Several politicians provincially and federally have said they expect to see offshore wind power development off Canada’s East Coast. However, it’s still just as challenged from a practical, business perspective as it was a couple of weeks ago.

There’s work in progress to firm up offshore regulations, to provide clarity and certainty. It could demand the better part of two years to settle, based on the only time reference given by the governments to date.

But the country needs to settle details, even around “land sales.” This region is familiar with the idea of offshore land sales, or licensing rounds, and the process of offshore industrial development, as a result of years of oil and gas activity. The process laid out for getting to similar systems for wind power makes it clear the system will still be a while in coming.

 

 

In contrast, leasing of offshore areas for wind developments is old hat now across the pond. In January, a leasing round in Scotland brought in about US$952 million in private company commitments. In the United States, over a decade ago, with a reorganization at the Department of Interior, a new Bureau of Ocean Energy Management (BOEM) was empowered to handle wind leasing and permitting. The agency has since also become a go-to for notices of public consultations and other communications. In October, the U.S. government announced plans for additional land sales—up to seven new calls for bids on offshore leases by 2025, including calls in the Gulf of Maine, New York Bight and Central Atlantic.

Canada and the provinces need to settle their regulatory environment for offshore renewables and start leasing in order to get in the game. It remains to be seen what the market will look like when things are settled.

 

Who is the regulator?

The Government of Canada included regulations for offshore renewable energy projects, including offshore power lines, in the law passed transforming the National Energy Board (NEB) into the Canada Energy Regulator (CER). The switch from NEB to CER came into effect Aug. 28, 2019.

The law establishes the CER’s legislative authority on offshore renewables. The regulations set a requirement for projects to be authorized by the CER, covered details like registration of ownership, records requirements and crossover with other laws like the Impact Assessment Act (for environmental reviews on proposed developments). It notes the Governor in Council, or effectively the federal Cabinet, hold the power to make additional regulations related to offshore renewables in Canada and sets CER’s ability to regulate things like security, safety and environmental protection. In short, the CER is intended to oversee exploration, construction, operation and decommissioning of wind and other renewables like wave or tidal power all around the country (interacting with federal departments like Transport Canada or the Department of Fisheries and Oceans as needed).

With the legal framework in place, the federal government under Natural Resources Canada began what is an ongoing process to review and develop up-to-date, precise regulations for the different offshore renewables, particularly in the specifics for areas like operational safety and environmental protection. The “Offshore Renewable Energy Regulations Initiative,” which is what the process is called, started in the fall of 2020 with a discussion paper and consultations. The multi-phase process is currently in phase two, closing a call in February for feedback on a publicly available technical discussion paper. A draft of the proposed, detailed regulations is scheduled to be released for comment in the fall. A final version of the new rules is expected to be settled and printed (in the Canada Gazette) in fall 2023.

And as for the existing Canada-Newfoundland and Canada-Nova Scotia energy boards? The feds have been clear throughout: “Respecting the long history of federal-provincial collaboration in the joint management of energy resources in the offshore (e.g. the laws establishing the Canada-Nova Scotia and Canada-Newfoundland and Labrador Offshore Petroleum Boards) this work does not prevent Canada and interested provinces from exploring joint management approaches for offshore renewable energy in the future.” Regulations developed in the ongoing process could simply act as a basis for anything to come under any joint management laws.

 

Welcome the CNLOEB, CNSOEB

The role and activities of the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB) and Canada-Nova Scotia Offshore Petroleum Board (CNSOPB) have become well understood over the years, backed by provincial-federal mirror legislation laying out governance of offshore oil and gas activity.

On April 5, the joint announcement from the federal government and Government of Newfoundland and Labrador stated the CNLOPB was getting an expanded mandate. The Board would now also be covering offshore renewables and be re-named the Canada-Newfoundland and Labrador Offshore Energy Board (CNLOEB). On April 11, a matching announcement came for a change of the CNSOPB to the Canada-Nova Scotia Offshore Energy Board (CNSOEB).

 

“Our staff will be working closely with governments in the coming months to ensure we effectively take on this expanded mandate coinciding with the legislative amendments being made”

—Lesley Rideout, CNLOPB communications lead

 

It was a natural and timely extension of the work ongoing at the federal level to settle offshore renewable energy rules.

The changes in the Atlantic region next require cracking open the provincial-federal Accords governing offshore oil and gas. Legally speaking, not even the name changes are official until that work is completed. Possible points of contention along the way in terms of expanding the Board mandates include details around licencing costs, fees and financials like recovery of costs through wind proponent companies. The specifics of the “land sale” process will be key.

Both federal and provincial politicians have publicly and adamantly expressed interest in seeing renewable energy developments offshore. The national-level work on offshore renewables and talks on specific changes to the local Accords will happen in tandem. Given the federal government’s original work was suggested to perhaps offer a foundation for the joint federal-provincial Boards (and that is not expected to be done until late 2023), it’s unlikely the Board work would be settled earlier. At the same time, there has not even been a rough sketch of a timeline for the changes to the Accord Acts. And it’s unlikely companies will want to jump in with investments before that’s done.

The regulators are under no illusions. The actual amending of the Atlantic Accord and establishing a set of concrete regulations “will take some time,” CNLOPB communications lead Lesley Rideout stated last week, responding to questions from Atlantic Business Magazine.

“Our staff will be working closely with governments in the coming months to ensure we effectively take on this expanded mandate coinciding with the legislative amendments being made,” she stated.

