With 13,300 km of coastline, Nova Scotia is uniquely situated to explore and develop marine renewable energy. The government of Nova Scotia had solidified the Province's commitment to maximize this renewable energy resource and provide a legal and regulatory framework to facilitate the industry by enacting the Marine Renewable-energy Act (Bill No. 110) in December, 2015. However, the legislation was not proclaimed in force until January 23, 2018, along with certain important amendments which were introduced through Bill No. 29 (An Act to amend Chapter 32 of the Acts of 2015, the Marine Renewable-energy Act) in October, 2017.
While some important conceptual clarifications have been made to the original legislation, the Marine Renewable-energy Act, as proclaimed in force, (the "Act") maintains largely the same legal and regulatory mechanisms as provided for in the earlier legislation (a synopsis of which can be found on our website).
It can be difficult to regulate an industry in the early stages of development, particularly when that industry is so dependent on new technology operating in a sensitive (marine) environment. The Act appears to allow the regulators to facilitate more innovative marine renewable energy projects, as well as, provide a more comprehensive regulatory and licensing scheme that can be flexibly applied to this developing industry.
Demonstration Permits - An Opportunity for Innovators
The amendments to the Act have introduced the concept of a "demonstration permit" which allows innovative project developers to test their technologies in order to assess their potential or capability. The term for a demonstration permit is 5 years with possibility of renewals for additional 5 year terms as long as the aggregate term does not exceed 18 years.
The scope of the demonstration permit allows:
(i) the project developers to sell the generated electricity; and
(ii) any devices and installations ancillary to the generators, such as onshore structures, cables and equipment, to be covered under the scope of the demonstration permit.
Some important considerations for project developers seeking a demonstration permit from the Minister of Energy (the "Minister") are:
- The generator is to be located wholly or partially within an area of marine renewable-energy priority as ear-marked in the Act;
- The aggregate nameplate capacity of all the generators operating under a permit cannot exceed five (5) megawatts;
- At the time of grant of a demonstration permit or at the time of renewal, the Minister will establish performance targets for every generator;
- Minister's ability to grant demonstration permit under the Act is limited to a cumulative projects nameplate capacity of ten (10) megawatts; and
- Environmental monitoring plans, to be approved by the Minister, in respect of activities to be conducted under the demonstration permit are required.
Power Purchase Agreement with the Public Utility for Demonstration Permit Holders
One of the most attractive and key concepts introduced by the Act for innovative project developers is that demonstration permit holders that connect to the electrical grid of a public utility are deemed to have entered into a power purchase agreement (the "PPA") with the public utility, in a prescribed form, at a price determined by the Minister.
The Minister determines the price for the electricity at the time of grant of demonstration permit and, therefore, it is critical that applicants submit detailed information about project financing and costs when they apply for the demonstration permits.
The PPA term is for the duration of the demonstration permit or 15 years from the date of commercial operation, whichever is earlier.
Some of the other important changes to the legislation include:
- Expansion in the definition of "generator" to provide coverage to presumably a wider variety of technologies.
- Enhancement in the scope of any licenses granted under the Act to include any ancillary facilities connected to the generators such as cables, equipment or structures.
- Administrative provisions in respect of call for applications for licenses.
- Powers to apply administrative penalties in the event of violation of the Act, regulations, permits or licenses.
- Royalties may be payable by license or permit holders if prescribed by regulations in the future.
Nova Scotia is taking the lead, domestically, as well as globally, in attracting the leading tidal power technology developers in testing and developing their technologies. It is anticipated that the Marine Renewable-energy Act 2.0 and regulations promulgated thereunder will facilitate innovative technologies capable of maximizing the benefits of the vast tidal energy resource available to Nova Scotia. With that being said, the Act and regulations will likely continue to develop as the marine renewable energy industry takes further strides towards commerciality.
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.