The following essay is part of a collaboration between MBP Intelligence and New Economy Canada, examining Canada's electricity strategy and the future of electrification. In the next few weeks, both Tyler Meredith and Ben Woodfinden will be publishing two-part essays on this question (the following is Part I). This follows a recent special edition of the MBP Intelligence Briefing with Merran Smith, Andrew Leach, Michael Powell. Ben Woodfinden’s Part I essay here.
Charlottetown made electricity a leaders'-table file — the real test is whether Ottawa governs the build-out or just finances its fragmentation.
Key Takeaways:
- Charlottetown made electricity a leaders-level file, with pre-development on interties due by July 2027 and every project underway by the end of 2028. But the projects stay provincially sponsored and sequenced, the commitments are “subject to favourable market conditions,” and there is no federal dollar figure, no cost-sharing formula and no scorecard.
- Ottawa’s job is not to be the electricity financier of last resort. Money spent without conditions finances fragmentation; the federal role is orchestration – setting conditions, keeping the file at the First Ministers’ table, and being disciplined about where federal dollars add value.
- A megawatt is not a megawatt. Who gets power, at what price, and where in the interconnection queue is becoming a first-order industrial-policy instrument, and New York’s summer – a $100 billion chip fab, then a moratorium on hyperscale data centres – shows the ratepayer politics of ducking that choice.
- The model is child care, not the health transfers: $30 billion through bilateral agreements with hard conditions built a system where none existed. Part II takes up how to finance the build.
With all the noise and anxiety this week about Trump’s tariffs and how Canada will mount a united response, yesterday’s First Ministers’ meeting in Charlottetown, PEI, was yet again a seminal moment at a critical time for our country. Given all the focus on Trump, some will be forgiven for perhaps missing some very important news buried in the joint communique about how, as the Prime Minister says, we can durably build strength here at home. And by that I don’t mean investing in defence, I mean electricity.
Notably, Premiers and the PM directed their energy ministers to work together on implementing interties as part of what is shaping up to be Canada’s first-ever national electricity strategy. They agreed to complete pre-development work on their respective intertie projects by July 2027, to have an initial tranche of projects underway by the end of 2027, and to have all of them underway no later than the end of 2028. They also named fair-priced electricity as a driver of long-term economic growth, against demand they expect to double by 2050.
Credit where it is due. I have argued for months that this file would only move when it became a leaders-level file, and this week it became one. Although driven by a crisis and wartime footing as we deal with the fallout of Trump’s upending of the global trade and economic order, Canada’s First Ministers have now met fourteen times in sixteen months. This is a cadence of First Ministers’ engagement we have not seen sustained in decades, and although it has a common thread in how we respond to Trump, the action items are pushing out in many other directions. That the electricity buildout is part of that – not simply as a weapon to be deployed potentially as a retaliatory response to tariffs – is meaningful and encouraging. This tells us this time may in fact be different for federal-provincial cooperation.
Reading the communique closely you also get a clear sense of what was not agreed. The projects are “their respective intertie projects,” in other words provincial projects, provincially sponsored, and provincially sequenced. The commitments are “subject to favourable market conditions being met,” a caveat wide enough to drive a transmission corridor through it. There is no money attached as yet (although we expect further steps will likely be announced in Budget 2026), no indication of how costs will be generally shared between levels of government, no agreed federal contribution, and no scorecard by which to as yet measure progress. That we at least have deadlines is a very hopeful next step. As we have seen through the development of the Canada-Alberta MOU and the subsequent follow-on of the BC Prosperity Agreement (an interesting name in itself), the deadlines themselves do focus the mind in producing subsequent action with the Carney government.
Which brings us to a central question for this first essay of mine. With the federal consultation on Powering Canada Strong still open and a budget coming this fall: what, exactly, is the federal government's role in the largest infrastructure build this country has attempted since the postwar years?
My answer is that Ottawa's job is not to become the country's electricity financier of last resort. Learning from what we know of past history in federalism, Ottawa ought instead to see itself as an orchestrator: the level of government that is able to set conditions that steer the system in a helpful, though not confrontational, direction, to fill in gaps that no province can set alone. It keeps the file at the leaders' table, and is disciplined about where federal money adds value rather than cutting cheques against provincial wish lists. The cheque is not the strategy. The conditions are or will be.
