The World Is Going Solar. Where’s Canada?

Canada is far less disadvantaged by our northern geography than is commonly believed.

Solar panels mounted on metal structures stand on a snowy meadow beside the ocean in Canada. (tsirika/stock.adobe.com)

Prime Minister Carney, like several of his predecessors, has spoken of making Canada an energy superpower, a phrase that is usually taken to mean a fossil energy superpower. But is the global energy future really destined to be dominated by oil and gas? Few informed observers think so. That’s not because the world is running out of fossil fuels or that demand for oil and gas for transportation and heating will disappear anytime soon. No: it’s because a different energy system—cleanly generated electricity—is proving to be cheaper, more efficient, and far less exposed to geopolitical risk.

At global scale, the transition to clean electricity is now well underway and is being driven above all by solar power. The spectacular decline in the cost of converting sunlight into electricity has emerged as an economic game-changer, though still underappreciated outside expert circles. This post, which summarizes my longer paper published by the Johnson-Shoyama Graduate School of Public Policy, focuses on solar power not because it’s the only clean technology that matters—hydro, nuclear, and wind are all essential—but because solar is where the pace of change is fastest and where Canada’s participation is weakest.

My central argument is straightforward: clean electrification represents the future of global energy; solar will play the single largest role in that transition; and Canada is far less disadvantaged by our northern geography than is commonly believed. Failing to grasp this risks not only missing climate goals but also undermining our future economic prospects.

The global solar energy inflection point

Solar power deployment is now growing at extraordinary speed. In 2024 alone, the world installed roughly 585 gigawatts of new solar photovoltaic capacity, pushing total installed capacity beyond two terawatts.¹ In other words, solar accounted for nearly three-quarters of all new renewable capacity added globally. More than twenty countries now generate at least 15 percent of their electricity from solar power. Canada’s share remains less than one percent.

The rapid growth globally is driven not by subsidies or environmental idealism, but by cost. Over the past 45 years, the cost of producing solar panels has fallen by roughly a factor of a thousand thanks to advances in materials science, manufacturing scale, and experience-curve effects. Panels that cost more than US$100 per watt in the 1970s can now be produced in China for as little as ten cents.

As panel costs have fallen, they are making up a smaller fraction of the total cost of delivering solar electricity, now roughly a third and falling. Cheaper panels allow designers to use more of them—in effect “wasting” panels—to extend generation into morning and evening hours and, crucially in Canada’s case, to more northern latitudes. The remaining costs of delivering solar power lie in installation, power electronics, site preparation, permitting, financing, and system integration. The economic implication is crucial: innovation pressure now is shifting away from the panels themselves and toward everything else in the system.

Critics often note that headline cost figures for solar and wind understate the full system cost of ensuring reliable electricity supply in the presence of intermittency. This is a legitimate but frequently overstated concern. Variability can be mitigated through interconnection across regions, complementary generation (especially wind), short- and long-duration storage, and demand-side flexibility enabled by digital technologies and pricing. As renewable penetration increases, and experience and innovation accumulate globally, the cost penalty associated with intermittency will continue to fall. It’s becoming just another factor, and a manageable one at that.

Global competition and the economics of electrification

Energy and innovation have always been the twin engines of economic progress. China has drawn the conclusion—earlier and more decisively than others—that the future energy system will be dominated by electricity generated from clean sources. Its motivation is not primarily climate-driven, but economic and strategic: falling costs, energy security, public health benefits of clean air, and the superior efficiency of electricity as a final energy carrier.

As a result, China has pursued electrification at extraordinary scale. It now accounts for nearly one-third of global electricity generation, while U.S. and Canadian generation has grown only marginally over the past quarter-century. China’s aggressive industrial policy in clean energy—spanning solar panels, batteries, and electric vehicles—has yielded formidable ‘first mover’ price and quality advantages.

This creates a dilemma for Western economies. China’s cheap clean-energy technologies accelerate electrification and decarbonization, but at the cost of increased dependency and erosion of domestic manufacturing capacity. Some tariff protection may be justified, but only if paired with credible strategies to build local capacity and only as a transitional measure.

The deeper point is that as energy end-use shifts toward electricity those that can supply electricity at lowest cost gain advantages across a wide range of industries, as Quebec has shown with cheap, abundant hydro. China’s dominance in electric vehicles and clean-energy supply chains offers the latest preview of how energy leadership translates into broad economic power.

Neither the United States nor Canada can afford to cede this terrain, and geopolitical competition may ultimately prove the strongest driver of global decarbonization. Ironically, even under an American administration sceptical of clean energy, U.S. solar and wind deployment continues to surge at the state level. Texas, despite its oil legacy, is now a North American leader in wind and solar deployment. Alberta, which has enjoyed a similar lead in Canada but now discourages renewables development, should take note!

Where does Canada stand?

Canada’s electricity system remains heavily tied to hydroelectricity, which supplied about 56 percent of generation in 2024. Nuclear contributed roughly 13 percent, while fossil fuels—mostly natural gas—accounted for about 21 percent. Wind and solar together supplied less than ten percent, with solar contributing less than one percent.