While the legalities are hammered out, the governments have decided to simultaneously launch separate assessments of Newfoundland and Labrador and Nova Scotia’s offshore areas, to “assist in providing long-term regulatory certainty and clarity for investors” as the “i”s are dotted and “t”s crossed over the next couple of years.

 

Wind onshore N.L.

Meanwhile, the Government of Newfoundland and Labrador announced regulations for wind onshore Newfoundland and Labrador will be changing. In 2006, in the process of creating the province’s Energy Plan, the Progressive Conservative cabinet of the day (including Premier Danny Williams) ordered a hold on industrial-level wind projects. No commercial wind energy projects proposing wind energy for sale were allowed to go through environmental assessment and no Crown land leases or grants would be issued for these commercial projects.

An exception was made to cover a process Newfoundland and Labrador Hydro had ongoing, after a 2005 request for proposals process for wind power proposals. A wind farm near St. Lawrence (developed by NeWind Group, a subsidiary of ENEL North America) and a wind farm at Fermeuse (proposed by Vector Wind Energy and developed by SkyPower Corporation) were both completed at the end of that process. The two have a capacity of 27 MW each and are now owned and operated by B.C.-based Elemental Energy (with the St. Lawrence farm acquired in March 2020).

The rules were tested a few years later, in 2010, when Wind Project Inc. registered a new wind farm for the Argentia area for assessment. The government ultimately refused to proceed with the environmental assessment, per the standing policy.

New legislation, introduced as Bill 61, making changes to the province’s Electrical Power Control Act, Energy Corporation Act and Hydro Corporation Act in 2012 secured Crown corporation Newfoundland and Labrador Hydro’s control over new power generation and large additions to the grid, making it a requirement that new generation be approved by and flow through the utility. Retailers like Newfoundland Power and industrial customers were required to buy their power from Newfoundland and Labrador Hydro, or obtain Hydro’s approval otherwise.

In April 2019, the Liberal government made a change. A new Cabinet order permitted wind projects proposing sale of produced electricity to an isolated, diesel-powered power system, versus the province’s main grid.

Now, Liberal Energy Minister Andrew Parsons says the “moratorium on wind development” onshore Newfoundland and Labrador is coming to an end. It was announced as an intention and really an early signal to would-be onshore, commercial wind developers of change. The initial statement said changes were being made to allow for private development of wind farms to generate electricity for: “industrial customers; export through transmission lines; for the production and export of hydrogen/ammonia; and, to supply energy to Newfoundland and Labrador Hydro.” It’s worth noting the list does not include private developments with plans for direct sales to local customers at the home and commercial level (versus sales to the Crown utility).

The details and actual changes will determine whether or not individual ratepayers and taxpayers are harmed. Changes affecting industrial customers, allowing for competition in power exports and even competing supply to Hydro all have the potential to be a win for a handful of businesses and a loss for a far larger number of businesses if not properly handled.

Speaking with Atlantic Business Magazine, Parsons said the details are still being worked out. There is the government policy and the legislation to consider. At this point, he said he did not anticipate but also would not rule out legislative changes. No change would mean companies would not be able to sell power direct to customers.

It’s important to emphasize the recent announcement on onshore wind was entirely about industrial-scale wind farms. There is no blanket prohibition against wind turbines in Newfoundland and Labrador. Wind power is not illegal.

There are essentially two levels of wind power to consider when thinking about the potential onshore: small turbines (0.3 to 100-kw) and utility-scale (+100kw). Small-scale developments on anyone’s existing property holdings, the kind that might serve an individual homeowner or business, have not been banned outright by any government.

Tied to that, Newfoundland and Labrador introduced a net metering framework in 2015 and, after detailed regulations were worked out with the power utilities and regulator, net metering was launched over five years ago. Like in neighbouring provinces, homeowners and commercial property owners are permitted to add solar panels to their roofs, to install systems whereby they can offset their usual use of electricity from the main grid and sell excess power back, through Newfoundland Power or Newfoundland and Labrador Hydro.

The net metering program was capped at a total of 5 MW of capacity for the whole of the province. Newfoundland and Labrador has not come anywhere near that cap at any time. As of the last updates held by the Public Utilities Board, to the end of 2021, total approved capacity of all installed net metering systems for both utilities is 595.9 kW, or just 12 per cent of the permitted 5 MW.

A lot might be said about the limited uptake on personal renewables in Newfoundland and Labrador versus, say, Nova Scotia. The discussion would have to include the overall public understanding of renewable energy options, mischaracterizations tied to the industrial-scale restrictions, limited advertising, differing financial incentives (proponents would emphasize lack of provincial government incentives) to promote installation of these personal renewables and more. However, the bottom line is they are legal and available. There are existing regulations and knowledge in the private sector to see them set up.

The net metering regulation explicitly provides for use of wind power, as well as geothermal, biomass, wave power and more. This week, Newfoundland Power spokesperson Michele Coughlan confirmed two customers are using small-scale wind for their net metering, with a total capacity for the two of 210.1 kW. The bottom line: there is room for more.

With Parsons’ announcement on industrial developments, one of the issues to settle will be whether or not changes being made will allow for things like community solar projects or other shared renewables.

As an overarching concern, there is a push happening throughout North America and in places around the world for independent electricity production and off-grid systems, with no connection to long-dominant, legacy utilities. In Newfoundland and Labrador, the government and legacy utilities are tied to payments for the Muskrat Falls Hydroelectric Project. The current system of regulations was explicitly developed to see that local ratepayers covered project costs. And it means the province will struggle to introduce programs matching its neighbours. At the same time, the province does have a wealth of renewable power production and potential.

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