1C A N A D I A N E L E C T R I C I T Y A S S O C I AT I O N | C A N A D I A N C L I M AT E A C T I O N

2C A N A D I A N E L E C T R I C I T Y A S S O C I AT I O N | C A N A D I A N C L I M AT E A C T I O N

TABLE OF CONTENTS

3 Introduction

4 OperationalizingtheParisAgreementthroughthePCFCGCC:challengesandimpacts

4 Coalphase-out,naturalgasregulations,carbontax(federal/provincial)

5 MovingCanada’selectricitymixfrom80to90percentcleanenergy

7 UnitedStatesclimateinactionandcanadiancompetitiveness

9 DichotomybetweenreducingGHGsandenvironmentalapprovals

forcleanenergyprojects

10 Buildinglong-termpublictrustandconfidence

12 Buildinganationalconsensusthroughopportunities

12 Howdoweencourageashifttocleanenergy?

13 Effectiveflexibilitymechanismdesign

13 Carbonrevenuerecycling

14 CanadaInfrastructureBank

15 Advancementofcleanenergyinremote/northerncommunities

17 Conclusionandkeyrecommendations

18 Recommendation1

18 Recommendation2

18 Recommendation3

19 Recommendation4

19 Recommendation5

3C A N A D I A N E L E C T R I C I T Y A S S O C I AT I O N | C A N A D I A N C L I M AT E A C T I O N

INTRODUCTION

FollowingthelandmarkParisAgreementreachedin2015,morecountriesthaneverbeforehavecom-

mittedtolimitingglobalaveragetemperatureincreasestolessthantwodegreesCelsius.Reachingthis

goalwillrequireagreateffortfromallsignatories,includingCanada.ThePan-Canadian Framework on

Clean Growth and Climate Change(“Pan-CanadianFramework”),towhichthefederalgovernmentas

wellasmostprovincesandterritorieshavesignedon,laysouthowCanadaplanstoachieveitsclimate

andcleanenergyobjectives,includingmeetingCanada’sgreenhousegas(“GHG”)emissionstargetof

30%below2005levelsby2030.

AsCanadaimplementsthePan-CanadianFramework,itisimportantforgovernmentstoconsiderre-

gional diversity, including differences inmarket conditions, electricity systemdesign, physical infra-

structureconstraints,andlocallyavailablenaturalresources.Thesefactorswillgreatlyinfluencehow

consumerpriceswillbeimpactedbyactionstakentoreduceCanada’scarbonfootprint.Someregions

willinevitablybeaffectedmorethanothers.

Whileactionsandimpactsrequiredueconsiderationoftheregionalandlocalrealities,alleconomic

sectors and individual Canadiansmust also participate in and contribute to this national endeavor.

NosectorshouldbeexcludedasCanadapursuesGHGemissionreductions,andrespectiveregulators

shouldfacilitatethistransition.IndividualCanadiansmustalsoplayaroleintheirwillingnesstosup-

portmajorcleanenergyprojects,aswellasadjusttheirownenergyconsumingbehaviors.Asuccessful

strategywill requireapragmaticpartnershipbetweengovernments, industry,energyregulatorsand

thepublic.

Indeed,awinningpolicywillreallytakea“village”.

Foritspart,theelectricitysectorhasalreadyreducedGHGemissionsbyover30%since2005andwill

likelyreduceemissionsbyat leastanother30%by2030,asexistingtraditionalcoal-firedplantsare

retired.ThispositionsthesectorasakeyenablerofCanada’stransitiontoacleanenergyeconomy,

including greater electrificationof transportation, spaceheating and industrial processes. Canadian

electricitygenerationisalreadyover80percentnon-GHGemitting,makingitamongthecleanestin

theworld.

Furthermore,thesectorhasbeeninvestingheavily,averagingover$20billionannually1,intherenewed

infrastructureandadvancedtechnologiesneededtoensurethesystem’ssustainedreliability,andpro-

vidingthecapacitytopowerCanada’sshifttoacleangrowtheconomy.

1Source:StatisticsCanada,CANSIMTable031-0002,RetrievedJune21,2015

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Whiletheelectricitysectorisleadingtheway,thevolumeandmagnitudeofproposedregulationssuch

astheacceleratedcoalphase-out,naturalgasperformancestandards,andcarbontax,combinedwith

thespeedoftheirdevelopmentandimplementation,couldposechallengestoelectricitycompanies

withfossilfuel-basedgeneratingassets.Costincreaseswillnecessarilybepassedalongtoindustrial,

commercialandresidentialcustomersintheformofhigherrates.AsCanadalooksahead,itisimper-

ativethatgovernments,stakeholders,andthepublicworkcloselytobuildandsustainanationalcon-

sensusoncleangrowthandclimatechangethatopenlyacknowledgesthepossibilityofcostimpacts.

AsanearlysupporterofaNorthAmerican-widepriceoncarbon,theCanadianElectricityAssociation

(“CEA”)anditsmemberssupportclimatechangeaction.Wearealreadyworkingwithgovernmentsto-

wardsthisend,whichmustalsoincludeclosecollaborationinmitigatinganyunindedcompetitiveness

impactsontheeconomy,ourbusinessesandCanadianfamilies.

1. OPERATIONALIZING THE PARIS AGREEMENT THROUGH THE PAN- CANADIAN FRAMEWORK ON CLEAN GROWTH AND CLIMATE CHANGE: CHALLENGES AND IMPACTS

a. Coal phase-out, natural gas regulations, carbon tax (federal/provincial)

Theelectricitysectorisresponsiblefor11 percent ofCanada’stotalemissions2.ThePan-Canadian

FrameworkproposesseveralpoliciestoreduceremainingGHGemissionsfromtheelectricitysec-

tor,includingrevisedemissionstandardsonnewnaturalgasandcoalfiredelectricitygeneration.

