Canadian Energy Perspectives

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Canadian Energy Perspectives

30 by 30: Alberta Announces Hard Targets in Alberta Renewables

Posted in Electricity, Energy – Renewable, Alternative and Clean, Power, Utilities
Alberta
Kimberly HowardKimberly Macnab

On September 14, 2016, the Alberta Government announced its firm target that 30% of electricity used in Alberta will come from renewable sources such as wind, hydro and solar by 2030.  In order to achieve this, the province intends to support 5,000 MW of additional renewable capacity.

The province’s 30 by 30 announcement also provides useful details regarding eligibility for the Renewable Electricity Program (or REP).  Projects must:

  • be based in Alberta,
  • be new or expanded,
  • be five megawatts or greater in size, and
  • meet the Natural Resources Canada definition of renewable sources.

Interestingly, the announcement also notes that work is underway to improve the rules surrounding smaller-scale electricity generation, in order to make it easier for individuals and communities to generate their own renewable energy.

The announcement builds on the previous announcement that the Alberta Electric System Operator (AESO) was chosen under the province’s Climate Leadership Plan to develop and implement the REP to add additional renewable generation capacity into Alberta’s electricity system.  The AESO delivered its recommendations to the Alberta government on May 31, 2016.

As discussed in a previous post, the AESO released the results of its stakeholder engagement process on May 5, 2016.  The AESO’s stakeholder engagement update also included a summary of expected development timelines for different sources of renewable generation.  Estimated timelines are based on key activities and timelines associated with the development, regulatory approval and construction of anticipated renewable projects:

  • Wind: 4 to 6 years
  • Solar: 1.5 to 3 years
  • Biomass: 2 to 3 years
  • Geothermal: 3 to 7 years
  • Large Hydro: 10 to 14 years

Further details on how the program will operate will be released later this year.  We are monitoring the development of the REP closely and will provide updates as information is released.

Large Renewable Procurement II – Final LRP II RFQ Materials Posted

Posted in Energy – Renewable, Alternative and Clean, Independent Producers, Ontario Independent Electricity System Operator, Power
Ontario
Kerri LuiZachary MasoudBrianne Paulin

On July 29, 2016, the IESO posted the final materials for the Large Renewal Project II (“LRP II”) Request for Qualifications (“RFQ”). Draft materials were posted on June 27, 2016 and the IESO solicited feedback from potential applicants and industry groups. As a result of this consultation, minor changes were included in the final materials for the LRP II RFQ.

As previously noted in detail in our post on July 15, 2016, the two major changes to the LRP II RFQ process are the introduction of the simplified process for LRP I Qualified Applicants (“QAs”) and a procurement target of 50 MW from technological upgrades and optimization of existing renewable facilities. Changes included in the final materials provide greater clarity regarding the application process under the simplified process for LRP I QAs, and the required submission materials for applicants submitting projects for technological upgrades and optimization of existing renewable facilities.

Simplified Process

To be eligible for the simplified process, an applicant must declare that (i) each LRP I Control Group Member is still a Control Group Member of the applicant and (ii) each LRP I designated team member is still a Designated Team Member.

The IESO has provided additional information for this requirement: if an LRP I QA or its Control Group Member(s) underwent an approved change of Control as part of the LRP I Process, it will qualify as an LRP I QA and can submit its RFQ under the simplified process. The applicant must submit the letter issued by the IESO or its predecessor approving the change of Control.

50 MW of Procurement from Existing Renewable Energy Facilities

The IESO has also introduced a new separate form that must be filled out by applicants who will submit technological and optimization projects, namely the Prescribed Form – Technical Upgrades and Optimization Questionnaire. In several of its online webinars, the IESO mentioned that the purpose of this form is to collect information that will assist the IESO in formulating the Request for Proposals (“RFP”) process and project requirements for technological and optimization projects.

The IESO confirmed that the applicant must evidence the Designated Team Member Development Experience for proposed technological upgrades and optimization of existing renewable generation facilities. The IESO received several comments on this issue, where applicants noted that existing generation facilities were operational and they therefore should not be required to re-evidence their development experience. Though the IESO kept this requirement in the final materials, it has included an exception where applicants submitting technological and optimization projects do not need to demonstrate development experience for the entity level.

Applicants are not eligible for the simplified process and will have to proceed through the standard process. The final materials also include a disclaimer, where the IESO reserves the right to make a determination (even if an applicant is deemed a QA), that it is not feasible to procure any additional generation resulting from technological upgrades to and optimization of existing renewable generation facilities.

Comment Period and Next Steps

The LRP II RFQ submission period began on July 29, 2016 and will end on September 8, 2016 at 3:00 p.m. (Eastern Prevailing Time). Successful applicants, who will be deemed QAs, will be notified in November 2016.

Target 2050: BC Releases Updated Climate Change Action Plan

Posted in Climate Change, Climate Policy, Emissions Regulation
British Columbia
Selina Lee-Andersen

The BC government released its long awaited Climate Leadership Plan (the Plan) on August 19, 2016. The Plan, which updates the province’s 2008 Climate Action Plan, contains 21 new actions to reduce emissions across the following sectors: (i) natural gas, (ii) transportation, (iii) forestry and agriculture, (iv) communities and built environment, and (v) public sector. The Plan follows the release of the Climate Leadership Team’s report in November 2015. The CLT, which was appointed by the BC government in May 2015 to provide advice for the development of the Plan, made 32 recommendations including, among others, the establishment of a mid-term 2030 greenhouse gas (GHG) emissions reduction target and a reduction in the provincial sales tax from 7% to 6%, which would be offset by an increase in the carbon tax by $10 per year commencing in July 2018.  While the Plan reflects some recommendations made by the CLT and feedback received through public consultation and stakeholder engagement sessions, the Plan bypasses BC’s 2020 target of achieving a reduction in GHG emissions of 33% below 2007 levels and instead charts a path for BC to reach its 2050 target of 80% below 2007 levels. In addition, the BC government has decided to keep the province’s revenue neutral carbon tax at $30 per tonne until the details for a pan-Canadian climate change policy, including the federal government’s approach to carbon pricing, are more clear.

Highlights of the Plan include the following:

Natural Gas

This action area is expected to reduce annual emissions by up to 5 million tonnes by 2050:

  • launching a strategy to reduce upstream methane emissions, including targets for reducing fugitive and vented emissions from extraction and processing infrastructure (built before January 1, 2015) by 45% by 2025;
  • developing regulations to enable carbon capture and storage; and
  • investing in infrastructure to develop upstream electrification of several projects including the Peace Region Electricity Supply Project and North Montney Power Supply Project.

