Alberta's Pause on Renewable Projects: What We Know So Far

August 04, 2023

Written By Martin Ignasiak, Jessica Kennedy and Larissa Lees

In an unprecedented move, the Alberta Minister of Affordability and Utilities issued a surprise announcement on August 3, 2023, that the Alberta Utilities Commission (AUC or Commission) was directed to pause approvals in respect of new renewable electricity generation projects until at least February 29, 2024, to facilitate a review of the policies and procedures for the development of renewable electricity generation. The direction to pause approvals was stated to be in direct response to a letter from the Commission that highlighted the need to review and consider broad policy changes in respect of renewable development. The AESO also provided a letter of support in relation to the Minister's decision to pause approvals for renewables. The direction took effect the day it was announced.

In recent months, renewable projects in the province have faced increased scrutiny through the AUC process. Not only are more project proposals being sent to the hearing process before a decision is rendered (a trend driven by increased stakeholder participation and opposition), the AUC has partially or fully denied several renewable projects in the past five months, and the list of approval conditions now considered standard appears to be growing. This trend has been occurring in conjunction with increased concern related to transmission costs and affordability of electricity in Alberta, perhaps most clearly reflected by the establishment of a new Ministry of Affordability and Utilities in June 2023 and associated mandate letters from the Premier, which squarely link affordability issues with electricity regulation and the AUC. The AUC does not cite these issues in their decisions denying renewable developments. This may be because, since the deregulation of the generation market in 1996 under the Electric Utilities Act, the need for generation and costs of transmission required to accommodate new generation are not relevant considerations when considering proposals for generation facilities. The inclusion of "the impact of increased renewables on Alberta's generation supply mix and electricity system reliability" within the scope of the forthcoming inquiry suggests this issue may now be considered as part of the forthcoming inquiry.

The details regarding the pause on new project approvals, upcoming AUC inquiry and surrounding context are provided below.

AUC Approval Pause

The approval pause for renewables has been implemented through the Generation Approvals Pause Regulation, which prohibits the AUC from granting approvals for hydro developments and power plants that produce renewable electricity during the period in which the regulation is in force.¹ Here is what we know so far about the scope of this "pause":

1. The AUC may still consider and approve amendments to and time extensions of existing power plant approvals.
2. The pause does not apply to interconnection applications for previously approved projects, including AESO needs identification document (referred to as "NID") applications, permit and licence applications for transmission infrastructure and connection orders.
3. Microgeneration, projects under one megawatt and isolated generation projects are exempted from the approval pause as "they are not expected to affect the work of assessing impacts on agricultural and other significant land".²
4. Electricity storage projects may be exempted from the approval pause, particularly in the case of standalone battery energy storage systems (BESS). There remains some ambiguity as to whether a BESS that solely charges from a renewable electricity resource would be exempted. This is because the approval pause relates to power plants that "produce renewable electricity" and storage project approvals are still being processed as "power plant" applications. The Electricity Statutes (Modernizing Alberta’s Electricity Grid) Amendment Act, 2022 (Bill 22) created specific approvals and standalone definitions for energy storage resources that would distinguish them from power plants; however, despite receiving royal assent on May 31, 2022, it has not yet been proclaimed into force.
5. The scope of the pause does not apply to the AESO's interconnection process, including with respect to new projects. The AESO has confirmed that it will be proceeding with the upcoming "Cluster Assessment Process", which will be the first cluster-based assessment of power project interconnection requests in Alberta, commencing September 1, 2023.³ However, proponents may be re-evaluating their plans with respect to that process given there is presently no clarity on when or if the AUC may approve the power plants that proponents are seeking to connect through the AESO's process.

With respect to in-flight projects before the AUC, the Commission is currently seeking feedback on the implementation of the approval pause, including whether the Commission should continue to accept and process new and existing applications for power plant approvals. While stakeholders have been invited to propose other options for implementation, the Commission has proposed three options:

1. complete abeyance: no new power plant applications permitted; no process steps completed for existing applications;
2. partial abeyance: new power plant applications permitted; all process steps completed up to the point of written evidence and prior to a public hearing; and
3. approval hold only: new power plant applications permitted; all process steps completed up to and including a public hearing.

We note that the Commission has also invited proponents in active proceedings to provide comments within the scope of their respective proceedings, which has the potential to result in a proceeding-specific approach.

The Forthcoming AUC Inquiry

The Commission's review of the policies and procedures for renewable development will include a public inquiry, after which the Commission is required to submit, no later than March 29, 2024, a report analyzing its findings to the Minister of Affordability and Utilities. The purpose of the inquiry is to "inquire into" specific matters "for the purposes of gathering and providing information to government", in reference to the Minister of Affordability and Utilities.

The scope of the inquiry includes consideration of:

• development of power plants on specific types or classes of agricultural or environmental land;
• the impact of power plant development on Alberta’s pristine viewscapes;
• implementing mandatory reclamation security requirements for power plants;
• development of power plants on lands held by the Crown in Right of Alberta (which is currently prohibited); and
• the impact the increasing growth of renewables has to both generation supply mix and electricity system reliability.

