canadian electricity association canadian climate … · 2018-03-14 · 13 carbon revenue recycling...
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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
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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.
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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
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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
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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.