A clean electricity standard in support of a net-zero electricity sector: discussion paper

Last updated: March 8, 2022
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Glossary

For the purposes of this discussion paper, it should be understood that the term:

Low-emitting generation means electricity that was produced in a manner that releases a small amount of GHGs (for example, 50 tonnes C02/GWh or less) as a result of fuel combustion, relative to unabated fossil fuel generation. One example of low-emitting generation could be natural gas-fired electricity generation where emissions are largely, but not entirely, captured through Carbon Capture Utilization and Storage (CCUS). Lifecycle emissions created in the manufacturing of generation equipment or during fossil fuel extraction and transportation to the site of combustion are not included.

Economy-wide net-zero by 2050 means Canada’s stated goal of having the Canadian economy achieve either no emissions of greenhouse gases (GHG) by 2050, or that all emissions are completely compensated for by removing carbon from the atmosphere (negative emissions) through other actions, for example, planting trees or CCUS deployment.  In realizing this goal, it is expected that some economic sectors, facilities, institutions, and other sources of GHG emissions that are difficult to eliminate entirely would continue to emit some GHGs, but at levels much lower than current rates and thus could be balanced by negative emissions elsewhere in the economy. 

Net-zero electricity means Canada’s stated goal of having the electricity sector achieve, in effect, no emissions of greenhouse gases (GHG) by 2035, or emissions are offset by other actions that remove carbon from the atmosphere. This only includes direct emissions and does not include lifecycle or upstream emissions. In realizing this goal, it is expected that some low-emitting generation facilities may continue to operate past 2035. The emissions resulting from this operation would need to be balanced by removals in or attributed to the sector.

Negative emissions refers to the removal of greenhouse gases (GHGs) from the atmosphere by deliberate human activities (for example, planting trees and deploying Direct Air Capture (DAC) and storage), that is, in addition to the removals that would occur via natural carbon cycle processes.

Non-emitting generation means electricity produced in a manner that does not directly release any greenhouse gases (GHGs) as a result of fuel combustion. Non-emitting generation sources include hydro, wind, photovoltaic solar, concentrated solar-thermal, geothermal, and nuclear, among others. While non-emitting sources can produce lifecycle GHG emissions from activities other than fuel combustion (for example, hydro reservoirs can release methane over time), attributing these emissions to electricity still results in a relatively low lifecycle emissions intensity.

Offset credits represent GHG emission reductions or removals generated from activities that are additional to what would have occurred in the absence of the offset project (that is, generated from activities that go beyond legal requirements and a business-as-usual standard). Generally, each offset credit generated by an offset project represents 1 tonne of carbon dioxide equivalent (CO2e) reduced or removed from the atmosphere.

The electricity system is a complex network of power generating plants, transmission and distribution wires that produce and deliver electricity to end-users, such as households, businesses, vehicle charging stations, and other critical infrastructure in the local, regional and national economy. This complex system is often referred to as the electric power grid.

1. Purpose

The Government of Canada is taking further action to reduce greenhouse gas (GHG) emissions from the generation of electricity to achieve a net-zero electricity supply by 2035 (NZ2035).  This will contribute significantly to meeting Canada’s broader goal of achieving net-zero emissions economy-wide by 2050.

The transition to a net-zero electricity supply by 2035 will be transformational. The effort will involve multiple measures and jurisdictions working together to achieve a clean, reliable and affordable electricity system. A clean electricity standard (CES) under the Canadian Environmental Protection Act, 1999 (CEPA) will be a key part of this suite of measures.

The purpose of this discussion paper is to send a clear signal that the Government of Canada intends to move forward with regulations to achieve a net-zero electricity system by 2035; to outline considerations related to this objective; and to solicit comments from Canadians regarding the scope and design of the CES. While the main objective of this document is to inform and collect feedback regarding the CES, it also welcomes input on other relevant measures that would support the net-zero 2035 target. The treatment of electricity under the current Output Based Pricing System Regulations (OBPSR) will also be reviewed as part of this process.

2. Introduction

The Intergovernmental Panel on Climate Change’s (IPCC) Special Report on Global Warming of 1.5 ⁰C concludes that achieving net-zero global GHG emissions by 2050 is necessary to avoid the worst impacts of climate change. Globally, pledges to reach net-zero by national governments, industries, companies, and others now cover almost 80% of the global economy. The United States and the European Union have committed to reducing GHG emissions by 50% from 2005 levels by 2030, while the UK has legislated a 78% emissions reduction from 1990 levels by 2035.

