Average households could spend 12% less on energy in a net-zero future, study
A report from the Canadian Climate Institute shows that total electricity costs will drop by 2050 for Canadian households, even if rates show modest increases. That said, provinces and territories need to ensure these savings reach lower income households.
For the average Canadian household, the transition toward net-zero by 2050 could mean less of their budgets go towards energy. This is according to a recent report, called “Clean Electricity, Affordable Energy,” from the Canadian Climate Institute, which shows a notable decrease in household spending on energy, particularly in light of federal clean energy funding.
The report notes, however, that lower-income households may not see these savings, while also suggesting that provincial governments have solutions to this problem.
The paper’s analysis comes from modeling done in a previous Canadian Climate Institute report, called “Canada’s Net Zero Future” that mapped out 62 scenarios in which Canada reaches its net-zero targets. In other words, this is a future where the Canadian economy “either emits no greenhouse gas emissions or offsets its emissions” by 2050.
This previous report calculated future energy expenditures in each scenario, and broke them down by income brackets. They calculated household energy spending by amounts paid on energy bills and equipment costs, such as on appliances and vehicles.
The Canadian Climate Institute’s work shows that there’s likely to be an increase in electricity rates as demand increases. However, Canadians will also end up spending less money on fuel and heat due to the spread of electric vehicles, heat pumps, and other clean technologies. In all, the average Canadian household can expect to spend 12 per cent less on energy in 2050, compared to 2020 (both dates use 2020 dollars and this calculation does not speculate on inflation levels).
“These technologies are significantly more efficient than fossil fuel alternatives at meeting our needs. So even if electricity rates go up, overall energy spending will drop,” Jason Dion, senior research director at the Canadian Climate Institute, said in a press briefing for the recent report.
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“Clean Electricity, Affordable Energy” makes use of the most conservative scenario identified in Canada’s Net Zero Future report. Further, it doesn’t factor in government policies that make household clean energy more affordable such as rebates for EVs.
But not all households across Canada will see the same benefit — and they may bypass the homes that need the savings most. Notably, lower-income households are less likely to be able to afford EVs or heat pumps, or pay the upfront costs that come with energy efficiency or clean energy government incentives.
However, the report notes that provincial and territorial governments — which control various parts of electricity generation including distribution and market structure — can help address this issue. Currently, most utility providers use fixed-rate charges as a way to offset some of their infrastructure costs.
These governments could update regulations on utility rates, either changing them so they are based on household income or peak electricity demand, rather than the fixed rate.
This would mean that higher-income households end up paying more for using more power, while those in lower income brackets could get a break. The paper posits that lower income homes would see savings equal to 1.3 per cent of household income, on average, while their richer peers would see an increase equal to 0.2 per cent of their incomes.
Thumbnail image: A white and brown wooden house on a hill is seen in a remote area in 2019. (Erik Mclean / Pexels)
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