The federal government is to tie billions of dollars in tax credits and grants for provincial electricity projects to progress toward Ottawa’s target for an emissions-free electricity grid by 2035.
“To access the tax credit will require that we are moving in the direction of a non-emitting grid,” Energy and Natural Resources Minister Jonathan Wilkinson said Tuesday.
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“We are in the process of consulting broadly, including with the provinces and territories, about how we will implement that in terms of the conditionality of the tax credit.”
The federal budget already made clear the restriction would be in place for the new refundable 15% clean electricity investment tax credit for non-emitting electricity production, storage, and interprovincial transmission, The Canadian Press reports.
But this year’s federal budget included several other new investment tax credits for hydrogen production, clean technology, and carbon capture and storage systems, worth tens of billions over the next 12 years. There is also at least C$3 billion in grants for renewable electricity projects and technology upgrades to make the grid more efficient, and the federal government has promised to consider helping fund transmission lines inside provinces in certain situations.
Different Paths for Different Provinces
Wilkinson made the announcement in Vancouver, where he acknowledged that net-zero grids will look different in different parts of the country.
“Provinces and territories have different starting points,” he said. “There will necessarily be different pathways.”
Wilkinson said more details on how that flexibility would be achieved will come with the regulations.
“We are cognizant of the need for regulations to provide sufficient flexibility. There needs to some allowance for backup, there needs to be some allowance for emergencies. We have to be thoughtful about stranded assets.”
Ottawa released a “vision document” for those regulations, Powering Canada Forward, yesterday, and CP says Environment and Climate Change Minister Steven Guilbeault is expected to publish the first draft of the new rules as early as this week. They will spell out, for example, a timeline for natural gas power plants to be closed or fitted with carbon capture systems.
Committing to a net-zero electricity grid is an easy move for six of the provinces, which are already more than 90% of the way there [although Ontario is trying very hard to squander its advantage—Ed.]. They’ll need a lot more electricity as the country decarbonizes end uses like cars, trucks, and home heating and cooling, but they won’t have to replace most of the power they already produce.
For the other four—Alberta, Saskatchewan, Nova Scotia, and New Brunswick—coal and natural gas still supply between 30% and 85% of their power. That makes a clean grid by 2035 a much steeper challenge. Alberta and Saskatchewan have simply said they can’t do it.
“We will not attempt the impossible when it comes to power production in our province,” Saskatchewan Premier Scott Moe said in May.
“We will not risk plunging our homes, our schools, our hospitals, our special care homes, our businesses into the cold and darkness because of the ideological whims of others.”
Both provinces have said they are instead targeting a non-emitting grid by 2050. That’s the year Canada is also aiming to be net-zero emissions, which means any greenhouse gas emissions that are still produced are captured by nature or technology.
A ‘Staggering’ Lack of Ambition
The Globe and Mail editorial board took those provinces to task yesterday in a missive that cited Ontario’s embrace of new natural gas plants, Saskatchewan’s and Manitoba’s wholesale rejection of the federal plan, and Alberta’s snap decision last week to declare a seven-month moratorium on new renewable energy projects.
Coming off the hottest month on record, with scientists urging “rapid, far-reaching and unprecedented” changes in energy production, “the absence of ambition is staggering,” the Globe wrote. “In the business of electricity, Canada is 10 different countries. The provinces export more power to the United States than to each other. But instead of a new spirit of collaboration and innovation, the provinces are saying no to the goal of clean power by 2035.”
An earlier target for net-zero electricity is essential to any net-zero target because it unlocks the potential to decarbonize other industries, CP explains. Electric vehicles, for example, are only non-emitting if the power used to charge their batteries comes from non-emitting sources.
Wilkinson said he’s not trying to draw a line in the sand, but there has to be some connection between the billions of dollars on offer and progress toward Canada’s goals.
“You know, my style is not to have big fights,” he told CP in an interview. “I actually like to listen to what people and provinces have to say and to try to figure out a pathway through which we can accomplish the goals that we all want to achieve.”
The disagreement isn’t about whether to build non-emitting electricity, he added: It’s about how fast to do it.
“The gap that exists between us is not about whether we should have a non-emitting grid. It’s about whether we get there by 2035 or somewhere a little bit later,” he said.
Taking Alberta At Its Word
Wilkinson commended Alberta for doing what he said was the most of any province to expand its solar power production. The province is also well ahead of schedule on retiring or converting its coal-fired electricity generators, he noted. The last one will be converted before the end of this year.
Last week, however, Premier Danielle Smith announced the province’s moratorium wind and solar projects over a megawatt in size, claiming it wants to address concerns about the effect on farmland, scenery, reliability, and eventually, cleaning up the projects at the end of their life. The renewables industry, which stands to lose billions of dollars over a provincial move that caught it by surprise, maintains all the issues Smith is raising are being addressed, and could be resolved without jeopardizing the province’s access to clean energy investment.
Wilkinson said he is taking Alberta “at its word” that the pause is just to ensure everything is being done properly in the face of faster-than-expected growth, particularly in solar power.
He also said he thinks there is already a good conversation happening with Alberta, and he is convinced an agreement between the two governments is possible.
The main body of this report was first published by The Canadian Press on August 8, 2023.
