Canada: Federal Government Proposes New Regulations On Coal-Fired Electricity Generation

Introduction

Last month the federal government published proposed regulations for coal-fired electricity generation units.1 This bulletin summarizes the proposed regulations, articulates the likely response from interested groups, and sets out some opportunities that could emerge as a result of the proposed changes.

The proposed regulations

The regulations will apply to units that produce electricity by means of thermal energy using coal (including petroleum coke and synthetic gas derived from coal), whether in conjunction with other fuels or not.

The heart of the proposed regulations limits each unit's emissions to 375 tonnes of carbon dioxide for each gigawatt-hour (GWh) of electricity produced from all fossil fuel sources in a calendar year. This limit was set with a view to including it in the gas-fired electricity generation regulations expected to be proposed over the coming years as part of the government's long-term strategy to reduce overall emissions from the electricity sector. However, these limits only apply to coal-fired units commissioned after July 1, 2015, and those that have reached the end of their useful lives. In most cases, a unit has reached the end of its useful life on the later of 45 years from its commissioning or 2020.

The calculation of the intensity limit allows for the exclusion of emissions that are captured, transported and stored, but does not allow for any exclusion of emissions derived from coal-derived synthetic gas (clean coal), natural gas, or any other fuel except biomass. The limit calculation is on a unit-by-unit basis, and not on an operation-wide basis.

Temporary exemptions (until 2024 for new units) are available if the units are designed, or can be retrofitted, to permit integration with a carbon capture and storage system. This exemption is available so long as the carbon capture system is economically and technically feasible and there is an implementation plan for capturing and storing carbon. Shorter temporary exemptions also exist for old units connected to existing units with carbon capture systems, and in emergencies. There are also provisions for certain existing units to be substituted for units that reach the end of their useful lives before 2020.

All coal-fired units must be registered with the minister. As well, an annual report must be filed for each new unit, old unit, substituted unit and unit tied to an old unit with a temporary exemption.

The regulations are open for comment until October 26, 2011. Final regulations are expected to be published in 2012 and come into effect on July 1, 2015.

Coal in Canada

According to the National Energy Board, in 2006 Canada generated just over 16,000 MW of electricity (13% of total generation) from the combustion of coal. Of this, 38% was generated in Alberta while 39% was generated in Ontario.2 The provinces with the greatest reliance on coal-fired generation are Alberta, Nova Scotia and Saskatchewan, where coal respectively accounts for 53%, 52% and 46% of electricity generation. Ontario has already committed to ending coal-fired generation by the end of 2014, while Alberta plans to retire 2,500 MW of coal-fired generation by 2023.

Reaction from industry

As expected, industry is concerned that the costs to change the electricity mix and develop and implement carbon capture and storage technologies will be passed on to consumers and businesses. The proposed regulations thus do not consider the true national or regional financial impact. Canadian businesses are also concerned about the lack of comparable regulations globally, especially in the United States; such disparity could reduce competitiveness of companies, especially those operating in Alberta and Saskatchewan—provinces without the luxury of hydroelectric or nuclear generation capabilities.

The inability for units to exclude clean coal from their calculation of the intensity limit will likely be an issue for companies involved in coal production and clean coal technology development and implementation. Clean coal, it is argued, is a cost-effective technology to reduce emissions that ought to be considered more seriously in Canada's future energy mix.

Further, the proposed regulations might induce certain provinces to rely more heavily on natural gas. The government has indicated that it intends for the intensity limits set forth in the proposed regulations to dovetail with those that will be introduced and applied to natural-gas-fired units; however, it is not clear when and exactly what intensity limits will be placed on gas-fired generation facilities. This creates uncertainty for companies and utilities attempting to make long-term electricity production plans, including those deciding if and how to move toward using natural gas. If the same intensity limit applies to future gas-fired generation regulations, industry is concerned it can only be met by the most efficient gas-fired units and will not be achievable at all for gas-fired units operating at high elevations, in colder temperatures, or intermittently to address off-peak energy requirements.

Lastly, the electricity generation industry wants the government to make the regulations more flexible by allowing generators to measure intensity limits on an operation-wide basis, instead of on a unit-by-unit basis. This change could help businesses in the energy sector make larger investments in better technology, rather than inefficiently spread those investment dollars out to retrofit existing units.

Reaction from environmental groups

Some environmental proponents have indicated that the proposed regulations do not go far enough. Because the regulations only apply to new and old coal-fired units, they will have no impact on reducing emissions from existing coal plants that are not at the end of their useful lives; this could mean two-thirds of operating coal plants will not fall under the regulations until 2020, and nine of Canada's 51 coal plants could continue to operate until 2030. The temporary exemptions and substitution provisions will only further delay the phasing-out of coal.