Canada must keep pace with, or even exceed, these targets in order to lead and compete in a net-zero emissions future. Within Canada, all provinces and territories, except for Alberta and Nunavut, have set an economy-wide GHG emissions reduction target, which range from 30% to 53% reductions over 2005 levels by 2030. Similarly, a number of Canadian companies, including many in the electricity generation sector, have made pledges to achieve net-zero emissions.  In line with this ambition, both internationally and within Canada, in 2020 the Government of Canada committed to reaching net-zero emissions economy-wide by 2050Footnote 1 , including achieving net-zero electricity.Footnote 2

On December 11, 2020, the Government announced Canada’s Strengthened Climate Plan for a Healthy Environment and a Healthy Economy which indicated the government would: “Work with provinces, territories, utilities, industry and interested Canadians to ensure that Canada’s electricity generation achieves net-zero emissions before 2035.”  The cornerstone of this effort will be the CES complemented by other policies, programs, and the $15 billion in investments announced under the plan in order to reduce emissions and build a clean economy. In April 2021, the Government of Canada committed to a national target of reducing GHG emissions by 40% to 45% below 2005 levels by 2030. At the 26th United Nations Framework Convention on Climate Change Climate Change Conference of the Parties, Prime Minister Trudeau stated Canada’s goal of establishing a net-zero emissions electricity system by 2035 (NZ2035). This commitment was reflected in the mandate letters for the ministers of the Environment and of Natural Resources in December 2021.

The actions required to meet Canada’s net-zero 2050 economy-wide goal will require transforming Canada’s energy systems.Footnote 3 Electrification, the process of replacing technologies that are powered by fossil fuels with those that use electricity, will play a key role in this transformation. While the transition to a net-zero economy will not rely solely on electrification, a net-zero electricity system will be essential to achieving economy-wide net-zero 2050. However, there is the potential for electrification to contribute to increased GHG emissions from the electricity sector, despite reducing overall energy emissions, if the expected increased demand is met through carbon-emitting electricity generating sources. Action is required now to prevent that from happening.

Achieving net-zero electricity will require coordinated efforts. Provinces and territories hold jurisdiction over electricity planning and operation, while the federal government holds jurisdiction over emissions reduction regulations, interprovincial transmission projects, and international commitments, among others. Provinces, territories and the federal government all hold jurisdiction over environmental protection. Indigenous Peoples are important partners on critical projects and decarbonisation efforts. As such, close partnerships between multiple levels of government will be important to ensure a smooth transition.

In response to the Government of Canada’s commitment to achieve a net-zero emissions electricity sector by 2035, this discussion paper will launch a collaborative process between the federal government, provinces, territories, and Indigenous groups. This process will help ensure that the design of the CES provides a clear and workable basis for provinces and territories to be able to plan and operate their electricity systems in a way that will continue to reliably deliver affordable electricity to Canadians. We recognize that establishing a net-zero-emitting electricity sector will largely be the work of provinces and territories, and a CES would provide the regulatory signal to support decision-making at the provincial and territorial level that would allow Canada to achieve this goal.

There are many important aspects to consider, and this discussion paper launches consultations to ensure that the Government of Canada considers the appropriate expertise, perspectives, and interests to develop the most effective and well-designed regulatory approach.

There are other federal policies that can support the effort to move towards a net-zero electricity system, such as support for infrastructure or tax incentives to encourage investments in or the deployment of clean generation. While views on other federal policies will be noted during CES consultations, potential new actions to support the transition will be discussed in a separate process. Natural Resources Canada will engage over the coming year on the broader strategy for achieving a NZ2035 transition.

3. The need for a clear and early regulatory signal to achieve NZ2035

Canada’s electricity sector has already contributed significantly to Canada’s efforts to reduced GHG emissions and will play a major role in the transition to net-zero, both through additional reductions in the electricity sector and by enabling reductions in other sectors through the supply of clean electricity for the electrification of activities currently powered by GHG emitting fuels. There are economic opportunities for Canada to build on this strength as our economy makes the transition to net-zero.

Canada’s electricity sector is currently 82% non-emitting and has significantly reduced its GHG emissions since 2005, even as generating capacity has increased modestly. This is a result of actions by provincial utilities and other electricity generators, as well as provincial and territorial policies that have reduced or limited GHG emissions from the electricity sector within their jurisdiction. Federal policies such as carbon pricing and regulations requiring the phase-out of coal-fired plants have also played a role.Footnote 4

Despite these reductions, electricity generation is Canada’s 4th largest source of emissions, accounting for 8.4% of Canada’s total GHG emissions in 2019. Without additional policy measures, there is real potential for the current emissions reduction trend in the electricity sector to reverse. While the phase-out of conventional coal-fired electricity generation by 2030 will reduce emissions, much of this phase-out is currently planned to be accomplished by a shift from coal to natural gas. According to the Canadian Energy Regulator’s Canada Energy Futures 2021 report, approximately 8,900 MW of new natural gas generating capacity is projected to be added by 2035 under current federal, provincial and territorial policies.Footnote 5

There is also the potential for emissions to grow from the addition of emitting generation to meet the increasing demand for electricity as other parts of the economy switch from carbon-based fuels to electricity in order to decarbonize their own activities. Several potential net-zero 2050 pathways, developed by various government, academic and research organizations, have concluded that electricity generation may need to double over the next few decades. In order to ensure that the entire economy achieves net-zero 2050, however, virtually all of this additional generation would need to come from non-emitting or low GHG-emitting generating sources.Footnote 6

Due to the long life of power generation assets, investments in emitting sources made today will directly impact our ability to meet the 2035 and 2050 goals. Building new high-emitting assets now risks transferring electricity rate increases to future generations, since these emitting assets will need to be extensively retrofitted or shut down before the end of their economic life in order to meet emissions standards. Some could become stranded assets as Canada, along with the world, makes the transition to net-zero emissions.

