The federal government’s hopes of encouraging more sharing of electricity among provinces took another hit this month as Nova Scotia abandoned the Atlantic Loop, raising further doubts about whether Ottawa can secure enough co-operation to rapidly decarbonize power grids.

Sometimes referred to as the Eastern Clean Energy Initiative, the Atlantic Loop would have run more than 1,000 kilometres from Quebec into New Brunswick and on to Nova Scotia. Always more of a vague concept than a clearly articulated plan, it nonetheless became a centrepiece of the federal government’s approach to lowering greenhouse gas (GHG) emissions in Eastern Canada. The basic idea was to replace the region’s coal-fired electricity plants with renewables, and fill any resulting shortfalls from those intermittent sources with hydropower from Quebec – and possibly from as far away as Labrador.

But this month, the government of Nova Scotia Premier Tim Houston unveiled a refined energy plan that dismissed the Loop as unviable. The reasons for its demise are familiar, and could thwart other transmission proposals such as strengthened links between Ontario and Quebec urged by some academics and activists.

Trade in electricity between Canada and the United States has long dwarfed exchanges between provinces. Beginning around 2018, the federal government embarked on a crusade to change this. Ottawa was prepared to put taxpayers’ money where its mouth was: In 2020 the Canada Infrastructure Bank, a Crown agency, earmarked $5-billion for “clean power,” an undefined proportion of which was to be spent on interprovincial transmission.

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Senior cabinet ministers were expected to toe the line. Environment Minister Stephen Guilbeault’s mandate letter specifically instructed him to support the Loop; Natural Resources and Energy Minister John Wilkinson’s letter charged him with a broader objective to “connect regions with carbon intensive electricity systems to more clean power by supporting transmission lines and the integration of renewables and clean fuels.”

Government officials and utilities across Atlantic Canada quickly offered endorsement. Scott Balfour, chief executive officer of Emera Inc. (which owns Nova Scotia Power) likened the Loop to a really long extension cord and called it “the right and best plan for Nova Scotia, frankly for the region as a whole.”

The largest stumbling block was its uncertain price tag. Early estimates put it at $3-billion: In a study published last year, the Pembina Institute, an energy and environmental think tank, found that “the availability of imported hydroelectricity can make clean energy portfolios even cheaper in the Atlantic provinces.”

But by 2021, Emera said a higher figure of $5-billion was “about right.” New Brunswick Power this summer put the cost at $6-billion. The utility told The Globe and Mail this was “not a detailed engineering estimate but preliminary estimates completed by the utilities in New Brunswick, Nova Scotia and Quebec.”

This month, Nova Scotia floated an even larger figure: $9-billion. Tory Rushton, Nova Scotia’s Minister of Natural Resources and Renewables, said the main contributors were rising labour and materials costs.

“We suspected that number could have could have grown even further, past $9-billion,” Mr. Rushton said, adding that alternatives were far cheaper.

“For Nova Scotia, the cost of onshore wind energy is very affordable, it’s some of the cheapest energy that we’re generating.”

A less discussed but ever-present obstacle is parochialism. Simply put, it’s difficult for provincial officials to get excited about costly projects when much of the benefits flow to neighbours. Not all governments openly acknowledge this, but Nova Scotia’s did: In a presentation, it stated that “investing in our own energy resources avoids Nova Scotians having to spend billions on infrastructure in Quebec and New Brunswick.”

Nova Scotia already had reasons to be skeptical about Big Transmission. Completed in 2018, the Maritime Link delivers an allotment of electricity from the troubled Muskrat Falls hydroelectric project in Labrador to Nova Scotia. Repeated delays at Muskrat Falls forced Nova Scotia to buy expensive coal to make up the difference.

“We were actually paying for two electricity systems,” Mr. Rushton said, “and it’s been borne on the backs of ratepayers in Nova Scotia.”

Nova Scotia wasn’t alone in harbouring doubts. In its latest integrated resource plan published during the summer, New Brunswick Power said in a report that while the Loop offered “numerous benefits,” it would also raise the province’s electricity costs by between $270-million and $310-million annually by the 2040s.

“Its economic value is challenged,” the report asserted. “A lower cost solution is to build carbon-free resources in New Brunswick.”

New Brunswick already has 1,200 megawatts of import capacity. A 575 MW boost from the Loop would be useful only “in hours when the existing infrastructure is being fully utilized,” the utility added. And that wouldn’t happen often.

Quebec’s government has been largely silent about the Loop. Just a few years ago, the province enjoyed a robust electricity surplus and was eager to sell to neighbours. But that surplus seemed to evaporate as the government of Premier François Legault pushed for lower GHG emissions through further expansion of what is already Canada largest hydroelectric generation fleet.

Mr. Rushton said that while he was never formally told Nova Scotia couldn’t count on Quebec’s dams, neither did he receive assurances that it could.

Brenna Walsh, energy co-ordinator at the Halifax-based Ecology Action Centre, said the Loop required co-operation from too many parties.

“It seems like there was a difficulty to get an agreement between three provincial premiers, and the federal government and the three associated utilities,” she said.

The lack of progress sapped enthusiasm even from unabashed supporters. Nova Scotia Power spokesperson Kathryn O’Neill wrote in a statement that since negotiations began several years ago, “the landscape has shifted: Between supply chain issues and a tight construction timeline to achieve 2030 goals, the option of the Atlantic Loop has become increasingly challenged.”

What remains is the daunting task of decarbonizing Atlantic Canada. A 2018 study published by the federal natural resources department examined the economic benefits of new infrastructure projects, and strongly favoured beefing up regional transmission. It deemed the alternatives to be few and costly.

“The higher costs are largely a consequence of the region having already exhausted lower cost GHG abatement opportunities in the electricity sector,” it noted.

Asked in late 2021 about Emera’s fallback plans if the Loop fell through, Mr. Balfour said natural gas-fired generation could be used to back up intermittent wind power.

“But we prefer not to do that,” he added, “because that has its own carbon emitting profile, of course. But also, we know that the access to natural gas in Atlantic Canada is constrained. So that’s one option.”

The notion of beefing up transmission well predated the Atlantic Loop. Ms. Walsh, while praising Nova Scotia’s latest commitments to build more renewables and battery storage, said the idea will likely arise again.

“We do think that more transmission build-out in the future will be needed to connect to other regions,” she said. “We really hope to see that conversation continue.”

Mr. Rushton said the governments of Nova Scotia, New Brunswick and Canada held a “very positive” meeting in Ottawa last week. His government remains interested in exporting power to neighbours as its renewables portfolio grows, and continues to support improved transmission links with New Brunswick.

“There may actually be a Loop in some shape or form in years to come,” he said.