Transportation

This action area is expected to reduce annual emissions by up to 3 million tonnes by 2050:

  • increasing the requirements for BC’s Low Carbon Fuel Standard, which currently requires a reduction in the carbon intensity of transportation fuels by 10% by 2020 (relative to 2010) – the LCFS will be increased to 15% by 2030;
  • amending regulations to encourage emission reductions in transportation by allowing utilities to double the total pool of incentives available to convert commercial fleets to natural gas, when the new incentives go towards vehicles using 100% natural gas; and
  • expanding support for zero emission vehicle charging stations in buildings through the Clean Energy Vehicle program;

Forestry & Agriculture

This action area is expected to reduce annual emissions by up to 12 million tonnes by 2050:

  • rehabilitating under-productive forests, recovering more wood fibre, and avoiding emissions from burning slash through the new Forest Carbon Initiative (which will seek to increase the rate of replanting and fiber recovery by 20,000 hectares per year).

Industry & Utilities

This action area is expected to reduce annual emissions by up to 2 million tonnes by 2050:

  • developing new energy efficiency standards for gas-fired boilers; and
  • facilitating projects that will help fuel marine vessels and commercial vehicles with natural gas.

Communities & Built Environment

This action area is expected to reduce annual emissions by up to 2 million tonnes by 2050:

  • working together with local governments to refresh the Climate Action Charter;
  • amending regulations to promote more energy efficient buildings; and
  • creating a waste-to-resource strategy to reduce waste sent to landfill and establishing a food waste prevention target of 30% and increasing organics diverted from landfills to 90%.

Public Sector

This action area is expected to reduce annual emissions by up to 1 million tonnes by 2050:

  • promoting the use of low carbon and renewable materials in public sector buildings; and
  • mandating the creation of 10-year emission reduction and adaptation plans for provincial public sector operations.

The BC government has indicated that the Plan is a living document that will be further updated as needed in order to reflect any policy initiatives within the context of the development of a pan-Canadian climate framework. At the First Ministers’ meeting in March 2016,  Prime Minister Trudeau and the Premiers launched a process to develop a national climate change plan which includes the establishment of working groups to study: (i) clean technology, innovation and jobs, (ii) carbon pricing mechanisms, (iii) mitigation opportunities, and (iv) adaptation and climate resilience. The working groups are expected to report back by October 2016, following which a national climate change plan will be negotiated.

Large Renewable Procurement II – IESO Webinar re: Upgrades of Existing Facilities

Posted in Energy – Renewable, Alternative and Clean, Independent Producers, Ontario Independent Electricity System Operator, Power
Ontario
Kerri LuiBrianne Paulin

On July 21, 2016, the IESO hosted a discussion on the portion of the Large Renewable Procurement II (“LRP II”) process pertaining to technological upgrades and optimization of existing renewable facilities. This discussion provided potential applicants with an opportunity to provide comments and feedback to the IESO as to the types of technologies that should be included in the LRP II process, procurement considerations for such technologies and contractual considerations.

Prescribed Form – Technical Upgrades and Optimization

The Prescribed Form for Technical Upgrades and Optimization is required for applicants submitting an RFQ for a technological upgrade and optimization project. The form requires the applicant to provide extensive information regarding the proposed project, the technology used and potential pricing.

Several concerns were raised about this Prescribed Form, including questions as to why this Prescribed Form is only required for technological upgrade and optimization projects. Some participants noted that the requested information was extensive and suggested that the deadline for submission should be extended. Others noted that the information requested would be more suitable for the LRP II RFP phase.

The IESO indicated that this Prescribed Form will only be used for data collection and will not be used to assess an applicant during the LRP II RFP phase. The IESO has significant data (including data regarding appropriate pricing) for certain types of renewable projects, such as wind and solar, but lacks information for technological upgrade and optimization projects. The IESO indicated that it will use the collected data to help determine the appropriate requirements for the LRP II RFP phase.

Consultation Process and Community Engagement

Some participants inquired about the consultation process between the IESO and the Ministry of the Environment and Climate Change (“MOECC”) and, in particular, noted that specific software upgrades could require additional environmental permitting and community engagement. The IESO indicated that community engagement is an important part of the process and that it would be unreasonable to not require any community engagement for a project change, even if such change is limited to a software upgrade. The IESO also mentioned that they are currently engaged in ongoing consultations with the MOECC and that the IESO’s ultimate selection of the technologies that are eligible for this portion of the LRP II procurement will impact such consultations.

Existing PPAs and Transmission Constrained Areas

Certain participants inquired about their existing power purchase agreements (“PPAs”) with the IESO. The IESO noted that each PPA is different and contains nuances that will need to be considered. The IESO did indicate that it would consider (i) suggestions regarding appropriate PPA terms and (ii) concerns raised by an applicant who does not believe that its proposed technological upgrade and optimization can be made under the project’s current PPA.

The IESO also addressed questions regarding the submission of projects from transmission constrained areas and advised that the standard LRP II capacity evaluation would apply, since this procurement is part of the LRP II process.

LRP II RFQ Materials and Process

As previously noted, the LRP II RFQ materials will be posted online on July 29, 2016. The LRP II RFQ process will launch on August 1, 2016. Question and comment periods will be held between August 1 and August 19, 2016. The deadline for Qualification Submissions is September 1, 2016. These dates are subject to change and will be finalized once the final LRP II RFQ documents are available. For additional information, please refer to the following link:

http://www.ieso.ca/Pages/Participate/Stakeholder-Engagement/Large-Renewable-Procurement-LRP-Engagement.aspx

Large Renewable Procurement II – IESO Webinar and Process Updates

Posted in Energy – Renewable, Alternative and Clean, Independent Producers, Ontario Independent Electricity System Operator, Power, Procurement, Purchase Agreements
Ontario
Kerri LuiBrianne Paulin

As previously noted, the IESO is currently developing the Large Renewable Procurement II (“LRP II”) process. Consistent with LRP I, the LRP II process will involve two phases: a Request for Qualifications (“LRP II RFQ”) and a Request for Proposals.

On July 13, 2016, the IESO hosted a webinar to provide an overview of the LRP II RFQ process and the changes it has introduced following the feedback received on the LRP I RFQ process. The IESO indicated that the LRP II RFQ process is substantively similar to the LRP I RFQ process. Two key topics emerged from the webinar: the introduction of a simplified process for Qualified Applicants (“QAs”) and the addition of a procurement target of 50 MW from technological upgrades and optimization of existing renewable facilities.

Simplified Process

The IESO has introduced a simplified process for applicants that were deemed QAs during the LRP I RFQ process. To be eligible for the simplified process, the qualification submission of an applicant must, for each renewable fuel, be the same or less than the aggregate number of MWs and large renewable projects that the applicant qualified for under the LRP I RFQ (less the MWs and number of projects awarded during the LRP process).

