On December 17, 2024, the Government of Canada finalized its Clean Electricity Regulations (CER), which are now in effect. In its release, the federal government also announced Powering Canada’s Future; its strategy to decarbonize Canada’s electrical grid.

What are the Clean Electricity Regulations?

The Clean Electricity Regulations aim to help decarbonize the electricity sector between 2035 and 2050, while balancing needs for electricity generation to be affordable and reliable as demand grows over this period. The Regulations establish carbon dioxide emission intensity limits for most electrical utilities and electricity producers across Canada.

An electricity generating unit will be subject to the Regulations if it burns fossil fuels, its generating capacity is 25 MW or greater and is subject to the North American Electric Reliability Corporation (NERC) standards. These rules mean that most small generating unites, such as those in remote communities or in hospitals, are exempt under the Regulations. Electricity imports to a jurisdiction are also exempt from the CER.

For generating units planned or in operation before 2025, they are exempt from the CER for 25 years or until 2050 (whichever is sooner).

The CER sets emission intensity limits on a generating unit’s annual emissions, based on its capacity. For example, a unit using relatively cleaner fossil fuels can operate longer but would still need to be turned off for most of the year. From 2035 until 2050, the emissions intensity of average units can be 65t of CO2 per GWh of electricity generated. Beginning in 2050, the emission intensity moves to zero.

The operator of the unit can use eligible offset credits, if needed, for a unit over its emission intensity limit. In this way, utilities can effectively pool their assets so the average emission intensity of their system outweighs the performance of a single unit with higher emissions. This rule helps balance emission reduction with reliability concerns. Carbon dioxide emissions of a unit can reduce its intensity by up to 35 tCO2/GWh before 2050, and by 42 tCO2/GWh in the following years. Importantly, offset credits used by industry or utilities can be used to comply with other federal or provincial regulations, which avoids duplication and unnecessary costs.

Other flexibilities within the CER include exemptions for emergency periods, omitting emissions from biomass and renewable natural gas, and recognizing cogeneration units (also producing thermal energy, such as steam) for their dual purpose.

Combined with requirements to phase out coal-fired electricity generation by 2030 and a rising price on carbon through Output Based Pricing Systems (OBPS), the federal government has created three relatively complimentary emission reduction policies for the electricity sector. Several financial incentives and tools, including the clean energy investment tax credits and Canada Infrastructure Bank loans, were created to help lessen the CER cost burden for ratepayers.

How have the Clean Electricity Regulations evolved?

The final Clean Electricity Regulations are significantly different than previous versions shared by the federal government. Public consultation on the CER began in March 2022, and it would seem much of the feedback received from provincial governments, electrical utilities, and other important stakeholders was acted upon. The final Regulations offer more flexibility for utilities to meet their obligations.

For examples, the draft Clean Electricity Regulations, released in the Fall of 2023, had an emission intensity limit of 30 tCO2/GWh, did not allow utilities to pool assets, and took effect at this low intensity in 2035. Utilities and other stakeholders expressed concerns that the draft CER did not adequately consider feasibility, technological readiness, reliability or affordability concerns.

How will the Clean Electricity Regulations impact Atlantic Canada?

Both the Governments of Nova Scotia and New Brunswick reached understandings on the Clean Electricity Regulations in September and December, . These understandings were reached after significant flexibility was added from the draft Regulations.

As Nova Scotia and New Brunswick electrical grids will continue to require fossil fuel generation in 2035 and beyond, they will both be impacted by the CER. However, as the phase out of coal-fired generation takes effect in 2030 and OBPS increases the price of fossil fuels until (at least) 2030, the incremental impact of the CER is relatively limited.

In Nova Scotia, the with Nova Scotia Power’s Evergreen Integrated Resource Plan and the Government of Nova Scotia’s 2030 Clean Power Plan, and does not require a change as a result of the Regulations. The CER framework supports the continued operation of existing emitting assets in a peaking capacity and for grid balancing, which is consistent with Nova Scotia Power’s current plans.

In New Brunswick, NB Power is looking at the option to covert the Belledune Generating Station from using coal to biomass by 2030. Other fossil fuel generating assets are used primarily for meeting demand peaks and reliability standards. The new natural gas-fired generating station planned near Scoudouc would be exempt from the CER until 2050.

The CER impacts in Prince Edward Island and Newfoundland and Labrador are expected to be less than the other Atlantic provinces as Prince Edward Island imports the majority of its electricity from New Brunswick, and nearly all utility generation in Newfoundland and Labrador is from hydroelectric .

What outstanding concerns or questions remain for the Clean Electricity Regulations?

Electrical utilities in Alberta and Saskatchewan in particular will be impacted by the Clean Electricity Regulations as some rely on natural gas-fired generation for a significant percentage of their total generation. Electricity Canada raised these concerns before and after the Regulations were finalized.

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