Enbridge’s Michele Harradence makes the case for a reimagining of Canada’s energy investment and regulatory landscape
Source: As seen in our paid article in the Ottawa Citizen
In September, Canada’s Enbridge Inc. completed the acquisition of three utilities based in the United States, encompassing Ohio, North Carolina, Utah, Idaho and Wyoming, to create the largest natural gas utility franchise in North America. It’s a moment of celebration for the company, says Michele Harradence, executive vice-president and president, gas distribution and storage with Enbridge Gas, as natural gas has a key role to play to meet energy demand, keep costs down—and reach climate goals.
But it’s also a time to reflect on the business environment that made the US$14-billion acquisitions so enticing—and what Canada can do to make domestic energy expansion more attractive for investors. More importantly, that conversation points to the growing role of energy in underpinning the competitiveness of the Canadian economy.
Harradence notes that Canada’s appetite for electricity will double by 2050 and reaching the country’s net zero goals could require investments of $1.5 trillion to $2 trillion. However, according to Natural Resources Canada, the number of completed major energy and natural resource projects went from 88 in 2015 to 56 in 2023, a decrease of 36%.
“The harsh reality is we will not meet our future energy needs at today’s pace of investment,” she says. “Energy has always been this country’s foundation for a healthy economy and our quality of life. However, energy investors look at Canada and they see a tangle of regulatory knots, an unwelcoming tax climate and tepid, fragmented incentives that can’t compete with those on offer right next door.”
How can Canada create an investment landscape that encourages the development of energy? Harradence believes it begins with understanding that we are undergoing an energy evolution, more than an out-and-out transition.
“We need all the energy resources available to fuel the economy, keep costs down and provide safe and reliable energy as we reach net zero,” she says. “That includes more renewables, more nuclear, more oil, more natural gas, more carbon capture, more efficiency and more innovation.”
Renewables will play a larger part in Canada’s energy mix, if they’re backed with more reliable, non-intermittent sources of energy. Mass investment will be required to modernize assets, to develop new projects and to advance technologies to support the energy evolution. Enbridge has, for example, begun to blend carbon-free hydrogen with natural gas for 4,000 customers in Markham, Ont.—the first utility in North America to do so.
However, needed investment can only be attracted by a simplified regulatory framework that would allow energy investors to act quickly and decisively, in addition to simplified tax and incentive systems.
“The goal should be a rational, competitive tax structure that investors understand, along with efficient economic incentives across the energy sector,” Harradence says. “If we can get these three elements working together cohesively, they can be magnets that help attract investment.”
Like other global energy and infrastructure companies, Enbridge is increasingly seeing the greatest potential for returns in the U.S. This potential is underscored by the recent acquisition of utilities in U.S. jurisdictions where government policies, regulatory frameworks and incentives were aligned.
While the U.S. federal Inflation Reduction Act provides tax breaks to companies employing clean energy technologies, Harradence says that Canada’s Bill C-59 provides an investment tax credit for investing in clean technologies, but also increases taxes on investment.
“In addition, the bill introduces extraordinary penalties against businesses for making environmental claims as measured against an as-yet-undefined standard,” Harradence says. “It muddies the waters and that uncertainty chases away investment.”
Canada’s complex tax regime is also stifling investment decisions. Recent changes to the capital gains tax, even with proposed amendments, are hampering competitiveness, she adds.
“We can’t keep patching over a system that needs complete rewiring,” Harradence says. “When we’re considering capital allocation for North America’s largest natural gas utility, we now see options with better rates of return and less uncertainty than Ontario or Quebec.”
Harradence says Ontario is moving in the right direction by clearly articulating an energy policy that is based on an all-of-the-above approach to expanding the energy supply to enable economic growth and position the province as a leading exporter of energy technologies. For example, Enbridge Gas recently broke ground on the $350-million Panhandle Regional Expansion Project in Southwestern Ontario. The project is designed to unlock $4.5 billion in investment opportunities in businesses ranging from greenhouses to EV battery facilities.
However, if Canada can’t attract the energy investment it needs to encourage production, generation, transportation and distribution of energy, the country risks becoming a net importer—dependent on energy and energy technology generated elsewhere.
“If energy investments go elsewhere, so too will investments in other sectors of our economy,” Harradence says. “We need to see consistency in every step of the process, from government policy to regulation to permitting. The stakes have never been higher. We need to re-energize Canada’s life force, ensuring we have the reliable, resilient, cost-effective energy we need to fuel our economy.”
Michele Harradence spoke at the Empire Club of Canada’s Energy Series in Toronto on Nov. 5.