While the sector is supportiveof theseemission reductionmeasuresand the relatedflexibility

mechanisms,itiscallingupongovernmentstofurtherhelpmitigateanyshort-mediumtermim-

pactsofthistransitiontoalowercarbonfuture.

Ascompaniestransitiontolower-emittingformsofgeneration,insomecaseswithanearlyshut

downofGHGemittingfacilities,consumerscouldbedirectly impactedbyhigherelectricitybills

ascostsarepassedthrough.Inarecentreport bytheSenateStandingCommitteeonEnergy,the

EnvironmentandNaturalResources,itwasnotedthat“manyCanadianscouldsoonbepayinghigh-

erelectricitybillsasthecountrytriestomeetreductiontargetsforitsGHGemissions-especially

thoseinprovincesthatrelyonfossilfuelgeneration”3.Itisanticipatedthatacarbontax(starting

at$10/tonneofCO2andincreasingeachyearto$50/tonnein2022),whenaddedtootherGHG

reductionmeasures,willfurtherincreasecoststocompanies,andultimatelyCanadianfamilies.

2Source:EnvironmentandClimateChangeCanada,“CanadianEnvironmentalSustainabilityIndicators:GreenhouseGasEmissions”3Source:SenateStandingCommitteeonEnergy,theEnvironmentandNaturalResources,“PositioningCanada’sElectricitySectorinaCarbon

ConstrainedFuture”

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Thepotentialcostimpactisofconcerntothesectorasitisalsointhemidstofinvestinginthere-

newalandmodernizationofexistinginfrastructurewhilecontinuingtoprovidesafe,reliablepower

toCanadians.Infact,in2012,aConferenceBoardofCanada(“CBOC”)studyprojectedthatthe

sectorwouldneedtoinvest$350billion4from2012-2030torenewitsexistinginfrastructure.In

anupcoming report,whichhasbeensharedwithCEA indraft form, theCBOC furtherpredicts

thatthesectorwillneedtoinvest$1.6trillionby2050tomeetCanada’sclimateandcleangrowth

objectives.

AsCanadapursuesintensiveenergysystemtransition,itiscrucialthatgovernmentsconsidermea-

surestoensurecoststoratepayers,especiallylow-incomeCanadians,areminimizedtotheextent

possible.Measurestobeconsideredmayincludedirectfundingforinnovativetechnologies,loan

guaranteestohelpaccesscapital,taxcreditsandacceleratedcapitalcostallowances,andthepo-

tentialrecyclingofcarbontaxrevenues.

b. Moving Canada’s electricity mix from 80 to 90 percent clean energy

Thefederalgovernmenthassetanambitiousandaspirationalgoalofachieving90percentclean

electricityby2030.Asfigure1illustrates,Canadaalreadyhasasignificantcleanenergyadvantage

withmanyprovincesandterritoriespoweredbyhydropower,nuclearandotherformsofnon-emit-

tinggeneration.However,coalandnaturalgascontinuestobeusedinmanyprovincesandterri-

tories,includingAlberta,Saskatchewan,Ontario,NewBrunswick,NovaScotia,Newfoundlandand

Labrador, theNorthwestTerritoriesandNunavut.For these jurisdictions, the faster thepaceof

changethemoreexpensiveitwillbe.Iftheaimistomovethesectorto90percentcleanenergyby

2030,thengovernmentsmustalsofacilitategreaterregulatorysupportandinvestmentsincurrent

andnewtechnologies,includinghydropower,energystorage,microgrids,modularnucleartech-

nologyandotherformsofalternativecleanenergysources.

MAKING HISTORY WITH SASKPOWER’S CARBON CAPTURE AND STORAGE PROJECT

Thecarboncaptureandstorage (CCS)projectatSaskPower’sBoundary

DamPowerStation istheworld’sfirstcommercial-scaleCCSprocess in-

stalledinacoal-firedplant.Bytakinganoldfacilitynearingitsendoflife

andrebuildingitwithCCStechnology,SaskPowercanproduceelectricity

that is10timescleanerthantraditionalcoalplants.AstheCCSprocess

rampsuptofulloperation,itwillcaptureupto90percentofcarbondi-

oxideand100percentofsulphurdioxide,whichcanthenbere-usedfor

industrialandresearchpurposes.

PhotocourtesyofSaskPower

4Source:ConferenceBoardofCanada,“SheddingLightontheEconomicImpactofInvestinginElectricityInfrastructure”.

6

NOVA SCOTIA POWER BIOMASS CO-GENERATION FACILITY

In July 2013, Nova Scotia Power Inc. commissioned a 60MWbiomass

co-generationfacilityadjacenttoapulpandpapermill inPortHawkes-

bury.TheprojectisanotheraspectofNovaScotiaPower’sstrategytodi-

versifyitsgenerationportfolioandmeetrenewableenergyrequirements.

ThefacilitywillsupplyroughlythreepercentofNovaScotia’selectricity

needsandactasasourceoffirmrenewableenergythatwillalsohelpback

uptheprovince’sextensivenetworkofnew,intermittentwindgeneration.

Figure 1: Electricity Generation in Canada by Province and Territory and Fuel Type, 2015. | Source: Statistics Canada

Newinvestmentsincleanenergytechnologieswillbeimportantforloweringemissions,promot-

ingeconomicgrowth,increasingcompetitivenessandensuringCanadaisattheleading-edgeof

agreen,knowledge-basedeconomy.TheywillalsohelpCanada’selectricitysystemexpandtoac-

commodatenewelectricityuses,increaseresponsivenessandstoragecapacities,andbuildatwo-

waygridthatallCanadianscanbenefitfrom.Thus,itiscrucialthatgovernmentsworktoreduce

regulatorybarrierstotheseinnovativecleanenergyprojectsandexplorewaystosupportthetran-

sitionthroughthetaxbaseratherthanrelyingsingularlyoncustomerratebase.