Sending a clear regulatory signal now should discourage further investments in assets that could become stranded in the years to come by this inevitable transition.  Further, it is possible that Canada’s main trading partners, such as the European Union and the United States, could enact border carbon adjustments (BCAs) in the future, meaning that these countries would add a tariff to imports to avoid creating trade advantages for countries with less ambitious climate policies than their own. If this happens, then a net-zero emitting electricity sector could help protect and, in some cases, strengthen the competitiveness of Canadian-made electricity-intensive products in these markets. In addition, private sector participants with strong Environmental, Social and Governance (ESG) commitments will see Canada’s clean supply of electricity as a reason to deploy capital in the country and key strategic regions.

As we approach meeting the 2035 target for a net-zero electricity system, continued reliance on natural gas will increasingly require the mitigation of its GHG emissions. Current and emerging technologies, including carbon capture, utilization and storage (CCUS) and non-emitting hydrogen blended with natural gas to generate electricity, could help make natural gas an option for low-emitting generation. Over time, however, natural gas coupled with CCUS will increasingly be in competition with other emerging options that are both non-emitting and flexible in the roles they can play in electricity systems. These include long- and medium-duration energy storage, geothermal energy, and small modular nuclear reactors (SMRs). Solutions such as these are rapidly advancing and decreasing in cost, and a CES could provide the regulatory signal to accelerate their deployment across Canada. These emerging technologies could support electricity system stability in addition to increased inter-provincial trade of hydroelectricity. Investments in non-emitting generation and the shift towards a net-zero electricity system needs to start without delay.

Although several low and non-emitting generation technologies are becoming more cost-competitive, the pace of low-carbon electricity deployment must accelerate for Canada to reach NZ2035. As such, the normal investment cycle and capital-replacement rate must also accelerate to enable new and emerging technologies to enter the marketplace rapidly. This acceleration will entail significant capital expenditures. Retrofitting existing equipment to reduce emissions, such as modifying natural gas turbines with turbines able to combust hydrogen, may provide some significant financial upside in the transition to a low-carbon environment. 

A well-defined and targeted approach to achieving NZ2035 will provide assurance to investors and developers of non-emitting technologies that their investments and products will have a role in Canada’s evolving electricity systems. Regulatory certainty will thus enable a smoother transition to non-emitting electricity generation, an increase in adoption rates, less risk for utilities and other electricity generators, and more limited impact on ratepayers.

4. The proposed CES regulations

While carbon pricing is a foundational measure in Canada’s overall approach to reducing GHG emissions, it is designed to incent the lowest cost reductions across the economy and does not guarantee emission reductions in specific and targeted sectors. Given the long lifespan of electricity generation assets, decisions made over the next few years will impact Canada’s GHG emissions for decades. Therefore, carbon pricing alone is not sufficient to ensure that the electricity sector achieves net-zero emissions by 2035, or likely even by 2050.  A Canada-wide CES will complement carbon pricing by requiring the phase-out of all conventional fossil fuel electricity generation. In tandem, carbon pricing will incent fuel switching in other sectors to drive increased demand for clean electricity.

Regulations to limit fossil fuel generation must be decisive and swift enough to prevent locking in new fossil fuel infrastructure that will persist beyond 2035. These policies must also be flexible enough to account for regional differences, such as resource availability and interconnection (interties) with neighbouring jurisdictions. In the end, all actions taken together will ensure that electricity is clean, reliable and affordable for all Canadians.

The Government of Canada is planning new regulations under CEPA for all sources of emitting electricity generation that sell to the electricity system (grid).  A CES regulation would set emissions performance standards for emitting electricity generators to ensure that the electricity sector transitions to NZ2035.

The final form of the CES’ scope and design will be influenced by consideration of the full set of changes needed to transition the electricity sector to NZ2035 while providing increased supply of electricity to support electrification, and the role of available technologies in the provision of clean power to Canadians.   

The electricity sector must achieve net-zero emissions while ensuring sufficient electricity is available when and where we need it. The scope and design of the CES will thus need to be stringent enough to achieve its objectives while including compliance flexibility to allow for the possibility of some natural gas. As natural gas currently plays a critical role in the electricity sector by providing fast-response powerFootnote 7 , exploration of the continued operation of natural gas assets in special circumstances may be needed. This includes providing flexibility to essential uses of natural gas, such as for emergency events, back-up power to complement variable renewables, and potentially supplying power during seasonal peaks of demand.

The CES will also be technologically neutral in setting the value of its standards, allowing electricity generators and decision makers the widest possible array of supply options that can contribute to the goal of achieving emission reductions.