Under the simplified process, the applicant must re-evidence its financial capability and must submit the IESO letter from the LRP I RFQ process (which confirmed its status as a QA). The applicant must declare that it continues to meet the LRP I RFQ development experience requirements, but does not have to submit new and current evidence to support such declaration. The applicant must also declare that (i) each LRP I Control Group Member is still a Control Group Member of the applicant and (ii) each LRP I designated team member is still a Designated Team Member. If any changes were made to a Control Group Member (i.e. in connection with a reorganization) or to any designated team members, the applicant will not be eligible for the simplified process.

50 MW of Procurement from Existing Renewable Energy Facilities

As this procurement target was not included in the LRP I process, the IESO is currently determining the types of technology that should be included in the LRP II process. The IESO has circulated questionnaires to the relevant industry groups in order to gain a better understanding of the available technologies and how such technologies could increase the capacity and annual output of an existing project. The IESO is also seeking feedback from appropriate stakeholder and industry groups as to which technologies should be considered for LRP II, the type of contracts that should be awarded, and any other information that may be relevant to this type of procurement process.

Applicants submitting proposals for such projects will not qualify for the simplified process and will have proceed through the standard process. Such applicants will also be required to submit their project’s existing power purchase agreement and provide information about each proposed upgrade and optimization (and the corresponding change to output).

Next steps and timeline

The final LRP II RFQ documents will be posted on the IESO website on July 29, 2016 and the LRP II RFQ process will be launched on August 1, 2016. Question and comment periods will be held between August 1 and August 19, 2016. The deadline for Qualification Submissions is September 1, 2016. These dates are subject to change and will be finalized once the final LRP II RFQ documents are available.

The IESO accepted feedback on the LRP II RFQ materials until July 14, 2016 and will post the results on its website on July 29, 2016. However, the IESO indicated during the webinar that it intends to continue to accept feedback after July 14, 2016 (which may be submitted via email to engagement@ieso.ca), provided that it has enough time to review the feedback before July 29, 2016.

The IESO will hold a session on July 21, 2016 from 9:30 AM to 12:30 pm, which will focus on the technical aspects of the LRP II. A discussion on the LRP II technological upgrades and optimization will follow from 1:30 PM to 2:30 PM.

For additional information on the upcoming session and the LRP II process, please refer to the following link: http://www.ieso.ca/Pages/Participate/Generation-Procurement/Large-Renewable-Procurement/default.aspx.

North American Leaders’ Summit Yields Tri-Lateral Climate, Clean Energy, and Environment Partnership Action Plan

Posted in Climate Change, Electricity, Energy – Renewable, Alternative and Clean
Selina Lee-Andersen

During the North American Leaders Summit held in Ottawa on June 29, 2016, Prime Minister Justin Trudeau, United States (US) President Barack Obama, and Mexican President Enrique Peña Nieto announced the North American Climate, Clean Energy, and Environment Partnership, which reflects the leaders’ shared vision for a clean energy economy. The Partnership is supported by an action plan (the Action Plan) that details the activities to be pursued by the three countries in order to achieve a “competitive, low-carbon and sustainable North American economy”.

As reported in our earlier blog, energy ministers from Canada, Mexico and the United States signed a Memorandum of Understanding (MOU) on Climate Change and Energy Collaboration on February 12, 2016 during the North American Energy Ministers Meeting in Winnipeg. The June 29 announcement builds on the MOU with a range of initiatives to support the North American leaders’ stated goals, including a target to achieve 50% clean power generation by 2025 through clean energy development and deployment, clean energy innovation and energy efficiency. This target will be achieved by:

  • scaling-up clean energy through domestic initiatives, including Mexico’s Energy Transition Law and new Clean Energy Certificates, the US Clean Power Plan, and Canada’s actions to further scale-up renewables, including hydro;
  • collaborating on cross-border transmission projects, including for renewable energy;
  • conducting a joint study on the opportunities and impacts of adding more renewables to the power grid on a North America-wide basis; and
  • aligning efficiency standards across all three countries, including a commitment to promote industrial and commercial efficiency through the voluntary ISO 50001 energy performance standard and to align a total of ten energy efficiency standards or test procedures for equipment by end of 2019.

On the climate change front, the leaders committed to implementing the Paris Agreement, which includes a goal to limit temperature rise this century to well below 2oC, while pursuing efforts to limit the temperature increase to 1.5oC. As the three countries work to implement their respective Nationally Determined Contributions, the parties will cooperate on climate mitigation and adaptation measures. In addition, the leaders committed to:

  • adopting a comprehensive Montreal Protocol hydrofluorocarbons (HFCs) phase-down amendment in 2016, and to reduce domestic use of HFCs;
  • phasing out fossil fuel subsidies by 2025 and urging the G20 to make commitments to reduce methane emissions in the oil and gas sector and to improve the environmental performance of heavy-duty vehicles; and
  • aligning approaches to account for the social cost of carbon and other greenhouse gas (GHG) emissions when assessing the benefits of emissions-reducing policy measures.

Further, Canada, the US and Mexico set out commitments to address short-lived climate pollutants such as methane, black carbon, and hydrofluorocarbons, which are significantly more potent than carbon dioxide. In particular, Mexico announced that it will join Canada and the US in committing to reduce their methane emissions from the oil and gas sector by 40% – 45% by 2025. To that end, the three countries will look to develop and implement federal regulations to reduce emissions from existing and new sources in the oil and gas sector as soon as possible.  The leaders also committed to developing and implementing national methane reduction strategies for key sectors such as oil and gas, agriculture, and waste management, including food waste, as well as taking action to reduce black carbon (soot) emissions in North America and promote alternatives to hydrofluorocarbons.

The Action Plan also includes a number of initiatives on transportation and biodiversity conservation, including:

  • accelerating deployment of clean vehicles in government fleets and working with industry to encourage the adoption of clean vehicles by consumers;
  • convening industry leaders and other stakeholders by spring 2017 as part of a shared vision for a competitive and clean North American automotive sector;
  • implementing aligned light-duty vehicle (LDV) and heavy-duty vehicle (HDV) fuel efficiency and/or GHG standards out to 2025 and 2027, respectively;
  • implementing aligned ultra low-sulphur diesel fuel and HDV exhaust air pollutant emission standards by 2018;
  • aligning LDV exhaust and evaporative air pollutant emission standards with full US Tier 2 standards by 2018 and fully phase in Tier 3 standards by 2025, while also implementing ultra low-sulphur gasoline standards;
  • supporting the adoption by all countries in 2016 of the market-based measure proposed through the International Civil Aviation Organization to allow for carbon-neutral growth from international civil aviation from 2020 onwards and joining the first phase of the measure adopted;
  • reducing GHG emissions from maritime shipping and continued work through the International Maritime Organization (IMO) to support implementation of a North American Emission Control Area that includes Mexico;
  • collaborating with Indigenous communities and leaders to incorporate traditional knowledge in decision-making, including in natural resource management, where appropriate;
  • renewing regional, bilateral, and trilateral activities in support of migratory bird and habitat conservation; and
  • implementing programs to conserve and improve biological corridors for whales and other species and their habitats, including their food chains and ecosystem quality.

