On March 29, 2023, the Independent Electricity System Operator (IESO) launched a clean energy credit (CEC) registry in Ontario (the Registry). Companies will be able to purchase and retire CECs on the Registry to meet their own corporate environmental and sustainability goals.
What you need to know
- The Registry is largely enacted through amendments to the Electricity Act, 1998, which creates a platform for the recognition, tracking and retirement of CECs, each representing one megawatt hour (MWh) of electricity generated by qualifying greenhouse gas emission-free electricity generation in the province.
- Under certain greenhouse gas reporting standards, companies can voluntarily use CECs or renewable energy credits to offset the greenhouse gas emissions attributable to their electricity use—i.e., their Scope 2 electricity use emissions1. The increasing demand for these products prompted the province to develop the Registry to transparently track the purchase and sale of these products in the province.
- Ontario's CEC program goes further than just creating a registry for CEC transfers; it also regulates the market for CECs by requiring certain entities, like the IESO, to make CECs available for sale, by limiting the pool of potential purchasers, by regulating proceeds from the sale of CECs and by limiting how CECs can be used.
- The Registry will be hosted by the Midwest Renewable Energy Tracking System (M-RETS), an existing registry used for tracking renewable energy certificates and other environmental products.
How the registry was launched
The Ontario Ministry of Energy proposed a provincial registry last August to support the creation, recognition, tracking and retirement of CECs within the province. The proposal followed the Ministry's January 2022 directive to the IESO to assess design options for the registry and the IESO's subsequent stakeholder engagement2. In December 2022, the province amended the Electricity Act, 1998 and issued related regulations to support specific design elements and the overall administration of the Registry. Those amendments are now in force, supported by updates to the M-RETS Operating Procedure.
Major players in Ontario have already taken steps to procure the environmental attributes underlying CECs. In one of the earliest examples, OPG and Microsoft Canada partnered on a historic initiative that included a 10-year purchase agreement for these attributes. The partnership will help advance Microsoft Canada's goal to transition towards carbon-free energy to power its datacentres.
CEC registry basics
Each CEC will represent the environmental attributes (EAs) associated with the generation of one MWh of electricity from one of the following qualifying generation sources: biofuel, biogas, biomass, hydro, nuclear, solar and wind.
The Registry will serve several main functions: (a) accept and display the registration of transferors and transferees, (b) accept and display information respecting EAs that have been recognized as CECs; and (c) accept and display information respecting the transfer and retirement of CECs.
The Registry requires the IESO, Ontario Power Generation (OPG) and any generator or other persons or entities specified in the regulations to make certain EAs available for transfer on the Registry as CECs. Currently, the IESO owns the EAs associated with the electricity for which it has contracted under long-term power purchase agreements. However, in recent procurement, the IESO has also indicated its willingness to allow electricity suppliers to retain ownership of the EAs associated with their generation.
Companies wishing to purchase these CECs must first set up an account on the Registry. This process is set out in the M-RETS Operating Procedure.
CEC market now and beyond
The CEC program goes beyond simply establishing a Registry for the creation, tracking and retirement of CECs. The amendments also regulate a future CEC market as follows:
- Purchasers of CECs must either be a distributor or a company with an IESO-account, and the purchased CECs must be retired against electricity consumed by that company in Ontario in the same calendar year as the CECs were created. These restrictions effectively prevent the use of the Registry for EAs created, for example, through behind-the-meter corporate power purchase agreements, where the electricity is not conveyed to the grid.
- Under the CEC program, the Ministry may, through regulation, specify the number and type of EAs that the IESO and generators make available for sale, including maximums or minimums or ranges.
- The Ministry may specify, through regulation, how proceeds from the transfer of CECs are to be applied.
The IESO will also be required to publish annual reports on the operation of the Registry, including the total volume of electricity generated in the year by generators connected to the grid or a distribution system and the total number of CECs transferred in the year, broken down by energy source.
Ontario expects sales in the first year of the registry to generate $8 million for the Future Clean Electricity Fund.
1. For further discussion of the use of these instruments to offset Scope 2 GHG emissions, see https://www.torys.com/our-latest-thinking/publications/2021/11/virtual-power-purchase-agreements-a-net-zero-strategy.
2. See the following link for the IESO's stakeholder engagement: https://www.ieso.ca/en/Sector-Participants/Engagement-Initiatives/Engagements/Clean-Energy-Credits.
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