Compliance flexibilities can thus ease the transition and ensure a reliable electricity system. Possibilities include the use of robust GHG offsets to assist with compliance with the CES as a transitional measure. Carbon dioxide removal technologies such as DAC with carbon sequestration and Bioenergy Carbon, Capture, and Storage (BECCS) have been frequently mentioned in literature as central to achieving net-zero due to their potential to achieve “negative emissions” and would enable further reductions attributable to the electricity sector. Consideration would need to be given to the scope of what emissions could be offset.

Finally, it will be necessary to ensure that the CES and the treatment of electricity generation under the federal Output-based Pricing System Regulations (OBPSR) are synchronized. The treatment of electricity under carbon pricing should maintain the incentive created by the carbon price for industrial facilities to innovate and reduce emissions, and continue to minimize carbon leakage and competitiveness risks. This may require modifications to the Output-based Standard (OBS) for electricity under the OBPSR. Similarly, where provincial or territorial carbon pricing systems cover electricity emissions, provincial/territorial governments may need to consider how to ensure their carbon pricing systems and the CES can be complementary.

5. Working together to achieve NZ2035

Achieving a net-zero electricity system throughout Canada represents a large economic, technical, and societal challenge. The structure of Canada’s electricity sector means that the CES will need to be complemented by actions at all levels of government. A whole-of-government approach, coupled with commercial and sustainable viability is critical for the transition.

Accordingly, Environment and Climate Change Canada will engage with the public on the design of the CES as a key component of the larger objective of achieving net-zero emissions from electricity by 2035, while Natural Resources Canada will engage in a linked but parallel process  on the development of other measures that will also contribute to this objective.

5.1 The importance of Canada-wide collaboration

Provinces and territories, as well as electricity generators and their regulators, will all play a critical role in achieving NZ2035 by supporting the transformation of the electricity system through their policies related to investments, regulating of the various aspects of electricity generation, and ensuring electricity distribution and supply. Throughout the transition to an electricity supply that is both net-zero emitting and substantially increased, provinces and territories will determine the measures needed to ensure reliable, affordable electricity within their own jurisdiction.

To mitigate rate increases, provinces and territories will have to manage several factors, including:

  1. the technical challenge of integrating wind and solar into the electricity system while maintaining reliability and de-risking intermittency challenges
  2. managing the system-wide impacts of increased demand as electrification links more end-uses, such as transportation, to the electricity system
  3. the cost-effective deployment of emerging non-emitting options like long and medium-duration energy storage alternatives, geothermal and SMRs
  4. providing incentives and programming for energy efficiency and demand-side management to minimize overall demand and help consumers reduce their electricity consumption, reducing their exposure to rate increases

There are significant regional differences in current electricity generation across Canada. The impacts of a CES will be largest in fossil fuel-dependent electricity generating regions including Alberta, Saskatchewan, New Brunswick, Nova Scotia, and Ontario.  Nunavut, Yukon, and Northwest Territories will face unique challenges as remote, off-grid communities transition away from diesel (see Annex A). The Government of Canada will continue to work closely with provinces and territories as they address these complex challenges, and will support the development of interties to bring clean energy to where it is needed. Support for smart grids, interties, and new ways of managing power (such as distributed generation and energy storage) will be helpful in the context of these challenges.

Wind and solar will play a key role in reducing the sector’s emissions. These renewable sources of energy are both cost-competitive and widely available, as is demonstrated by their ongoing rapid expansion throughout every region of Canada. Increased reliance on these intermittent resources will require careful planning so that electricity system stability and reliability are maintained. The efficient integration of wind and solar will involve market and regulatory reforms, expansion and reinforcement of transmission and distribution infrastructure, and unlocking flexibility within the broader electricity system. Utilities, other electricity generators, regulators and system operators will need to move rapidly to ensure that sufficient firm supply is in place to back a larger intermittent supply.

The “Atlantic Loop” project is an example of collaboration to bring clean power to where it’s needed in Eastern Canada. The Government of Canada and the Canada Infrastructure Bank are currently collaborating with provinces and regional partners to advance this intertie project, which could greatly reduce emissions and maintain electricity affordability in the Atlantic region.

As the clean energy sector expands, the Government of Canada is committed to working with provinces and territories, Indigenous groups, industry, labour organizations, and others to ensure that workers affected by the transition to a net-zero economy can access the resources and build the skills required to work in clean energy. Creating good, well-paying jobs in the net-zero economy and ensuring that workers have the right tools and skill sets is essential to building a sustainable and prosperous future for Canada.

5.2 Additional federal actions and complementary policies

A successful and smooth transition to net-zero electricity generation will require a significant shift in the behaviour and operations of utilities and other electricity generators, provinces, territories, industry and other customers. The federal government will continue to provide support during this complicated transition, both through existing programs and through additional actions and complementary policies.

