Deployment of battery storage needs to accelerate to align Canada’s electricity system with net zero
Increasing the supply of wind and solar in every region of Canada is critical to building the bigger and cleaner electricity systems that Canada will need to power its clean energy transition and reach its climate goals. But to manage the variability of low-cost renewable generation and boost system resilience, electricity systems will also need to get “smarter,” or more flexible.
There are many solutions to support system flexibility as more variable renewable sources come online, including combining wind and solar, increasing grid interconnections across regions, enhancing demand-side flexibility, and deploying energy storage solutions (Figure 1).
Figure 1: There are many ways to manage the variability of solar and wind
This week’s Insight takes a closer look at the role of battery storage solutions and finds that momentum is building, but governments, system operators, utilities, and other system actors need to supercharge deployment to align electricity systems with Canada’s climate goals.
Battery storage 101
Broadly speaking, energy storage technologies allow for electricity to be stored and used at a later time. Energy storage can take many forms, including behind-the-meter technologies like electric vehicle batteries or home batteries, short-term grid-scale storage like lithium-ion batteries, and longer-duration grid-scale storage solutions like pumped hydropower.
Short-term, grid-scale lithium-ion batteries are considered a safe bet solution, due to their commercial viability and declining costs. Systems in places such as South Australia, Texas, and the United Kingdom already make moderate use of lithium-ion batteries. By contrast, the potential for long-term grid-scale storage solutions—like compressed air, flow batteries, and hydrogen—is more uncertain, since many of these technologies are only in the piloting stage, and face high costs.
Beyond enhancing the flexibility of electricity systems—that is, their ability to respond to fluctuations in supply or demand—energy storage solutions have other benefits. For one, more battery storage can reduce overall costs in the electricity system by lowering the level of investment required for additional transmission and distribution infrastructure or generation capacity—including more emissions-intensive and costly gas plants, such as peaker plants.
Furthermore, batteries can enhance electricity system resilience by providing backup supply when generation sources are disrupted—a feature that will be helpful as grids grapple with the growing impacts of extreme weather driven by climate change.
Supercharging battery storage in Canada
While battery storage has been growing slowly and steadily, it’s poised for exponential growth. Globally, energy storage capacity is expected to grow 15-fold from now to 2030, with the majority of new capacity coming from batteries. This is in large part due to recent dramatic cost declines of batteries.
Canada, too, is on the cusp of a battery storage boom (Figure 2). Battery storage capacity has seen steady growth, with the latest data from S&P Global showing total installed capacity rising from 11 megawatts in 2016 to around 92 megawatts in 2023. The number of projects installed across Canada by the end of last year suggests that capacity may be even higher. In 2024, projects that are planned or under construction could bring Canada’s total battery storage capacity up to 559 megawatts. By 2028, that could rise to 4,177 megawatts—a 45-fold increase from 2023 figures.
At the same time, battery storage capacity will likely need to rise even further to support Canada’s climate goals. Our recent analysis with Navius Research shows that battery storage capacity needs to rise above 12,000 megawatts by the end of this decade and to around 50,000 megawatts by mid-century to align with Canada’s climate targets. Energy Storage Canada similarly estimates that the net zero transition will require between 8,000 and 12,000 megawatts of energy storage capacity by 2035.
The exact rate of deployment will ultimately depend on the uptake of other flexibility options, such as grid integration and demand-side flexibility, as well as the pace of electrification and deployment of renewables. Uptake will also vary by region. Provinces with abundant hydropower like Quebec, Manitoba, and British Columbia will likely need less battery storage than provinces with fewer flexibility options. This is because hydropower reduces the need for wind and solar deployment and acts as an energy storage solution in itself.
Canada is making moves to mainstream batteries
Global market forces are moving battery storage from margin to mainstream, and federal and provincial governments in Canada are making moves to get more battery storage projects off the ground here at home.
To date, the main source of federal support has come through the Canada Infrastructure Bank (CIB). So far, the CIB has provided over $673 million in funding for two utility-scale battery storage projects. Other programs, such as the Clean Energy for Rural and Remote Communities and Smart Renewables and Electrification Pathways Program, have supported battery storage projects in remote and Indigenous communities.
On top of that, a series of proposed federal investment tax credits will further accelerate the deployment of battery storage in Canada. While details are still being finalized, the investment tax credits for clean electricity, clean technology, and clean technology manufacturing all include battery storage projects as eligible investments.
At the provincial level, Crown corporations and system operators are taking action. Ontario is making big strides to increase its battery storage capacity. The largest project under construction in the province is currently the Oneida Energy Storage project, which is expected to have an installed storage capacity of 250 megawatts by 2025. In addition, Ontario’s Independent Electric System Operator is in the process of procuring an initial round of 2,500 megawatts of storage capacity by 2027, with seven battery storage facilities, totaling 739 megawatts, to be in operation by 2026.
In Alberta, Enfinite’s battery storage facility in Northern Alberta added 60 megawatts onto the grid last month, and Alberta Electric System Operator has several battery storage projects in the pipeline. Of these, two battery projects being proposed have storage capacities of 465 megawatts each, the largest single unit size allowed in Alberta. Nova Scotia has also announced plans to build three 50-megawatt battery storage facilities, slated for operation in 2025.
Giving battery storage a policy boost
The momentum behind battery storage is building in Canada and around the globe. However, accelerating battery capacity at the scale and pace to support Canada’s climate goals will require targeted policy support to overcome barriers to deployment. Barriers include long project lead times and the need to secure local support, but also unique challenges to battery storage, including supply chain constraints, challenges with grid integration, and current market structures, rate designs, and rules.
While some of these challenges are easier to overcome than others, one clear solution is to adjust regulatory and market rules to recognize and reward the unique and multiple benefits of battery storage—including their ability to enhance the flexibility of clean electricity systems.
Overcoming these barriers and giving battery storage a boost can support the bigger, cleaner, and smarter electricity systems that will underpin Canada’s climate policy success.
Arthur Zhang is a Research Associate at the Canadian Climate Institute. Anna Kanduth is the Director of 440 Megatonnes at the Canadian Climate Institute.