About the Energy Transition Technology Profile series: These profiles draw on, and update, the Institute’s analysis of specific safe-bet and wild-card technologies that are driving Canada’s clean energy transition.
Strengths and cautions
Can increase the efficiency and reliability and reduce the costs of electricity systems.
Make achieving climate goals more affordable, reliable, and sustainable.
Built on proven technologies, ready for mainstream use.
Face hurdles to widespread adoption, including regulatory barriers and consumer hesitancy.
What are smart grids?
The term smart grid describes a range of technologies that can be used to enhance the flexibility of electricity systems. These innovations will prove crucial for managing growing electricity demand as the clean energy transition accelerates.
Some smart-grid applications also enable two-way communication between grid operators and participating households, businesses, and industrial consumers. And grid operators and other entities, such as aggregators, are starting to link together individual “smart” consumers to act as a virtual power plant. The virtual power plant works together to optimize how energy is generated, stored, and used, to manage supply and demand more efficiently on the grid.
Why do they matter now?
To power Canada’s clean energy transition and weather the extremes of climate change, Canada’s electricity grids must become more flexible, and smart grids have a major role to play in enabling this transformation. The International Energy Agency, for example, expects demand-side smart-grid measures to become the most important source of electricity system flexibility globally, contributing 30 per cent of the flexibility that grids will require by 2050.
A smarter grid can enhance the reliability of the electricity system and lower overall costs, particularly as the energy transition requires a bigger and cleaner electricity supply, in which growth is expected to be led by decentralized, variable wind and solar, simply due to their being the most cost-effective sources of new power available.
On the supply side, solutions like battery storage can support the flexibility of grids with growing shares of variable renewable energy generation and improve reliability, which in turn helps keep costs down. On the demand side, virtual power plants and technologies such as smart metering and smart appliances make it possible to shift demand from high-use times to lower use times, reducing the difference between peak demand and average electricity demand. This ability to mitigate peak demand reduces the need for grids to build out high-cost excess capacity to meet ever-higher demand peaks.
Electricity system operators in Canada have already identified smart-grid technologies as critical tools for achieving their climate goals and meeting growth in demand. Grids in the majority of provinces and territories have already been using smart meters for years, providing real-time data on electricity consumption and allowing users to adjust their usage to save on energy and receive financial incentives for participating. In British Columbia, BC Hydro has deployed smart substations that use advanced sensors and communication technologies to monitor and manage electricity flow more efficiently, and Hydro-Québec provides smart thermostats and dynamic pricing to customers. In Ontario, the IESO administers Peak Perks, a demand response program that automatically adjusts participants’ smart thermostats during summer peak events in exchange for financial compensation. The program has enrolled more than 125,000 participants and has achieved a maximum peak demand reduction of 157 megawatts, equivalent to taking the electricity demands of the city of Barrie off the grid at summer peak. And a recent pilot project in Yukon called Peak Smart enlisted 400 customers in a demand-side flexibility program, shifting usage of baseboard heaters and hot water tanks to times of lower demand through automated sensors and controls.
The potential benefits that smart grid technologies can unlock are much bigger than programs implemented to date have been able to realize, however. For Canada to manage the anticipated surge in electricity demand over the coming years, mastering the use of smart grid technologies will be crucial. And early implementation of these technologies can bring substantial benefits. For example, in the United States, Virtual Power Plants could reduce peak demand by 60 gigawatts by 2030, growing to more than 200 gigawatts by 2050. Delaying these advancements risks missing out on significant savings and a more resilient energy future.
Are smart grids a safe bet or wild card?
Smart grid technologies are considered safe bets. Many of the core technologies and applications—including smart-metering, dynamic pricing, load balancing systems, and automated demand-shifting technologies—are already widely used in some jurisdictions. The technologies themselves and the mix of demand-side and supply-side applications will continue to evolve in the years to come, but the basic building blocks of smart grids are proven technologies ready for mainstream use.
What challenges must they overcome?
Although smart grid technologies are safe bets, mainstream uptake in Canada of many of the associated technologies has been limited to date. The main challenge today is accelerating the uptake of smart grid infrastructure, and optimizing their deployment to capture cost savings and reliability benefits for participating customers and at the grid scale.
Significant regulatory barriers to access remain, however. These include implementing standards for the integration and interoperability of smart grid technologies and reforms to existing utility incentives. Such standards would encourage smart-grid use and enable the introduction of new business models.
The current systems of legislation, regulation, and pricing are not well-designed to reward speedy adoption of smart grid technologies in Canada, slowing progress on electricity system growth and innovation, including the implementation of smart-grid technologies. And some smart grid technologies could face difficulties achieving consumer buy-in for applications where customer-side participation is necessary.
What are the next steps for policy makers?
To crack open smart grids’ potential to enhance reliability and reduce costs, Canada’s utilities need to deepen and broaden their ongoing investments in digital grid infrastructure. These systems are needed to enable tools like consumer behaviour response to time-of-use pricing, distributed storage, and other solutions that could offer both system-wide value and cost savings to individual consumers that participate in these programs. Adequately incentivizing smart grid investments may require updates to utility regulation and policy leadership from governments.
Because Canada’s electricity systems are operated and largely regulated at the provincial level, enabling utilities’ and consumers’ faster adoption of smart grid technologies is primarily in the hands of provincial policymakers and regulators. But the federal government can also play an important role—for example, by prioritizing grid modernization initiatives in their innovation and technology deployment funding, building on previous efforts such as the Smart Renewables and Electrification Pathways Program and the Smart Grid Energy Innovation Program.
Some provinces are farther ahead than others. Provinces with more experience, such as Quebec, Ontario, and B.C. can provide viable models for others. Canada’s electricity systems are in a strong position to seize the opportunities presented by smart grids. But they still face barriers to the faster deployment of this suite of technologies that would maximize their impact for utilities and consumers.
Fortunately, with demand for electricity expected to grow across the country, policymakers and electricity authorities increasingly recognize the beneficial role that smart grids can play in a growing grid. But tapping that potential will require new investment, policy, and innovation.
Profile text by Chris Turner.
