Will new gas plants deprive Ontario businesses of billions in tax credits?
It's the $25-billion question.
The federal budget released last month included a clean-electricity tax credit worth an estimated $25.7 billion. But it's only available in provinces that commit to a net-zero electricity grid by 2035 - something Ontario has not done.
Instead, Premier Doug Ford is about to sign contracts for new power plants fuelled by natural gas - a particularly potent greenhouse gas - that will be in operation until 2040.
Does this mean Ontario's businesses will miss out on the generous subsidies and electricity users will end up paying more for power?
Neither the province nor the federal government will answer the question directly. They only say negotiations are ongoing and that they hope to reach a deal before next year, when the credits come into effect.
Experts, however, warn that the gas plants are incompatible with a net-zero grid, and will end up costing Ontarians.
If they go ahead with the gas plants, they're either going to have to break those contracts, which means that Ontario electricity customers are going to be paying gas plants to sit idle, or the province is going to have to forego this clean energy tax incentive," said Keith Brooks, programs director at Environmental Defence.
Either way, it's going to be a multibillion-dollar scandal to add to the tally of this government's already expensive ideological battle against climate policy."
Decarbonizing electricity is the foundation of Canada's effort to cut greenhouse gas emissions. As we transition away from fossil fuels, Canadians will have to electrify virtually everything from transportation to heating to manufacturing and mining, the federal budget said.
If the electricity isn't carbon-free, it will undermine efforts to decarbonize almost everything else.
The Clean Electricity Investment Tax Credit will provide a 15 per cent refundable tax credit to private electricity developers, public utilities and Crown corporations such as Ontario Power Generation on the capital costs of building new, and refurbishing existing, non-emitting generators and batteries.
There is no cap on how much money is available for these projects, but Ottawa estimates they will cost $6.3 billion over the next four years, and an additional $19.4 billion for the following seven years until 2035.
Evan Pivnick, clean energy program manager at Clean Energy Canada, said the tax credit represents the ambition necessary to accelerate the clean energy transition. In particular, he pointed to the fact that it will be available to utilities, which haven't traditionally been able to access tax credits.
It's huge for the federal government to say: We're going to cover 15 per cent of the capital cost of building these facilities,'" Pivnick said.
If the tax credit is the carrot used to entice provinces to clean up their electricity, the federal government also has a stick.
The Clean Electricity Regulations (CER) will require every province to have a net zero grid by 2035. Currently in draft form, they state carbon-emitting generation can only be used during emergency" situations or to back up" renewable energy.
Natural gas plants provided more than 10 per cent of all electricity generated in Ontario last year.
If Ontario's gas plants are allowed to operate under the federal Clean Electricity Regulations, then the regulations clearly aren't strong enough to deliver on the Prime Minister's commitment to a net-zero electricity sector by 2035," Brooks said.
Bryan Purcell, vice-president of policy and programs at The Atmospheric Fund, which finances clean energy initiatives, said over the course of consultations, the federal government has been loosening the restrictions on gas plants in a way that risks undermining the push to net zero.
There are several exceptions proposed for the (CER) that could allow the continued operation of natural gas plants for a significant period after 2035," he said. We're encouraging the federal government to move forward with an ambitious, clean electricity regulation that really minimizes these exceptions."
Asked for comment, Ontario Ministry of Energy spokesperson Michael Dodsworth said the province believes the gas plants will be permitted beyond 2035.
Despite having one of the cleanest grids in the country, Ontario's electricity is getting progressively dirtier, moving away from net zero instead of toward it.
In 2017, 96 per cent of the province's electricity came from carbon-free sources, chiefly nuclear and hydro. Last year, 89.6 per cent of the grid was non-emitting.
Carbon emissions from the grid are rising because shortly after getting elected, Ford cancelled more than 700 renewable energy projects. With the Pickering nuclear plant slated to shut down and demand for electricity on the rise, the province is in the process of signing contracts for 1,500 megawatts of new gas generation.
The plants will operate until 2040 - five years after the 2035 net zero deadline - in apparent contradiction of a commitment to a net zero grid.
Last fall, the Star revealed that the province had written clauses into the gas plant contracts that would guarantee payment even if they had to shut down due to net zero rules.
Since winning office, Ford has started to change his tune on renewable technology. While he campaigned on getting rid of electric vehicle subsidies, he later announced billions of dollars in incentives to bring EV battery and assembly plants to Ontario - and the automakers said they were attracted to the province in part by the clean electricity available.
But Ford's softening on clean tech has not changed his attitude toward renewable electricity. Under the previous Liberal governments, Ontario commissioned more than 30,000 solar and wind generation projects. But that stream of new renewables came to a halt under Ford and virtually no new renewables have been built in the last five years.
The premier has come around on electric vehicles. He has got behind clean steel. There's no reason not to support clean energy because it is the lowest cost of new electricity generation," said Brooks.
Pivnick says ambition is important from both levels of government to ensure the transition to net zero occurs.
We've been through transitions in a couple of provinces - including in Ontario when we phased out coal - and one of the most important things we saw is: ambition matters," he said. When we're ambitious about the targets we set and we truly drive at them, we're often able to achieve far more than we realize," he continued, citing Alberta's coal phaseout, on pace to happen seven years ahead of schedule.
It set restrictions and brought incentives and then worked with people to make it happen. That's the exact same mission we need to set here."
Marco Chown Oved is a Toronto-based reporter covering climate change for the Star. Reach him via email: moved@thestar.ca