Clean Electricity Regulations: maintaining reliability
Executive summary
- Informed by an extensive and constructive consultation and engagement process, the Clean Electricity Regulations (the Regulations) have been designed with the recognition that it is essential to maintain a reliable and affordable electricity system that can support growing demand, including demand unique to each jurisdiction.
- The Government consulted system managers and operators, as well as the North American Electricity Reliability Commission (NERC), to ensure that modelling represents realistic conditions and that flexibilities in the Regulations support reliability.
- The Regulations provide significant flexibility to provincial and territorial governments, utilities and unit operators to enable reliable electricity grids.
- Extensive modelling that supported the development of the Regulations, including by independent experts, confirms that provinces and territories and utilities will be able to comply with the Regulations without disrupting the ability to meet energy and capacity needs.
- Canada's clean electricity grid will likely include significantly more wind and solar power. Many European countries and many U.S. states have demonstrated that much higher levels of wind and solar power than Canada currently has can be successfully integrated into electricity systems while maintaining reliability.
- The tools and technologies needed to maintain reliability are readily available and can be deployed by Canadian utilities and system operators as they advance their systems towards the shared goal of a net-zero electricity grid by 2050.
Introduction
The reliability of Canada's electricity system is critically important to society, the economy, and the wellbeing of all Canadians. A reliable electricity system requires having enough electricity supply available to meet the energy needs of consumers at all times (known as “resource adequacy”) and to ensure the system is able to withstand sudden disturbances such as weather events (known as “operational reliability”).
The Government of Canada has recognized the importance of a reliable electricity grid in developing the Regulations. The Regulations' design will reduce pollution while providing flexibilities so provinces can maintain a reliable power supply.
Canada's Clean Electricity Regulations and reliability: flexible compliance pathways
Reliability has been a key area of discussion throughout the development of the Regulations. The Government of Canada heard from system operators that in order for them to be able to maintain reliability, the Regulations need to provide sufficient flexibility to account for regional differences. Some emphasized the need for continued use of natural gas facilities, since they are easily dispatchable to help maintain grid reliability.
In response, the Government of Canada proposed several important updates to the draft Regulations in a February 2024 Public Update paper. These improvements were then subject to additional consultations with electricity operators to ensure that they would provide the flexibility needed to enable electricity providers to meet power demand at all times, including during the winter, summer, extreme weather conditions, and at times of peak demand.
The Regulation's compliance flexibilities include the following:
- The amount each unit is allowed to emit has been shifted from a fixed emissions intensity standard of 30 t/GWh (tonnes per gigawatt hour) in the draft Regulations to an annual emissions limit based on 65 t/GWh, with an additional 35 t/GWh enabled with the use of offsets. Together these changes create more flexibility for gas units to operate as “peaker units,” supporting reliability by generating electricity at times when it is needed most, while provinces increase the use of renewable and other clean sources of power as they transition to net zero by 2050.
- Existing natural gas units will have 25 years after the date they are commissioned before needing to comply with the annual emissions limit in the Regulations.
- Increased flexibility for co-generation units will also help ensure continued baseload access.
- The ability to transfer or “pool” compliance credits among electricity units within a province. This provides significant flexibility for individual units to over- or under-perform, so long as the emissions across the fleet do not exceed the total pooled limit.
Other flexibilities include:
- Allowing electricity units to “bank” compliance credits for use in future years. This will help address year-to-year variability in the need for fossil fuel-based power, such as during drought conditions that could limit the generation capacity of hydropower facilities.
- Allowing units to operate over their emissions limit through the remission of carbon offsets, which allows electricity systems operators to call on additional firm generation if needed, while not adding to overall emissions outcomes.
- In order to respond to an emergency situation, electricity system operators will be able to direct units to provide electricity. The resulting emissions can be exempt the emissions limit, without needing to seek prior federal approval, for a period of 30 days.
- An exemption for small units of less than 25 MW, including those used by hospitals, public safety installations and remote communities and regions that are not connected to a grid regulated by the North American Electric Reliability Corporation (NERC). The Regulations do not apply in the territories for this reason.
In addition, provinces and territories will have the option of entering into equivalency agreements. These would stand down the federal Regulation if the province has adopted rules that deliver a level of emission reductions equivalent to Canada's Clean Electricity Regulations.
Tools and technologies to maintain reliability
There are numerous ways to successfully and reliably integrate wind and solar into Canada's electricity mix at the levels projected over the coming decades while maintaining reliability.