The Action Plan represents a renewed push to strengthen continental ties among the three countries, and establishes climate change as a key policy driver for reducing GHG emissions from the oil and gas sector, boosting the development of clean power and building new cross-border transmission lines. The Action Plan also shares common objectives with provincial climate change and clean energy initiatives, including Alberta’s Climate Leadership Plan and Ontario’s Climate Change Action Plan. The newly announced initiatives under the Action Plan will no doubt feed into the development of a pan-Canadian framework for clean growth and climate change. In March 2016, four working groups were established at the First Ministers’ meeting to address four priority areas: (i) clean technology, innovation, and jobs; (ii) carbon pricing mechanisms; (iii) specific mitigation opportunities; and (iv) adaptation and climate resilience. With the working groups due to report back to the Ministers with recommendations in October 2016 and the implementation of commitments under the Action Plan, the fall agenda is shaping up to be a busy one for both provincial and federal decision-makers.

Large Renewable Procurement II

Posted in Energy – Renewable, Alternative and Clean, Independent Producers, Ontario Independent Electricity System Operator, Power, Procurement, Purchase Agreements
James Klein

On June 27, 2016 the IESO posted the draft Request for Qualifications (LRP II RFQ) and associated Prescribed Forms on the LRP Engagement page for review and comment.  According to the IESO, the LRP II RFQ builds on the LRP I RFQ and on the feedback received on the LRP I process, and the policy direction from the Minister of Energy.

 Comments and feedback on the draft LRP II RFQ and the associated Prescribed Forms are due by July 14, 2016 and can be provided via email to engagement@ieso.ca using the feedback form available on the LRP Engagement page.  In addition, a webinar will be offered on July 12, 2016, to provide an overview of the draft LRP II RFQ.

 Please visit the LRP Engagement page for more information and the latest updates.

 http://www.ieso.ca/Pages/Participate/Stakeholder-Engagement/Large-Renewable-Procurement-LRP-Engagement.aspx

 

Ripple Effect Continues: AER Issues Bulletin 2016-16 in Wake of Redwater

Posted in Energy – Conventional
Alberta
Craig SpurnKimberly HowardKimberly Macnab

On Monday, June 20, 2016, the Alberta Energy Regulator (AER) issued Bulletin 2016-16 (Bulletin) detailing its interim regulatory response to the Alberta Court of Queen’s Bench decision in Re Redwater Energy Corporation (Redwater).

As detailed in a previous post, the Redwater decision allows a trustee to disclaim certain assets (and their associated abandonment and reclamation obligations) under the provisions of the federal Bankruptcy and Insolvency Act (BIA).  In doing so, such a trustee will not be liable as a licensee under the provincial oil and gas regulatory regime in relation to the renounced assets.  Further, the trustee is not required to assume any liabilities, and will not be bound by any abandonment orders issued by the AER relating to renounced assets, in seeking approval of the sales process to sell assets remaining under its possession and control.

With respect to the AER’s Licensee Liability Rating Program (LLR Program), the result of Redwater is that the AER cannot consider the disclaimed assets in calculating a company’s Licensee Liability Rating (LLR) for the purpose of approving or refusing a transfer of licences to a purchaser who is subject to a BIA bankruptcy or receivership.  Generally, these impacts all resonate from the court’s finding that the provisions of the provincial legislation governing the actions of licensees of oil and gas assets do not apply to receivers and trustees in bankruptcy of insolvent companies insofar as they conflict with the BIA, as the federal legislation is paramount.

Bulletin 2016-16

The Bulletin confirms that the AER and Orphan Well Association (OWA) have appealed Redwater, and announces three interim regulatory measures to be effective immediately.  According to the AER, the following measures are temporary, pending the earlier of the Redwater litigation or the implementation of appropriate regulatory measures:

1.           Licence Eligibility Approvals

The AER will consider and process all applications for licence eligibility under Directive 067: Applying for Approval to Hold EUB Licences as nonroutine and may exercise its discretion to refuse an application or impose terms and conditions on a licence eligibility approval if appropriate in the circumstances.

2.           Material Changes in Licence Eligibility

For holders of existing, but previously unused, licence eligibility approvals, prior to approval of any application (including licence transfer applications), the AER may require evidence that there have been no material changes since approving the licence eligibility.  This may include evidence that the holder continues to maintain adequate insurance, and the directors, officers and/or shareholders are substantially the same as when licence eligibility was originally granted.

3.           Post-Transfer LLR of 2.0 or Higher

As a condition of transfer of existing licences, approvals, and permits, the AER will require all transferees to demonstrate they will have a LLR of 2.0 or higher immediately following the transfer.

Earlier this year, the AER had issued Bulletin 2016-10 to “remind” licensees and their directors and officers “of their statutory responsibilities when ceasing operations because of insolvency or for any other reason.”  Bulletin 2016-10 specifically noted licensees’ responsibility to obtain AER approval to transfer licences, approvals, or permits to an eligible party with an LLR of at least 1.0 post-transfer, which was increased to a LLR of 2.0 in the new Bulletin.

AER’s Justification for the Bulletin

The Bulletin could have significant and far-reaching impacts to the oil and gas industry and Alberta’s economy, including preventing new licensee entrants, reducing competition for leases, properties and assets, and creating a chilling effect on investment interest.  Notwithstanding these impacts, it is our understanding that the AER felt it was necessary to quickly formulate an interim response to Redwater and as such issued the Bulletin without extensive consultation.

In justifying its regulatory measures, the AER stated the following within the Bulletin:

  • The changes are interim measures to minimize risks to Albertans and the AER intends to work with industry and other stakeholders and the Government of Alberta to develop broader and more permanent regulatory measures in accordance with government policy in response to Redwater.
  • While the AER recognizes that these measures will inconvenience some stakeholders, they are necessary to ensure the continued protection of Albertans and confidence in both the regulatory system and AER licensees; and
  • The post-acquisition minimum LLR of 2.0 was justified on the following basis: (i) it only applies to licensees wishing to acquire AER-licensed assets; (ii) it is required because the AER has observed licensees maintaining a LLR at the minimum level (i.e. 1.0) and purchasing assets, only to find themselves in financial difficulty shortly after the acquisition; and (iii) licensees have a number of ways to achieve a LLR of 2.0 or higher, including posting security, addressing existing abandonment obligations, or transferring additional assets.