Considering the timeframe in which action must be taken and the amount of transformation that will need to occur, no single policy measure will suffice on its own. The Government of Canada is already investing in electricity infrastructure improvements, non-emitting electricity generation, and the development and deployment of emerging technologies.   Measures specific to the electricity sector in the strengthened climate plan include:

Through the Investing in Canada infrastructure plan, the Canada Infrastructure Bank (CIB) announced a $10 billion Growth Plan, which includes $2.5 billion for clean power projects (including renewable generation and storage) and electricity transmission between provinces, territories, and regions (including to northern and Indigenous communities). These investments will help to lower the costs of reducing emissions from the electricity sector for consumers and leverage the significant opportunity presented by new and emerging technologies.

The federal government will continue to explore how federal investments in infrastructure can support pathways to scale technology solutions in regulated and unregulated electricity markets with the ultimate goal of an affordable and reliable energy transition.

If ongoing engagement indicates a need for new measures, the government will consider them in close collaboration with provinces and territories, utilities and other electricity generators, Indigenous peoples, and other stakeholders to ensure that they effectively support the electricity sector as it evolves to meet the considerable technical challenge of reaching net-zero electricity by 2035.

6. Key questions

The Government of Canada is seeking input regarding federal regulatory actions to support net-zero electricity generation by 2035. Please consider the following questions to support your input.

General

  1. Should interim standards be included in the period before 2035?
  2. How should the CES regulation be designed to minimize stranded capital assets and associated rate impacts?
  3. What would be an acceptable end-point emissions intensity standard to achieve the objective of the CES?
  4. How do considerations differ for non-competitive electricity markets, vertically integrated utilities, etc.? 

Compliance flexibilities

  1. Should the CES offer compliance flexibilities?
    1. What kinds of flexibilities?
    2. Should the flexibilities be targeted to individual generating units? To corporate fleets of units, such as fleet averaging, etc.?
    3. What constraints or limitations should be incorporated into flexibilities?
  2. Under what conditions should offset credits available through federal, provincial/territorial, or other programs be permitted?
  3. To what extent can negative emission technologies like BECCS and DAC contribute to meeting the obligations of a CES regulation? To what extent should they be allowed to contribute to meeting those obligations?
  4. Should compliance be assessed for the electricity sector on an annual or multi-year basis?

Alignment with carbon pricingFootnote 8

  1. Should the way in which electricity generation is currently treated by carbon pricing be changed to facilitate achieving NZ2035?
  2. How might the treatment of electricity under the OBPS have to change to align with the CES?

Treatment of natural gas generation

  1. What is the role of natural gas in a net-zero electricity sector before 2035? Post-2035?
  2. What flexibility should be allowed to use natural gas to maintain reliability in rare and extreme weather, emergencies, or other special circumstances? Which additional operating conditions/scenarios, if any, should be given special consideration?
    1. If natural gas has an electricity system-support role post-2035, what are the expected impacts on the rollout of emerging system support technologies such as energy storage?
    2. If natural gas has a role in generation post-2035, what are the expected impacts on the penetration of nascent generation technologies like SMRs, geothermal electricity, etc.?

Treatment of industry, private generation and remote generation

  1. How should the CES treat electricity generated by cogeneration units that is sold to the electricity system? Should the CES apply fully to cogeneration units by 2035 or should it phase-in its application to cogeneration units after 2035?
  2. What are the benefits of applying a CES to industrial generation units? What are the challenges of doing so? Of not doing so?
  3. How should the CES consider electricity generation in remote, northern, and Indigenous communities?
  4. How should the CES consider distributed energy resources?

Treatment of biomass

  1. If CO2 emissions from biomass combustion are not counted towards compliance under a CES, to what degree might biomass generation increase?
  2. What types of biomass are suited to electricity generation? What are their characteristics with respect to regenerative life cycle, non-CO2 GHG emissions, and land use characteristics?
  3. What emissions reporting and compliance requirements for biomass generation should be considered to ensure that nature is protected and land-based emissions do not increase?

Other questions

  1. What additional investments are anticipated to be necessary to achieve NZ2035 to help ensure affordability for consumers?
  2. What role could existing and expanded energy efficiency programming play in helping to meet new demand as they transition towards net-zero 2035? What are the constraints for additional efficiency measures? Technological? Policy? Other?
  3. What other factors should the government consider in developing the CES?

7. Next steps

This discussion paper seeks input to inform the development of regulatory action to support net-zero electricity generation by 2035. This input will help to ensure that the Government of Canada considers the appropriate expertise, perspectives, and interests as part of a meaningful engagement process. The goal is to develop policies that support economic growth, reduce GHG emissions from electricity generation in a way that achieves a net-zero electricity system by 2035 as other parts of the economy electrify while continuing to ensure affordable, reliable power to Canadians. 

Following the publication of this discussion paper, ECCC will continue to engage with provinces, territories, Indigenous Peoples, utilities and other electricity sector stakeholders, industry, non-governmental organizations, and Canadians on regulatory design and, where relevant, complementary measures. 

Parties wishing to comment on any aspect of this paper, including responding to questions posed, are invited to provide written comments to ECD-DEC@ec.gc.ca by April 15, 2022. Comments received will help to inform federal policy actions to achieve net-zero electricity generation, as part of an ongoing engagement process.