Dispatchable sources
Wind and solar power can be complemented by dispatchable generators powered by hydro, nuclear, or abated natural gas. These units can ramp up generation when wind and solar power are generating less power than usual, and slow down generation when wind and solar power are generating more.
Energy Storage
Energy storage technologies, such as grid-scale batteries or pumped hydro storage, can support variable renewable energy by storing energy when there is excess generation and releasing it to the grid later, when needed. The Canada Electricity Advisory Council's final report observed that these technologies are improving rapidly.
Interties
The Canada Electricity Advisory Council's final report identifies the reinforcement and expansion of inter-regional transmission as a critical measure to support the reliability of Canada's electricity systems. Interties can enhance reliability (and limit costs) by exploiting synergies among adjacent systems by expanding access to lowest-cost supplies, smoothing costly demand peaks, and mitigating supply risks. Interties can facilitate the sharing of reserve capacity and inertia services among suppliers. Interties can qualify for support under the Clean Electricity Investment Tax Credit.
The expansion of electricity networks across large geographical areas can allow provinces to take advantage of varying solar and wind generation patterns and to manage electricity demand across larger areas. Interties help to ensure reliability in many European countries and American states with high levels of renewable energy generation, by facilitating electricity imports when local supply is limited. Canada has significant unrealized potential with regards to developing interties between provinces. Inter-provincial interties can qualify for support under the Clean Electricity Investment Tax Credit.
Demand-side management and energy efficiency
Demand-side management is a strategy that utilities can use to help balance the supply and demand of electricity, through adjustments in consumer behavior. For example, utilities can offer financial incentives or lower prices to consumers or companies who agree to reduce their usage during peak hours. Energy efficiency improvements can limit overall electricity consumption and demands on the grid. These measures can also support affordability by reducing the need for new generation capacity.
Operational reliability
ECCC considered conditions of inertia, voltage and frequency stability so that the Regulations would not impact the ability of regional operators to manage important grid requirements.
Studies indicate that although the need to address reliability considerations like inertia and voltage tends to increase as the share of variable renewable generation increases, the integration of high shares of variable renewables is manageable and feasible.Footnote 1
As grid mixes incorporate more wind and solar in the future, the deployment of energy storage technologies and grid-stabilizing technologies like synchronous condensers may be required to maintain reliability in some parts of Canada. During the development of the Regulations, utilities, grid operators and provincial governments were invited to provide information about these types of investments and their costs, and where their development may be needed. Their input was reflected in ECCC's modelling.
Large-scale energy storage projects are underway in Alberta, Ontario and Nova Scotia. Nova Scotia is also planning to deploy synchronous condensers to help ensure continued reliability as the use of wind power grows. In Manitoba, a decommissioned coal unit has been converted to operate as a synchronous condenser, to help regulate the grid's voltage.Footnote 2
How modelling accounted for grid reliability
Multiple analyses were done to consider reliability, including extensive internal modelling, third-party modelling, and numerous rounds of feedback from electricity providers. Input and collaboration and input from provincial governments, utilities and experts helped ensure the federal modelling represented realistic conditions.
ECCC's modelling of the Regulations includes a high demand scenario where electricity demand nearly doubles by 2050. This scenario accounts for increased electricity demand from new sources, such as a possible proliferation of data centres as the use of Artificial Intelligence increases. This scenario is consistent with an updated demand forecast recently published by Ontario's electricity system operator. The Ontario forecast accounts for data centre growth, and projects that demand will grow by 75% to 2050.
As a complement to federal modelling, the Government engaged third-party modellers with long-standing experience in the electricity sector to independently assess key aspects of the Regulations.
None of the modelling results, including by third-party experts, found that the CER is infeasible or would prevent provinces and territories and utilities from maintaining grid reliability.
One way that federal modelling accounted for reliability was by constraining the models so that demand and operating requirements must be satisfied at all times, including to meet peak loads and reserve margins. The modelling also made conservative assumptions about the deployment of wind and solar, such as limiting the development of wind power to sites close to existing transmission lines and constraining the model to only build solar in areas that already have sufficient firm capacity availableFootnote 3. In addition, the modelling required that dispatchable generators, including backup peaking units, would be available to meet demand at all times. To be conservative, the modelling also did not assume that new interties would be built even though, as noted above, additional interties could allow provinces to help each other balance supply and demand and support reliability.
Canada's electricity grid is part of the North American bulk power system regulated by NERC. The NERC requirements are intended to minimize risks to the reliability and security of the grid. The NERC works with provincial and territorial governments and system managers and operators. This includes examining how systems can adapt to the increase in wind and solar power. ECCC consulted with NERC officials on reliability prior to finalizing the Regulations.
