Canada: Renewable Energy Progress: Alberta's Proposed Renewable Electricity Act And Key Provisions Of The RESA

On November 3, 2016, the Minister of Environment, Shannon Phillips, announced the introduction of the Renewable Electricity Act (the Act). The Act is currently progressing through second reading and given the current pace is expected to be proclaimed in force prior to the end of 2016. The Minister also announced that the first Renewable Electricity Program (REP) will be developed based on the Renewable Electricity Program Recommendations issued by the Alberta Electric System Operator (AESO) in May 2016 (AESO Recommendations). On November 10, 2016, the AESO released the much anticipated key provisions for the proposed form of Renewable Electricity Support Agreement (RESA) for comment by the industry. Further commentary on each of these developments are set forth below.

These actions by the Government represent important steps towards the implementation of its Climate Leadership Plan and its objective of adding 5,000 MW of renewable electricity capacity in Alberta by 2030. The addition of 5,000 MW of renewable electricity is estimated by the Government to result in C$10.5 billion in new private investment and 7,200 new jobs in Alberta. The Climate Leadership Plan, which was first announced by the Government in November 2015 and set a goal of generating 30 percent of Alberta's electricity from renewable sources by 2030, is summarized in an earlier post, AESO's Recommendations on Renewable Electricity Program.

The Act

The Act grants substantial powers to, and imposes certain obligations on, the Minister (likely to be the Minister of Energy) to:

  • implement the REPs intended to achieve the Government objectives, including powers to set targets, monitor progress (including making its findings public);
  • direct the AESO, as independent system operator;
  • develop a proposal for the development and implementation of renewable electricity programs to meet those targets and promote specific other goals (i.e., environmental, social and economic);
  • establish the terms of the RESA for the applicable REP; and
  • take security in applicable generating units.

Although the details of each REP must be submitted to the Minister for approval, the AESO retains the authority to select the successful proponent and award a RESA following a competitive procurement process, subject, again, to the Minister's approval of the total quantity of electricity to be generated and form of RESA to be entered into (in particular, the cost associated with administering and performing the RESA).

Regarding funding of the AESO's support payment obligations, the Act provides that any payments made to generators will be made first from the Climate Change and Emissions Management Fund established under the Climate Change and Emissions Management Act. The taxes levied on large industrial carbon emitters will therefore be used in part to finance the transition to renewable electricity. Any additional funds needed to fund the support payments will be paid out of the General Revenue Fund upon request of the Minister. It is noteworthy that the AESO has indicated that the Government will be considering an "affordability threshold", which could potentially cap the amount the Government would spend implementing the REP and/or the AESO's financial liability pursuant to the RESAs.

The Act seems to anticipate preferential treatment for renewable generators operating in Alberta's otherwise competitive electricity market and vests significant authority in the AESO. In addition, in order to streamline the process and reduce any challenges to the Government's programs, the Act provides that neither the Market Surveillance Administrator nor the Alberta Utilities Commission is permitted to investigate or consider complaints against the AESO for any reason connected with an approved REP. However, as a counterbalance, in an effort to ensure that the applicable procurement process and REP is conducted fairly, the Act requires that the AESO engage an independent fairness advisor.

Parameters of the First REP

The Minister established an interim target of 400 MW of new renewable generation capacity to be procured by Q4 of 2017 and in-service by Q4 of 2019. The AESO expects that the pace of subsequent competitions under the Act would be determined by the schedule for the eventual phase-out of coal assets (which is not yet known). Details regarding the coal phase-out (including timelines) are anticipated in the report to be prepared by Terry Boston (which was to be published at the end of September, but is not yet available).

The AESO Recommendations specify the following in relation to the first competition:

  • The project must be a new or expanded project in Alberta.
  • The project must have a minimum capacity of 5 MW.
  • The project must meet the Natural Resources Canada definition of "renewable energy" (water, wind, solar, biomass and other natural resources that can be naturally replenished or renewed within a human lifespan).
  • The project must utilize the existing transmission and distribution system.

It is expected that each competition within an REP will have three phases occurring in the following order:

  1. Request for Expressions of Interests Phase to attract/gauge the level of interest of proponents.
  2. Request for Qualifications Phase to qualify proponents in categories of project eligibility, financial strength and capacity, as well as development, construction and operations capability.
  3. Request for Proposals Phase in which only qualified proponents will be eligible to submit a final binding offer and the successful proponent will be selected and provided the opportunity to enter into a RESA.

This three-step process is anticipated to run for approximately 7-11 months.

RESA

The AESO began public consultations regarding the terms of the first competition pursuant to the REP (and, in particular, the commercial terms of the form of RESA) on November 10, 2016. The deadline for receipt of stakeholder comments on the RESA is December 9, 2016.

The AESO proposes that the first competition will adopt a 20 year contract for differences model (referred to by the AESO as an "indexed renewable energy credit" pricing mechanism), under which the generator receives a support payment. The support payment amount in each case is calculated as the difference between the generator's proposed "strike price" for the project which will be quoted in its bid and the pool price. Where the pool price is lower than the strike price, the AESO would be required to pay the difference to the generator and where the pool price is higher than strike price, then the generator would be required to pay the difference to the AESO. The AESO has proposed that 20 percent of the strike price shall be escalated at Alberta CPI.

As would be expected in a contract of this nature, the key principles of the RESA proposed by the AESO present a complicated inter-relationship between risks and rewards which developers will need to carefully consider. In-service risk to the AESO is addressed by establishing longstop dates for construction commencement, target commercial operations dates (COD) and longstop CODs with a series of consequences including revenue truncation, RESA termination rights of AESO and associated liquidated damages for failures to meet such milestones. Security for such pre-COD events is contemplated as letter of credit security based on $50,000/MW. Developers will need to review the manner in which they will be able to mitigate these risks together with the contemplated force majeure relief, change in law accommodation, termination for convenience rights of AESO, ownership restructuring limitations and various other risks under the proposed principles.

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
Duncan M. McPherson
Jana Prete
 
In association with
Related Topics
 
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