26 State of the Canadian Electricity Industry 2022 Accelerate Net Zero
Theme 3 Regulating and Policymaking for Net Zero: Moving from Ambition to Transition
Path Forward Overarching recommendation 1. Establish a mechanism for federal, provincial and territorial electricity policy coordination: This recommendation is a holdover from 2020. As no progress was made on it in 2021, we once again recommend that current federal, provincial and territorial ministerial forums on energy (Energy and Mines Ministers Conference, or EMMC) and the environment (Canadian Council for Ministers of the Environment, or CCME) prioritize discussions on collaboration in support of national Net Zero objectives. Moreover, Electricity Canada recommends that this policy coordination be prioritized as a standing item at all future First Ministers’ Conferences. Provinces and territories should do the same at all future Council of the Federation meetings. Provincial and territorial governments and regulators 1. Create legislative and regulatory pathways for utility innovation: Utilities should be enabled to participate in competitive markets for energy services. Regulators should also adopt sandbox mechanisms to enable novel energy projects, which should include a policy modernization component that makes regular pathways for new types of projects or technologies that start through sandbox streams. In addition, regulators and governments should consider implementing established mechanisms to create incentives for innovative investments. For instance, performance-based regulation principles provide utilities with outcomes-based earnings opportunities that are technology agnostic.
This approach can enable solutions such as energy storage-based non-wires alternatives (NWAs), which defer costly investments. An international example is New York State, which implemented such mechanisms in its Reforming the Energy Vision (REV) framework, begun in 2015.40 2. Value environmental outcomes: To be more agile, the mandates of regulators should be extended to include environmental and social considerations in their regular utility review processes. This mandate extension can avoid the need for onerous legislation to enable regulatory approvals of projects critical to climate ambitions. It will also serve to better value firm clean energy projects. An excellent international example of progress on this front is recent legislation in the State of Maryland, which mandates that utility commissions consider the climate change effects of projects under review.41 Another innovative policy mechanism is carbon contracts for difference. It has been used by the German government to compensate companies and sectors for the difference between the market cost of a process and the cost of implementing a climate-friendly option. The German government has targeted this mechanism for hydrogen deployment. 3. Streamline regulatory processes: Initiatives aimed at reducing regulatory lag and providing certainty in regulatory processes are critical. Efficiency will be critical as the grid expands and modernizes at a rapid pace. The initiatives in place in Alberta and Ontario are critical in this regard and should be replicated across the country.