PhotocourtesyofNovaScotiaPower

c. United States Climate Inaction and Canadian Competitiveness

Withprotectionismontherisesouthoftheborder,

coupledwiththependingrenegotiationoftheNorth

AmericanFreeTradeAgreementandclimatechange

policyreversals,Canadamustconsiderthepotential

competitivenessimpactsofU.S.domesticpolicies.If

the American federal government continues to ex-

press a protectionist, “America-first” approach and

remains unsupportive of climatemitigation efforts,

thiscouldposearisktothecompetitivenessofCana-

dianbusinesses.This‘competitiveness’gapbetween

CanadaandtheU.S.couldwidenfurtherifplanned

broad-based tax reforms, includingapotentialBor-

derAdjustmentTaxandcorporate taxcuts,areen-

actedbytheU.Sgovernment.

Thus,asthefederal,provincialandterritorialgovern-

mentsmaintaintheirclimateactiontrajectory,they

mustbecognizantofthisdynamicandworkcollabo-

rativelywithindustryinanefforttobridgeacompet-

itivenessgapbetweenthetwocountries.Failureto

dosocouldresultineconomicdisadvantagesforour

businessesandconsumers.

Canadian electricity exports are a major revenue

generator. Canada sold $3.1 billion worth of elec-

tricityin2015and$2.9billionin2016.5AsCanadian

electricity exports are predominantly hydropower,

withsomenuclear,thereisasignificantopportunity

tohelpreduceAmericanGHGemissions.Thismakes

itimportantforCanadatocontinuetoarticulatethe

benefitsofcross-bordercooperationonenergyand

environmentalissues.DuringCEA’sannualBoard of

Directors Washington Policy Forum in April 2017,

AmericancounterpartsreadilyacceptedthatCanadi-

anenergysupply,includingimportsofcleanelectric-

ity,havecontributedmightilytoU.S.nationalenergy

security,andexpressedastronginterestincontinu-

ingthatintothefuture.

NEW BIOGAS FACILITY ADDS GENERATION TO SASKATOON LIGHT

& POWER’S MIX

Saskatoon Light& Power, amunicipal distribution utility,

hasbuiltitsfirstnewgenerationfacilityinmorethan100

years.CompletedinMarch2014,theLandfillGasCollection

Systemcapturesmethane-richgasfromSaskatoon’slandfill

anduses it to fuel twogenerators thatproduce13GWh

eachyear,whichisenoughenergytopower1,300homes.

Thefacilitywillalsobecomeanewrevenuesourceforthe

municipalityonceitsinitialinvestmentisrepaid.

OPG’S PETER SUTHERLAND GENERATION STATION’S CLEAN, RENEWABLE ENERGY

POWERS THOUSANDS

OntarioPowerGenerationInc. (OPG), inpartnershipwith

TaykwaTagamouNation(TTN)completedPeterSutherland

Sr.GSin2017,onbudgetandaheadofschedule.Thehy-

droelectricstation,namedafterarespectedTTNcommuni-

tyelder,isoperatedremotelyoutofOPG’scontrolroomin

Timminsandproducesenoughelectricitytopowerabout

28,000homeseachyear.Thisstationgeneratesclean,re-

newableelectricity24hoursaday,365daysayearandis

partofOPG’scleanenergyportfoliowhichismorethan99

percentfreeofgreenhousegasandsmogemissions.

5 Source: Statistics Canada, Canadian International Merchandise Trade

Database,Table908-0027

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U.S.officialsspoketothemandateofchangethatPresidentTrumpwonlastNovember.Butin

thesamebreath,theyfeltan“obligation”toinformtheirPresidentaboutthemattersthatare

workingwellanddonotrequirechange.Andinthatcontext,theyindicatedthatbilateralenergy

cooperationbetweenourtwocountriesisaprimeexampleofsomethingthatis“notbroken”.

Indeed,theelectricitysectorhasmanyopportunitiesuponwhichtheU.S.federalgovernmentis

keentocapitalizeon.Thisincludeslowcostenergyintegration,especiallyasitsupportsenergy

securityandjobcreation,aswellaspolicyimprovementstosafetyandsecurity.Thisisessential

astheU.S.hasplacedahighpriorityonprotectionagainstcyberandphysicalattacks.Currently,

thereisconsiderableandconstructivecollaborationonsecuritymattersbetweenourtwogov-

ernmentsandprivatesectors,butthereisscopeforraisingthelevelofcooperationevenfurther.

It is also reassuring thatmany sub-nationalAmericangovernmentsand industry leadershave

committedtotakingactiononclimatechangeandcleangrowthdespitepolicyreversalsbythe

TrumpAdministration.ArecentstudyconductedbytheNewYorkTimesfoundthat69%ofAmer-

icanadultssupportCO2limitsoncoalfiredpowerplants,indicatingthatthenarrativeandbelief

aroundclimatechangeanditsimpactsisentrenched6.ThetwolargestatesofCaliforniaandNew

York,forinstance,haveindicatedadesiretostaythecourseonclimatechangeaction.

This trajectory towards a cleanenergy future in theU.S.will offer some respite forCanadian

competitivenessconcerns,butfederalandprovincial/territorialgovernmentsmustconsiderus-

ingdifferentandinnovativetoolsfromtheirfiscalandregulatorytoolboxestoensureCanadian

industryisnotdisadvantagedbytheU.S.federalgovernment’slackofactiononclimatechange.

Forexample,whataresomeoftheiroptionsatourdisposal?

• ShouldCanadafollowsuitiftheTrumpAdministrationlowersU.S.corporatetaxrates?