Further, by targeting only units commissioned after July 1, 2015, critics fear there will be a rush to commission coal plants prior to that date to avoid the regulations. In particular, a proposed 500 MW coal-fired generation plant in Alberta could go ahead without the need to comply with the regulations resulting in, some say, 1.5 million tonnes of emissions per year for 45 years. Critics argue the proposed regulations should come into effect when the regulations are published in 2012, and the commissioning trigger date should be well before 2015.

As well, critics cannot explain why the temporary exemption is available for plants that merely plan to implement carbon storage systems considering such technology is already available and the costs of such systems will not decrease by 2020.

Opportunities

Whether the government has found the perfect balance remains to be seen. If the regulations go ahead as planned, and if they have an effect on Canada's electricity generation industry, opportunities will emerge for businesses with the foresight and ability to capitalize on the forthcoming change. Opportunities that may emerge include:

  • Carbon Capture and Storage. If governments and electricity generators want to continue to use coal under the proposed regulations, they may have to adopt new technologies to bring existing coal plants into compliance. This will likely mean new government spending and private-public partnerships to develop, plan and implement carbon capture and storage systems. This could create new opportunities for industry to access public money to develop and perfect carbon capture technologies and expertise in Canada that could then be deployed globally, especially in nations heavily reliant on coal-fired generation, particularly China.
  • Biomass. The proposed regulations do not apply to biomass, which could create opportunities to establish biomass-fired units, or repower retired or existing units on biomass. This could grow markets for bio-based fuels, and spur the development of technologies and expertise surrounding biomass electricity generation that could be used both in Canada and abroad. Businesses in land-rich Alberta, Saskatchewan and Ontario could look at biomass to help replace coal plants, if the economics make sense.
  • Renewables. Wind and solar generation could also experience increased interest as alternatives to coal-fired units that may eventually be retired or never built. Stable, long-term financial incentives to encourage this shift, along with removing regional and local barriers to renewable energy implementation, could result in opportunities for businesses in Canada, especially in Ontario, Alberta, Saskatchewan and Nova Scotia, that are poised to move on renewable energy.
  • Electricity Marketing. Exports from provinces with an abundance of hydroelectric and renewable capability to coal-reliant jurisdictions could mean new opportunities for participants in the energy market and developers of transmission infrastructure. This opportunity could particularly apply to those operating in markets connecting Ontario and Nova Scotia.

Summary

As consultation on the proposed regulations carries through the fall, companies involved in a host of industries across the country should consider the potential impacts, whether positive or negative, on their businesses and seize the opportunity to comment. Regardless of the details in the final regulations, it is clear the federal government plans to discourage reliance on coal-fired power and reduce greenhouse gas emissions in the electricity generation sector. In the long term, this should result in new market opportunities for companies that can strategically position themselves.

Footnotes

1 "Reduction of Carbon Dioxide Emissions from Coal-Fired Generation of Electricity Regulations," Canada Gazette Vol. 145, No. 35 – August 27, 2011.

2 "Coal-Fired Power Generation - An Overview - Energy Brief," National Energy Board of Canada, September 2008, based on information from Statistics Canada, 2006.

Norton Rose OR LLP

Norton Rose OR LLP is a member of Norton Rose Group, a leading international legal practice offering a full business law service to many of the world's pre-eminent financial institutions and corporations from offices in Europe, Asia Pacific, Canada, Africa and the Middle East.

The Group's lawyers share industry knowledge and sector expertise across borders to support clients anywhere in the world. The Group is strong in financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and pharmaceuticals and life sciences.

Norton Rose Group has more than 2600 lawyers operating from 39 offices in Abu Dhabi, Amsterdam, Athens, Bahrain, Bangkok, Beijing, Brisbane, Brussels, Calgary, Canberra, Cape Town, Dubai, Durban, Frankfurt, Hamburg, Hong Kong, Johannesburg, London, Melbourne, Milan, Montréal, Moscow, Munich, Ottawa, Paris, Perth, Piraeus, Prague, Québec, Rome, Shanghai, Singapore, Sydney, Tokyo, Toronto and Warsaw; and from associate offices in Dar es Salaam, Ho Chi Minh City and Jakarta.

Norton Rose Group comprises Norton Rose LLP, Norton Rose Australia, Norton Rose OR LLP, Norton Rose South Africa (incorporated as Deneys Reitz Inc), and their respective affiliates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions