Key Insights

• Budget 2026 is the first fiscal delivery of Powering Canada Strong, and it treats the grid as the foundation for industrial strategy. NRCan’s companion action plan puts federal support for electrification at $115 billion through 2041-42, including $52 billion in new commitments, organized around four pillars: Build, Connect, Make and Train. The aim is a much larger grid that powers new industry and is built with Canadian equipment, minerals and workers.
• This budget is not the end of the financing story. A line that has had little attention commits Ottawa to work with provinces and territories on new approaches to financing the largest electricity projects, with the aim of limiting the impact on bills. That work is on NRCan’s six-month agenda. It opens the question of how much of the grid’s cost should fall on ratepayers and how much on federal and provincial taxpayers.
• The Make pillar puts industrial policy into the electricity build-out.

• • A Canadian-content bonus of up to 10 points on the clean tax credits.
  • $6 billion for emerging generation technologies.
  • Continued support for domestic manufacturing of grid components and battery materials.
  • The same approach extends to critical minerals, factory-built housing and forestry. It should target products Canada can realistically make at scale and be backed by long-term orders.
• End-use electrification is still the prize. The energy wallet is now at the core of the government’s affordability case, and heat pumps and EV charging are well funded.

 

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From Strategy to Budget

Budget 2026 places electricity at the centre of Canada’s economic strategy. The government is counting on a grid twice its current size by 2050 to attract new industry and lower household energy costs, and this budget puts serious federal money behind that plan.

Last spring, when the federal government released Powering Canada Strong, its national strategy to double the grid by mid-century, we wrote that it named the right goal and the right pillars, but that the test would be whether real money followed in the upcoming budgets. Budget 2026 takes a step in that direction.

However, in evaluating this budget, we believe two questions matter most: whether the federal effort matches the ambition, and whether it is focused on what only Ottawa can deliver — a long-term investment signal and a lower cost of capital.

In our view, the budget makes real progress on scale and sends a strong long-term signal through the tax credits. How the cost of the largest projects is shared between ratepayers and taxpayers, federal and provincial, is still to be worked out with the provinces.

Is it sized to the job?

At the same time the budget was released, NRCan shared Powering Canada Strong: From Strategy to Action, a companion document mapping the budget’s measures onto the strategy. Read together, they show how Ottawa intends to pay for the grid and where the gaps remain.

NRCan adds $52 billion of new federal support for electrification to the budget, bringing the total to $115 billion through 2041-42. The largest piece is the extension of the Clean Technology and Clean Electricity tax credits to 2040, which the government costs at $38.5 billion.

Spread over 16 years, total investments come to roughly $7 billion a year. Our analysis estimates that holding average electricity rates to inflation would require roughly $30 billion annually in public support through 2050. Federal support covers roughly a quarter of that benchmark. Holding rates to inflation is a benchmark for discussion; how much ratepayers should carry remains to be decided through the financing talks with provinces discussed later.

Build, and how to pay for it

On the second question, whether the budget focuses on what Ottawa can do best, the answer is clearer for the long-term investment signal than for the cost of capital. Both run through the Build pillar, where most of the new money sits:

• The tax credit extension;
• Nearly $4 billion for electricity infrastructure and the Smart Renewables and Electrification Pathways Program;
• $6.5 billion in new and existing support for nuclear;
• $1.6 billion for northern grids and diesel replacement.

The tax credit extension is the strongest part of the answer. By extending the Clean Technology and Clean Electricity credits to the end of 2040 “to provide the certainty needed for longer-term projects,” the budget gives utilities and developers a federal commitment that runs long enough to cover the planning and construction of many major projects. That is the kind of long-term signal Ottawa should send. How the government amends the Clean Electricity Regulations, which it has said it will do to provide more flexibility, will also shape how investors read that signal.

On the cost of capital, the answer depends on decisions yet to be made. Provincial utilities and their customers will pay for most of the grid through rates, as they always have, and the federal government can help keep those increases in check. If rates rise too much, it exposes this plan to increased political risks. Rising rates eat into the savings households get from electrifying, weakening the energy wallet case, along with voter support

The most consequential commitment may be one that has had little attention. Ottawa will begin working with interested provinces and territories on new approaches to financing the largest and most transformational electricity projects across their full lifecycle. The action plan adds that this will happen over the coming months, with the aim of limiting the impact on electricity bills, and lists it among NRCan’s first priorities.

The budget is not the government’s last word on financing the grid. The tax credits and program dollars could be costed and booked this year; the financing work is still being designed. The central question is the balance between ratepayers and taxpayers. Today, almost all of the cost of new generation and transmission goes into rates, with the federal tax credits covering part of the capital cost.

For the largest projects, such as major hydro, nuclear, offshore wind, and long-distance transmission, the rate impact in the early years can be steep, and the benefits are national and long-lived. A larger public share of the capital cost for those projects, extending beyond the tax credits and split between federal and provincial governments, would keep rates in a range that preserves the energy wallet savings. Lower-cost financing, such as federal loans and guarantees, can do part of the work, but it lowers the cost of borrowing rather than the amount that has to be recovered. The talks with provinces are where the federal and provincial shares can be worked out, and a standard approach would serve better than negotiating each project separately.