As with any intergovernmental relations file the federal government needs to be humble about its own role (something I think PM Carney, in his renewed commitment to “cooperative federalism,” understands). As we have seen, for example, in the evolution of child care from Canada’s initial $500 million per year investment in child care in 2016 to eventually supercharging it into an $8–9 billion a year national program in 2022 – the ability to set conditions depends on showing up with a materially large and significant commitment and knowing what you want to do. You can’t shape the outcome if you aren’t properly invested. Doing so will require very large dollars – and in my second essay I will consider how to think about this in the current fiscal environment.
But assume for the moment the federal government does show up with meaningful dollars (on top of existing investment tax credits previously announced in Budget 2023), what should its role be to accomplish?
Some personal context first, because it explains why I think governance is the whole game here. For most of my years in the federal government from 2015–22, when electricity executives came to Ottawa, the honest reaction inside the system was mild confusion. Electricity wasn't really a federal file. We didn't run a utility. We had responsibilities in the North, and a genuine project in moving remote communities off diesel, as well as, yes, the interprovincial movement of things like electrons, but unless provinces were willing to play ball we couldn’t really act. So beyond that the conversation usually ended the way conversations about provincial jurisdiction end in Ottawa: politely, and without follow-up.
That world is behind us. In May the Prime Minister personally launched the national strategy, a consultation paper whose headline ambition is to roughly double the capacity of the grid by 2050, a build in excess of a trillion dollars and, in my view, more likely a trillion and a half. In a decade, the federal government has moved from “not our jurisdiction” to putting real money on the table through the investment tax credits, to asserting something much bigger: that the abundance of energy will substantially determine the future growth rate of the Canadian economy, and that Ottawa intends to be in that conversation.
The reason for that movement is that we are living in a period in which the abundance of energy is itself now intimately linked to the future of a jurisdiction’s potential GDP.
Let me be honest about the consultation document itself – it is not yet a strategy. It asks more questions than it answers, and its four tidy pillars – build, connect, train, manufacture – compress eight areas of action whose hard choices are all still ahead. But it does something no federal document of record has done in my professional lifetime: it states plainly what I just mentioned, that the future of electricity supply is the story of the economy. Power is no longer an environmental file with an economic footnote. It is a growth file. It is a sovereignty file: Ontario and Quebec, once substantial net exporters, have watched that position erode, and import dependence on the United States is no longer a comfortable place to sit. And, above all, it is an industrial file.
Ten grids in search of one country more than a century after Confederation
Electricity in Canada is provincial. Section 92A gives provinces the development, conservation and management of generation; they own most of the utilities, set the rates and run the system operators. The federal government's levers are real but specific: jurisdiction over interprovincial and international lines, the tax system, the spending power, and the ability to convene. Any national strategy that forgets this constitutional context is not a strategy.
A century of provincial building has produced ten strong vertical systems and almost nothing horizontal. Our grids run north-south because that is where the money and the trade relationships were: Hydro-Québec into New England, BC Hydro into the Pacific Northwest, Manitoba Hydro into the American Midwest. The strategy's own numbers make the required turn explicit: interprovincial flows more than double in every demand scenario the document contemplates, and intertie capacity could grow 27 per cent by 2035 and 70 per cent by 2050, figures that look ambitious only until you remember the base they grow from. Meanwhile, the provinces' own capital plans – on the order of $200 billion at Hydro-Québec, $36 billion at BC Hydro, Ontario's nuclear program on top – are enormous and almost entirely vertical, as was most of the roughly $450 billion provinces have invested in electricity since 2000.
Now the uncomfortable part: federal money, spent without conditions, will simply finance fragmentation rather than fixing it. If Ottawa simply subsidizes each province's standalone buildout – a cheque for Ontario's nuclear, a cheque for Alberta's gas and storage, a cheque for Quebec's wind – it lowers every province's cost of not cooperating. Every dollar that makes self-sufficiency cheaper makes integration less likely.