What’s Next?

While ensuring that abandonment and reclamation obligations are borne by industry is within the public interest, unilateral strategies and policy changes will only compound the crippling effects on the Canadian oil and gas industry caused by current economic conditions and global oversupply and competition.  The AER appears to have recognized this in the Bulletin by committing to work with industry, stakeholders and the Government of Alberta in developing broader, more permanent regulatory measures in accordance with government policy.

The magnitude of the abandonment and reclamation liabilities in Alberta must be viewed in context in order to fully understand the size and scope of the issue.  The liabilities are magnified through the lens of the AER’s LLR Program, which looks primarily at the licensee/operator of the assets rather than all of the working interest participants.  In contrast, although the licensee/operator is the only party subject to the AER’s LLR Program, the OGCA and operating procedures provide that abandonment and reclamation obligations are shared by all working interest participants.  The vast majority of working interest participants in the province are solvent, viable companies with the financial capacity to fund their abandonment and reclamation obligations.

When viewed in light of the number of parties to whom responsibility can be cast, the magnitude of the risks is not nearly as large as originally perceived.  Changes to the LLR Program for the purposes of casting a wider net would provide a more accurate assessment of the actual risks and liabilities for Albertans.

However, the Canadian oil and gas industry is currently under significant financial hardship, as evidenced by tens of thousands of job terminations, termination of billions in capital spending, 10% rig utilization, and 25% office vacancy rates.  Among other challenges, low commodity prices, lack of access to international markets, competing international resource developments, and new carbon emissions regimes all contribute to a very tough economic environment.  Nonetheless, the oil and gas industry remains a substantial part of the Canadian economy, and it is the backbone of the provincial economy.

In this current period of restricted cash flow, piling additional obligations and financial hardship solely on licensees/operators for abandonment and reclamation liabilities risks the long-term viability of the industry in Western Canada.  While industry must help the AER and provincial government solve the problem of abandonment and reclamation liabilities, an important point that seems to be missing from the debate is that the best way of funding those liabilities is ensuring the continuation of a healthy and robust industry.  Measures to increase the burden on industry for the purpose of addressing abandonment and reclamation liabilities today and in the future must be weighed carefully against ensuring a return to a more robust provincial economy, which benefits all Albertans.

Further, increasing the LLR for transfers to 2.0 while existing licensees must only meet an LLR of 1.0 raises a number of questions, including related to fairness.  While requiring transferees to meet a LLR of 2.0 or greater, the Bulletin does not impose a similar obligation on transferors – presumably there is an equal risk that a transferor’s LLR can dip to 1.0?  Further, we speculate whether, in order to meet the required threshold, the higher LLR for transferees could lead to the disclaimer of more borderline economic, but currently inactive, wells.  What happens if a transferee’s LLR dips below 2.0 post-acquisition – would it be required to take steps to maintain a LLR of 2.0 or greater, or is 1.0 sufficient (as it is for other licensees)?

Clearly the AER and industry ought to be working together to find a long-term and viable solution to the funding and retirement of abandonment and reclamation liabilities.  In fact, we understand that discussions of this nature have begun among the AER, the Explorers and Producers Association of Canada (EPAC), the Canadian Association of Petroleum Producers (CAPP) and potentially others.

The Quebec Government introduces the Petroleum Resources Act

Posted in Québec
Québec
Pierre BoivinPierre RenaudDominique Amyot-BilodeauMartin Thiboutot

On June 7, 2016, the Quebec Minister of Energy and Natural Resources, Mr. Pierre Arcand (the “Minister“) introduced Bill No. 106 at the National Assembly (An Act to implement the 2030 Energy Policy and to amend various legislative provisions) (the “Bill“). Among other things, this Bill would enact the new Petroleum Resources Act in replacement of the existing provisions of the Mining Act (CQLR c M-13.1) that currently regulate hydrocarbons mining activities in the province.

This Bill had been expected for several months and would significantly modify the legal framework applicable to the development and production of hydrocarbons in Quebec. It purports to govern the development of petroleum resources in the province of Quebec while ensuring the safety of persons and property, environmental protection, and optimal recovery of the resource. The bill also aims at ensuring that mining work involving hydrocarbons is performed in compliance with the greenhouse gas emission reduction targets set by the Quebec Government. Continue Reading

The Quebec Government introduces its Bill to Modernize the Environmental Authorization Scheme

Posted in Québec
Québec
Dominique Amyot-BilodeauCindy Vaillancourt

On June 7, 2016, the Quebec Minister of Sustainable Development, Environment and the Fight against Climate Change, Mr. David Heurtel (the “Minister“), introduced Bill 102[1] at the Quebec National Assembly, which aims at modernizing the environmental authorization scheme established by the Environment Quality Act. If adopted in its current form, this bill could have important repercussions on the environmental assessment procedure and on the authorization scheme of industrial projects carried out in Québec. Continue Reading

Quebec Government Introduces Legislation Implementing its 2030 Energy Policy

Posted in Plan Nord, Québec, Régie de l’énergie, Regulation
Québec
Daniel BénayMathieu LeBlancMason Gordon

On June 7, 2016, the Quebec Government introduced before the National Assembly Bill 106, An Act to implement the 2030 Energy Policy and to amend various legislative provisions. The 2030 Energy Policy has the principal goal of making Quebec, by 2030, a North American leader in renewable energy and energy efficiency. Continue Reading

What Every Stakeholder Needs to Know About Lobbyist Registration

Posted in Energy – Conventional, Energy – Renewable, Alternative and Clean, Federal
AlbertaBritish ColumbiaOntarioQuébec
Mathieu LeBlanc

The following article published in our firm’s newsletter could be of interest to many readers active in the energy industry across Canada. It discusses the applicable rules for lobbyist registration in Ontario, Ontario municipalities, Québec, British Columbia, Alberta and at the federal level. Continue Reading

When the Levy Breaks: Alberta Government Tables the Climate Leadership Implementation Act

Posted in Carbon Tax, Climate Change, Climate Policy, Energy – Renewable, Alternative and Clean
Alberta
Kimberly HowardSelina Lee-AndersenKimberly Macnab

On May 24, 2016, Alberta’s provincial government tabled Bill 20 for first reading in the legislature.  Otherwise known as the Climate Leadership Implementation Act (Climate Act), Bill 20 furthers the implementation of the provincial government’s Climate Leadership Plan released in November 2015.

Bill 20 provides for a carbon levy on consumers of fuel, and creates an agency called Energy Efficiency Alberta, as part of the provincial government’s ongoing commitment to climate change policies and initiatives.   Notably absent from Bill 20 are any details on initiatives or incentives for transitioning to renewable energy sources.

