Alberta & Saskatchewan Renewable Energy Finance Summit Alberta and Saskatchewan Climate Policy Developments and Implications for Renewables

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1 Alberta & Saskatchewan Renewable Energy Finance Summit 2018 Alberta and Saskatchewan Climate Policy Developments and Implications for Renewables Lisa (Elisabeth) DeMarco DeMarco Allan LLP February 6, 2018

2 Overview DeMarco Allan LLP: Established in Canada s only Climate and Clean Energy Boutique Law Firm Climate Policy Context: 2017, a very good year Alberta: Climate Incentive Regulation Saskatchewan: Prairie Resilience Strategy Implications for Renewables?

3 Climate Policy Context 2017 a very big year for climate policy in Canada Canadian federal backstop to be applied in provinces not deemed equally stringent carbon levy for fossil fuels ($10 rising to $50/tonne over 5 years) output based pricing for large emitters above 50KT, relative to sector emission intensity (price applies on each tonne above) Flexible compliance: surplus credits, offsets Annual assessment of provincial performance by feds AB: CCIR SK: Prairie Resilience: Climate Change Strategy ON (CT market starts and links to QC and CA) NS introduces CT legislation NFLD announces pricing system similar to AB MB announces carbon $25/tonne Patchwork of carbon policy: clearly establishes carbon has financial value, very relevant to energy markets, extremely important for renewable projects

4 GHG Emissions in AB and SK by Sector, 2015 Alberta Saskatchewan Alberta Total (2015) = Mt CO 2 e Source: NIR, Greenhouse Gas Sources and Sinks in Canada, Table A12-10 (2015 data) Source: SK Climate Change Strategy

5 AB and SK Carbon Pricing at a Glance CCIR replaces SGER 12/17 Coverage: economy wide with specific cap for O&G, all Paris GHGs, imports and exports addressed, partially exempt Electricity: covered, coal phase out and subject to 30% renewables commitment by 2030 Threshold: 100,000 tonnes, opt 50,000 or if renewable facility not covered by a RESA Obligation: largely product emission intensity benchmarks must be met, price $30/ tonne applies above, 3 year phase in 50%, 75%, 100% by 2020,, very large emitters must submit quarterly Flexibility: tech fund, offsets (60% max), surplus credits Accountability and Stringency: 100 MT oil sands cap; 1%/year increasing stringency Prairie Resilience Strategy 12/17 Coverage: economy wide, with Oil, Gas and Electricity subject to direct regulation for reductions but potential for linkage to pricing system especially for CH4, Ag included in offsets, imports and exports contemplated consistent with Paris Electricity: covered in SaskPower 50% renewables commitment by 2030; 40% sector GHG reduction from 2005 by 2030 Threshold: 25,000 tonnes Obligation: sectoral intensity based EPS price TBD applies above, climate related financial disclosures TBD Flexibility: tech fund, offsets, best performance credits, Paris ITMOs *Accountability and Stringency: Best Practice IPCC Multi-factor Resilience Target and Regular Measure (measure and adjust for Natural systems, Infrastructure, Economy, Communities)

6 Implications for Renewables All jurisdictions: Carbon has real financial value (safer bet than bitcoin or marijuana) In Alberta: Old and new renewables have choice (offset and REP system offer differing term/carbon price combinations that must be assessed in light of the project) In Sask: 200 MW underway. Much more to come to meet 50% renewables commitment and 40% sector GHG target Policy Certainty? No. Increasing Carbon Stringency? Yes. Sustained value of renewables generated carbon benefits? Yes. AND value not just restricted to renewable generation Enhanced/new/upgraded transmission Distributed generation Energy storage Indigenous Partnerships

7 AESO Renewable Energy Program AB directs AESO to design and implement a plan to incentivize the development of 5000 MW of new renewable electricity generation in Alberta by 2030 REP 1: Renewable attributes (an indexed REC for Round 1) produced from renewable output procured through competitive process prices are record low $37/MWh funded by carbon levy REP 2: 300 MW Indigenous Partnerships, and REP 3: 400 MW like REP 1 announced yesterday Storage: AESO with assessing how dispatchable renewables and electricity storage could benefit a lower-carbon electricity system Stakeholders to provide comments by February 14, 2018

8 Electricity Inter-ties in the Indigenous, Trade, and Climate Context: Generation Emissions Intensity (kg CO 2 per MWh in 2015) and Existing and Proposed Transfer Capability (MW) First Nations 12.6 BC 790 AB 32 NL 3.3 MB 1.1 QC 660 SK 40 ON 20 PE 106 WA NAFTA 618 MT 839 ND 531 MN 593 MI 685 OH 423 PA 235 NY 5.4 VT 182 NH 251 ME 417 MA 280 NB 600 NS Slide adapted from Natural Resources Canada, Implementing Strategic Interties to Support the Pan-Canadian Framework, Standing Committee on Natural Resources (September 20, 2017). Emissions intensity data sources: Canada National Inventory Report , Part 3, Annex 13 Electricity in Canada: Summary and Intensity Tables ; U.S. Energy Information Administration, State Electricity Profiles (Table 7). Schematic only.

9 Renewables Increasingly called upon to Solve Canadian Energy/Economic Challenges Economic transition to low carbon economy via electricity 30% below 2005 levels by 2030 means electrification and fuel optimization in transportation (173Mt, 24%), buildings (86Mt, 12%), O&G (189Mt, 26%) (Source: NRCAN, 2015 NIR) Optimization and innovation in Canadian energy system Efficiency lost in fuelism directed at natural gas and lack of interfuel cooperation, solve for carbon not fuel; NAFTA Energy Chapter negotiations may worsen Electron Waste Out-dated electricity market rules, lack of energy storage, and trade dynamics resulted in 2016 spill of 4.7 TWh greenest, cheapest hydro power (7.6 TWh total zero emission power) in Ontario alone (Source: OPG) Indigenous Energy Poverty Reliability in certain indigenous communities 2081% worse than southern neighbours, 400% worse than northern neighbours, yet bills among the highest (Source: Anwaatin Evidence, OEB EB proceeding)

10 Thank you. Lisa (Elisabeth) DeMarco Senior Partner DeMarco Allan LLP