Canada: Strategic Electricity Interties Between Canada And The United States

...[T]here is demand from the United States for low-emission electricity, which in turn presents an economic opportunity for Canada to capitalize on its clean electricity and create additional value for exports allowing both parties to meet their emissions reduction goals and curtail spillage of renewable resources.1 – The House of Commons Standing Committee on Natural Resources

On December 13, 2017, the House of Commons Standing Committee on Natural Resources (the "Committee") published a report highlighting six recommendations to the Canadian government on the need for strategic electricity interties to better connect not only the provinces and territories in Canada, but to promote trade between Canada and the United States.2 Of the six recommendations, three stand out as drivers for economic opportunities among industry proponents and First Nations/Tribes on both sides of the border:3

Recommendation 1: Assess Economic Opportunity

Economic opportunities for increased electricity interties in different regions across Canada must be assessed, including ("Economic Opportunity Recommendation"):

  1. Interties to increase interprovincial trade of electricity and provide other benefits for electric utility operators, such as reliability and resilience; 4
  2. Interties to increase Canada-U.S. electricity trade and provide safe, secure, reliable, clean and efficient power to both markets; and
  3. Interties to help reduce economic losses from the electricity sector by stemming curtailment and spillage of renewable resources.

Recommendation 2: Interties Can Improve Low-Carbon Energy Access

Interties can improve low-carbon energy access, affordability, security and storage in northern and remote communities where there is over reliance on diesel based energy supply (the "Northern and Remote Communities Recommendation"); and

Recommendation 3: Interties for Resource Development

Interties can improve the carbon footprint of resource development and low-carbon electric energy access for resource development projects across Canada and the United States (the "Resource Development Recommendation").

The Committee proposes that the Government of Canada work and collaborate with industry proponents, provincial and territorial governments, along with Indigenous governments and communities to explore and assess avenues for strategic electricity interties. As demonstrated in the figure below, each province has a varying electricity generation portfolio in terms of the volume of electricity generated and the fuel sources used:

As the electricity sectors for both Canada and the United States are in a period of rapid innovation, it is imperative that industry stakeholders and First Nations/Tribes in the U.S consider these recommendations, especially the Economic Opportunities Recommendation and the Resource Development Recommendation. The Committee noted, "Current investments in the sector, which have averaged $20 billion a year in Canada since 2012, are transforming electricity operations and markets by offering more tools for managing and selling transmission, generation, storage, distribution, and demand."5 Further, with

Canada's climate policies driving reform, electricity is becoming "the cornerstone of a modern, clean growth economy."6 The Committee reports that there are currently six proposed interties to expand the electricity trade between Canada and the United States markets, with one proposal featuring a 1000 MW line between Ontario and Pennsylvania.7 As demonstrated in the figure below, electricity interties are stronger north to south rather than east to west, meaning provinces, such as Quebec and Ontario, are capable of transferring extensive volumes of electricity to their American counterparts.

Focusing on central Canada, there is an opportunity to strengthen the intertie capacity from Quebec to transfer electricity through Ontario for export to the United States and for import back into Canada. Exporting electricity could advance economic development in the generating jurisdiction while providing cheaper electricity to the importing jurisdiction.

With many uncertainties surrounding the current North American Free Trade Agreement (NAFTA) negotiations, it is important that First Nations/Tribes in the U.S. and industry stakeholders across both markets consider how relationships can be leveraged in light of potential impacts on the importation and exportation of renewable energy. Additionally, the Committee reports that there is an opportunity for the existing electricity intertie between Ontario and Manitoba to be strengthened as the jurisdictions augment their electricity capacity.

Taking into account the Economic Opportunities Recommendation and the Resource Development Projects Recommendation along with the geographic location of First Nations, especially those in Northern and remote communities, the north-south and east-west capabilities within Canada provide considerable opportunities for First Nations and industry stakeholders to develop equity partnerships and reliable access to renewable energy.