More information on this development may be found on McCarthy Tétrault’s Canadian ERA Perspectives blog.

Ontario Energy Agency Could Correct Province’s Past Policy Mistakes

Posted in Climate Change, Emissions Regulation, Ontario Ministry of Environment
Ontario
George Vegh

The Ontario government’s proposed creation of an agency with a mandate to reduce carbon emissions by buying offsets, funding cleaner factories and buildings, and co-ordinating rooftop solar and energy conservation has been met with skepticism, particularly in light of the province’s experience with energy agencies.   However, there is also reason for optimism.  Read the whole article here.

The AESO’s Renewable Electricity Incentive Program Marches Forward

Posted in Climate Policy, Electricity, Energy – Renewable, Alternative and Clean, Power, Procurement, Utilities
Alberta
Kimberly MacnabKimberly Howard

As noted in an earlier post, on March 3, 2016, the government announced that the Alberta Electric Systems Operator (AESO) has been chosen under the province’s Climate Leadership Plan to develop and implement a renewable electricity incentive program (Renewable Electricity Program or REP) to add additional renewable generation capacity into Alberta’s electricity system.

The expected timeline of this process is as follows:

Q1-Q2 2016

Phase 1 of stakeholder engagement process closed on March 24, 2016.

May 2016

Provincial government has requested AESO’s draft recommendations on program design.

Q2-Q3 2016

Program development.

Q4 2016

First competition for new REP projects.

Q2 2019

Expected in-service date of first REP projects.

On May 5, 2016, the AESO released an update of the stakeholder engagement process and the development of its recommendations to be provided to the provincial government in the next month (Update to Stakeholders).

In its Update to Stakeholders, the AESO summarized the stakeholder feedback received in Phase 1 of the stakeholder engagement process, and commented on its next steps.

Next Steps

The next step of the AESO’s process will involve targeted, one-on-one follow-up meetings over the next few weeks with those parties whose responses may potentially impact the AESO’s recommendation respecting the REP design, and which may inform key features of the first procurement under that program.

The AESO also provided a few details that are expected (although not yet governmentally approved) to delineate the scope of the first REP procurement, namely:

  • The definition of “renewable” is anticipated to align with the definition used by Natural Resources Canada.
  • The procurement is anticipated to be fuel-neutral.
  • Facilities may be expected to be in-service in 2019.
  • It is anticipated that the existing transmission system will be leveraged.

The AESO plans to release information respecting contractual provisions for the first procurement in the fall of this year, and noted its commitment to ongoing engagement with industry on subsequent REP procurements and updates on the REP.

Phase I Stakeholder Feedback

Stakeholders self-identified into one of three main categories: (i) developers/investors; (ii) associations and environmental public policy groups; and (iii) others (which included a Transmission Facility Owner, and ancillary service  providers and manufacturers, among others).  Most of the feedback summarized by the AESO was garnered from developers/investors.

Further Information Needed

Respondents indicated that more information was needed in a number of areas prior to making a decision to invest in Alberta.  This included clearer regulatory processes for specific fuel types, and more information on the coal retirement schedule, as well as defined procurement and overall renewable development targets.

The definition of “renewable” was also requested, which the AESO has noted in this update will parallel the definition used by Natural Resources Canada.  Other key informational gaps included information on existing transmission capacity and areas of constraint, which is of particular importance to wind development in southern Alberta, given existing system constraints and plans to continue transmission reinforcement in the region.

Investment Considerations

Respondents also provided information on their opinions as to key considerations and barriers to investing in renewable energy projects, and noted, among others, the current power pool prices in combination with the capital-intensive nature of renewable energy projects.  Other issues included work already underway on the coal phase-out schedule, changes to the carbon pricing regime and market prices, as well as regulatory and interconnection timelines, and clarity about the level of support being provided.  Another key issue identified was the ability to obtain financing at attractive rates.

Barriers to Energization by 2018

There are a number of projects currently advancing through the AESO’s connection queue which have the potential to achieve energization by the end of 2018.  However, the AESO noted that most developers found that 2018 is a challenging timeline based on a number of factors, including: (i) conducting environmental studies and obtaining environmental permitting; (ii) obtaining interconnection and other regulatory approvals; (iii) obtaining financing or the potential for financing delays; (iv) conducting procurement and construction for larger projects; and (v) the visibility of the coal phase-out schedule.

Recommendations to Address Investment Considerations

  • The provision of financial support which could take a variety of forms (i.e., capped/uncapped REC, contract for differences, power purchase agreement, feed-in-tariff agreement, government financing etc.).
  • The introduction through the REP of carve-outs (i.e. for specific fuel types, to advancement other socio-economic objectives).
  • Greater clarity with respect to the long term plan / schedule for the procurement of renewable electricity generation, in addition to any short and long term targets.
  • Greater clarity with respect to the coal phase-out schedule.
  • Exploring whether there may be options to build renewable energy projects on public land.
  • Making transmission modelling/transmission capacity information with respect to the grid available.

Stakeholder Comments on Timelines

Finally, the expected timelines for different resources were provided by stakeholders as 4-6 years for wind, 1.5-3 years for solar, 2-3 years for biomass, 3-7 years for geothermal, and 10-14 years for large hydro projects.

Conclusions

It is clear from the AESO’s summary of stakeholder feedback that renewable energy developers are still missing information which will affect investment decisions in the province.  Many similar themes appear to have arisen throughout the consultation process, chief among them being the lack of certainty and visibility surrounding the province’s climate change plans such as incentive programs and the coal phase-out.

As the AESO’s mandate letter for developing the REP states that the AESO must prepare a plan for review and consideration by the provincial government no later than May 2016, observers can expect a significant increase in the information available on the proposed form of the REP in the near future.  Stay tuned.

Sign of the Times: 177 Nations (and counting) Ink the Paris Climate Agreement while the World Bank and IMF Push for Carbon Pricing

Posted in Climate Change, Climate Policy, Emissions Regulation, Emissions Trading
Selina Lee-Andersen

As recently reported on our Canadian ERA Perspectives blog, the Paris Agreement was opened for signature on April 22, 2016 at the United Nations (UN) Headquarters in New York. The Paris Agreement, which was adopted by the parties to the United Nations Framework Convention on Climate Change (UNFCCC) on December 12, 2015, will remain open for signature until April 21, 2017.

