Manitoba’s electric grid is one of the cleanest in Canada thanks to the province’s use of hydropower as its primary generation source. However, according to Manitoba Hydro, the province will need to increase its electrical capacity by the 2040s to support the transition away from fossil fuels. In fact, Manitoba Hydro believes that a new generation will be needed as soon as 2029. In this article, we’ll take a closer look at the issue, the reasons behind it, as well as possible solutions.
What are the reasons behind the power problem?
There are two factors behind Manitoba’s electrical supply problem. First, drought conditions in 2023 lowered the province’s hydroelectric reserves. In response, Manitoba Hydro increased electricity imports as well as running backup thermal generators. Droughts are expected to continue in the coming years, which will place further pressure on hydroelectric generation.
Second, Manitoba (like in other provinces) is facing increased electrical demand as a result of Canada’s transition to a net-zero electricity grid by 2035 and the national efforts to reach net-zero carbon emissions by 2050. In order to meet both targets, the Manitoba government estimates that generation will need to grow by two-thirds and installed capacity will need to double from the current supply to 13,000 MW. However, Manitoba Hydro says they do not have enough surplus energy to support these efforts. Building up generation and capacity levels will be an expensive investment, which could lead to higher electricity prices for residents and businesses. For example, Manitoba does not plan on building new hydroelectric dams due in large part to the utility being leveraged by debt. Manitoba Hydro has also noted that wind and solar infrastructure will be a costly investment for the province.
What are some possible solutions?
To keep up with demand, Manitoba has made use of its natural gas generators. In fact, Manitoba Hydro used more natural gas-fuelled electricity in 2024 than it has in a decade. From 2003-2023, the utility ran its natural gas generators for an average of 54 GWh. In the first half of 2024 alone, 122 GWh of natural gas power has already been used. Relying on natural gas can work in the short term, but several experts believe Manitoba will have to find other generation sources in the long term. A 2022 report by the Pembina Institute states that natural gas production will ultimately become uneconomical and will clash with the federal government’s goal for a net-zero grid. Instead, renewable energy will play a significant role in shoring up Manitoba’s electrical capacity. According to Jay Grewal, Manitoba Hydro CEO, the province will rely more on wind generation. The utility plans to contact independent energy producers to supply wind power and other sources in the coming years. Furthermore, Manitoba plans to increase generating capacity from wind and solar power to 10,000-16,000 MW by the 2040s, according to a new energy policy announced on July 28, 2023.
A short-term solution currently used by Manitoba is importing power from neighbouring wholesale markets. Recent drought conditions have already forced the province to import energy. Between April 1 and December 31, 2023, Manitoba Hydro purchased 1,955 GWh of energy, seven times more than what was imported over the same period in 2022 (289 GWh). The downside of importing power is it is expensive. In 2024, Manitoba curtailed imports due to high electricity prices.
Another possible solution is introducing a time-of-use rate. For residential properties, Manitoba currently has two rate classes, Residential standard and Residential seasonal The time-of-use rate would encourage residents to move the majority of their electricity usage to off-peak times (e.g., 9:00 PM to 7:00 AM) by offering lower prices for those times. The time-of-use rate has received some pushback from the Manitoba government who have called the idea “surge pricing”. However, according to Manitoba Hydro, time-of-use rates have firm prices according to time periods, while surge pricing refers to charging market prices according to supply and demand at any given time. As a result, there is increased volatility.
(To learn more about time-of-use rates, click here).
To mitigate the cost of building up renewable energy infrastructure, Manitoba could accept proposal bids from independent producers. This strategy is already being used by utilities in other provinces. In June 2023, BC Hydro issued a call for new sources of renewable energy with the goal of developing clean electricity projects as soon as 2028. Hydro-Québec issued a call for tender in March 2023 to add 1,500 MW of wind power to the province by the end of the decade. In January 2024, the utility announced it had approved eight wind farm projects with a combined capacity of 1,550 MW. The Manitoba government has pushed back on this strategy and has publicly announced its intent to increase grid capacity without external partners. This stance contradicts advice given to Manitoba Hydro from Dunsky Energy and Climate, which suggested the province turn to independent power producers.
What will the impact be on energy bills?
While the answer to this is somewhat uncertain, rate increases are expected to come. The Public Utilities Board has already granted a 1% rate increase in September 2023 and in April 2024. Future increases are believed to exceed 1% as Manitoba Hydro tries to recoup financial losses due to the drought as well as build up capacity.