• ShouldtheCanadiangovernmentstakestepstomitigatePresidentTrump’sexecutive

ordersonstreamliningtheirregulatoryregimesandreducingredtapeonnaturalre-

sourceexplorationanddevelopment?

• ShouldCanadiangovernmentsaccelerate funding for innovationand infrastructure

projects?

• Should governments extend production incentives for new emerging generation

technologiessimilartopastinitiativessuchastheWindPowerProductionIncentive

(WPPI)?

• Shouldgovernmentsre-examineacceleratedcapitalcostallowancesforcleangener-

ationtechnologies?

• ShouldthefederalgovernmentdomoretohelpCanadianfirmsmarkettheirclean

energyexpertiseinternationally?

6Source:TheNewYorkTimes,“HowAmericansThinkAboutClimateChange,inSixMaps”

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Thereisanarrayofoptionsavailabletogovernments,andtheelectricitysectorencouragesCan-

ada’spoliticalleaderstocarefullyconsiderallthepolicyinstrumentsattheirdisposal.Theelec-

tricitysectoralsostandsreadytoworkconstructivelywithgovernmentstoensurethatCanadian

businessesremainonahealthyandrobustfooting.

d. Dichotomy between reducing GHG emissions and speedy environmental approvals for clean energy projects

Therearemanypoliciesinplacetobalanceenvironmentalprotectionandeconomicnecessity.

Forinstance,well-functioningandconsistentenvironmentalassessmentsarecriticaltoensuring

companiesconsiderandmitigateprojects’environmentalimpacts.However,proceduraldelays

andduplicativeprovincial and federal requirementsoftendelay investment. Thesedelays can

havearealimpactonCanada’sclimategoalsaslongapprovalprocessescanhindergreenprojects

andincreasethecostofCanada’sswitchtocleanergeneratingsources.

Theenvironmentalassessmentprocessesforlarge-scalehydroornuclearprojectsareintensive,

requiringsubstantialplanning,environmentalstudies,analysisofcumulativeeffects,andmore.

Asaresult,projectscanextendoveradecadefromplanningtoconstruction.Theoriginalintent

of theCanadianEnvironmentalAssessmentAct (CEAA)was toensure that theenvironmental

implicationsofallfederaldecisionswereconsideredandmanaged.Today,overlappingregulatory

regimestoprotectenvironmentalresourcesincludingfisheries,migratorybirdandspeciesatrisk,

haverenderedthesystemcumbersomeanddifficultforcompaniesandcommunitiesalike.

Buildinga low-carbonelectricity generation systemneeded toachieveour carbonabatement

goalswillrequirelargeprojects,suchashydroelectricdams,allofwhichwillbesubjecttothese

assessments.AsdescribedinCanada’sMid-CenturyLongTermStrategyreport,thevarioussce-

nariosfordeepdecarbonizationby2050wouldrequirebetween36,000MWand130,000MW

ofhydroelectricitytobebuilt.Thereportalsostatesthat“theconstructionoffuturelargehydro

projectswillrequirecarefulconsultationprocesses”,duetopotentialnegativeimpactsfromlarge

hydrodevelopments7.Consultationandassessmentprocessesfordevelopmentsofthatscalewill

bechallenginggiventherelativelyshorttimelinesCanadahassetforacceleratingcleanenergy.

Inmanycases,thesameenvironmentalresourcesareprotectedbybothfederalandprovincial

legislationcausingduplicationand inconsistences. The current system limits the industry’s at-

temptstorejuvenateaginginfrastructureandmakebetteruseofrenewablegeneration.Italso

makesbuildinganationwideconsensusmoredifficultaspopulationsclosesttoandmostreliant

on theseprojectsexperiencefirsthand the frustrationofproceduraldelays,whichcandisrupt

employmentandthedailylifeoftheircommunities.

7Source:Canada’sMid-CenturyLong-TermLowGreenhouseGasDevelopmentStrategy

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e. Buildinglong-termpublictrustandconfidence

Itisimperativethatgovernmentsandindustryworktogethertobuildpublictrustandconfidence

inourclimateactionstrategies.Whileelectricitycostsvaryacrossthecountry,comparedtomost

developednations,Canadaonaveragehaslowerelectricitycosts.Arecentreportpublishedby

theNationalEnergyBoardstatesthatCanada’spricesarerelativelylowcomparedtomanyother

countriessuchasGermanyorDenmarkwhopaymorethantwiceasmuchasCanadiansforeach

kilowatthourofelectricity(See figure 2)8 .However,therelativecostofCanadianelectricity,as

wellastheformulathatisusedtosetrates,arenotwidelyunderstoodbythepublicorgovern-

ments.

Notwithstandingthiscomparativereality,Canadiansperceivetheirelectricitycostsasbeingtoo

high. In fact, inmost jurisdictions across Canada, rates have become a top ofmind issue for

residents,althoughconsumersarewellprotectedbyaprocesswherebyallelectricityratesare

provinciallyregulatedinthorough,transparent,publicratehearings.Inaddition,CEA’smembers

aremindfuloftheneedtokeepcostsaslowaspossible.

Atthesametime,ifwearetocontinuetoprovidereliableelectricityandachieveanationalcon-

sensusonclimateaction,thenratepayerswillalsoneedtoincorporatethevaluepropositionof

electricity;namely,thatelectricityhasbecomeanindispensablecommodityforahighstandard

of livingandforarobustnationaleconomy.Andtogetherwithanytransitiontoa low-carbon

future,thepublicmustbemadeawareofthebalancedinterplaybetweenbenefitsandcosts.In

thisregard,industry,governments,andregulatorsallhaveanobligationtoinformCanadiansof

thefactsandissuesbehindthepolicypronouncements.