The budget also reshapes the federal institutions that could lower that cost. Following a mandate review of the federal financing Crown corporations, the budget introduces some consolidation, including:

• A transition process will create a single federal development bank by bringing together BDC and Export Development Canada.
• Responsibility for the Canada Infrastructure Bank moves to the Minister of Finance. Its mandate narrows to loans and loan guarantees for major infrastructure, and the Indigenous Loan Guarantee Program is consolidated within it.

The Canada Growth Fund’s mandate expands to support broader growth and productivity opportunities and to better complement other federal financing tools. The government expects these Crown corporations to have a greater risk tolerance than private-sector peers.

Whether these changes stimulate capital to flow to the projects that matter most will only become clear once these institutions start lending and the talks with provinces produce results.

Connect

Most transmission is built inside provinces, and, until now, the Clean Electricity tax credit didn’t cover these investments. The budget extends the credit to high-voltage intra-provincial lines, at 500 kV and above in Alberta, B.C., Ontario, and Manitoba, and at lower thresholds elsewhere. It is one of the best ways for Ottawa to support provincial grids without stepping on provincial jurisdiction.

Between provinces, the action plan names five priority interties: Alberta–B.C., Alberta–Saskatchewan, Saskatchewan–Manitoba, B.C.–Yukon, and P.E.I.–New Brunswick. First Ministers have agreed to finish pre-development work by July 2027, and the budget adds $37 million for cost-benefit and cost-allocation analysis. Three of the five are on the Prairies, where interties have been studied for years without agreement on who pays. Cost-sharing agreements are expected next summer.

Connecting Canada’s grids is the agenda Electrifying Canada has been advancing under the banner of setting electrons free, so that provinces can share power, back each other up, and build larger projects together than any of them could on their own. The Maritime cooperation agreement, the work toward an Atlantic system operator, and a national list of priority interties all move in that direction.

Every new line in a doubled grid crosses Indigenous territory. The action plan points to Hydro One’s 50% equity model and the Wasoqonatl intertie as the standards to build on. Through our collaboration with the Indigenous Power Coalition, we have argued that Nations should be proponents from the start of a project, and the consolidated loan guarantees can help make that routine.

Make and Train

Under the Make pillar, the budget opens consultations on a Canadian-content bonus of up to 10 points on the Clean Technology credit and five points on the Clean Electricity credit, and commits $6 billion to emerging generation technologies starting in 2028-29.

Our work on grid equipment supply chains is relevant here. Prices for transformers, switchgear, and cable have risen more than 50% since 2020, lead times for major equipment are measured in years, and Canada depends heavily on imports. NRCan’s consultations heard calls for pooled procurement and a national supply chain roadmap. The content bonus should target products Canada can realistically make at scale and be paired with long-term orders. A bonus on components Canada cannot yet produce would mostly add to project costs.

The same industrial approach shows up elsewhere in the budget:

• Critical minerals: the strategy is renewed, exploration tax credits are extended to 2032, and the $2 billion Critical Minerals Accelerator managed by EDC has made its first investment (together with the CGF), in Teck’s Trail smelter expansion, including commitments to offtakes of germanium, antimony, and gallium.
• Factory-built housing: $500 million goes to building factory capacity for prefab and modular homes, another $8 million sets common standards and data for modern methods of construction, with Build Canada Homes giving those factories substantial demand certainty.
• Forestry: a $4 billion accelerator, also at EDC, can finance biorefineries and other facilities producing higher-value and innovative forest products, such as mass timber.

Several of these tools run through EDC, which is being consolidated with BDC into a single development bank.

On Train, Team Canada Strong aims to add 80,000 to 100,000 Red Seal trades workers by 2031. More than 80% of electricity employers say finding skilled workers is their biggest constraint.

End-use is still the prize

A bigger grid only pays off if Canadians use it to heat their homes, drive their cars, and run their businesses. Both the budget and the action plan feature the energy wallet — the idea that a household’s combined spending on gasoline, natural gas, heating oil, and electricity falls as it electrifies, even though the share of electricity used grows. It draws on our analysis for the Canada Electricity Advisory Council, which found that seven in 10 households would pay less. It is now central to the government’s affordability case.

The demand-side measures follow from our findings. The $2 billion National Heat Pump Rebate runs for eight years and could reach 820,000 households, charging support is renewed past 2027, and $400 million goes to industrial energy efficiency.

What happens next

Over the next six months, NRCan is planning calls for proposals under the renewed programs, financing talks with provinces, amendments to the Clean Electricity Regulations, a federal-provincial framework on interties, and Nova Scotia’s first offshore wind call for bids.

Budget 2026 puts a fiscal plan behind the electricity strategy for the first time. Over the next year, the financing approach, the intertie agreements and the industrial measures will move from commitments to program design.