Canada-U.S. electricity tariffs: The consequences and opportunities
The fight between the U.S. and Canada over electricity tariffs could open up new opportunities for domestic energy production, but there are some serious complicating factors.
What used to be a stable, straightforward business of providing reliable power has become fraught with complexity and uncertainty. Utility leaders will need comprehensive energy resource management systems to navigate the challenges while satisfying regulators and ensuring profitability.
These systems don’t exist yet. But integrated solutions combining core ERP data and processing, load forecasting and generation planning, transmission and distribution optimization, self-healing grid behavior, AI-assisted capital planning, and more – they’re coming.
From an IT perspective, utilities can build the foundations for these comprehensive systems by doing what they should be doing anyway: Transitioning to the cloud.
Utilities and energy resource management: 3 truths
There are few absolute certainties in the utility business anymore, but one is that electricity demand will climb for decades to come. Globally, we’re talking a doubling or tripling of power delivery by midcentury.
McKinsey expects U.S. power demand to grow an average of 3.5% a year through 2040, about 30% faster than recent historical averages. That growth will be driven mainly by increases in hydrogen production (via wind and solar-powered electrolysis), vehicle electrification, and demand from data centers, McKinsey says.
Something else we know for sure is that renewable energy will continue to dominate new power generation. Solar accounted for 69% of new U.S. generating capacity in the first quarter of 2025, lifting installed capacity to 248 gigawatts.
Renewables already comprise 47% of electricity generated in Europe, and the proportion of solar and wind power is expected to grow. And China now has more than quadrupled U.S. solar capacity, having added 198 gigawatts from January through May alone – plus 48 gigawatts of wind for good measure.
A third certainty—though one that brings plenty of questions for utilities— is that distributed energy resources (DERs) will continue to proliferate, and that they’ll need combinations of AI-based systems to manage the complexity they introduce to an already byzantine generation and T&D mix.
A recent technology demonstration in California hinted at where this is going: 100,000 Sunrun customers with solar and batteries supplied 535 megawatts of power to the grid for two hours on July 29, noticeably shaving demand.
But so much uncertainty
The opposite side of the confidence ledger is loaded. While state-level support remains generally solid, the new federal budget bill and a slew of presidential executive orders and agency actions have muddied the outlook for renewable energy and electric vehicles. A few examples:
- The U.S. Department of Energy wants to prevent large fossil fuel plants slated for retirement from actually retiring, which could cost ratepayers $3.1 billion a year in 2028 alone.
- The executive branch has a general distaste for wind power with decisions such as cancelling Idaho’s Lava Ridge wind project and taking 3.5 million acres of federal offshore area off the table for wind projects.
- Tariffs and trade friction are bringing uncertainty to the costs of imported materials and equipment such as transformers.
- The 30% tax credit for residential solar is expiring at the end of 2025, nearly 10 years earlier than initially legislated; the $7 billion Solar For All program was recently cancelled; and business clean energy investment credits, extended to 2032 under the Biden-era Inflation Reduction Act, are also ending early.
- The $5 billion National Electric Vehicle Infrastructure (NEVI) program will get its $5 billion, but with substantial changes in terms, including streamlined regulations and the removal of requirements that a certain percentage of stations be built in rural, underserved, or disadvantaged communities.
- The federal tax credits for new ($7,500) and used ($4,000) EVs end at the end of September – rather than in 2032.
Add to all that problems with grids; long permitting cycles; labor scarcity in the trades; extreme weather as the planet warms; five-year-plus delivery backlogs for natural gas turbines for dispatchable power; uncertainty surrounding the true extent and impact of reshoring of U.S. manufacturing; the pace of progress toward V2G technology; and the longer-term outlook for potential future advanced geothermal and small modular reactor developments.
AI solutions on the grid edge aren’t enough
Utilities have been using machine learning and computational AI for years in various operations. These forms of AI, together with generative AI, will be crucial to the comprehensive energy management systems that will enable the holistic management of diverse distributed energy resources.
AI systems will be able to track thousands of energy sources and uses and establish the basis for nimble capacity management and dynamic pricing models that adjust energy prices (and, therefore, steer production as well as usage patterns) based on market conditions, consumer demand, weather patterns, and other inputs. These systems will enable more accurate supply/demand forecasting and more precise energy storage and load balancing than is possible today.
As said, comprehensive energy management systems don’t exist yet. But the technological underpinnings and the key components are all there, and utility industry leaders are working with major IT solution providers on making them real.
Each solution will look different, but they’ll all be built on the same foundations: cloud-based ERPs and specialized systems – all increasingly AI-infused – that combine for universal integration of a utility’s data. For utilities that aren’t at least moving in that direction, now’s the time.