Emerging ESS market—Canada: from hydropower advantages to a net-zero grid

Introduction

Amid rapid expansion of the global energy storage market, attention to the North American market has long been concentrated on the U.S.. However, Canada, which shares a highly interconnected power grid with the U.S., is gaining attention as a standalone emerging market, supported by its federal-provincial policy framework and structured energy storage procurement mechanisms. This article reviews Canada’s energy storage market across three dimensions: energy mix, energy storage policy framework, and installed capacity development.


 

Canada’s energy mix

Canada holds nearly 7% of the world’s renewable freshwater resources and, supported by its geography, has become a major hydropower producer. According to the Canada Energy Regulator, Canada generated around 622 TWh of electricity in 2023, with hydropower accounting for 57%, nuclear power 14%, and other renewables such as solar and wind 10%. However, this generally clean power mix varies significantly by province. More than 85% of electricity in British Columbia, Quebec, Manitoba, and Newfoundland and Labrador comes from hydropower. Ontario relies on a mix of nuclear, hydropower, and natural gas, while Alberta, Saskatchewan, and Nova Scotia have historically depended on natural gas and coal.

Such structural differences shape each province’s energy storage demand. Provinces with lower clean power shares face greater decarbonization pressure and stronger policy support for storage deployment. In Ontario, the need for flexible capacity is particularly acute, driven by nuclear refurbishments and continued load growth.


Source: Canada Energy Regulator
 

Drivers of energy storage development in Canada

Policies

Canada’s energy storage policy support is jointly driven by federal and provincial governments, with federal policy forming the market’s core foundation. In December 2024, Canada enacted the Clean Electricity Regulations, which set annual emissions limits for fossil fuel-fired power generation from 2035 and target a net-zero grid by 2050. The regulation provides a clear timeline for provincial power system transitions and reinforces the strategic value of flexible resources such as energy storage. On the funding side, the federal Clean Technology/Electricity Investment Tax Credit (ITC) significantly reduces upfront investment costs for energy storage projects and improves long-term return visibility.

At the provincial level, Ontario is the most representative market. In 2014, it became the first jurisdiction in North America to fully phase out coal-fired power, laying the groundwork for large-scale renewable energy expansion. Since then, the Independent Electricity System Operator (IESO) has used structured procurements to position energy storage as a core component of its long-term supply strategy. Ontario has launched two long-term (LT) procurement plans: LT1 awarded around 1.75 GW of energy storage capacity, while LT2 will be conducted in multiple rounds, with a total storage procurement capacity of 1.6 GW.


Sources: Canada Energy Regulator, Independent Electricity System Operator, BC Hydro
 

Driven by power demand growth and coal phaseout

Beyond policy support, Canada’s long-term energy storage growth is also driven by rising electricity demand and coal phaseout. According to IESO, Ontario’s annual electricity demand is projected to rise by 40% from current levels by the mid-2040s, mainly driven by EV adoption, heat pump deployment, and industrial load growth, including emerging sectors such as battery manufacturing. Much of this new demand will come from intermittent or variable loads, raising grid flexibility requirements and making energy storage a critical planning resource.

Coal plant retirements are another key driver of energy storage demand. In December 2018, Canada amended its 2012 regulations on carbon dioxide emissions from coal-fired power generation, bringing forward the mandatory phaseout of unabated coal units from 2050 to 2030 and accelerating coal retirements across provinces. Ontario completed its coal phaseout as early as 2014, while Alberta shut down its last coal-fired unit, Genesee 2, in 2024, meeting the federal target ahead of schedule.

As coal exits the power mix, intermittent sources such as wind and solar PV are taking on a larger supply role. Unlike dispatchable coal generation, wind and solar output depend heavily on weather conditions and cannot be adjusted on demand, increasing pressure on real-time grid balancing. Against this backdrop, energy storage is becoming increasingly important as a key resource for smoothing intermittent output and providing flexible grid support.
 

Energy storage installations in Canada

Source: Infolink Emerging Market Energy Storage Demand Database

In the near term, Canada’s energy storage market is currently in a steady ramp-up phase, with a small number of utility-scale projects driving most new additions. Utility-scale storage remains the main growth driver, with projects concentrated in Ontario and Alberta. According to InfoLink’s data, Canada added 1.5 GWh of energy storage capacity in 2025, mainly supported by the 1,000 MWh Oneida project in Ontario, which was connected to the grid in Q2. Latest data shows that the 1,200 MWh Hagersville project and the 320 MWh Ontario Sanjgon project were also connected in 1Q26. Over the medium to long term, supported by existing project pipelines and potential procurement plans, annual utility-scale storage additions are expected to remain above 3 GWh.
 

Conclusion

In terms of energy mix, Canada benefits from strong clean energy resources, while electricity generation mixes vary, creating differentiated drivers of energy storage demand. On the policy side, the federal Clean Electricity Regulations, Clean Technology ITC, and Clean Electricity ITC, together with provincial policies across different application scenarios and established long-term utility-scale storage procurement mechanisms, provide a clear institutional foundation for Canada’s medium- to long-term energy storage development.