I expect the government will focus heavily on interties as the area where it wants a national strategy to have the most impact, but the key here is to realize that unless it makes clear that it will deprioritize other areas where provincial treasuries or rate bases are better positioned, Ottawa should expect to be awash in an effort to upload costs rather than build strategically.
Even before this recent period of cooperation, in the aftermath of COVID-19, the Atlantic Loop was supposed to be the proof of concept for east-west integration. Federal financing was available through the Canada Infrastructure Bank, but not sufficiently concessional in the minds of Atlantic Premiers, and so the project fizzled, temporarily at least. Nobody settled who pays, who benefits, who bears the risk, and who arbitrates when those answers collide. The Loop and related projects like it are back on the table now because jurisdictions are willing to rethink what the strategic value of the project is and what kind of capital is needed to make it happen.
Before anyone treats leaders-level dealmaking as the cure-all, consider Churchill Falls: the most celebrated bilateral energy agreement of the decade, and it is already coming apart and headed back to the table. The lesson is not that big deals are impossible in this federation. The lesson is that episodic, bilateral, personality-dependent dealmaking is not governance. Durable architecture is.
Which is why the Charlottetown caveat matters more than the deadlines set out in the communique. “Subject to favourable market conditions” is something to be underlined and remembered. Whether a line between two provinces pencils depends on how costs are allocated between the systems it connects, on the offtake arrangements, on regulated rates of return, and on the size and terms of a federal contribution. Every one of those variables is a policy choice. Ottawa's job now is to make the exit unattractive: to help improve how market conditions are seen as favourable, and to attach its own conditions where necessary.
We are seeing this to a certain extent play out between Alberta and B.C., where previously intertie discussions had been stalled for decades over an inability to settle who was buying what and why. The recent B.C. and Alberta MOUs that Ottawa has separately negotiated with each province have helped to bring each other back to the table, and thanks likely to federal financing down the line that will help move this cooperation along constructively.
The Prime Minister's file, or nobody's
There is reason for confidence that the top of the government understands all of this. The Prime Minister announced the strategy himself. He has framed the abundance of energy as a determinant of the growth rate, and the future itself as steel, concrete and code. And, unusually, three of the most senior figures in this government, the Prime Minister, the Clerk of the Privy Council and the Minister of Energy and Natural Resources, trace their prior careers through various pathways that touch electricity: Brookfield, Hydro-Québec, Hydro One. That combination of knowledge and authority at the very top of the Government of Canada has never existed on this file before and will not exist again soon. It is a window. Windows close.
So the first prescription is to consolidate what Charlottetown started. Since First Ministers agreed to keep meeting regularly, it is imperative that electricity stay on the agenda. Premiers respond to two things: money, and publicly visible comparison with other premiers. Yesterday's commitments deploy neither as yet. The 2016 Pan-Canadian Framework on Clean Growth showed that Premiers can land a common accord on energy and climate when the Prime Minister personally carries it and there is buy-in around the table to make it happen. This is the successor project, and it is bigger. It is also the same method now being applied to internal trade, where First Ministers just committed to model mutual recognition legislation by the end of 2026. Electricity deserves nothing less. It is arguably one of our biggest interprovincial trade barriers.
What is the power for?
So far federal discussions about the role of an electricity strategy have assumed all demand is the same. But that is just not the world we live in today. A megawatt is not a megawatt because how it is used, particularly given the massive build costs involved, and the potential downstream implications for the environment and jobs, matters a lot more than it did in the past.
A megawatt delivered to an aluminium smelter, an electric-arc steel furnace, a chip fab or a biomanufacturing campus produces a fundamentally different stream of jobs, exports and productivity than a megawatt delivered to a hyperscale data centre. This is not to make a normative choice about which is better necessarily, just that the productivity and jobs impacts are very different. In a world where these projects are themselves wrapped up in bigger geopolitical and technological tensions about disruption and dominance, policy cannot be blind to the world in which this will all land. Deciding who gets access to power, at what price, and in what order in the interconnection queue will soon become one of the most important industrial-policy instruments any government in this country holds. Because power as yet, unlike money, is still scarce even if we are trying to make it more abundant.