The AUC is required to hear from interested parties in conducting the inquiry. Ultimately, the AUC's report following the inquiry must "make findings or provide observations or considerations for options, as it deems appropriate, based on its analysis of the evidence received during the inquiry" and be submitted to the Minister of Affordability and Utilities. In its letter to the Minister, the AUC asked for "government direction, either in the form of provincial policy or new legislation" following this inquiry.

The absence of government direction on the issue of using agricultural lands for solar projects was also recently noted by the Commission in relation to the Creekside Solar Project, where the Commission placed little weight on the loss of agricultural land in its public interest determination, finding that "[i]n the absence of legal or government policy restrictions that affect a private landowner’s ability to take agricultural land out of production, the Commission attributes significant weight to a private landowner’s discretion over land use."⁴

The AUC has indicated that further information regarding the inquiry, including next steps, will be provided "in due course".⁵

Recent Trend of Increased Scrutiny for Renewables

In recent months, we have observed a trend of increased scrutiny for renewable projects in Alberta, which aligns with growing interest and concerns expressed by various stakeholders through AUC processes. While previously the Commission has been more likely to impose mitigation measures and conditions in respect of any potential impacts of renewable projects (including post-construction monitoring), recent decisions demonstrate less tolerance and acceptance of such measures. Furthermore, recent decisions demonstrate a desire for more detailed justification or evidence for siting decisions as a prerequisite for approval. As a result, there have been a number of applications for the construction and operation of renewable projects which have been fully or partially denied, in addition to some proposals (including amendments applications) being subjected to unusually lengthy and involved hearing processes. Additionally, for projects that successfully receive approval, the list of commitments and conditions considered "standard" in relation to wind and solar projects appears to be growing.

Apart from any changes that may result from the upcoming inquiry, proponents should consider and incorporate applicable recent precedent from the Commission in evaluating likely restrictions on contemplated operations when designing projects, developing financing models and preparing regulatory applications. Recent and notable decisions in relation to approvals for renewables include:

Foothills Solar Project

On April 20, 2023, the Commission denied an application for the construction and operation of the Foothills Solar Project. The Commission found that despite the potential environmental and economic benefits to the Cold Lake First Nations, the project was found to create a high mortality risk to birds and bird habitat. Among other reasons, the Commission found that there  was a lack of conclusive evidence in respect of the environmental impact given that "the science is not settled".

Burdett Solar Project

On July 20, 2023, the Commission denied an application for the construction and operation of the Burdett Solar Project. The Commission found that approval was not in the public interest as the project was sited within 1,000 meters of a "named lake" and would create unacceptably high risks to migratory birds and water birds.⁶ Unlike in the case of the Foothills Solar Project, there were no interveners opposed to the Burdett Solar Project and no hearing was held.

Nova Solar Power Plant

On July 19, 2023, the Commission denied the application for approval of a transmission line to connect the Nova Solar Power Plant to the Alberta interconnected electric system on the basis, among other reasons, that not enough information was provided in relation to the routing methodology; stakeholder concerns in relation to routing were not adequately addressed; and other routing options appeared to be available but were not explored in the evidence.⁷

Halkirk 2 Wind Power Project Amendment

On July 27, 2023, the Commission approved applications to amend, construct and operate the Halkirk 2 Wind Power Project. However, the Commission denied the location of two turbines due to impacts on aviation safety and aerodrome use, and imposed a condition that would require the proponent to engage in further process to address outstanding and unresolved concerns about the aviation safety of three additional turbine locations, should it choose to proceed with them. The proponent also voluntarily agreed to shut down operations at night during high bat migration periods as a mitigation measure to the risk of bat mortality.⁸

Increased Focus on Managing Wires Costs and Affordability of Electricity in Alberta

The AESO's Reliability Requirements Roadmap published on March 10, 2023, identifies significant reliability impacts largely occurring or expecting to occur as a result of the increasing penetration of wind and solar generation in Alberta. While the Commission did not expressly note that it was concerned with the reliability impacts of renewables (and associated costs) in its letter to the Minister requesting the approval pause for renewables, transmission costs and affordability considerations have increasingly been at the forefront of recent government policy. Most recently, the mandate letter sent to the Minister of Affordability and Utilities on July 19, 2023, was replete with initiatives to address and reduce utility costs and ensure affordability.

The growing concern with wires costs as a result of renewable development appear to have coincided with increased scrutiny for renewable approvals and with the request from the Commission to pause approvals for renewables. Proponents are now faced with continued uncertainty given the potential for policy changes from government following the Commission's inquiry. However, a comprehensive policy review for renewable development has the potential to provide a clear and consistent framework for proponents and may assist in navigating the increased scrutiny for renewables that has materialized in Alberta.

The government has acknowledged, in setting the terms for the inquiry, that "the development of new renewable electricity will play an important role in the province’s sustainable energy future."

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