Power Surge: The Hidden Risk in Ontario’s Electricity Boom

Ontario has begun a major build-out of electricity generation and modification of electrical system management processes.  The Independent Electricity System Operator (IESO) projects electricity demand will grow by approximately 75% by 2050 driven by the increased demand for data centers, industrial growth, and the adoption of electrical vehicles at scale.  As CNA’s Paul Gullo, AVP, National Accounts Property states, “To meet 2050 generating capacity targets, the industry will need significant financial commitment, regulatory approvals, and infrastructure investment - requiring the groundwork to be in place by 2035.”

Louis Vatrt, VP, National Accounts Property at CNA, sees Ontario leading electrification in Canada: “Ontario will likely be at the forefront, perhaps followed by B.C., with population growth alone driving increased power demand.” He points to industrial electrification, coal-to-electric transitions, export growth, and population increases as key drivers.

That translates into a high volume of new generation, transmission, and storage projects moving through planning, permitting, and construction phases simultaneously.  For brokers advising developers, asset owners, and Engineering, Procurement, and Construction (EPC) contractors, it’s important to consider how the risk profile of these projects has shifted and where the requirement for both the build and connection into the electrical grid can become a significant financial exposure.

¹Completed But Not Operating: The Grid Connection Gap

Once an electrical power generating plant is built, it must complete testing and commissioning and then secure final connection to the grid before it can enter service. The period between physical completion and commercial operation, known as the grid connection gap, is a period of potential financial exposure that is not triggered by damage – it occurs due to a delayed connection to the electricity grid whereby costs continue but operating revenue has not begun. A project can be fully constructed, physically undamaged, and unable to generate revenue while sitting in this grid connection gap.

In Ontario, that exposure is not theoretical. Bill 40 has reinforced the province’s regulatory authority over how large, power-intensive operations move toward grid connection, with system stability, economic considerations, and approval sequencing directly affecting access. That makes connection timing more consequential for projects already operating on narrow construction and financing schedules.

“With Bill 40, power intensive operations like data centres, advanced manufacturing, and large industrial projects must adhere to the specified admission requirements, so they should not assume immediate or unconditional grid access,” Vatrt explains “The focus on local economic benefits and job creation should help new electrical generating facilities secure connectivity, but it remains to be seen how consistently that plays out in practice.”

Why Delays Are Becoming Harder to Absorb

Connection  delays for large power projects often hinge on a small number of components that sit at the intersection of the facility itself and the broader grid system. Large power transformers, high-voltage switchgear, and gas turbines remain essential to commissioning, but they are also subject to constrained manufacturing capacity, global sourcing concentration, and extended delivery timelines.

As Timothy Skelton, AVP, Underwriting – National Accounts Property, noted, “Some transformers are now taking more than 160 weeks to deliver, even without a loss event.”

That matters because these delays rarely remain isolated. If one critical component is unavailable, testing and commissioning can move off schedule, causing the project to miss its grid connection window. In Ontario, where access is increasingly managed and sequenced, a missed connection date may not result in a short administrative delay; it can mean waiting months for the next available opportunity.

Where the Insurance Conversation Gets Complicated

Most power construction programs rely on two core coverages:

• Builder’s Risk, which covers physical loss or damage during construction, and 
• Delay in Start-Up (DSU), also called Advanced Loss of Profits (ALOP), which covers lost revenue and ongoing fixed costs when the start of operations is delayed due to insured physical damage.

DSU coverage is typically triggered by physical loss. Where delays arise without a covered event, such as supplier backlog or manufacturing delays, the policy may not respond. As a result, projects can face financial exposure despite the absence of physical damage. Procurement contracts for critical components should account for these scenarios and clearly allocate responsibility in the event of delay.

Business Interruption is also an important component of the overall program. Coverage should be structured to reflect the specific risk profile of each project and operations, with appropriate limits, triggers, and terms. Contractual arrangements with external parties should further define responsibility for coverage, including when it applies and to what extent, in alignment with the client’s risk tolerance.

“These elements are the backbone of most programs, but they’re not the whole picture,” said Skelton. “Building an insurance structure takes close coordination between internal risk management teams and external industry specialists to make sure coverage truly reflects project exposures and holds up over the long term."

