Ottawa Loosens Rules on Burning LNG and Using CCS

Feb. 20, 2024

The federal government is getting mixed reviews for proposing major regulatory changes that offer up more flexibility for power producers to burn natural gas and embrace carbon capture and storage (CCS) technology, but contain no specifics on how the revisions would affect greenhouse gas emissions.

The 11-page update [pdf] on Ottawa’s proposed Clean Electricity Regulations (CER), released on a Friday afternoon before a long weekend, was billed as a “what we heard” report from the first round of consultations on the draft rules. It suggests amending the draft regulations to permit greater use of natural gas “peaker” plants in times of high electricity demand, make it easier for power plants to adopt carbon capture and storage (CCS) technologies, and allow “limited” use of carbon offsets for facilities that still can’t meet the standard, among other changes.

Due to the timing of the update, no additional details were available on the emissions impact of the proposed changes, or on options for speeding up the shift to a net-zero grid, as The Energy Mix went to virtual press Monday night. But a federal official told The Canadian Press the government’s commitment to decarbonizing power production was still within reach.

“We can still get to the same aim,” said Environment and Climate ChangeCanada (ECCC) spokesperson Oliver Anderson.

Environment and Climate Change Minister Steven Guilbeault maintained Ottawa’s commitment to a net-zero grid remains unchanged. “This is a totally normal process,” he told the Globe and Mail. “We put out draft regulations. We consult. We listen to what people have to say. And then we adjust. We do that all the time.”

More Flexibility for Power Producers

The original version of the regulations, released in mid-August, allowed provincial utilities and private power producers to continue burning natural gas beyond the government’s 2035 target date to decarbonize the grid, but only if they could capture almost all of the climate pollution they produced. At the time, senior government officials said Ottawa’s “technology-neutral” approach would allow utilities to choose the electricity sources they relied on, as long as they didn’t emit more than 30 tonnes of carbon dioxide for every gigawatt-hour (30 t/GWh) of power they generated, roughly 95% less than the emissions from the most efficient gas-fired power plant.

“This inclusive approach is important,” the officials told media in a background briefing, because “affordable, reliable power is going to be the foundation of the net-zero economy.”

For that initial release, officials had specifics on the greenhouse gas emission reductions and cost savings Canadians could expect: a cumulative 342 million tonnes between 2024 and 2050, and 10 to 12% of home energy costs. Households would have ended up paying more for electricity and using more of it, an official said. But those costs would have been “more than offset by the fact that we’re no longer going to be buying gasoline or diesel to power our cars and trucks, we’ll no longer be paying for natural gas to heat our homes and cook our food, and we’ll no longer be using natural gas for things like cement and steel and aluminium,” all costs that are passed on in the price of consumer goods.

Six months, 600 written submissions, and more than 18,000 incoming letters and emails later, the officials’ confident, detailed analysis appeared to have been overwhelmed by demands from provincial governments and electricity system operators to make heavier use of natural gas over a longer period of time.

“Our ability to decarbonize the remainder of the economy by 2050 depends in part on our ability to get the CER balance right,” the Canada Electricity Advisory Council said in mid-January, in a report cited prominently in Friday’s update. “If the electricity system bears too great a cost burden or is unable to meet growing demand reliably, it will be hindered in its ability to support economy-wide net-zero emissions by 2050.”

The draft changes in the ECCC update would allow utilities and grid operators to:

• Use CCS more flexibly, rather than being pushed into running gas plants more often for baseload power in order to meet the 30 t/GWh standard;

• Run gas “peaker” plants beyond the 450-hour-per-year limit in the original regulations;

• Combine the allowable emissions from individual power plants into a “pooled emissions limit”, allowing them to rely more heavily on their most efficient units;

• Buy carbon offsets if they still can’t hit their emission targets;

• Run gas plants beyond the 20-year limit in the original CER, even though a 2045 closure date would already add a decade to the federal target for a net-zero grid;

• Take more time to get new gas plants built.

The proposed revisions would also exempt private power producers from the new emissions standard unless they “export” more power to the grid than they receive.

The document had nothing to say about opportunities or incentives for utilities to move more quickly to distributed energy resources (DERs), demand response, or other measures that would enable them to quickly draw down peak electricity demand that many of them now plan to meet with gas plants. That’s in spite of analyses showing that Ontario could install enough distributed resources to clear a large electricity shortage over the next decade without building new gas or nuclear plants, and that solar and wind farms with energy storage are both cheaper to build than gas plants in Ontario and Alberta.

Good News and Bad

Friday’s update produced a mix of reactions from analysts and observers who’ve been following the development of the CER and the consultations that followed.

“The design changes being considered are a step in the right direction towards providing more flexibility while still keeping the goal of reducing emissions from electricity generation,” University of Calgary energy economist Blake Shaffer told CP in an email. “Rather than a certain number of tonnes per calendar year, make it some amount over a longer period, say three years, so that fleets can better manage across different periods with different conditions (such as) droughts.”

Jason Dion, research director at the Canadian Climate Institute, called the update “a welcome change that will deliver more flexibility for grid operators in order to protect reliability and support affordability.” He urged Ottawa to finalize the regulations as soon as possible.

Evan Pivnick, clean energy program manager at Clean Energy Canada, agreed that the government should move swiftly to complete the regulations, but without compromising emission reductions. “Flexibility should be balanced with the necessary stringency,” he said, “and more details on the new proposal are needed to determine if the former compromises the latter.” At the same time, the Clean Energy Regulations “were never a silver bullet” to bring the grid to net-zero on their own, he told the Toronto Star in a separate interview.

But several groups expressed alarm that the revisions would make it that much easier for some provinces to run gas-fired power plants well beyond the 2035 deadline.

“Strong Clean Electricity Regulations are an essential tool to make our energy cheaper, more reliable, and better for the environment while creating hundreds of thousands of jobs,” Stephen Thomas, clean energy manager at the David Suzuki Foundation, said in a release. But the “changes being considered to this cornerstone climate regulation could make it harder to deliver a zero-emissions grid. Adding more loopholes would needlessly allow fossil fuel generators to continue polluting until 2045 or beyond and could allow for new fossil fuel plants to be built, undermining the necessary transition to clean electricity.”

“Taking an approach that limits emissions of fleets rather than individual generators must not result in higher emissions,” agreed Pembina Institute Electricity Director Scott MacDougall. “Allowing unabated gas-fired generators to come online after January 1, Prime Minister Justin Trudeau “made a commitment to a net-zero grid in 2021,” Environmental Defence Canada Programs Director Keith Brooks told the Star. “But provinces like Ontario and Saskatchewan, they have gone ahead (and started building new gas plants) in a direct challenge to federal regulations, and now the federal government seems to be waffling.”

He added: “If these regulations allow new plants to be contracted, constructed, and run completely unmitigated out past 2045, and the existing fleet [of gas plants] is allowed to continue to operate for its 20-year end-of-life period as well, there’s no limit on emissions for quite some time.”

2025 (the previous cut-off date) risks locking in gas emissions and higher electricity costs for decades.”

[Top photo: Jon Sullivan/flickr]