Articles

Onwards and Upwards: New Nova Scotia Energy Policy Targets Solar, Hydrogen and the Atlantic Loop

Authors: , and * | April 2023 – Volume 11, Issue 1 2023

2022 was an eventful year for Nova Scotian energy policy. Nova Scotian lawmakers ushered in a bevy of legislative changes to advance their environmental/energy agenda for the province. The changes focused mainly on sparking the development of more renewable energy generation.

Just like many provinces across Canada, Nova Scotia has ambitious emission reduction targets. Nova Scotia’s Environmental Goals and Climate Change Reduction Act calls for a reduction of greenhouse gas emissions by 53 per cent below 2005 levels by 2030, and the achievement of net-zero greenhouse gas emissions (“GHGs”) by 2050.[1] A tall order by any measure, but one that Nova Scotia’s conservative government seems dedicated to achieving based on the flood of new legislative changes they passed this past year.

In addition to the environmental-based legislative changes, the Nova Scotia government also ushered in legislation to cap electricity rate increases.

This article considers three key legislative developments that occurred in 2022: a) the amendments to Nova Scotia’s Electricity Act[2] and Renewable Electricity Regulations[3] to expand the net-metering program; b) the changes to the Electricity Act and liquid fuel legislation to promote the development of green hydrogen projects; and c) the amendments to the Public Utilities Act[4] to impose a 1.8 per cent cap on Nova Scotia Power Inc.’s (“NSPI”) net rate increases in 2022, 2023 and 2024.

THE NEW SOLAR NET-METERING PROGRAM

The Existing Program

Since 2010, Nova Scotia’s net-metering program has provided a proven channel for Nova Scotian homeowners, businesses, and institutions to install renewable electricity systems. Specifically, the metering program allows Nova Scotia Power Incorporated customers to:

  • Install and interconnect eligible renewable energy generators to the grid. Eligible technologies include wind, solar, tidal and biomass; currently, solar photovoltaic represents the overwhelming majority of renewable energy generators installed under net metering programs;
  • Reduce their electricity bills by an amount equivalent to the amount of energy that they produce;
  • Receive credit for any excess energy injected into the electricity grid.

Hundreds, if not thousands, of Nova Scotia Power customers have taken advantage of the net-metering program.

However, while some commercial and institutional customers have participated in the net-metering program, to date most participants have been residential homeowners. The 100 kW cap on installed nameplate capacity limited uptake by commercial and institutional players.

Recent Amendments to Electricity Act

Effective April 22, 2022, the Nova Scotia Department of Natural Resources and Renewables announced amendments to the Electricity Act.[5] The amendments expanded, protected, and built upon the Nova Scotia’s net-metering and other renewable electricity programs by, among other things:

  • Eliminating the previous 100 kW nameplate capacity cap to enable more commercial and institutional customers to use the program;
  • Prohibiting Nova Scotia Power from introducing any fee structures or system access charges that discourage participation in net-metering programs;
  • Introducing provisions that subject Nova Scotia Power to greater regulatory oversight by the Nova Scotia Utilities and Review Board in administering the net-metering programs; and
  • Introducing a “right to self-generate” that enables any Nova Scotian to install up to 27 kW nameplate capacity of renewable electricity generation and storage equipment without NSP approval.

Amendments to Renewable Electricity Regulations

Effective October 28, 2022, the Nova Scotia Department of Natural Resources and Renewables announced amendments to the Renewable Electricity Regulations[6] that, among other changes, create a more viable net-metering stream for commercial and institutional customers.

Specifically, the amendments increased the net-metering cap from 100 kW to up to 1 MW of nameplate capacity. The amended regulations will therefore allow eligible commercial, institutional, agriculture or aquaculture customers to install one or more eligible renewable energy generators of up to 1 MW (or 1,000 kW) of installed capacity per distribution zone.

Eligible customers include:

  • Customers that pay a demand charge as part of their existing rate (corresponding to ratepayers under the General, Industrial or Municipal Tariff Codes);
  • Customers that own or operate a winery registered under the Agriculture and Marketing Act;
  • Customers that own or operate a farm registered under the Farm Registration Act; and
  • Customers that own or operate a licensed aquaculture plant under the Fisheries and Coastal Resources Act.

All other customers can install eligible renewable energy generators of up to 200 kW of nameplate capacity per distribution zone.

The amendments also streamline net-metering application processes for customers with multiple different locations and/or generators by allowing customers with multiple locations to install one or more renewable electricity generators under a single net-metering agreement, provided:

  • The generators are all installed within the same distribution zone;
  • The generators are all subject to the same rate or tariff; and
  • The total nameplate capacity of these generators doesn’t exceed the applicable caps set by the Electricity Act and the Renewable Electricity Regulations.

