant, and resells the capacity as customers materialize. The DOE has clear legislation that allows it to act as a direct buyer, but risk-sharing instruments such as backstop offtake agreements could also provide a similar outcome. These also underwrite the risk that customers and revenue don’t fully materialize in the early years of operation.
For higher-risk projects of national benefit, there are international examples of more direct support. The U.S. TFP funds projects located within national interest electric transmission corridors, for example. Likewise, the European Union adopts a similar approach through the Connecting Europe Facility, a public funding instrument that supports cross-border grid projects in priority areas.
Canada already has both a process for identifying projects of strategic national interest and investment tax credits for new interprovincial lines. There is a case for the federal government to extend financial support to intra‑provincial transmission in line with its international peers. Doing so will be essential to fast-tracking these projects and would better align who pays for them with who benefits, while recognizing that transmission is long‑lived, foundational infrastructure.
Next steps: build, Canada, build
If Canada wants to realize its nation-building goals at this critical time, electricity transmission must be treated as enabling infrastructure for private capital. A pragmatic federal agenda that accelerates transmission build-out while respecting provincial jurisdiction would:
- Establish a national test. Apply a transparent national cost‑benefit framework to identify the transmission projects where federal risk‑sharing investments are justified (acknowledging economic, reliability, resilience and emissions benefits). Then match the project to an appropriate fiscal support tool according to the risk and return.
- Scale the Canada Infrastructure Bank and other financing tools to match the build‑out required. Provide more funds for the CIB to invest in clean power and Indigenous-owned infrastructure. These funds should come with clear expectations on how the programs should operate and what success would look like. This includes how effectively CIB financing (1) mobilizes private capital, as opposed to replacing it, (2) recycles public dollars over time through load repayment, and (3) passes cost-saving from federal support through to electricity customers.
- Offer selective non‑repayable support. Where national benefits are high but financing policy tools are insufficient, extend federal investment tax credits or other direct contributions to intra‑provincial lines (such as those that are essential to projects of national significance). Funding helps to align who pays for such infrastructure with the broader national benefit.
A commitment to Canada’s competitiveness should be matched by an equal commitment to the transmission backbone that makes major investments feasible. Doing so can make sure Canada’s clean power advantage is transformed into durable growth, resilience, and energy security at this critical time.
1 In 2024, Canada’s total electricity generation was 622.2 TWh compared to Australia’s 284 TWh. Some estimates have put Canada at 166,000 k.m. of lines, compared to Australia with 28,000 k.m.