Figure 2: Share of Renewables and Electricity prices in various countries. | Source: National Energy Board (NEB)

8Source:NationalEnergyBoard,‘Canada’sAdoptionofRenewablePowerSources’

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Ultimately,itisthegovernment’sdutytosetthelevelofambition,definethepublicpolicyframe-

workandsupportkeyprojectsandinitiatives.Industry’sroleistoinvest,innovateandimplement

thesedecisions.Anditisthepublic’sresponsibilitytoactivelyengageintheprocessandunder-

standtheimplications.Thereisnowayaroundit.Consumerswillneedtotakeonhigherelectric-

itypricesthantheyhavebeenaccustomedtoforlong-termcleanenergysolutionstobecomea

reality.Canadianswillalsoneedtoweighthecostsofnotpursuingacleanenergytrajectory.This

mustbediscussedopenlyandcandidlyatthefront-endofourclimatechangestrategies.Industry

hasalreadymadesignificantstridestoengagethepublicandwillcontinuetodoso.Butclearly,

theycannotactalonetoachievepublicsupport.

Weneedeffectivecommunicationtoolsandprocessestoaddressallaspectsoftheclimatepol-

icies,includingtheircosts.Inthisway,wecanhelpbridgethegapinpublicunderstandingand

strengthenthenationalconsensusthatisrequiredforourstrategiestosucceed.

SustainableCanadaDialogues(SCD),anacademicconsortium,statesthat“aninformedandcon-

tinuingpublicdebateaboutsociallyacceptableenergypathwaysthataimstobuildunderstand-

ingandconsensus[isneeded]toachievethistransition”9.Thisisnotsimplyapublicrelations

exercise;Canadian’scostperceptionsposeaseriousrisktobroadsupportfortherequiredclean

energyinfrastructureinvestmentandultimatelymayjeopardizeanylong-termclimatestrategy.

Canadamustensurethatstakeholdersfeelincludedintheprocessofbuildingafairandinclusive

nationwideconsensus.

Ausefulexampletothisconsensus-buildingobligationis‘GenerationEnergy:ADialogueAbout

Canada’sEnergyFuture’,whichwasrecentlylaunchedbytheMinisterofNaturalResources.This

initiativeisaimedatstartinganationaldialogueonCanada’spathtoalowcarbonfutureandin-

vitesCanadianstosharetheirideasandparticipateinhelpingdefineourcountry’senergyfuture.

Sucheffortsmustcontinueandbereplicatedifwearetoimprovenationalunderstandingof,and

approvalfor,cleanenergypolicies.

9Re-energizingCanada:PathwaystoaLow-CarbonEconomy,https://crcresearch.org/sites/default/files/u11276/reenergizing_short_final.pdf

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2. BUILDING A NATIONAL CONSENSUS THROUGH OPPORTUNITIES

a. How do we encourage a shift to clean energy?

Withoutadoubt, therearesignificantfinancial costsassociatedwithclimateaction.Asprevi-

ouslymentioned,theConferenceBoardwillsoonpublishareportthatestimatesthatat least

$1.6trillionmustbeinvestedinourelectricitysystemalonetomeetthechallengeoftheParis

agreementandthePan-CanadianFrameworkby2050.Itisimportanttonotethatthisisontopof

theday-to-dayregularsystemupdatesandrepairs.Theelectricitysectoracceptsthatinactionon

climateisnotanoption,andthatwemusttransitiontoacleanenergyfuture.Thatiswhyweare

encouragedbythefederalgovernment’scommitmenttofundinggreeninnovativeinfrastructure.

Budget2017recentlyoutlinedmanynewandimprovedfundingoptionsthatwillbecrucialto

reducingthefinancialburdenofthecleanenergytransition.

However,investmentaloneisnotenough.Flexibilityintheregulatorysystemwillberequiredif

electricitycompaniesareto leveragetheseprogramstobuildasystemuponwhichCanadians

canrelyonwellintothefuture.Wemustovercomethedisconnectbetweengovernmentpolicies

thatprioritizeinnovationandenergyregulatorydecisionsthatcurtailthecapitalrequiredtode-

liverit.This“innovationgap”,stemmingfromasingle-mindedfocusoncost,hasledtotherejec-

tionofinnovativepilotprogramstodevelopanddeploynewtechnologies,reduceemissionsor

helpprovidepowertoremotecommunities.Thisgapbetweenwhatregulatorspermitelectricity

companiestodoandthegovernment’sstrategicaspirationsreaffirmstheneedforagovernance

andnationwideconsensusonourtransitiontoacleanenergyeconomy.

Consumersalsoneedtoknowthecostsofinaction.Inotherwords,whenitcomestotheelec-

tricitysector,whataretheimplicationsofnotmakingtherequiredinvestmentsininfrastructure

andinnovation?

Theconsequenceswouldbequitesignificant;therewouldbeless-than-reliableelectricity,acor-

respondinglossinthestandardofliving,squanderedeconomicopportunities,andalesscompet-

itiveeconomy.Allbecauseofthepotentialformoredisruptionscausedbyincreasedbrownouts

and/orblackouts.Whileitistemptingtosimplybuildthecheapestsystempossible,wemusttry

toresistthisshort-termtemptation.Instead,weshouldtakethelong-termview,andinvestinand

buildthestrongestsystempossible.

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Ofcourse,weneedtokeepcostsaslowaswecan.But,weneedtocomplementthiswiththe

value thatelectricityplays in theeveryday livesofCanadians,and in theeconomic lifeof the

country,andinvestaccordingly.Theguidingvisionistopassontofuturegenerationsasystem

thatisatleastasgoodastheonewewerefortunatetoinherit,butthatisgreenerandbetterable

tosupportcleanenergyinnovations.

