Unprecedented Opportunities Ahead for Renewable Developers Across Canada

January 10, 2024

Written By Jessica Kennedy, Tyler McAuley, Charlene Hiller, Yannick Beaudoin, Ashley White, Alexis Fol, Larissa Lees, Jade Scrymgeour, Nathan Green, Claire Lingley and Siobain Quinton

Electricity grid operators across the country continue to announce expanded procurements for non-emitting electricity to ensure supply adequacy in a transforming energy landscape. These announcements continue procurement trends from recent years as provinces turn to private developers to meet growing demands for electricity supply and storage while aiming to achieve aggressive carbon emissions reductions targets.

Recent developments and opportunities arising from coast to coast are discussed below, including: Ontario, Québec, British Columbia, Alberta, Saskatchewan and the Atlantic Provinces.

Ontario

As part of its broader Resource Adequacy Framework, the Ontario Independent Electricity System Operator (IESO) has been engaging stakeholders on a long-term strategy to meet Ontario’s resource adequacy and reliability needs. It recently announced a significant new procurement process focused on renewable electricity supplies, which builds on procurements previously announced in 2022.

IESO Procurements Announced in 2022

As part of this process, the Expedited Long-Term RFP (E-LTI), Same Technology Upgrades Solicitation and the Long-Term 1 RFP (LT1 RFP) were announced in 2022. The E-LTI aimed to competitively secure capacity capable of coming online by 2027. The E-LTI procured 880 MW of capacity from storage facilities and approximately 250 MW of expansions at natural gas facilities. Under the Same Technology Upgrades Solicitation, the IESO secured 286 MW of incremental capacity through agreements with natural gas companies for enhancements to existing equipment.

The LT1 RFP built upon the E-LTI and is expected to procure 2,518 MW year-round capacity from dispatchable new build resources, including new build storage facilities. LT1 RFP proposal submissions were due on December 12, 2023, and an announcement on awarded contracts is expected in Q1 or Q2 of 2024.

Long-Term 2 (LT2) RFP Procurement Process

In their recent Resource Adequacy Update to Ontario’s Minister of Energy, the IESO announced their intention to procure a significant amount of new renewable electricity through additional procurement initiatives going into 2024.

The Resource Adequacy Update highlighted several risks and uncertainties facing the electricity sector, including: (1) the likelihood that newly-procured assets can enter service as anticipated, in the volumes procured; (2) growing pains inherent to new technologies, including their ability to participate and operate effectively in the real-time market and contribute to system needs immediately after entering service; (3) the ability for aging assets (i.e., Lennox Generating Station, wind and solar procured more than 20 years ago) to continue contributing to resource adequacy in a consistent manner; and (4) the policy considerations inherent to some thermal generation.

The IESO believes that rolling procurement initiatives, with target capacity exceeding anticipated demand, will mitigate these risks while ensuring that investment takes place in existing, repowered, and new facilities.

Citing the need for clean electricity generation to keep pace with Ontario’s growing economy and grid decarbonization efforts, the IESO is forecasting that the Province will require up to 5 terawatt-hours (TWh) per year of additional renewable electricity generation by 2030, which figure is expected to grow significantly through the 2030s. To meet these anticipated needs, the IESO has announced their latest long-term procurement initiative, the LT2 RFP.

Engagement on the LT2 RFP officially kicked off on December 13, 2023, with a webinar hosted by the IESO. The LT2 RFP is open to all non-emitting resources, provided they can: (1) inject energy into the market; (2) be fully operational by the milestone date for the yet-to-be announced commercial operation; and (3) meet certain financial and experience requirements.

The LT2 RFP has a target of approximately 2,000 MW and will focus on meeting system needs in the 2030 to 2034 timeframe. The LT2 RFP is expected to launch in 2025, and selected proponents are expected to be announced in Q2 of the same year. Subsequent procurements are expected to be announced in 2027 and 2029, with the goal of procuring a total of 5,000 MW of new renewable electricity.

The IESO has provided the following table for reference:

On top of procuring new clean generation, the IESO will also look at options to re-acquire, upgrade, or expand existing facilities. To minimize consumer costs, the IESO will use a competitive procurement approach, giving them the ability to adjust targets as required.

Evaluation Criteria for LT2 RFP: Indigenous Participation and Community Support

Proponents can expect that Indigenous participation requirements for the LT2 RFP will be similar to those in the LT1 RFP process, which included both mandatory components and a rated criteria scheme. Rated criteria assign value to a bid beyond the mandatory requirements in the RFP. An Indigenous Economic Interest level that is: (1) 50 percent or higher earns 3 rated criteria points; (2) between 25 percent and 50 percent earns 2 points; and (3) between 10 percent and 25 percent earns 1 point. If the project is located on Indigenous land, evidence of Indigenous support is expected to be required.