Focusing on Northern and remote communities, which often rely on diesel generators to meet electricity demands and experience severe reliability issues, strategic electric interties can provide alternatives to diesel that can contribute to affordable and reliable energy.

The Northern and Remote Communities Recommendation encourages resource development projects in these areas, which is pivotal in improving low-carbon electric energy access, affordability, security and storage. As new technologies, products and services emerge, renewable energy and storage technology has seen a decrease in pricing that has contributed to the ever-increasing rate of adoption. With renewable energy sources such as hydroelectricity, wind, solar, and tidal being naturally variable during different times and seasons, strategic interties can improve reliability, displace coal-generated electricity, and reduce overall costs. Facilitating a transition to renewable energy generation in Canadian northern and remote communities can help Canada meet its goal of reducing its carbon economy by 30% in 20308 and improve energy efficiencies and reliability of service for First Nations communities. Through the Northern and Remote Communities Recommendation, First Nations and industry stakeholders can explore investments in renewable energy that generate economic development opportunities while building resiliency into the electricity grid and enabling economic growth and prosperity.

To support cooperative relations, partnerships and strategic trade policy, the Canadian federal government has launched two initiatives that can assist in the development and construction of strategic electricity interties, including:

  • The Investing in Canada Infrastructure Program, committing $9.2 billion over 11 years to fund provincial and territorial infrastructure priorities, including electricity interties, provided they "increase capacity to generate clean energy and/or to manage more renewable energy."9
  • Creation of the arms-length crown corporation, the Canada Infrastructure Bank, which will, among other things, invest at least $5 billion over 11 years in green infrastructure projects, including interties, which reduce GHGs, generate revenue, attract private and institutional investment, and serve are in the public interest.10

CONCLUSION:

As the pace and scale of electricity generation, transportation, and adoption continues to increase, it is important for industry proponents and First Nations in Canada to be proactive and take up the Committee's recommendations. The lawyers at Dickinson Wright LLP have experience and expertise in the area of energy generation and transmission development and can provide critical insight into strategic partnerships to further economic development and ensure sustainable access, security and reliability of the electricity grids within both Canada and the United States.

Background on the House of Commons Standing Committee on Natural Resources

The Committee examines issues related to the four industrial sectors that constitute the mandate of the Department of Natural Resources, including the energy sector, the forest sector, the minerals and metals sector and the earth sciences sector. More specifically, the Committee focuses on bills, expenditures and activities of the organizations that are part of the Natural Resources portfolio. In its 42nd Parliament from the period of December 3, 2015 to the present, the Committee consists of the chair, James Maloney, the vice-chairs of Shannon Stubbs and Richard Cannings along with the members Ted Falk, T.J. Harvey, Mary Ng, Kim Rudd, Jamie Schmale, Marc Serré, Geng Tan and Nick Whalen.

Footnotes

[1] Standing Committee on Natural Resources, "Strategic Electricity Interties," (December 13, 2017), online: http://www.ourcommons.ca/Content/Committee/421/RNNR/Reports/RP9335660/rnnrrp07/rnnrrp07-e.pdf

[2] Ibid.

[3] Ibid.

[4] Alberta Electric System Operator, "Regional Electricity Cooperation and Strategic Infrastructure Initiative (RECSI)," online: https://www.aeso.ca/market/market-updates/regional-electricity-cooperation-and-strategic-infrastructure-initiative-recsi/.

[5] Supra, note 1, p. 4.

[6] Ibid, p. 5.

[7] Cherie Brant of Dickinson Wright LLP is special legal counsel to this project advising on all matters related to Indigenous consultation and engagement processes.

[8] Environment and Climate Change Canada, "Pan-Canadian Framework on Clean Growth and Climate Change" (2016), online: http://publications.gc.ca/collections/collection_2017/eccc/En4-294-2016-eng.pdf.

[9] Infrastructure Canada, Brief, 4 October 2017.

[10] Ibid.

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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