As of April 29, 2016, 177 countries had signed the Paris Agreement, 15 of which had also deposited instruments of ratification. Canada is expected to ratify the Paris Agreement in 2016 along with Australia, Argentina, Cameroon, China, France, Mali, Mexico, the Philippines and the United States. The Paris Agreement will enter into force on the thirtieth day after the date on which at least 55 parties to the UNFCCC accounting in total for at least an estimated 55% of the total global greenhouse gas emissions have deposited their instruments of ratification, acceptance, approval or accession with the UN Depositary.  While the United States and China issued a joint statement on March 31, 2016 pledging rapid accession to the Paris Agreement, the two nations represent approximately 38% of global emissions. This means that other significant emitters and a number of additional nations will be needed to meet both the emissions and number thresholds that will bring the Paris Agreement into force.  Entry into force could happen as early as 2017 or 2018, but given the varying timelines for countries to complete their domestic approval processes, the timing of entry into force is uncertain at this time. The World Resources Institute has unveiled its Paris Agreement Tracker, an interactive tool which enables users to monitor countries’ progress toward ratifying the Paris Agreement.

In related climate change policy news, the World Bank and International Monetary Fund (IMF) have created a Carbon Finance Unit that will provide financial and technical assistance to countries that are creating carbon pricing systems.  Leveraging their economic and technical expertise, the World Bank and IMF will work together with developing countries to help them create carbon pricing systems. To date, the World Bank has given an $8 million dollar grant to China, which is developing what is expected to be the world’s largest cap-and-trade program. South Africa and Chile have also received similar grants from the World Bank. The IMF is advising countries on how best to introduce carbon pricing as a means to generate revenue while simultaneously reducing their GHG emissions.

On April 21, 2016, the World Bank, IMF, Organization for Economic Cooperation and Development and the heads of state of Canada, Chile, Ethiopia, France, Germany and Mexico released a statement calling for more carbon pricing.  The goal is to reach enough countries to cover 25% of the world’s GHG emissions by 2020 and 50% of emissions by 2030.

Ontario Court of Appeal rules OEFC changes to calculation of price adjustment index breach the terms of power purchase agreement

Posted in Electricity, Independent Producers, Power, Purchase Agreements
Ontario
Héloïse Apestéguy-ReuxLynn ParsonsJustin Shoemaker

On April 19, 2016, the Ontario Court of Appeal released its decision in Iroquois Falls Power Corporation v. Ontario Electricity Financial Corporation. The decision concerned a dispute between several non-utility generators (“NUGs”) and the Ontario Electricity Financial Corporation (“OEFC”) over changes to a price adjustment index contained within the long-term contracts for the purchase of electricity generated by the NUGs.

This change affected a component portion of a measure known as Total Market Costs (“TMC”), which measure was used to derive the price adjustment index. At the heart of the dispute was an issue of contractual interpretation—whether or not the terms of the power purchase agreements (“PPAs”), and in particular, the price adjustment indices contained within them, required the calculation of the component portion of the TMC to reflect the actual costs of providing existing and new electricity generation. Continue Reading

Court Dismisses Appeal Related to the Darlington Nuclear Refurbishment

Posted in Energy – Conventional, Nuclear, Projects
Ontario
Joanna Rosengarten

On April 13, 2015, the Federal Court of Appeal dismissed the appeal related to the environmental assessment (“EA”) for the refurbishment and continued operation of the Darlington Nuclear Generating Facility (the “Project”). The appeal was from the Federal Court’s earlier decision dismissing a judicial review application related to the EA for the Project. Continue Reading

Phase I of Ontario’s Large Renewable Procurement Process Concluded

Posted in Electricity, Energy – Renewable, Alternative and Clean, Ontario Independent Electricity System Operator, Power, Procurement, Projects
Ontario
Christopher Zawadzki

The Independent Electricity Systems Provider (IESO) has announced that the 16 contracts offered on March 10, 2016 for Phase I of the Large Renewable Procurement process (LRP I) have now been signed and executed. The execution of the contracts concludes the LRP I process. Moving forward, contracted projects will be required to obtain all necessary licenses and approvals before they can be constructed and operated. These processes are separate from the IESO’s procurement activities and will involve additional community engagement. Continue Reading

Ontario Launches Phase II of the Large Renewable Procurement Process

Posted in Electricity, Energy – Renewable, Alternative and Clean, Ontario Independent Electricity System Operator, Ontario Ministry of Energy, Power, Procurement, Project Finance
Ontario
Christopher Zawadzki

The Ontario Ministry of Energy has announced the launch of the second phase of the Large Renewable Procurement (LRP) process (LRP II). The LRP is a competitive bid process for procuring large renewable energy projects in Ontario larger than 500 kilowatts. Continue Reading

Québec’s New Energy Policy

Posted in Québec Hydro-Québec, Régie de l’énergie
Québec
Daniel BénayThomas LavierJacob StoneGrégory Larroque

The Québec Government has unveiled its energy policy for 2016-2030, entitled “Politique énergétique 2030, L’énergie des Québécois – Source de croissance” (Energy Policy 2030, The Energy of Quebecers – a Source of Growth). The policy is the result of two major public consultations that took place in 2013 and 2015. It follows the previous policy in effect from 2006 until 2015 and aims to set out a clear vision of energy development in Québec as well as addressing the concerns of certain stakeholders. Continue Reading

Politique énergétique 2030 du Québec (in French)

Posted in Projects, Québec, Québec Hydro-Québec, Régie de l’énergie
Québec
Daniel BénayThomas LavierGrégory LarroqueJacob Stone

This article will be translated to English shortly.

Le gouvernement québécois a dévoilé aujourd’hui sa politique énergétique pour la période 2016-2030, intitulée « Politique énergétique 2030, L’énergie des Québécois – Source de croissance ». La Politique est le fruit de deux consultations populaires importantes qui ont eu lieu en 2013 et en 2015. Elle intervient à l’expiration de la politique précédente (2006-2015) et vise à énoncer une vision claire du gouvernement en matière de développement énergétique et à répondre à certaines préoccupations contemporaines. Continue Reading

Phasing Out Coal: Alberta Names the Coal Facilitator

Posted in Climate Change, Climate Policy, Coal, Emissions Regulation, Energy – Conventional, Power
Alberta
Kimberly HowardKimberly Macnab

On March 16, 2016, the Government of Alberta finally named the coal facilitator, and announced the next steps for its plan to phase-out coal by 2030.  The province appointed Terry Boston to act as the province’s independent coal phase-out facilitator, and released details of Boston’s mandate and next steps.

Boston’s Prior Experience

Boston is the recently retired CEO of PJM Interconnection (PJM), which is a regional transmission organization in the United States.  PJM controls approximately 105,502 km of transmission lines and manages 186,000 MW of generation serving 61 million people.

Boston has been involved with energy initiatives around the world, including consultation with White House staff and Congress, and has testified before the Federal Energy Regulatory Commission, and served on a number of corporate boards within the electricity industry.  Boston is a recognized expert in grid reliability and transmission.