Annex A - Cost and technological readiness of important technologies

The following table presents an indicative list of electricity generation technologies and associated costs.

Table 1: CostFootnote a and Technology Readiness Level (TRL)Footnote b of technologies (EIA Annual Energy Outlook 2021 and IEA Clean Energy Technology Guide, 2021)
Technology (cont.)Footnote c Fuel type Size (MW) Lead time (years) Total overnight cost
(2022 CAD $/kw)
Variable O&M (2022 CAD $/MWh) Fixed O&M (2022 CAD $/kw-yr) Technology readiness level
1 (Initial idea)-
11 (Proof of stability reached)
Ultra-supercritical coal with 90% CCS Coal 650 4 $8,413.75 $14.59 $79.17 4-5
Combined cycle-- single shaft NG 418 3 $1,525.27 $3.39 $18.75 11
Combined-cycle--multi shaft NG 1083 3 $1,348.74 $2.49 $16.22 11
Combined-cycle with 90% CCS NG 377 3 $3,613.15 $7.76 $36.69 5-6
Simple cycle natural gas – aeroderivatived NG 105 2 $1,643.38 $6.25 $21.67 11
Simple cycle natural gas—industrial frame NG 237 2 $996.95 $5.98 $9.31 11
Fuel cells Hydrogen 10 3 $9,174.48 $0.79 $40.93 7-9
Nuclear—light water reactor Uranium 2156 6 $8,928.10 $3.15 $161.73 10-11
Nuclear—small modular reactor Uranium 600 6 $9,584.69 $3.99 $126.31 6-9
Battery storage (Lithium-ion utility-scale) n/a 50 1 $1,671.32 $0.00 $32.97 9
Biomass Biomass 50 4 $5,746.75 $6.43 $167.16 4-10
Geothermal n/a 50 4 $3,906.52 $1.54 $181.89 4-11
Municipal solid waste--landfill gas n/a 36 3 $2,213.61 $8.24 $26.72 7
Conventional hydropower n/a 100 4 $3,915.41 $1.85 $55.60 11
Wind, onshore n/a 200 3 $2,181.86 $0.00 $35.01 9-10
Wind, offshore seabed fixed n/a 400 4 $7,672.07 $0.00 $146.25 9
Solar thermal n/a 115 3 $10,026.65 $0.00 $113.53 9
Solar photovoltaic (PV) with tracking n/a 150 2 $1,685.29 $0.00 $20.28 9-10
Solar PV with storage n/a 150 2 $2,219.96 $0.00 $42.76 9-10

a Source of Size, Lead time, Total overnight cost, Variable O&M, Fixed O&M, Heat rate: Energy Information Agency. 2021. Annual Energy Outlook 2021. Cost and Performance Characteristics of New Generating Technologies; Annual Energy Outlook 2021 (PDF document).

b International Energy Agency. 2021. ETP Clean Energy Technology Guide.

c Non- Abated fossil fuel generation included for cost comparison.

d Compared to industrial frame CTs of the same MW output, aeroderivative CTs are lighter weight, have a smaller size footprint, and are made of advanced materials because they were adapted from aircraft engines.

Table 2: Technological Readiness Level Key (International Energy Agency, 2021
Readiness level Definition Explanation
1 Initial idea Basic principles have been defined
2 Application formulated Concept and application of solution have been formulated
3 Concept needs validation Solution needs to be prototyped and applied
4 Early prototype Prototype proven in test conditions
5 Large prototype Components proven in conditions to be deployed
6 Full prototype at scale Prototype proven at scale in conditions to be deployed
7 Pre-commercial demonstration Prototype working in expected conditions
8 First of a kind commercial Commercial demonstration, full-scale deployment in final conditions
9 Commercial operation in relevant environment Solution is commercially available, needs evolutionary improvement to stay competitive
10 Integration needed at scale Solution is commercial and competitive but needs further integration efforts
11 Proof of stability reached Predictable growth

The following table presents the direct GHG emission intensities of electricity generation technologies.

Table 3: National Electricity Generation GHG Emission Intensities by Technology (From the internal version of ECCC's Fuel Life Cycle Analysis (LCA) Model as of March 1, 2022)
Technology Generation Pathway (Canada) Direct emissions (tCO2e/GWh)
Biomass, wood, cogeneration 15.4
Biomass, wood, simple cycle 28.5
Coal, bituminous 1036.0
Coal, lignite 721.2*
Coal, sub-bituminous 660.7*
Heavy fuel oil 906.9
Hydro, reservoir 0.0
Hydro, run-of-river 0.0
Natural gas, cogeneration 258.1
Natural gas, combined cycle 305.8
Natural gas, converted boiler 557.5
Natural gas, simple cycle 478.4
Nuclear, CANDU 0.0
Solar, concentrated solar power 0.0
Solar, photovoltaic 0.0
Wind, onshore 0.0
Diesel, on-grid 736.2

* Values under review

Annex B - Canada’s electricity sector

Electricity generation sources vary significantly across Canada’s provinces and territories due to regional factors such as resource availability and industrial heat and power needs (see figure 1).