This composition reflects history, not future needs. Electricity demand in Canada is poised to as much as double over the next two to three decades, driven by electric vehicles, heat pumps, electrified industrial processes, and rapidly expanding data centres linked to AI. Hydro capacity can be expanded only modestly. Nuclear will grow, but faces cost, timing, and public acceptance challenges. Fossil generation will become increasingly uncompetitive as the cost of renewables continues to fall and CO₂ emissions constraints tighten.

Virtually every credible scenario for Canada’s electricity future therefore implies that wind and solar must supply the significant majority of new demand growth. The question is not whether these sources will expand, but whether Canada will begin to treat solar power as a core strategic asset or continue to regard it as marginal.

Is large-scale solar realistic for Canada?

Scepticism about solar in Canada is usually rooted in latitude. More northerly locations generally receive less annual solar energy per panel and exhibit greater seasonal variation—dark earlier in winter and light later in summer with the variation increasing as one moves north. These facts are real, but their economic significance has changed dramatically.

Germany and the Netherlands, both north of much of southern Canada, already generate 15–17 percent of their electricity from solar. Halifax and Montreal lie south of Paris; Toronto is only slightly north of Rome. Latitude matters but no longer determines viability.

That’s because as solar panels become “cheap as dirt,” the solution to lower power output per panel is simply to deploy more panels. For example, while Toronto receives roughly 30 percent less annual solar input than Los Angeles, this could be offset by expanding panel area by about 40 percent. Because panels themselves now represent a low and shrinking fraction of total system cost, the economic penalty is modest.

Meanwhile, Canada enjoys advantages that are often overlooked: abundant, relatively low-cost land suitable for utility-scale solar, and strong complementarities with other clean resources, particularly wind and hydro. In the emerging economics of solar power, land availability and system integration matter more than raw sunlight.

Solar’s intermittency remains the most serious challenge. Daily variation can be managed with batteries, whose cost also continues to fall rapidly. Canada will not be at a disadvantage in accessing grid-scale battery storage.

Seasonal variation is more problematic, particularly as solar penetration increases as a percentage of supply to the grid. At low penetration, the winter-summer variance can be accommodated by existing hydro and gas generation. At higher penetration, long-duration storage becomes essential.

Here Canada possesses a major, underappreciated advantage. Existing hydro reservoirs already function as vast energy storage systems. Beyond this, Canada has enormous technical potential for pumped hydro storage, particularly in British Columbia, Quebec, and Labrador. Using surplus summer solar electricity to pump water uphill and releasing it in winter offers a scalable, proven solution to seasonal balancing.

Canada’s clean-energy advantage lies not in any single technology, but in the potential for much greater system integration. Prairie solar and wind can ideally be complemented by hydro resources in B.C. and Manitoba. In the east, hydro in Quebec and Labrador and unlimited wind from offshore Atlantic Canada can balance solar from Ontario east. But realizing these complementarities requires expanded interprovincial transmission and coordinated system planning, a win-win vision that to date has been inhibited by provincial jurisdictional silos.

What’s at stake is more than tomorrow’s electricity bills. Equally important is the broad-based innovation that’s unleashed by cheap electricity. Just as Moore’s Law revolutionized computing by relentlessly lowering costs, the plummeting cost of converting light into electricity is creating incentives for transformative innovation across the economy on both the supply and demand sides.

What’s holding Canada back?

Several factors explain Canada’s slow uptake of solar power:

• Institutional inertia. Electricity systems are conservative for good reason. Canadians are accustomed to reliable, low-cost power, and utilities are understandably cautious by nature.

• Provincial fragmentation. Siloed planning and network investment limit the benefits of regional complementarity and prevent national optimization.

• Demand uncertainty. Electrification of transport, building heating, industrial processes, and AI promise enormous demand growth, but the timing remains uncertain, creating a chicken-and-egg dilemma for investment.

• Outdated perceptions. In Canada, solar is still seen as marginal relative to hydro, nuclear, gas, or even wind—views increasingly at odds with global cost trajectories.

As Canada hesitates, peer countries continue to forge ahead. The global economy is electrifying rapidly, and renewables, especially solar, are driving the transition. Climate considerations matter, but today the larger motivator is cost. In an electrifying world, nations that secure access to abundant, low-cost electricity will enjoy enduring advantages in terms of reliability, affordability and the competitiveness of energy-intensive goods. That’s the key strategic insight.

The good news is that all the inhibitors bulleted above are subject to public policy solution. Canada has abundant resources to be among the leaders—but only if it recognizes where the world is heading. To become an energy superpower of the future, Canada must heed Gretzky’s advice and skate to where the puck’s going to be, and not to where it’s been.

1. To put this in context, 585 gigawatts (GW) of solar capacity would generate about 820 terawatt hours (TWh) of electrical energy in a year, or an amount equal to 135% of Canada’s total annual electricity production from all sources (610 TWh) in 2024. Averaged globally and over a year, current solar cells generate only about 16% of the maximum capacity indicated by their wattage rating. The reduction is due to diurnal, seasonal, geographical and atmospheric variation.