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Canada and the US could imperil North American energy stability if they restrict cross-border electricity and gas supplies in a trade war, an industry watchdog warned.
Canada and the US have a “symbiotic relationship” for power supplies, with both nations importing electricity from each other to meet demand. Any move to restrict supplies could cause a “big problem” for both countries, according to the North American Electric Reliability Corporation, a regulatory body that monitors the reliability of the power systems in the two nations.
Jim Robb, NERC’s chief executive, told the Financial Times: “If some of the sabre-rattling around ‘turning off exports’ occurs, it could create a significant resource adequacy problem for the Canadian provinces that benefit from US exports as well the [US] states along the border that benefit from Canadian imports.”
Canadian authorities have threatened to levy retaliatory surcharges on electricity exports to the US and cut off supplies entirely following Donald Trump’s decision on Tuesday to impose 25 per cent tariffs on US imports from its northern neighbour.
Mark Carney, a favourite to win Saturday’s Liberal party leadership contest and become Canada’s next prime minister, has expressed willingness to curb electricity exports in the event of a trade war.
Ontario’s premier, Doug Ford, said he would “immediately apply a 25 per cent surcharge on the electricity we export” if the Trump administration’s Canada tariffs persist. “We will not hesitate to shut off their power as well,” he added.
Ontario provides about 1.5mn Americans in New York, Michigan and Minnesota with electricity. Several other Canadian provinces supply US states in the Midwest and west through cross-border transmission lines.
The US consumed $2.1bn worth of electricity imports from Canada last year, according to BloombergNEF, a research group.
Electricity trading between the two nations is relatively small, representing less than 1 per cent of total generation. But it is important for grid balancing — the constant real-time matching of electricity supply and demand.
Canadian and US power systems are under strain. In December, NERC warned North America’s electricity grid faces “critical reliability challenges” in the years ahead, as generation fails to keep pace with surging demand from artificial intelligence.
The threat of a shut down in Canadian supplies has alarmed officials in some of the most exposed US states, who have warned it would have an “immediate impact” and trigger price increases for consumers.
“If we had a world where there was a shut off of energy products to Vermont, you would have a large, huge number of customers in the northern part of the state that wouldn’t be able to heat their homes,” said a senior energy official in Vermont who was not authorised to speak publicly.
It remained unclear how Ontario’s premier would cut off electricity supplies or levy an export surcharge. The ministry that oversees energy said it can “adjust” exports to the US “through legislative or regulatory measures”.
Andrew Leach, an economist at the University of Calgary, said Ford “could curtail production, such that exports would be reduced or, perhaps, take a line out of service, but generally, exports are federal jurisdiction”.