Iftheelectricitysectoristoprovidetheservicesthatwillsupportthefleetsofelectricvehicles,

microgrids,energystorage,andothertechnologiesofthefuture,companiesmustbeallowed

toinnovate,experiment,andseeknewopportunitiestogrowtheuseofcleanelectricity.Public

funds areoneway to address and fund the innovation gap andBudget 2017 recognizes this.

Theelectricitysectorissupportiveoffederalgovernment’seffortsaroundcleanenergyfunding,

particularlywithrespecttotheCanada InfrastructureBankwhich, ifwelldesignedand imple-

mented,holdssignificantpromiseforaccessingprivatecapitaltorenewCanada’scleanenergy

infrastructure.

b. Effectiveflexibilitymechanismdesign

I. CARBON REVENUE RECYCLING

PricingcarbonisoneofthemainpillarsofthePan-CanadianFramework.Acrucialelementinthe

successofthisinitiativeishowthemoneyisrecycledbacktotheeconomy.Thefederalgovern-

menthasbeenclearinstatingthatprovincialgovernmentswillultimatelydecidehowtheircar-

bontaxrevenueswillbespentorinvested.Asoneoption,provincialandterritorialgovernments

haveanopportunitytoreinvestthefundsgeneratedbythecarbonpricebackintotechnologies

andinfrastructurethatalignwithCanada’sclimatecommitments.

Theelectricitysectorisattheheartoftheseinvestments,withopportunitiesrangingfromrenew-

ableenergy,electricitystorage,micro-grids,energyefficiencyprograms,andtheelectrification

oftransportation,buildingsandindustrialprocessesallleadtobetterclimateoutcomes.Aswell,

electricityinfrastructureinvestmentsupportseconomicdevelopmentandjobcreation.

Overthelastdecade,theelectricitysectorhasconsistentlyrankedatthetopof infrastructure

investmentsinCanada.Infact,ReNewMagazine’scompilation ofCanada’stop100infrastructure

projectsbyvaluein2017,againnotedthatsevenofthetopten,includingthetopthree,come

fromtheelectricitysector,representingabout$61.5billionworthofinvestment10.

10RenewMagazine,“Top100Projectsfor2017”

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Thesevenprojectsareasfollows:

• BrucePowerRefurbishment,$13billion

• DarlingtonNuclearRefurbishment,$12.8billion

• MuskratFallsProject,$9.1billion

• SiteCCleanEnergyProject,$8.8billion

• RomaineComplex,$6.5billion

• KeeyaskHydroelectricProject,$6.5billion

• BipoleIIITransmissionLine,$4.9billion

Federal,provincialandterritorialgovernmentsshouldcontinuetosupporttheseinvestmentsas

theycreatehigh-paying jobsforCanadians,andwherepossible,consideroptionsforrecycling

someofthecarbonrevenuesbacktolocalcleanenergyprojectswithintheirjurisdictions.These

fundsandinvestmentscouldalsoworktoproviderebatesandincentivesforcustomersandcom-

paniestocontinuallyinnovateanddevelopenvironmentallyfriendlyalternatives.Thiswillbetter

facilitatethenationalconsensusthatweseek,aswetransitiontoaneraofcleanerenergy.Ulti-

mately,carbonpricingwillonlybesustainableandeffectiveifitpromotesfurtherGHGreductions

and stimulateseconomicgrowthby creatingapositive feedback loop through investments in

technologies,infrastructure,anddecarbonizationprograms.

II. CANADA INFRASTRUCTURE BANK

TheCanadaInfrastructureBank(CIB)isanotherfundingopportunitythatshouldbeusedstrate-

gicallytosupportclimateaction.Wemustbuildtheinfrastructurefortomorrow,today.Canada

hasagenerationalopportunity tobuildurbanenvironments,energynetworks, transportation

systemsand‘anchorprojects’thatwillspurinclusivegrowthinanincreasinglyclean,knowledge

basedworld.TheCIBwillberesponsibleforinvestingatleast$35billionfromthefederalgov-

ernmentintolargeinfrastructureprojectsthatcontributetoeconomicgrowthandleveragead-

ditionalprivatecapital.CEAsupportsthecreationoftheCIBandbelievesthat,ifdesignedand

implementwell,itcouldbeacriticalenablerofelectricitysectorinvestments.

CEArecentlyappearedasawitnessbeforetheHouseStandingCommitteeforTransportation,

InfrastructureandCommunities,fortheirstudyontheCIBandsubmittedten recommendations.

Theseinclude,butaren’tlimitedto:prioritizingprojectsthatalignwithCanada’scleanenergyfu-

ture;activelyseekingprojectsfromallregionsofCanadawithspecialconsiderationforNorthern

Canada;andensuringearlyandongoingconsultationwithstakeholders,includingrelevantindus-

tryplayers.IncorporatingtheseandothersuggestionswillincreasetheeffectivenessoftheCIB

andimproveoverallunderstandingontheimportanceofanationwidefundingoptioninachiev-

ingourclimatechangeagenda.

15C A N A D I A N E L E C T R I C I T Y A S S O C I AT I O N | C A N A D I A N C L I M AT E A C T I O N

c. Advancement of clean energy in remote/northern communities

TheimplementationofthePan-CanadianFrameworkmustfullyaddressdiesel-reliantnorthern

andremotecommunities.AccordingtotheRemoteCommunities Energy Database,thereare288

remoteandoff-gridcommunitiesinCanada,190ofwhichrelyondieselfuel,eithercompletely

orpartially,fortheirelectricityneeds.11Thisisanenvironmentalandeconomicchallengeasthe

costofelectricityinmanyoftheseregionsisapproximatelytentimeshigherthantheCanadian

average,limitinglocaleconomicopportunitiesandstiflinggrowth.Toaddressthis,Budget2017

hasproposedseveralfundingstrategies.

