The practical approach to Canada’s proposed Clean Electricity Regulations

Trying to meet our electricity goals using the Clean Electricity Regulations alone would be the wrong approach. A larger suite of policies needs to be leveraged.

The proposed Clean Electricity Regulations would establish performance standards to reduce GHG emissions from fossil fuel–generated electricity starting in 2035. Blue Sky Air Ltd. photo.

This article was published by Policy Options on Dec. 11, 2023.

By Jason Dion, Evan Pivnick

Canada’s transition to clean electricity is under intense scrutiny, and the centrepiece of the debate is the federal government’s proposed Clean Electricity Regulations published in August 2023.

The proposed regulations would establish performance standards to reduce GHG emissions from fossil-fuel-generated electricity starting in 2035. Such regulations are critical to reaching our energy-transition targets and paving the way to a net-zero future.

Electrification is both key to reaching those targets and a pathway to securing economic prosperity in the decades to come, whether it’s through households looking to ditch the price volatility that comes with fossil fuels in favour of cost-saving heat pumps or EVs, or industries looking to leverage clean electricity as a competitive advantage.

Unfortunately, the ensuing debate has quickly polarized rather than bringing constructive discussions about the pros and cons of different approaches. Exaggerated claims about the costs and impacts of pursuing a clean power grid are largely dominating the discourse.

Pragmatic changes will help 

These regulations are a key part of building a clean and affordable electricity grid at a time when demand is growing. But to be effective, they will need to remain flexible enough to ensure that power is reliable and affordable across provinces where the mix of electricity generation varies.

Canada needs power that is reliable, affordable and clean. Unfortunately, many of the public calls for redesign of the regulations seek to pursue some of these goals at the expense of others.

The Canadian Climate Institute and Clean Energy Canada have made recommendations for how the regulations can strike a more pragmatic balance.

A more achievable performance standard

First, more relaxed limits should be placed on emissions from power generators so an ambitious yet achievable performance standard for a typical well-performing gas facility is the benchmark.

The regulations are binary in nature, meaning a natural-gas facility that is covered by the regulations must either achieve the standard or cannot operate. If the performance standard is too stringent, there is a risk that facilities will wind up forgoing investments in abatement technologies like carbon capture and storage and instead cease operating altogether. This would undermine grid reliability.

More flexibility for gas acting as backup

Second, the regulations should expand provisions allowing natural-gas facilities without carbon capture and storage to operate as back-up power. Allowing natural gas to play a limited role as a backup to variable power sources like wind and solar will help ensure the reliability of the grid and the affordability of power in the near term as work is done to deploy other non-emitting sources.

Avoid locking in new unabated gas generation 

Third, rather than only taking effect well into the next decade, the regulations should immediately apply an interim performance standard to newly commissioned natural-gas units. Those interim standards should then be progressively tightened until they eventually do meet the 2035 standard.

This approach will phase in the new regulatory requirements and help reduce the risk of new natural-gas plants that are designed and built to be compatible with carbon capture never actually getting equipped with it. Applying a gradually raised performance standard will encourage early adoption of carbon capture and storage while also leaving enough flexibility to give operators time to work out any kinks.

A larger suite of policies 

The Clean Electricity Regulations policy discussion needs a broader view grounded in facts. These improvements will help ensure the need to decarbonize is balanced properly against the need to keep electricity reliable and affordable. But more help will be needed to achieve this.

Trying to meet our electricity goals using the Clean Electricity Regulations alone would be the wrong approach. A larger suite of policies needs to be leveraged:

– Implementing the proposed Clean Electricity Investment Tax Credits.

– Strengthening the way carbon pricing applies to electricity.

– Federal government procurement of offsets to neutralize residual emissions.

– Funding to enable demand-side solutions like energy efficiency and distributed energy resources.

Many of Canada’s closest trading partners – including all G7 countries – have joined the goal of net-zero power by 2035, and they are rapidly putting their own policies in place, including the U.S. There is an imperative that Canada act with the same urgency.

Four conditions for the new Clean Electricity Investment Tax Credit

Getting Canada’s proposed clean electricity regulations right to reverse our poor climate performance

Zero-emissions electricity by 2035 is possible

There is room for healthy debate on how the Clean Electricity Regulations and other electricity policies should work. But it needs to be grounded in facts. By taking a pragmatic approach to the Clean Electricity Regulations that leverages a larger suite of complementary policies, we can remove unnecessary obstacles from the road to a clean, affordable and reliable electricity grid.

 

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