The amended regulations also enhance transparency and oversight by requiring NSPI to submit both of the following for approval by the Nova Scotia Utility and Review Board (“NSUARB”):

  • The terms and conditions of the program, including the requirements for participating in net-metering and the grounds on which Nova Scotia Power can deny an application; and
  • A standard form net-metering agreement that governs the sale of renewable, low-impact electricity to NSPI.

NSPI’s Application for approval of its new net-metering program is currently before the NSUARB.[7] NSPI is not permitted to make any further changes to its net metering program(s) without first obtaining Board approval.

The amended regulations also require Nova Scotia Power to process net-metering applications in a “timely” manner and approve all net-metering applications unless there are “reasonable grounds” to deny them. These changes serve as a legislative basis to expedite net-metering application processing times and reduce processing barriers to net metering application approval, system commissioning, and interconnection.

Finally, the amended regulations provide that, upon request by a customer, Nova Scotia Power must register all “renewable energy certificates” associated with a customer’s renewable energy generator(s) with an internationally accredited organization on an annual basis. Upon request by a customer, Nova Scotia Power must furnish the customer with renewable energy certificates describing the volume and vintage of renewable electricity generated by the customer’s generator(s) on an annual basis, at which time the certificates will be considered retired.

The amended regulations further provide that Nova Scotia Power can count the total output of all renewable energy generated under a net-metering program and all residential net-metering customers to meet its renewable electricity performance standards.

The interaction of these provisions suggests that commercial or institutional net-metered customers can apply the renewable energy certificates resulting from their renewable energy generator(s) against their internal renewable electricity performance and reporting requirements. Concurrently, Nova Scotia Power can apply the energy generated by all net-metered systems against its legislated renewable energy standard. If a commercial customer wished to register, sell, or assign the renewable energy certificates associated with its system independently, it must do so outside the context of the net-metering program.

Overall, the changes to the Electricity Act and Renewable Electricity Regulations are intended to expand the net-metering program to more commercial participants, streamline the application process, and lend greater transparency and accountability to NSPI’s application review process.

GREEN HYDROGEN DEVELOPMENT

In recent years, the excitement around the potential of hydrogen as a green energy source has been gaining momentum. Hydrogen as an energy source attracted considerable attention globally throughout 2022, and Atlantic Canada was no exception. Indeed, Atlantic Canada has positioned itself to become a key export hub for hydrogen and has been holding its own in this burgeoning sector. For example, in August 2022, Canada and Germany held a hydrogen summit in Newfoundland and signed a “joint declaration of intent” to begin investing in the creation of a “transatlantic Canada-Germany supply corridor” to allow for the export of hydrogen produced in Atlantic Canada to Germany.[8]

In Nova Scotia, there are at least six active green hydrogen projects, including four large export projects to deliver low-carbon energy to markets in Europe, and two smaller projects for domestic use.[9]

The recent legislative amendments in Nova Scotia are targeted at facilitating the development of green hydrogen projects.

Amendments to Nova Scotia’s Liquid Fuel Legal Regime

In November 2022, Nova Scotia’s legislature passed amendments to the Pipeline Act[10], the Gas Distribution Act[11], and the Subsurface Energy Storage Act[12] (formerly known as the Underground Hydrocarbon Storage Act). These three pieces of legislation establish rules and standards for the storage, transportation, and distribution of liquid fuels in Nova Scotia. The specific changes that were made include the following:

  • hydrogen, ammonia, carbon sequestration and compressed air energy storage have been added to the scope of the Underground Hydrocarbons Storage Act;
  • pipelines built for hydrogen or hydrogen blends have been included under the Pipeline Act; and
  • hydrogen is now considered part of a gas distribution system under the Gas Distribution Act, and thus subject to Nova Scotia Utility and Review Board oversight under that legislation.

By updating these three pieces of legislation, Nova Scotia has confirmed that its existing legal regime for liquid fuels applies to new hydrogen fuels.

These changes lend certainty to businesses undertaking (or interested in undertaking) new green hydrogen projects, and provides greater clarity on the rules, procedures, and standards they must follow.

New Green Hydrogen Projects in Nova Scotia

In November 2022, the Nova Scotia government introduced Bill 207[13] to amend the Electricity Act. Bill 207 will (a) establish a “Hydrogen Innovation Program” to facilitate green hydrogen projects, and (b) allow eligible and participating green hydrogen businesses to buy wholesale electricity on the open market under Nova Scotia’s Open-Access Transmission Tariff (“OATT”).

Subsection 4FA of the amended Electricity Act[14] will require the Minister of Natural Resources and Renewables to “develop and maintain a hydrogen innovation program for the interconnection of a hydrogen facility to the electrical grid of a public utility for the purpose of hydrogen production and processing.”