Indigenous andNorthernAffairs Canada, for example, is set to invest $24.1million over four

years tosupport renewableenergyprojects inoff-grid,diesel reliant Indigenousandnorthern

communities.InfrastructureCanadaisalsosettoinvest$220millionoverfiveyearstoreducere-

lianceondieselfuelandsupporttheuseofmoresustainablerenewablepowersolutionsinrural

andremotecommunitiessouthofthe60thparallel.Furthermore,$400millionistobeinvested

throughNaturalResourcesCanadaover10yearstoencourageinfrastructureimprovementssuch

astherenewalandreplacementofenergysystemstoreducerelianceondieselinnortherncom-

munities.

Despiteeffortsonthepartofthesecommunitiesandgovernments,thereisstillmuchworkto

bedonetosupportanortherncleanenergytransitionandbillionsofdollarswillultimatelybe

required.Thenarrow focusoncostsand ratesprohibitselectricity companies fromextending

gridcoverageduetoalackofcriticalmass.Canadaneedstobetterservethesecommunitiesby

facilitatingcollaborativefundingsolutionsbyalllevelsofgovernment.

Ournortherncommunitiesarealso idealcandidatesforthedeploymentofhydro,wind,solar,

biomass,energystorageandotherdistributedgenerationoptionsandsustainedsupportfrom

governmentiscriticaltomakingtheseinvestmentspossible.Therearealreadysuccessstories,

suchasthecommunityofOldCrowintheYukonandtheTakuRiverTlingitFirstNationsinAtlin,

BC.Intheformer,residentsrecentlyinstalledaneffectivesolarpowersystemdespitethemany

challengesduetothecommunity’sremoteness.Andinthelatter,peopletransformedtheirFirst

Nationscommunity,whollydependentondiesel,toonethatisnowpoweredbycleanhydropow-

er.Thiscommunityisnowmakingplanstoexpandtheirfacility,andexportexcesspowertothe

YukonorotherpartsofB.C.

11NaturalResourcesCanada,RemoteCommunitiesDatabase

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Knowingthatbetterispossible,ournortherncommunitiesdeservebetteroptionsforpowergen-

eration,andtheelectricitysectorhastheabilityandthedesiretopartnerwiththesecommuni-

tiestoimprovetheiraccesstocleanelectricity.

Whilethereareconsiderableenergydifferencesbetweenthethreeterritories,includingsources

ofgeneration,infrastructuredevelopment,relianceondiesel,andtheremotenessoftheircom-

munities,theyalsosharesomechallengesthatareuniquetoNorthernCanadacomparedtothe

restofthecountry.TheNorthhasasmallpopulationandratebase;anunderdevelopedecono-

my;isisolatedfromthegrid;andisconfrontedbyharshclimaticconditions.Itisthereforecritical

fortheNorthtospeakwithoneunitedvoiceaboutenergysystemtransitionsandclimatechange.

Historically, the roleof the federal government in the lifeof ourNorthhasbeen crucial. The

nationalgovernmenthasservedasacompensatingforceinaddressingtheseuniquechallenges

facedbyourfellowcitizenswholiveandworkthere.Thecriticalimportanceofthatroleremains

unchangedtoday.

ItiswiththisunderstandingthatCEAhasrecommended,andreaffirmsitagaininthisdiscussion

paper,thattheMinisterofNaturalResourcesorganizeanEnergyForuminCanada’sNorththat

would:i)coordinatethedifferentelementsofthefederalgovernment’sclimateandenergystrat-

egies; ii) identifyareasofcooperationwithterritorialgovernments; iii)drawtogetherrelevant

stakeholdersfromnortherncommunities;iv)providenorthernresidentsanopportunityfortheir

regionalenergyconcernstobeheard;andfinally,v)buildagreementaroundafocusedenergy

planfortheNorth.

NEWFOUNDLAND AND LABRADOR HYDRO’S WIND-HYDROGEN-DIESEL ENERGY PROJECT

ManycoastalisolatedcommunitiesinCanada’seasternmostprovincerely

ondiesel-fueledgenerationsystemsforelectricity.Toreducedieselgen-

erationandemissions,NewfoundlandandLabradorHydrocommissioned

aninnovativewind,hydrogenanddieselintegratedprojectinthecommu-

nityofRamea.During2012,commissioningworkwascompletedonthe

energy-managementsystemandtheprojectmovedintotheoperational

phase.Operationaldatawillplayan importantrole indetermininghow

thistechnologycanbeeffectivelyusedinotherisolatedcommunities.

PhotocourtesyofNewfoundlandPower

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3. CONCLUSION AND KEY AREAS OF DISCUSSION

Canada’sfutureprosperitywillbebuiltuponafoundationofclean,sustainablegrowth.However,

weshouldnotunderestimatethecomplexityofthistransition.Itwillbeformidable.

Canadiangovernmentsmuststrikeadelicatebalancebetweenclimateactionandkeepingcosts

affordableforbusinessesandconsumers.Andbecausethebattleagainstclimatechangewillbe

along‘game’,anypolicymustbelongtermifitistobemetwithsuccess.Thatstrategymustalso

offerpolicy stability,predictability andflexibility.Additionally, governmentsmustmitigateany

unintendedimpactsontheeconomy,ourbusinessesandourhomeowners.

Inshort,politicalleadersmustforgeanationalconsensuswhichwillstandthetestoftimeand

scrutiny.

CEAanditsmembersaresupportiveofthePan-CanadianFramework,aswehavelongcalledfor

apriceoncarbon.Moreover,theelectricitysectorhasdonemorethananyotherindustrialsector

acrossthecountrywhenitcomestoreducingitsGHGemissions.Ifourclimateactionstrategyis

tosucceedinthelongterm,then,aspartofharnessingthatnationalconsensus,governments

andindustrymustformaclosepartnership.