Other mandatory components include engagement and support of the municipality the project is sited within. The IESO is also considering including a requirement that assesses the project’s maturity and readiness.

Next steps for LT2 include:

• January 15, 2024: The IESO is hosting a webinar January 15, 2023, to discuss the materials and topics discussed at the December 13, 2023, webinar, including the LT2 RFP and system reliability needs.
• January 15, 2024: Feedback is due on the materials and topics presented at the December 13th, 2023, LT2 RFP webinar.

Québec

Québec is the largest generator of electricity in Canada. Though non-hydro renewables such as wind and biomass account for a relatively small percentage of Quebec’s electricity generation mix, renewable energy capacity in Québec, much like most other Canadian provinces and territories, is expected to grow alongside its ambitious hydro, wind and biofuel goals over the next several years.

The Québec Government repeatedly stated its goal for the Province to generate more than 60 TWh of energy by 2035 in order to meet the growing demand for electricity in the context of electrification, energy transition and decarbonization of the Québec economy. Hydro-Québec plans to develop an additional 150 to 200 TWh, to meet Québec's electricity demand by 2050, which means doubling the province's current electricity supply.

To support this goal, Hydro-Québec’s electricity supply plan anticipates significant additional energy and power needs over the next few years. To this effect, recent announcements show a strong trend in pursuing calls of tenders for (1) a dedicated energy block of wind energy; and (2) a dedicated energy block of renewable energy (which may include wind energy as well as solar, biomass, biogas or other forms of renewable energy).

For example, Hydro-Québec announced on March 15, 2023, the seven submissions it received following the two calls for tenders launched on December 13, 2021. Collectively, these submissions total 1,303.36 MW of installed capacity, and are required to meet growing demand for electricity in Québec and other markets served by Hydro-Québec. Deliveries of electricity from these projects are required to start no later than December 1, 2026. The selected submissions include a portion of the dedicated block of power from renewable sources and another portion of the dedicated block of power from wind energy. Six of the seven winning submissions are wind energy projects.

It is expected that the newly-announced Hydro-Québec 2035 action plan will enhance Québec's energy portfolio with more wind and solar energy, in addition to energy storage. For instance, market participants expect that wind energy will make a significant contribution to future energy deployment in Québec, with Hydro-Québec planning to triple wind generation capacity to over 10,000 MW by 2035. The Hydro-Québec action plan also reflects a broader discussion on net-zero emissions and a formal consultation on the framework and development of clean energy in Québec. It seems clear that Hydro-Québec's 2035 action plan is not only a step towards meeting greenhouse gas reduction targets by 2050, it also clearly positions Québec to become a major player in the production of renewable energy in Canada over the next decade.

In addition to the increased demand, there is a strong trend indicating the government of Québec aims to maximize the social and financial benefits of these projects for local communities and in Québec. Accordingly, we are expecting that projects submitted and approved will need to respect some or all of the following requirements:

• collaboration with Indigenous peoples;
• participation of local stakeholders in the project;
• maximization of the Québec content, based on the overall project expenses;
• maximization of the regional content in the region where the project will be located; and
• long-term supply contracts.

Available grid capacity is also a key consideration. To illustrate, a 1,500 MW wind energy block call for tenders was recently launched by Hydro-Québec. This RFP includes a novel geographical component, where certain regions have been identified as being favourable to quick integration into Hydro-Québec’s power grid. A map outlining these various integration zones was made public. Projects submitted to the RFP must be located in the target areas. As indicated on the map, certain regions’ capacity to receive energy is expected to be capped to varying degrees. Successful projects will be required to connect to Hydro-Québec’s main transmission network between December 1, 2027, and December 1, 2029.

In addition, three key objectives detailed in the recent 1,500 MW wind energy block RFP were included:

• local community participation in projects should be around 50 percent;
• a project’s Québec content should be approximately 60 percent of the project’s total spending; and
• projects should favour the development and maintenance of harmonious relations with Indigenous communities.

After the bid period closed in September 2023, Hydro-Québec announced it would review the 16 bids received and communicate the results in the coming months.

British Columbia

On June 15, 2023, the Government of British Columbia announced that BC Hydro would be moving forward with its first call for power in 15 years. The call, expected to launch in spring 2024, will focus on new sources of 100 percent clean, renewable emission-free electricity, with the goal of acquiring new sources of electricity as early as 2028. Ultimately, BC Hydro is looking to acquire approximately 3,000 GWh (3 TWh) per year of new clean, renewable energy from greenfield facilities starting in 2029, and 700 GWh per year of new clean, renewable energy from existing facilities before fiscal 2029. A more detailed overview of the call to power can be found in our previous blog post, Electrification of Vehicles, Industry, Prompts BC Hydro's First Call for Power in 15 Years. Recent drought conditions limiting hydroelectric generation have meant BC Hydro was a net importer of electricity in 2023—to the tune of 10 TWh, underpinning the province's need for additional power beyond what the new Site C dam will be able to provide when brought online.¹

The Province is currently in Phase 2 of its public engagement process for the call, which has included sessions with Independent Power Producers, Indigenous communities, members of industry and other stakeholders. Though not finalized, it is anticipated that the call for power will likely be deployed using a competitive process and will be announced in Spring 2024. This is a shift from previous calls for power, which operated as a continuous-intake program with a standing offer at a fixed rate.