Purpose of the Facilitator

Boston is tasked with presenting options to government that will strive to maintain the reliability of Alberta’s electricity grid, maintain stability of prices for consumers, and avoid unnecessarily stranding capital.

Desired Outcomes of the Facilitation Process

The desired outcomes are those which have been iterated in the Climate Leadership Plan, namely, that by 2030, two-thirds of Alberta’s coal generation capacity will be replaced by renewable energy, and one-third will be replaced by natural gas.  The provincial government has repeatedly promised that “throughout this process, government will ensure that workers, communities and affected companies are treated fairly.”

Facilitator’s Approach and Deliverables

One key aspect of Boston’s work is that he will engage with the three coal-fired generators who are currently operating units beyond 2030, with the support of Alberta Energy’s Coal Secretariat and the Alberta Electric System Operator.

Because twelve of Alberta’s eighteen coal-fired generating units are expected to shut down prior to 2030 under the current federal regulations, the facilitator’s mandate is focused on the six generating units remaining after 2030.  As set out in the previously released Fact Sheet on the coal phase-out, this will entail discussions with Capital Power, TransAlta, and ATCO Power about the Keephills 3, Genesee 1, 2 & 3, and Sheerness 1 & 2 thermal generating units.

What’s Next?

In addition to consultation with affected generators, the government is also engaging in a parallel process of consultation with the goal of ensuring ongoing support for coal communities and workers.  More announcements on the next stage of these consultations are expected in the next month.

In another recent announcement, the March 8, 2016 Speech from the Throne touched on the implementation of climate change initiatives, noting that one of the elements of “investing in a clean energy future” will be a Climate Leadership Implementation Act, designed to put the Climate Change Plan into action.  Further detail on this legislation, and what it may mean for Albertans, is still up in the air.

 

BC Hydro Releases Long-Anticipated Updates to Standing Offer Program and Introduces Micro-Standing Offer Program

Posted in BC Hydro, Electricity, Energy – Renewable, Alternative and Clean, Independent Producers, Procurement, Purchase Agreements
British Columbia
Ainslie HurdSebastian NishimotoSven Milelli

Updates to the Standing Offer Program (SOP)

On March 4, 2016, BC Hydro released a new version (Version 3.1) of its SOP Rules to address feedback it received during First Nation and stakeholder consultation meetings and focus group discussions conducted over the last few years. The SOP offers small-scale, clean energy projects in British Columbia with capacities between 100 kW and 15 MW the opportunity to enter into energy purchase agreements (EPAs) with BC Hydro. An EPA requires the project developer to sell all energy from the project to BC Hydro for a term of 20 to 40 years commencing on commercial operation date (COD).
Version 3.0 of the SOP Rules introduces several notable changes:

  • Key vs. Standard Eligibility Requirements – eligibility requirements have been reorganized into key eligibility requirements and standard eligibility requirements, with key eligibility requirements serving as an initial threshold within the SOP review process.
  • Annual Energy Volume Target – the developer’s target COD must be in a year where there is sufficient room available in BC Hydro’s annual SOP energy volume target (currently set at 150 GWh/year). This new target volume management system is designed on a first come, first served basis. If the energy volume target for a year has been met, a project will be deferred until the next year with available volume.
  • Public Utility Customers – customers of public utilities other than BC Hydro cannot apply under the SOP, except for customers that take only back-up or start-up electricity service from that public utility.
  • Additional Generators – new generators added to sites with existing generation are no longer eligible under the SOP.
  • Customer-Based Generation – a simplified rule for projects behind a BC Hydro customer load allow these projects to apply under the SOP but BC Hydro will only purchase energy on a net-of-load basis.
  • First Nations Consultation – BC Hydro now considers the issuance of land tenure, permits and licenses as sufficient evidence that a Crown agency has completed its First Nations consultation.
  • Conflicts of Interest Rule – pursuant to a new conflicts of interest rule, a developer must not be in or have the potential to be in an actual, apparent or deemed conflict of interest as a result of entering into an EPA with BC Hydro.
  • Cluster Rules – revised rules regarding project clusters and common generation facilities clarify that such arrangements are permitted but must not exceed 15 MW in the aggregate.
  • Pre-Application Meetings – pre-application meetings remain optional but are strongly recommended. There is a focus on providing eligibility and cost information as early as possible in the development process.
  • Staged Review Process – SOP application and review processes are now organized into stages – BC Hydro will undertake an eligibility assessment before it requests a system impact study (previously referred to as an interconnection study). Rigid timelines for EPA offer and acceptance have been replaced with the more general requirement that such steps occur “within a commercially reasonable period of time”.
  • Changes to EPA – the Standard Form EPA has been streamlined, and now contains only three appendices instead of 12. Other changes to the Standard Form EPA include:
    • clarification that BC Hydro is not obligated to accept delivery of power in excess of the specified hourly energy limits;
    • the requirement, as a condition to COD, that a Project must have generated energy for 54 hours during a period of 72 continuous hours; and
    • the reference to First Nations consultation depending on evidence of Aboriginal claims under section 35 of the Constitution Act, 1982.

The New Micro-Standing Offer Program (Micro-SOP)

On March 4, 2016, BC Hydro introduced the Micro-SOP, which is designed for very small-scale clean energy projects in British Columbia with capacities between 100 kW and 1 MW. The Micro-SOP is only available to First Nations and communities, including municipalities, not-for-profit groups, all organizations of the public and agricultural sectors.

To participate in the Micro-SOP, a First Nation must show that it has significant beneficial ownership of, and will actively participate in, the project. A community group must provide evidence that it has at least 50% control and beneficial ownership of the project. Provided that they satisfy these beneficial ownership requirements, First Nations and community groups are still eligible for Micro-SOP if they partner with private sector independent power producers to develop the project. As with the SOP, there must be sufficient room in BC Hydro’s energy volume target of 150 GWh/year at the time of the Micro-SOP application.

The Micro-SOP differs from the SOP in certain key respects:

  • Non-BC Hydro Utility Service Areas – projects located within another utility’s service territory or jurisdiction, such as the FortisBC service area, are not eligible.
  • Cluster Rules – project clusters and common generation facilities are not eligible.
  • Time of Delivery Price Adjustments – there are no time of delivery price adjustments.
  • Smart Meters – smart meters for measuring energy output and/or consumption are to be used wherever possible.
  • Interconnection – all projects must be directly interconnected to BC Hydro’s distribution system.
  • Standard Form Agreements – the standard form interconnection agreement and EPA are simplified.
  • Screening Studies – there is a mandatory screening study which estimates the interconnection requirements for the project (subject to a $5,000 fee).
  • EPA Term – the EPA term is 5 to 40 years from COD of the project.