Inthisspiritandaspartofitsongoingcontributiontothepublicdiscourse,CEAproposesthatthe

governmentsfocusonfivecriticalareas;

NTPC DELIVERS NORTHERN CANADA’S FIRST-EVER LNG FACILITY

In2013,NorthwestTerritoriesPowerCorporationbeganconstructionof

NorthernCanada’sfirst liquefiednaturalgas(LNG)plantwhichwillpro-

vide customers throughout the regionwith a cleaner,more affordable

powersource.Byusingnaturalgas insteadofdiesel togeneratepower

for the town of Inuvik and its surrounding communities, this facility is

expectedtoeliminatealmost6,000tonnesofCO2eqemissionsfromthe

atmosphereeachyear.

PhotocourtesyofNorthwestTerritoriesPowerCorporation

18C A N A D I A N E L E C T R I C I T Y A S S O C I AT I O N | C A N A D I A N C L I M AT E A C T I O N

RECOMMENDATION 1 Canadian governments must help mitigate short-medium term competitiveness impacts through

investment support:

IftheU.S.federalgovernmentstaysonitscurrenttrajectoryofbeingunsupportiveofclimatemitiga-

tionefforts,whileloweringtaxrates,streamliningregulatoryregimes,andpotentiallyintroducingoth-

erpoliciessuchastheBorderAdjustmentTax,theseactionswillcollectivelyposeasignificantriskto

Canadiancompetitiveness.Tohelpalleviateanyshort-to-mediumtermcompetitivechallengesfrom

transitioningtoacleanenergyfuture,Canadiangovernmentsmaywanttousenewandinnovative

fiscalandregulatorytools.Someofthesetoolsmayinclude:

• loweringcorporatetaxratesaccordingly;

• extendingcleanenergyproductionincentivesfornewemergingtechnologies;

• providingacceleratedcapitalcostallowances(CCA)rates;

• reducingbarrierstocleanenergyprojectapprovals;

• acceleratingfundingforinnovationandinfrastructureprojects;

• helpingCanadianfirmsmarkettheircleanenergyexpertiseinternationally;

• providingfundingand/orloanguaranteesforcleanenergy;

• recyclingcarbontaxrevenues,and;

• capitalizingonpriorityareasoftheU.S.,suchaslowcostenergyintegrationandpolicy

improvementstosafetyandsecurity.

RECOMMENDATION 2Governments must reduce regulatory barriers to clean energy projects:

AspartofmeetingCanada’sclimatechangeandcleanenergyobjectives,governmentsshouldwork

toreduceregulatorybarrierstocleanenergyprojectsthatareoflocalandnationalinterest,andbuild

anationalconsensusontheneedforelectricitysectorinfrastructurerenewalandmodernization.Re-

dundantapprovalprocessesforcleanenergyprojects,suchasenvironmentalassessments,increase

costs anddelayprojects, even for those cleanenergyprojects that couldprovideGHG reductions

today.

RECOMMENDATION 3Governments must break down barriers to electricity sector “innovation” at the provincial and ter-

ritorial level:

Thereisoftenagapbetweengovernmentpolicyaspirationsoninnovationandprovincialregulatory

approval(eg.EnergyBoards)ofsuchprojects.This“innovationgap”mustbeeffectivelyaddressedif

19C A N A D I A N E L E C T R I C I T Y A S S O C I AT I O N | C A N A D I A N C L I M AT E A C T I O N

wearetomeetCanada’sclimateandcleanenergyagenda.Provincialregulatorscanbesingle-minded

intheirfocusonkeepingrates low,evenasutilitiesareexhortedbyfederalandprovincialgovern-

mentstoinnovateandinvest.Thisgapmustbeaddressedtomaketheboldinvestmentsneededto

meetthegoalsofthePan-CanadianFramework.Thereisalsoafederalgovernmentrolehere,through

thefundingoftransformativeinnovationandinfrastructureprojectsviathetaxbase.

RECOMMENDATION 4

Governments must support and sustain a northern and remote clean energy transition:

Diesel-reliant remoteandnorthern communities requireunique support in their efforts to reduce

transitiontocleaner,lessexpensiveenergy.GovernmentsshouldsupportIndigenousentrepreneurs

andorganizationsintheireffortstoaccessthecapitalfortheequipment,trainingandtoolsneededto

getprojectsofftheground.Accordingly,CEAcallsupontheMinisterofNaturalResourcestohostan

energyforuminCanada’sNorthtodiscussthe“unique”challengesthisregionfacesinrelationtoa

cleanenergytransition.Theforumshouldi)coordinatethedifferentelementsofthefederalgovern-

ment’sclimateandenergystrategies;ii)identifyareasofcooperationwithterritorialgovernments;iii)

drawtogetherrelevantstakeholdersfromnortherncommunities; iv)providenorthernresidentsan

opportunityfortheirregionalenergyconcernstobeheard;and,v)buildagreementaroundafocused

energyplanfortheNorth.

RECOMMENDATION 5Governments must develop and sustain a public education and outreach campaign in order to build

a national consensus on clean energy and climate change:

AsCanadatransitionstoacleanenergyfuture,itisimperativethatCanadiansarefullyinformedof

boththechallengesandopportunitiesassociatedwithagreenerandcleanerfuture.Assuch,citizens

needtounderstandthe importanceof investing in thenextgenerationof infrastructureand inno-

vation,andtherelatedcosts.Thisincludesthecostsandimplicationsofinaction.Forexample,itis

essentialthatthefederalandprovincial/territorialgovernmentsbuildonprogramsliketheNRCan’s

GenerationEnergyinitiative.Alongtermclimatepolicystrategyandacleanenergyfuturewillrunthe

riskofbeingcompromisedwithoutadequate,transparentandongoingpublicengagement.