A data centre is the definitionally footloose industry: it can locate anywhere, and it shops the continent for the cheapest power, land, water and property-tax deal. A smelter, a fab, a quantum facility cannot. Canada's clean, cheap, reliable, firm power, backed by a legacy hydro and nuclear fleet whose reliability services cannot be replicated by anyone building from scratch, is one of perhaps three genuine site-selection advantages this country holds. We already export electricity embedded in aluminium; the smelters are in Quebec and British Columbia because the hydro is, and the United States could not reproduce that at any price – something Donald Trump is now finding out.
New York State has just shown what it looks like to have a view. Over recent years New York deployed its power endowment deliberately to land generational manufacturing; earlier this summer Governor Hochul celebrated Micron pouring the concrete foundation of its $100 billion semiconductor campus. Nine days later, the same governor signed the first statewide moratorium in the United States on new hyperscale data centres, pausing permits for facilities of 50 megawatts or more while the state writes binding standards, including rules that would require data centres to fund their own clean generation or pay a premium to draw on the grid. Chips yes. Server farms, not on default terms. That may not be the right approach for every jurisdiction, but it shows you the key choices involved here.
To be clear about my own position: I am not anti-data centre. If artificial intelligence is going to be a significant driver of future productivity growth, and I believe it is, then Canada needs sovereign compute, deliberately sited, deliberately sized and Canadian-controlled. What I am against is a default to just let us choose any project at will. “The market will decide” is itself a decision, and for a country with our endowment it is a bad one. There is a second-order reason to care, and New York taught it in real time: sell the power endowment to whoever arrives first in the queue, and we import American ratepayer politics within one electoral cycle. The affordability backlash behind the New York moratorium – legitimate, bipartisan and fierce – is precisely the backlash that would kill Canada's buildout politically. Protecting ratepayers from socialized data-centre costs is not a constraint on the strategy. It is the strategy's licence to exist.
So the real question for this federal government’s own strategy is not how to serve demand. It is what we want the next hundred terawatt-hours to make.
My answer runs through comparative advantage:
- advanced manufacturing and clean materials, where electricity is the feedstock, such as aluminium, electric-arc steel, processed critical minerals and other things;
- defence industrial capacity, where power-intensive production has become a sovereignty requirement;
- quantum, where Canada is the only country outside the United States with four privately held firms valued above a billion dollars, and perhaps sovereign A.I. compute; and
- health innovation, including the biomanufacturing base we swore after the pandemic never again to be caught without.
- major provincial build outs that will support further electrification and decarbonization of high emitting industries in order to bring down industrial emissions or to support consumer transition to greater use of electricity over higher cost fossil fuels (e.g. ZEVs).
These are not the only things we should spend on, but they are areas where we ought to think about how to strategically achieve value.
A Liberal Policy
All of which brings us to what kind of stamp a Liberal government also wants to put on this.
Often when Ottawa moves money to provinces without strings (the health transfers being the obvious example), the money proves fungible, the outcomes unenforceable, and the federal government buys neither results nor credit.
In the postwar years, before there was a Canada Health Transfer, the federal government cost-matched hospital construction because the country needed hospitals: a standing, formula-based offer that built a system without dragging Ottawa into choosing which town deserved a ward. And in 2021, Ottawa committed roughly $30 billion not as a cheque but through asymmetric bilateral agreements with hard conditions, fee schedules, space targets, public reporting in order to establish a national child care system. Provinces grumbled and signed. Five years later there is a system where there was none, even if its story and structure are still being built.
Conditional federalism, honestly practised, is not an affront to provinces. It can build tangible benefits across the country and do so in ways that still recognize regional variation, priorities and provincial jurisdiction.
But it requires Ottawa to see its role as not simply just cutting a cheque but engaging in the necessary hard work of governance and delivery. In his own answer to these same questions, my colleague Ben has made the case for honest disclosure of who pays in Power at Cost. It is well worth the read, and I think highly consistent with some of what I have outlined here. Part two of this essay takes up the other side of the same question: how to actually finance the build, across ratepayers, taxpayers, the federal balance sheet, and what ought to be the conditions Ottawa sets as part of that arrangement.