The Province also seeks to advance Indigenous ownership and equity interest opportunities in the electricity sector through the call. The Province's draft proposed First Nations Economic Participation model, released in November 2023, indicated that the Province will require a minimum 25 percent  First Nations equity ownership to be eligible for the call for power, with evaluation credits also granted for Indigenous equity ownership beyond the minimum requirements, or support for the proposal from non-equity owning Indigenous groups on whose land the project is located. The Province has also committed $140 million to the B.C. Indigenous Clean Energy Initiative to support Indigenous-led power projects and Indigenous communities’ ability to respond to future electricity demand, facilitating their ability to compete in the call for power despite their smaller size.

Alberta

Alberta’s unique open market framework and established carbon emission offsetting regime has enabled significant investment in renewable projects by private developers. More than three-quarters of all wind and solar generation capacity built in Canada in 2022 took place in Alberta, and an estimated five billion dollars of investment has been injected into Alberta’s renewable energy market since 2019.²

Due to the tremendous interest in further deployment of renewable technologies in Alberta and related regulatory and technical challenges identified by the provincial government and Alberta Electric System Operator, Alberta placed a pause on approvals of new renewable power projects, effective August 3, 2023. The pause is scheduled to lift by the end of February 2024.

For an update on recent developments relevant to Alberta developers, see our blog posts:

• Update on Alberta’s Renewables Pause: AUC Inquiry and Interim Requirements
• Update on Alberta’s Renewables Pause: Expert Recommendations Provided on Module A Land Impact Issues
• Change on the Horizon for Alberta's Electricity Regulatory Regime in 2024

Saskatchewan

Further to the 700 MW of new renewable generation that SaskPower approved in 2022, in mid-2023, SaskPower issued requests for pre-qualification to procure two 100 MW solar generation facilities and two 200 MW wind power generation facilities. The deadlines to apply for pre-qualification expired in the summer of 2023, and qualified proponents were invited to participate in a second stage competitive procurement process in the fall. 

Through this process, SaskPower will select up to four successful proponents to provide all metered energy, ancillary services and environmental attributes associated with the selected projects. Successful proponents will enter into a 30-year Power Purchase Agreement with SaskPower. As with procurement processes in other provinces, Indigenous participation is a mandatory requirement for proponents. Contracts will only be awarded to proponents with 10 percent or more Indigenous equity ownership. Additional points will be awarded up to 51 percent Indigenous ownership.

Given the significant geothermal, solar and wind resources in Saskatchewan and the province’s stated goal of adding 3,000 MW of renewable generation capacity to the grid by 2035, we expect further opportunities for renewable developers to arise in Saskatchewan in the near- to mid-term.

Atlantic Canada

Atlantic Canada has also been advancing the procurement of renewable electricity. Both Nova Scotia and New Brunswick recently announced their intention to procure new renewable electricity:

• On December 1, 2023, Nova Scotia announced the Green Choice Program (GCP). The GCP is a program for large-scale electricity customers (average energy load of 10,000 MWh per year over the past three years) that will allow such customers to receive up to 100 percent of their electricity from renewable energy. To support this program, the province of Nova Scotia concurrently launched a procurement process to secure 350 MW of renewable generation, beginning in 2027. The procurement is open to wind and solar projects. All interested proponents must submit their bids by June 2024, with successful bids likely to be announced in September 2024.
• On December 13, 2023, the New Brunswick government released their electricity strategy, “Powering our Economy and the World with Clean Energy—Our Path Forward to 2035.” The 12-year strategy aims to increase New Brunswick’s renewable generation five-fold. To do so, the province seeks to eventually procure 1,400 MW of new wind power, 200 MW of grid-scale solar power, 300 MW of onsite solar and 100 MW of energy storage. Procurement of wind and solar will take place in stages, beginning in 2027. The strategy also sets out the province's plan to invest in New Brunswick’s transmission system, increase electric vehicle charging stations, and increase the use of biofuels and hydrogen.

Key Takeaways

From coast to coast, Canadian provinces recognize that investment in renewable energy is an important step in achieving Canada’s economic and environmental goals. The string of recent procurement announcements emphasize that the private sector will play a key role in meeting the growing need and desire for renewable energy, and the significant opportunities that lie ahead.

Bennett Jones will continue to track developments in the renewable sector. To discuss how these developments will impact you, and the potential opportunities that may be available for your organization, please contact the authors of this post.

Authors