The new amendments will empower the government to pass regulations setting out the terms and conditions for participating in this new program. Owners or operators of hydrogen processing or production facilities will be able to apply to the Minister to participate in the Hydrogen Innovation Program, subject to the terms and conditions established by the new regulations passed pursuant to the amendment.

Bill 207 provides relatively few concrete details on the substance of the Hydrogen Innovation Program. However, the regulatory powers created by Bill 207 nonetheless provide several important hints regarding the shape the program is expected to eventually take:

  • The program will create a pathway for the owners or operators of hydrogen facilities to interconnect with Nova Scotia’s power grid and purchase power on the open market to enable their operations. The purchase and sale of electricity through Nova Scotia Power’s grid is enabled by, and subject to, the Open-Access Transmission Tariff, which imposes a fee on buyers and sellers of wholesale electricity who make use Nova Scotia’s power grid.
  • To take advantage of this program, owners and operators of hydrogen facilities must comply with the program eligibility criteria, data reporting requirements, and performance standards established by regulations passed pursuant to the amended Electricity Act.
  • Reporting requirements and ongoing compliance obligations for participants in the program will be designed to (among other things): (a) enable the government to monitor and measure the carbon emissions of new hydrogen projects; (b) establish performance standards regarding the carbon intensity of these projects; (c) establish penalties for hydrogen projects that fail to satisfy the performance standards; and (d) establish requirements or conditions for the sale of hydrogen or electricity produced from hydrogen at participating hydrogen facilities.[15]

Further details regarding the Hydrogen Innovation Program will likely be forthcoming in the months after Bill 207 comes into force (Bill 207 received royal assent on November 9, 2022, and will come into force when proclaimed by the Governor in Council).

Clarity on EAs for Hydrogen Projects

Nova Scotia has also changed two sets of regulations to provide clarity to green hydrogen developers about what their environmental assessment obligations will be in relation to these types of projects. The changes were made to the Environmental Assessment Regulations[16] and Activities Designation Regulations[17], and provide as follows:

  • large-scale projects that produce and/or store hydrogen or ammonia require a Class I environmental assessment;
  • facilities that produce and/or store hydrogen or ammonia require operational approvals; and
  • several operational approvals can be bundled under one clear, facility-level approval for hydrogen facilities

Once again, this legislative change lends greater certainty and predictability to what environmental hurtles will have to be satisfied during the planning stage of hydrogen projects.

THE ATLANTIC LOOP

As indicated, Nova Scotia has incorporated in legislation its goal to reduce greenhouse gas emissions to at least 53 per cent below 2005 levels by 2030 and to achieve net zero emissions by 2050. A big part of achieving these goals is a program to reduce Nova Scotia’s dependence on coal to generate electricity.

An important part of this program is a new multi-billion dollar transmission project called the Atlantic Loop which will give Nova Scotia greater access to hydroelectricity generated in Labrador and Québec.

The project’s funding structure is still under review. The federal government, the governments of Nova Scotia and Quebec, and Nova Scotia Power, are engaged in ongoing discussions about the Atlantic Loop project.[18] The Nova Scotia government has taken the position the Atlantic Loop will not be economically feasible without federal funding. Specifically, Karen Gatien, Deputy Minister of the Nova Scotia Department of Natural Resources and Renewables recently stated that “[t]here is no loop without federal support, it’s just too costly.”[19]

However, the project has faced some uncertainty recently as a result of the recent legislation by the province to limit the rate increases the utility could be granted by the Nova Scotia energy regulator.[20]

On January 27, 2022, Nova Scotia Power brought a General Rate Application seeking overall average smoothed rate increases across rate classes of 3.6 percent beginning August 1, 2022, January 1, 2023, and January 1, 2024. The Fuel Update Nova Scotia Power filed on September 2, 2022 showed a significantly higher forecast for fuel and purchased power costs, representing an increase of $681.5 million over the original forecast for the period from 2022 to the end of 2024. The Province of Nova Scotia agreed to provide some relief to NS Power customers from this amount by exempting NS Power from approximately $165 million of greenhouse gas (GHG) compliance expenses to the end of 2022.

On October 19, 2022 (after the hearing had concluded, but before written closing submissions were filed by the parties), the Nova Scotia Government introduced Bill 212 in the Legislature. The legislation came into effect on November 8, 2022, and limited the non-fuel rate increase to 1.8 per cent over the next two years.[21] The changes to the Public Utilities Act also placed limits on the maximum rate of return on equity, being (9.25 per cent compared to the 9.5 per cent requested by Nova Scotia Power), and equity thickness ratio (40 per cent compared to the 45 per cent requested by Nova Scotia Power).[22]

In response to this legislative cap, Nova Scotia Power announced it was putting the Atlantic Loop project on hold.[23] The federal government stated that it is still committed to continuing negotiations on reaching an agreement in principle for the Atlantic Loop project, and that despite Nova Scotia Power pressing pause on its involvement, the federal government remains committed to the project.[24]

On February 2, 2023, The Nova Scotia Utility and Review Board issued its decision in relation to Nova Scotia Power’s General Rate Application. The decision largely approved a settlement agreement between Nova Scotia Power and several Intervenors. In the settlement agreement, the parties agreed (subject to Board approval) to average rate increases of 6.9 per cent (across all customer classes in each of 2023 and 2024, and including fuel and non-fuel costs).