Broker Expertise

Clients in power construction are managing connection agreements, equipment procurement, EPC contracts, and project financing all at once.  Many may not have mapped out exactly where the grid connection gap sits in their risk picture, or whether their insurance program would respond if they landed in one. Skelton explains, “Identifying whether a client’s insurance program meaningfully addresses their needs is one of the most direct ways brokers can add value in today’s risk environment.”

That’s where brokers can add immense value by asking some key questions:

• Does the project have appropriate agreements with milestone obligations?  What happens contractually if those dates are missed?
• What is the longest lead-time equipment dependency?  What is the current delivery estimate?
• Who carries the financial exposure from a delay or business interruption exposure under the EPC contract?
• Is the DSU waiting period based on an appropriately chosen recovery timeline?
• Does the specified coverage actually respond if any of the anticipated risks materialize?

Where Insurance Expertise Earns its Place

This is where an insurer’s experience and expertise become a true differentiator.  “Our role is to evaluate protection systems around assets that can take years to replace”, said Gullo.  “Carriers, like CNA, who understand how power projects are sequenced evaluate risk differently.  We look at critical path dependencies, equipment lead times, and whether waiting periods are realistic when supply is constrained.”

Vatrt elaborates on where that difference shows up, “The difference in program quality shows up at claims time. When timing drives loss, recovery planning, schedule reconstruction, and causation analyses need to begin immediately.  Programs placed with markets which understand project sequencing, and waiting periods calibrated to realistic recovery scenarios, produce materially different outcomes versus standard placements.”

Ontario, and Canada more broadly, is undergoing a significant electricity plant build-out and is generating a high volume of complex placements in a short timeframe.  Acquiring coverage for possible risks isn’t a niche concern, it’s worth actioning early, well before the project begins.

References

¹Connection timelines, eligibility, and regulatory requirements are subject to evolving policy, including legislative amendments such as Bill 40 and related regulations. Project participants should obtain current regulatory guidance specific to their project type and location.

Canada Energy Regulator. (2026, April 9). Canada's Energy Future 2026. Retrieved May 10, 2026, from https://www.rec-cer.gc.ca/en/data-analysis/canada-energy-future/2026/results/#a2

Dow, A. (2024, October 16). Sr. Manager, Public Relations, IESCO. Electricity Demand in Ontario to Grow by 75 per cent by 2050, www.iesco.ca. Toronto, Ontario, Canada: IESCO. Retrieved May 10, 2026, from https://www.ieso.ca/Corporate-IESO/Media/News-Releases/2024/10/Electricity-Demand-in-Ontario-to-Grow-by-75-per-cent-by-2050

Dunsky Energy + Climate Advisors. (2025). Forecasting Canada’s. Montreal: Dunsky Energy + Climate Advisors. Retrieved May 15, 2026, from https://transitionaccelerator.ca/wp-content/uploads/2025/11/Forecasting-Canadas-Electricity-Future-Report-Final-November-2025.pdf

Electricity Canada. (n.d.). Electricity is essential: The state of the Canadian electricity industry 2025. Retrieved May 15, 2026, from Electricity Canada: https://www.electricity.ca/advocacy/electricity-is-essential-the-state-of-the-canadian-electricity-industry-2025/

Goyal, R., Bayne, J., & Lei, C. (2026, January 14). Ontario’s Protect Ontario by Securing Affordable Energy for Generations Act, 2025: Expediting Regulatory Approvals for Energy Infrastructure Projects. Toronto, Ontario, Canada: Blakes.com. Retrieved May 8, 2026, from https://www.blakes.com/insights/ontario-proposes-expediting-regulatory-approvals-for-energy-infrastructure-projects-with-bill-40/

Ontario Energy Board. (2025, December 11). Ontario Energy Board Act, 1998. Ontario Energy Board Act, 1998, S.O. 1998, c. 15, Sched. B. Toronto, Ontario, Canada. Retrieved May 8, 2026, from https://www.ontario.ca/laws/statute/98o15#BK158

Statistics Canada. (2025, October 27). Installed plants, annual generating capacity by type of electricity generation. Ottawa, Ontario, Canada. doi:https://doi.org/10.25318/2510002201-eng

The Hon. S. Lecce (Minister of Energy and Mines). (2025, December 11). Bill 40 (Chapter 22 of the Statutes of Ontario, 2025) An Act to amend various statutes with respect to . Toronto, Ontario, Canada. Retrieved from https://www.ola.org/sites/default/files/node-files/bill/document/pdf/2025/2025-12/b040ra_e.pdf