On Tuesday, July 26th, Environment and Climate Change Canada (ECCC) released a discussion paper titled Proposed Frame for the Clean Electricity Regulations (“the discussion paper”), which outlines the conceptual framework for a regulatory mechanism, the Clean Electricity Regulation (CER), that will drive Canada towards a net-zero electricity grid by 2035.
The discussion paper follows an information session presented by ECCC on July 22nd which provided a summary of what was heard during the initial round of consultation on the CER. It also sends a clear signal that the government believes that a net-zero grid by 2035 is achievable while maintaining electricity system reliability and affordability.
The discussion paper is the second step in the regulatory development process, with the intent to have draft regulations by the end of 2022, and final regulations by end of Q1 2023.
Summary of Proposed Frame
The CER would regulate GHG emissions from electricity generating units that meet all of the following criteria: (1) combust any amount of fossil fuel for the purpose of electricity generation; (2) have a capacity above a small MW threshold (yet to be determined but will be small), and; (3) Offer electricity for sale onto an electricity system regulated by the North American Electricity Reliability Corporation (NERC).
Additionally, the CER as proposed would have two components: a performance standard and financial compliance requirements.
The discussion paper contemplates exemption from the CER for a small subset of thermal generators, including the following:
It is important to note that the CER would only regulate industrial units that offer electricity for sale to the electricity system. The CER would not regulate a cogeneration unit that generates electricity for its own needs, i.e., “self-consumption” of electricity generated and consumed behind the industrial fence line. Other regulatory and pricing measures would continue to apply to those emissions.
ECCC is considering the inclusion of an End of Prescribed Life (EoPL) concept, allowing utilities the ability to use natural gas or liquid fuel assets already deployed during the preliminary period of applicability (e.g. the early years following 2035). The paper notes EoPL can reduce the number of assets stranded by the CER and help maintain affordability.
The length of the ‘prescribed life’ is still to be determined. It may be defined as a fixed period after a unit’s commissioning date. That said, the paper reiterates that conventional coal units must still be phased out by 2030.
Additionally, it is worth noting that the performance standards will differ for existing facilities (those built before 20225) and new ones built in 2025 or later.
The paper recognizes that the structure of Canada’s electricity sector means that provinces and territories, as well as electricity generators and their regulators, will all play a critical role in achieving net-zero by 2035. The Pan-Canadian Grid Council and the Regional Energy Tables will be important forums for this coordination.
A short consultation period on the conceptual framework presented in the discussion paper is now open. Comments are due to ECCC by August 17th. Next, there will be another webinar on September 9th detailing ECCC’s modeling. Draft regulations will be published before the end of 2022.
Happy to help
Should you have any questions on the Clean Electricity Regulations, the discussion paper, or ECCC’s consultation process, please reach out to your Sussex advisor.
Devin McCarthy, Senior Vice President and Federal Practice Lead: firstname.lastname@example.org
Roberto Chavez, Senior Associate, Federal: email@example.com
Dan Lovell, Senior Associate, Federal: firstname.lastname@example.org