Figure 1: Provincial GHG emissions and Electricity by Energy Source (2021 NIR)

Figure 1. GHG emissions and electricity by engery source (See long description below)
Long description for figure 1
Utility electricity generation in terawatt hours by province
Sector BC AB SK MB ON QC NB PE NS NL YK NT NU
Petroleum 0.9 0.7 0.0 0.0 0.7 1.2 1.2 0.0 1.0 1.3 0.0 0.1 0.2
Natural Gas 1.4 23.6 9.3 0.0 9.4 0.0 0.9 0.0 1.4 0.0 0.1 0.01 0.0
Coal 0.0 27.7 10.0 0.0 0.0 0.0 1.8 0.0 5.0 0.0 0.0 0.0 0.0
Nuclear 0.0 0.0 0.0 0.0 90.5 0.0 3.0 0.0 0.0 0.0 0.0 0.0 0.0
Wind 1.5 4.0 0.8 0.9 11.5 11.3 0.9 0.6 1.1 0.2 0.0 0.0 0.0
Solar 0.0 0.0 0.0 0.0 2.4 0.0 0.0 0.01 0.0 0.0 0.0 0.0 0.0
Hydro 55.9 2.5 3.7 32.9 83.3 198.8 3.0 0.0 1.0 40.7 0.4 0.3 0.0
Greenhouse gas emissions from electricity generation by province
  BC AB SK MB ON QC NB PE NS NL YK NT NU
GHG Emissions 1.0 36.3 15.8 0.0 3.9 0.2 3.3 0.0 6.7 1.1 0.05 0.1 0.2
Table 4: GHG emission data from electricity generation**
(National Inventory Report, 2021) (kt CO2e)
Source of combustion 1990 2000 2005 2013 2014 2015 2016 2017 2018 2019
Coal 80 500 109 000 98 200 63 800 60 300 62 300 57 100 57 200 44 100 42 500
Natural gas 2 720 13 800 15 400 18 600 18 600 19 300 18 300 16 300 20 900 21 900
Other fuels 11 300 9 380 11 200 4 860 4 860 5 400 5 020 4 800 4 610 4 200
Other emissions - 27 52 63 73 87 80 80 78 80
Total 94 500 132 000 125 000 87 500 83 800 87 000 80 500 78 400 69 800 68 600

** NIR GHG emissions data for electricity generation includes utility-owned industrial generation units.

GHG emissions by generation source

The following generating sources account for GHG emissions from the electricity sector:

Coal

In 2018, coal-fired generation provided approximately 9% of Canada’s utility electricity generation and was responsible for approximately 63% of GHG emissions from the electricity sector. Coal continues to be a key electricity source in 4 provinces: Alberta (43%), Saskatchewan (47%), New Brunswick (21%) and Nova Scotia (58%) (2018). The Government of Canada has taken regulatory action to phase out conventional coal-fired electricity by 2030, through the ECCC-led Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations. Provincial governments, including in Alberta and Ontario, have also taken action to phase out coal. Note that under the current federal regulations, coal units employing CCUS technologies can continue to operate in Canada after 2030 if their emissions intensity does not exceed 420 tonnes per gigawatt-hour (t/GWh).

Natural gas

In 2018, natural gas provided 9% of Canada’s electricity generation and was responsible for approximately 30% of GHG emissions from Canada’s electricity sector. Historically low natural gas prices, accompanied by relatively low capital equipment costs and lower GHG emissions than coal generation, have made combined-cycle natural gas electricity generation an attractive and readily available option for many provinces. Utilities and other electricity generators are currently deploying new natural gas generation, which will likely continue without further policy action to limit electricity generation from fossil fuels. As a result, GHG emissions from natural gas electricity generation are expected to increase as coal is phased out and electricity demand increases.

Fuel oil

The combustion of fuel oil to generate electricity has significantly declined in Canada, largely due to fuel oil’s high cost. Fuel oil now represents less than 1% of total electricity generation in Canada, and generating facilities that still burn fuel oil are used primarily as peaking or back-up units. The largest facilities that still burn some fuel oil, primarily located in Atlantic Canada, therefore generate much less electricity than their maximum capacities would allow.

Diesel

Diesel, a distillate fuel oil, remains an important (though costly) fuel source for small-scale electricity generation across Canada, mainly in remote and northern communities. While diesel generation accounts for a small share of Canada's GHG emissions, it is a significant source of air pollutants and black carbon (a GHG that has an increased climate impact when emitted onto glaciers, as it decreases albedo and accelerates melting) and therefore negatively affects local air quality and human health.

Cogeneration (integration of heat and electricity)

Reducing emissions from industrial heat and electricity generation, which relies primarily on natural gas, will be crucial to reaching economy-wide net-zero emissions by 2050. Heat is the main source of energy consumed by industrial sectors and represents approximately 80% of all industrial energy needs (with the remaining 20% being electricity). Without low or non-emitting options to supply heat, Canada will not reach its goal of economy-wide net-zero by 2050. Fortunately, emerging technologies such as small modular nuclear reactors (SMR), renewable natural gas, clean hydrogen (low-emissions production), and geothermal heat, show potential to significantly contribute to the supply of low/zero-carbon heat,  when co-located or connected to heat end-users, such as industry, while simultaneously supplying low/zero-carbon electricity through cogeneration. 

