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    Canada’s regulator sees 62% drop in fossil fuel demand by 2050


But natural gas demand will remain strong through much of the forecast period, CER report says

by: Dale Lunan

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Canada’s regulator sees 62% drop in fossil fuel demand by 2050

The Canada Energy Regulator (CER), in an energy supply and demand forecast released December 10, says unabated fossil fuel use in the country will fall by 62% in the next 30 years, while electricity demand will grow 44%, largely from new areas like electric vehicles and hydrogen.

That projection is the key takeaway of the CER’s Evolving Policies scenario in its report, Canada’s Energy Future 2021: Energy Supply and Demand Projections to 2050 (EF2021). In the Evolving Policies scenario, actions to reduce emissions continue at a pace similar to recent history, both in Canada and around the world.

But that likely won’t be enough for Canada to reach its goal of net-zero emissions by 2050, the report cautions.

“The unabated fossil fuel demand trends in the Evolving Policies Scenario imply significant reduction in GHG emissions,” it says in EF2021. “They also imply that the Evolving Policies scenario is unlikely to achieve net-zero emissions by 2050.” 

Alongside falling fossil fuel demand, the CER also sees continued strength in the gas sector, spurred by an assumption that LNG exports will account for 40% of total Canadian natural gas production by 2050.

In the Evolving Policies scenario, natural gas production remains near current levels of about 15.5bn ft3/day through much of the next two decades, with LNG exports growing from 1.8bn ft3/day in 2026 to 4.9bn ft3/day by 2039, the CER suggests. After 2040, assuming no new LNG exports, total production begins to decline, falling to 13.1bn ft3/day by 2050.

“The additional LNG-related production is based on our assumption that 75% of LNG feedstock comes from incremental production that only exists because LNG export capacity exits,” it says. “Without additional production to feed LNG exports, production would continuously decline over the projection period to 9.5bn ft3/day in 2050.”

Natural gas for power generation also remains important in Alberta and Saskatchewan, although by 2050, the CER expects most of generation in the two provinces will utilise carbon capture and storage (CCS) technologies. Other provinces will also use natural gas in small amounts, largely to maintain grid reliability.

To offset the falling contribution of fossil fuels in the Canadian energy system, electricity will play a greater role, with a near 45% increase in electricity use to offset the 62% reduction in fossil fuel demand.

“Low-cost wind and solar power provide much of the additional electricity needed to meet new demand over the projection period,” the CER says, noting again that natural gas generation for electricity increasingly includes CCS. “By 2050, low and non-emitting electricity generation rises to 95% from 82% in 2021.”

And hydrogen demand will also grow, EF2021 projects, reaching 4.7mn mt, or 565 PJ, by 2050 – about 6% of total end-use energy demand.

The industrial sector will account for 60% of hydrogen demand, the CER says, with the transportation sector – where it replaces diesel in long-distance trucking and marine applications – accounting for 15% of demand. The remaining 10% of hydrogen demand would come from blending it into existing gas distribution systems for residential and commercial space heating.

Natural gas with CCS will be used for much of Canada’s hydrogen production in the early years of the EF2021 forecast, largely due to its lower cost, at US$1.60-$2.00/kg in 2020, falling to US$1.50-$1.70/kg by 2050.

Grid-powered electrolysis of green hydrogen remains a costly alternative through the forecast period, in the US$4.00-$6.00/kg range by 2050, but electrolysis from dedicated renewable power sources will gain ground on blue hydrogen by the latter years of the forecast period, as costs fall from US$8.00-$10.00/kg in 2020 to US$1.50-$2.00/kg by 2050.

“By 2050, natural gas with CCS makes up 57% of total production (2.95mn mt),” the forecast suggests. “Production from electrolysis powered by dedicated renewables and the grid (1.8mn mt) make up 33% and 9% respectively.”