Electricity Market and Tariffs

Icon Energy Management Energy Management

Electricity Market and Tariffs

As of March 2025, Canadian electricity markets—especially Ontario—have experienced notable turbulence driven by ongoing trade disputes with the U.S. In early March, Ontario introduced a 25% surcharge on electricity exports targeting industrial states such as Michigan, Minnesota, and New York, directly responding to U.S. tariffs on Canadian steel and aluminum.
March 20, 2025
Electricity Market and Tariffs

Trade Dynamics and Electricity Pricing Concerns

As of March 2025, Canadian electricity markets—especially Ontario—have experienced notable turbulence driven by ongoing trade disputes with the U.S. In early March, Ontario introduced a 25% surcharge on electricity exports targeting industrial states such as Michigan, Minnesota, and New York, directly responding to U.S. tariffs on Canadian steel and aluminum. The surcharge threatened significant cost increases while generating daily revenues of $300,000 to $400,000 for Ontario (Reuters).

Although Ontario quickly suspended the surcharge following negotiations with U.S. officials—prompted by threats of escalated U.S. tariffs—the underlying risk remains. For industrial manufacturers, this episode highlights the ongoing volatility in cross-border trade, emphasizing the need for proactive risk management and flexible energy procurement strategies (AP News).

Accelerating Renewable Energy Transition

Despite trade uncertainties, Canada remains firmly committed to achieving 90% emission-free electricity by 2030. The country's renewable energy capacity grew by 46% over the past five years, surpassing 24 gigawatts (GW) in 2024. Provinces like Alberta continue to lead, investing over $2.7 billion into renewable infrastructure (Canadian Renewable Energy Association).

However, increasing renewable energy introduces complexities such as price volatility and intermittency risks. Industrial manufacturers, particularly those relying on continuous operations, will need to factor renewable energy’s unpredictability into their cost management and production planning strategies.

Infrastructure Investments and Reliability

To ensure grid stability amid rising electricity demand, Canada is significantly upgrading its infrastructure. Notable developments include British Columbia’s Site C Dam, set to add 1,100 megawatts (MW) of new capacity upon its 2025 completion (Site C Dam). Additionally, rising electricity consumption driven by energy-intensive sectors—such as data centers and automated manufacturing—is spurring further infrastructure investments nationwide (S&P Global).

For industrial manufacturers, these infrastructure upgrades promise greater reliability and improved supply stability, potentially mitigating risks associated with market volatility and intermittent renewable energy supplies.

Bottom Line for Manufacturers

The recent electricity export surcharge controversy, ongoing renewable energy expansion, and targeted infrastructure investments underscore the complexities of Canada's electricity market in 2025. Manufacturers must remain vigilant, proactively managing energy procurement to mitigate risks related to pricing volatility, trade tensions, and reliability challenges. Strategic investment in energy-efficient technologies, on-site generation, and energy management systems will be essential for industrial manufacturers aiming to remain competitive amid these evolving market dynamics.

 

RECENT NEWS
Federal Carbon Levy Ends April 1st
Icon Natural Gas Apr 1, 2025
As of April 1, 2025, the federal carbon tax on fuels and heating will be removed across Canada. This change offers immediate savings for households and businesses, but carbon pricing remains in place for major emitters under industrial compliance programs. Here’s what energy users need to know.
Electricity Market and Tariffs
Icon Energy Management Mar 20, 2025
As of March 2025, Canadian electricity markets—especially Ontario—have experienced notable turbulence driven by ongoing trade disputes with the U.S. In early March, Ontario introduced a 25% surcharge on electricity exports targeting industrial states such as Michigan, Minnesota, and New York, directly responding to U.S. tariffs on Canadian steel and aluminum.