Federal investments and financing to drive grid reliability
The Government of Canada agrees with the Canada Electricity Advisory Council that ensuring reliability requires the development of power supply, storage, and transmission.
The Government has announced over $60 billion in support through to 2035 for clean electricity. These include:
- the Clean Electricity Investment Tax Credit (ITC)
- the Clean Technology ITC
- the Canada Infrastructure Bank
- the Smart Renewables and Electrification Pathways Program
- the Smart Grids stream of the Energy Innovation Program
- the Strategic Interties Predevelopment program
- the Strategic Innovation Fund
Related links
- Final Clean Electricity Regulations
- Powering Canada's Future: Clean Electricity Strategy
- Affordability technical backgrounder
- Powering Canada’s Future: Securing jobs, investments, and savings by building more affordable and reliable clean electricity
The role of offsets in Canada's Clean Electricity Regulations
Context
One of the flexibilities in the Regulations is that they allow the use of eligible Canadian greenhouse gas (GHG) offset credits as a compliance option. The ability to use offsets will be available throughout the application of the regulations, including in 2050, when the use of offsets may be essential to achieving net zero by compensating for any remaining emissions from the grid at that time.
Each electricity unit regulated under the Clean Electricity Regulations will be subject to an Annual Emissions Limit (AEL) starting in 2035 at the earliest. Regulated units are allowed some use of eligible Canadian offset credits. This provision allows units to exceed their AEL up to a certain amount by using eligible offset credits to account for those extra emissions.
The AEL is calculated based on emissions intensity (65 tonnes per gigawatt-hour [t/GWh] from 2035 to 2049) and tailored to each electricity generating unit based on its size (in terms of electricity generation capacity in megawatts). Similarly, the amount of emissions over and above the 65 t/GWh that each unit can offset is calculated based on an applicable emissions intensity (35 t/GWh until from 2035 to 2049) and tailored to the unit's generation capacity.
Therefore, until 2050, a unit could operate full time even with an emissions intensity of 100 t/GWh, as long as it remits the necessary offset credits. Starting in 2050, all emissions must be offset. The use of offsets would be allowed up to 42 t/GWh, which is modelled to be enough to cover any residual emissions left on the grid post-2050.
The availability of offsets
ECCC expects that sufficient offset credits will be available for use by parties regulated under the Regulations beginning in 2035. This is for several reasons:
- ECCC modelling suggests that the use of offset credits under the CER would be relatively low from 2035 to 2049, largely because the costs of reducing emissions within the electricity sector are projected to be lower than the cost of purchasing offsets. More use of offsets is expected to occur starting in 2050. This provides 25 years for Canadian offset credit markets to responsibly and credibly mature.
- The number of offset protocols and projects registered in Canada's Greenhouse Gas Offset Credit System is growing. The three published federal protocolsFootnote 4 are already generating offset projects. A fourth is close to being finalized, and the government is in the process of developing four additional protocols, including a world-leading protocol for direct air carbon dioxide capture and sequestration, the preliminary draft of which will be published soon. ECCC will continue to develop protocols on an ongoing basis. Moreover, provincial offset credits recognized for use under the federal Output-Based Pricing System (OBPS) are also eligible for use in the CER, allowing some credits under existing provincial offset systems in British Columbia and Alberta to also be used.
- As the demand for offsets grows along with their value in the market, it is expected that more firms will seize the market opportunity and step in to supply those offsets. This will create associated economic benefits for Canadians, including good jobs. In other words, as the demand and price offered for offsets grows, offset suppliers will step in to meet that demand, as has occurred in the growth of other markets such as the Western Climate Initiative cap-and-trade system with California and Quebec.
Ensuring quality of offsets
Offset credits registered under Canada's Greenhouse Gas Offset Credit System represent verified emission reductions that meet robust criteria to ensure environmental integrity, including requirements that the offsets be permanent and represent an incremental benefit (i.e., would not have occurred otherwise). These offsets either reduce emissions or remove them from the environment. Each GHG offset credit is equal to one tonne of carbon dioxide equivalent (t CO2e) reduced or removed.
The Regulations allow the use of offset credits to meet overlapping obligations under eligible carbon pricing systems and the Regulations, as long as certain conditions are met to ensure both policy tools function towards their intended purposes. This is known as ‘cross-recognition' and avoids requiring multiple offset credits to be remitted for the same tonne of emissions.
Additional information on offsets
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