Annex C - Regulations and other policy measures to reduce GHG emissions

The electricity sector is covered by various federal regulations.

Regulations under the Canadian Environmental Protection Act

The Reduction of Carbon Dioxide Emissions from Coal-Fired Generation of Electricity Regulations require that coal units meet an emissions limit of 420 t CO2/GWh by no later than 2030. Currently, only coal units retrofitted with CCUS can meet these standards, and the majority of coal units in Canada are expected to be retired by 2030. While this regulation indirectly encourages electricity producers to replace coal units with non-emitting generating sources, this is not a requirement.

The Regulations Limiting Carbon Dioxide Emissions from Natural Gas-fired Generation of Electricity complements the coal regulations by setting emissions limits (420 or 550 t CO2/GWh, depending on the size of the unit) for new natural gas-fired electricity generation. This regulation helps to ensure that natural gas units replacing coal-fired units are higher-performing units (top-performing natural gas units can achieve 370 t CO2/GWh). The regulation also includes provisions for the economic life extension of coal units converted to natural gas (based on the initial emission performance of the converted units, ranging from 480 to 600 t CO2/GWh).

Carbon pricing

Carbon pricing has proven to be one of the most efficient means to reduce GHG emissions in jurisdictions across the globe. Since 2019, every jurisdiction in Canada has had a price on carbon pollution. Canada’s approach is flexible: any province or territory can develop its own pricing system tailored to local needs, or can choose the federal carbon pricing backstop system. The federal government sets minimum national stringency criteria (the benchmark) that all provincial and territorial systems must meet to ensure they are stringent, fair and efficient. If a province decides not to price pollution, or proposes a system that does not meet the federal benchmark, the federal carbon pricing system applies.

On July 12, 2021, the Government of Canada confirmed that the minimum price on carbon pollution will increase $15 per year until 2030, starting in 2023. Through this increase, the price of carbon pollution will rise to $170 per tonne by 2030. The Government of Canada published updated federal benchmark requirements for the 2023-2030 period in August 2021. All proceeds collected under the federal carbon pricing system are returned to the jurisdiction in which they were collected.

Under the Greenhouse Gas Pollution Pricing Act (GGPPA), the federal carbon pollution pricing system has 2 parts, the fuel charge and the Output-Based Pricing System Regulations. One or both parts may apply in a province or territory. /p>

Fuel charge

Part 1 of GGPPA establishes a regulatory charge on 21 fossil fuels including gasoline and natural gas (the “fuel charge”).  The fuel charge is generally paid by fuel producers and distributors. The fuel charge rates reflect a carbon pollution price of $40 per tonne of carbon dioxide equivalent (CO2e) as of April 1, 2021, rising by $10 per tonne annually to $50 per tonne as of April 1, 2022.  Federal fuel charge rates for the 2023-2030 period, reflecting an increase in the $15 per tonne increase each year starting in 2023 to reach $170 per tonne in 2030, were published in fall 2021. The federal fuel charge currently applies in Ontario, Manitoba, Yukon, Alberta, Saskatchewan and Nunavut. 

Output-Based Pricing System Regulations

The federal Output-Based Pricing System Regulations (OBPSR) (OBPSR) establishes a regulatory trading system for emission-intensive and trade-exposed industry under Part 2 of GGPPA. It is designed to ensure there is a price incentive for industrial emitters to reduce their GHG emissions while mitigating risks to competitiveness and carbon leakage (that is, the risk of industrial facilities moving from one region to another to avoid paying a price on carbon pollution). The federal OBPSR currently applies in Manitoba, Prince Edward Island, Yukon, and Nunavut.

The federal OBPSR sets output-based standards (OBSs) in the form of emissions per unit of production. Facilities must calculate an emissions limit based on their production and relevant OBSs. If a facility emits below its emissions limit, it will earn surplus credits that it can sell. Facilities that emit above their limit must provide compensation either by paying the carbon price to the federal government via an excess emissions charge or remitting eligible compliance units in an amount equivalent to their excess emissions. By allowing facilities to generate and trade surplus credits for reducing their emissions below the limit, the OBPSR ensures the incentive to reduce emissions created by the carbon pollution price applies to every tonne of emissions from industrial facilities. It also incents the lowest-cost emissions reductions across industrial sectors.

The approach to electricity under the OBPSR was designed to incent emissions reductions from electricity generation while mitigating competitiveness impacts and carbon leakage risks for industrial sectors and reducing costs for businesses and households; the OBPSR assigns different OBSs to electricity generation according to the type of fuel used.

The OBSs are:

Other policy measures

Some examples of other actions the federal government announced in the December 2020 Strengthened Climate Plan and the April 2021 federal budget include:

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