The development of the Atlantic Loop, including the funding structure that will be in place for the project, is still under negotiation. It remains unclear what impact, if any, the recent developments will have on the progress of the Atlantic Loop project. However, one thing is certain: the progress of the discussion around the Atlantic Loop will be closely watched by all those with a keen interest in the Atlantic Canadian energy space over the course of 2023.

CONCLUSION

Achieving “net-zero by 2050” is an ambitious goal. It will be difficult to achieve without sweeping and varied changes to existing legislation: it will take the legislative equivalent of a ‘full-court press’ to achieve the sort of legislative change required to meet the challenges and opportunities that have been ushered in by the renewable energy transition.

At the same time, these legislative changes must be flexible enough to evolve with the ongoing development of energy alternatives.

Overall, it is increasingly clear that, when it comes to renewable energy, the tides of industry are turning, compelling lawmakers to rise to the challenge of guiding that sea change: Nova Scotia’s 2022 story provides an example of one government’s multifaceted efforts to meet this challenge.

 

* Gordon Kaiser is a member of Energy Law Chambers in Toronto. Melanie Gillis and Noah Entwisle are Lawyers at McInnes Cooper in Halifax.

  1. Environmental Goals and Climate Change Reduction Act, SNS 2021, c 20, s.6.
  2. Electricity Act, SNS 2004, c. 25.
  3. Renewable Energy Regulations, NS Reg 155/2010.
  4. Public Utilities Act, RSNS 1989, c. 380.
  5. Supra note 2.
  6. Supra note 3.
  7. Nova Scotia Utility and Review Board, In the Matter of an Application by Nova Scotia Power Incorporated for approval of a new Commercial Net-Meting Program (M10872), Hearing Order (NSUARB, 2022), online (pdf): <nsuarb.novascotia.ca/sites/default/files/M10872%20-%20Notice%20of%20Paper%20Hearing.pdf>.
  8. Natural Resources Canada, “Canada and Germany Sign Agreement to Enhance German Energy Security with Clean Canadian Hydrogen” (23 August 2022), online: Government of Canada <www.canada.ca/en/natural-resources-canada/news/2022/08/canada-and-germany-sign-agreement-to-enhance-german-energy-security-with-clean-canadian-hydrogen.html>.
  9. Natural Resources and Renewables (Nova Scotia), “Legislation Supports Green Hydrogen Development” (17 October, 2022), online: Province of Nova Scotia <www.novascotia.ca/news/release/?id=20221017007>.
  10. Pipeline Act, RSNS 1989, c. 345.
  11. Gas Distribution Act, SNS 1997, c 4.
  12. Subsurface Energy Storage Act, SNS 2001, c 37.
  13. Bill 207, Electricity Act (amended), 1st Sess, 64th Gen Ass, 2022 [Bill 207].
  14. Supra note 2.
  15. Supra note 13.
  16. Environmental Assessment Regulations, NS Reg 26/95.
  17. Activities Designation Regulations, NS Reg 47/95.
  18. Francis Campbell, “Nova Scotia, others still in the Atlantic loop but little progress being made, deputy minister says”, Saltwire (11 January 2023), online: <www.saltwire.com/atlantic-canada/news/nova-scotia-others-still-in-the-atlantic-loop-but-little-progress-being-made-deputy-minister-says-100813358/>.
  19. Ibid.
  20. Bill No. 212, An Act to Amend the Public Utilities Act, 1st Sess, 64th Assembly, Nova Scotia, 2022, online: <www.nslegislature.ca/legc/bills/64th_1st/1st_read/b212.htm>.
  21. Ibid.
  22. Ibid.
  23. Paul Withers, “Emera is pausing the Atlantic Loop in the wake of power rate cap legislation”, CBC News Nova Scotia, (21 October 2022), online: <www.cbc.ca/news/canada/nova-scotia/emera-pauses-atlantic-loop-after-ns-power-rate-cap-1.6624183>.
  24. Paul Withers, “Ottawa ‘very committed’ to Atlantic Loop electricity mega project despite pause”, CBC News Nova Scotia, (9 November 2022), online: <www.cbc.ca/news/canada/nova-scotia/trudeau-government-atlantic-loop-project-pause-emera-1.6646208>.

 

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