HEAT EXCHANGE

The report finds that a cost-optimal path to net zero in Canada requires a massive shift toward electrification of building heat, with electricity powering 78% to 91% of annual space heating demand by 2050. It argues that continued expansion of gas networks is inconsistent with these goals and risks creating stranded assets. The analysis highlights a critical gap in provincial policy leadership, noting that current utility regulation—which incentivizes infrastructure growth—is ill-suited for the energy transition. To mitigate risks, the report recommends that provincial governments legislate net zero targets, mandate electrification for new buildings, and equip regulators to manage the gradual contraction of gas networks while investing in electricity capacity and peak demand management.

• A cost-optimal pathway to net zero requires a significant increase in electricity for building heat and a decline in gas use. Nationally, electricity's share of annual space heating energy demand is projected to rise from 21% today to between 55% and 60% by 2040, and between 78% and 91% by 2050.
• Continued expansion of gas distribution networks is inconsistent with cost-effectively reaching net zero. Such expansion risks creating stranded assets that ratepayers must pay off, as overall gas demand in buildings is projected to fall in every province.
• Low-carbon gases, such as hydrogen and biomethane, are too scarce and expensive to replace fossil gas at scale in the buildings sector. They are more cost-optimally used in other hard-to-abate sectors like heavy industry.
• Hybrid heating systems (pairing heat pumps with gas furnaces) may serve as a stepping stone or a long-term solution in some cold-climate regions, but they do not justify gas network expansion because total gas consumption still drops significantly.
• Reaching net zero will require a massive build-out of electricity system capacity, with a projected national average increase of 2.6 to 2.9 times current levels. Managing winter peak demand is identified as the central challenge for electric utilities.
• Current utility regulation is based on outdated assumptions of steady demand growth and incentivizes the installation of infrastructure over fuel efficiency. This creates a direct economic incentive for gas utilities to pursue network growth even when long-term usage is uncertain.
• Canada's buildings sector is currently off-track for net zero; greenhouse gas emissions from the sector grew 8.8% between 2005 and 2022, and existing policies are insufficient to reverse this trend.
• There is a significant lack of provincial policy leadership. No province has yet issued a long-term direction on the future of gas for building heat or mandated the transformation of energy systems to align with a cost-effective net zero path.

APA

Harland, K., Gibson, S., Dion, J., Gajudhur, N., & Mifflin, K. (2024). HEAT EXCHANGE. Canadian Climate Institute. https://climateinstitute.ca/wp-content/uploads/2024/06/Heat-Exchange-Report-Canadian-Climate-Institute.pdf

Chicago

Harland, Kate, Sachi Gibson, Jason Dion, Nikhitha Gajudhur, and Kathleen Mifflin. HEAT EXCHANGE. Canadian Climate Institute, 2024. https://climateinstitute.ca/wp-content/uploads/2024/06/Heat-Exchange-Report-Canadian-Climate-Institute.pdf.

Wikipedia

{{cite report |last1=Harland |first1=Kate |last2=Gibson |first2=Sachi |last3=Dion |first3=Jason |last4=Gajudhur |first4=Nikhitha |last5=Mifflin |first5=Kathleen |title=HEAT EXCHANGE |publisher=Canadian Climate Institute |date=June 2024 |url=https://climateinstitute.ca/wp-content/uploads/2024/06/Heat-Exchange-Report-Canadian-Climate-Institute.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{harland2024heat, author = {Harland, Kate and Gibson, Sachi and Dion, Jason and Gajudhur, Nikhitha and Mifflin, Kathleen}, title = {{HEAT EXCHANGE}}, institution = {Canadian Climate Institute}, year = {2024}, month = jun, url = {https://climateinstitute.ca/wp-content/uploads/2024/06/Heat-Exchange-Report-Canadian-Climate-Institute.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }