Canada: Development And Export Of Green Energy In B.C.: Growing Interest And Regulatory Challenges

Last Updated: February 18 2008

Article by Paul Cassidy & Gloria Chao, © 2008, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Environmental Law, February 2008

As we look back on 2007 and forward into 2008, it is clear that the Government of British Columbia has prioritized its goals to reduce its greenhouse gases (GHG) and become a net exporter of green energy in the upcoming years. Under the British Columbia Energy Plan released on February 27, 2007, the province is to achieve electricity self-sufficiency and become a net exporter of electricity by 2016.

The Energy Plan further states that B.C. Hydro, the largest public utility in the province, is to ensure that clean or renewable electricity generation continues to account for at least 90 per cent of total generation, thus eventually becoming a net exporter of green energy.

There is keen interest in British Columbia to develop green sources of energy – also referred to as "alternative", "clean technology" or "renewable" energy. Green energy includes run-of-river small hydro, wind, biomass, ocean, geothermal and solar sources. Green energy developers are independent power producers (IPPs) operating independently from government and producing power for sale to B.C. Hydro power grid.

IPPs are distinct from "self-generators", such as mines or pulp mills, which produce electricity largely for their own consumption rather than for the power grid. Currently, B.C.'s green IPP projects have resulted in an annual reduction of 4 million tonnes of GHG that would otherwise have resulted from importing more power from coal-fired plants.

Interest in B.C.'s green energy export capacity is growing south of the border. Although there has never been an IPP facility specifically built for export in B.C., B.C. Hydro has been exporting power to the United States for decades and opportunities abound for green exports to the U.S. market.

In the spring and summer months of 2007, the B.C. government signed individual agreements with the states of California and Washington to forge a Pacific Coast Collaborative that establishes a framework for leadership and co-operative action on additional areas of mutual interest, including climate change.

In late October 2007, the B.C. government signed an agreement with several European Union countries and certain U.S. states to form the International Carbon Action Partnership (ICAP) in an international effort to fight climate change. ICAP provides an international mechanism where those public authorities, including sub-national levels of governments, adopting caps on GHGs, will share their best practices on strategies such as the development of compatible global carbon trading systems.

"A larger, global trading market will benefit British Columbia and Canada, particularly with [B.C.] playing a pivotal role in the process to develop a system. The very existence of a global carbon market will boost demand for low-carbon products and services and drive innovation as the entire world looks for efficient, cost-effective ways to cut carbon emissions", said Premier Gordon Campbell when he signed the ICAP agreement.

Trading systems currently exist in Europe and systems are being developed by eastern U.S. states as well as the Western Regional Climate Action Initiative (WRCAI), a collaborative effort of western U.S. states and Canadian provinces to co-ordinate GHGs targets and develop a market and system for carbon trading, of which B.C. is a member.

On November 20, 2007, B.C. continued to pursue its aggressive green agenda by introducing the Greenhouse Gas Reduction Targets Act to put GHG reduction targets into law as part of the government's ambitious strategy to reduce the province's GHG emissions by 33 per cent below current levels by 2020. The Act came into force on January 1, 2008 and includes provisions to set interim targets by regulation and a longer term target to reduce GHG emissions 80 per cent below 2007 levels by 2050.

Also in November 2007, the government announced its Climate Action Team (CAT), a 22-member team with one special advisor, chaired by the Premier's Technology Council. CAT's mandate is to identify policies to help the province achieve its GHG reduction targets and is expected to present its recommendations to the government by the end of July 2008. In order to reach the province's GHG targets, the Ministry of Environment must develop and report on GHG emissions for the 2007 base year.

In pursuing its ambitious goals to reduce its GHGs and become a net exporter of green energy, the B.C. government will be required to navigate within the complex federal and provincial regulatory framework that continues to evolve around climate change.

In particular, on April 26, 2007, the Federal Government released its Turning the Corner – An Action Plan to Reduce Greenhouse Gases and Air Pollution, which proposes to impose a "cap and trade" carbon market and mandatory GHG standards on industry. For example, facilities that emit more than 100,000 tonnes of GHG per year (approximately 700 such facilities exist nationwide) will be required to decrease their emissions intensity by 18 per cent, relative to 2006 levels, by 2016. The reduction rate will then increase annually by 2 per cent until reaching a 26 per cent reduction rate in 2015.The federal government has been criticized for allowing a 'patchwork' of GHG trading systems to develop across the country as the Action Plan encourages provinces to implement their own GHG reduction strategies.

As for the British Columbia government's plan to become a net exporter of green energy, it is noteworthy that it cannot act alone in such an endeavour. The government has the legislative power to determine to whom B.C. Hydro may sell power and does so through the B.C. Utilities Commission. However, the permitting of electricity exports is federally-based, through the National Energy Board (NEB). Pursuant to its service standards, the NEB seeks to decide on export permits of minor or moderate complexity within 90 days of the public notification of an export application. Complex applications are not subject to a service standard deadline for a decision.

Given that the British Columbia GHG legislation has only recently come into force and that it will be implemented primarily through regulation, the regulatory framework will continue to evolve with respect to the applicable federal and provincial GHG legal targets, the mechanisms for achieving them, as well as the implementation of the B.C. government's plans to become a net exporter of green energy.

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.

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