Wind turbines

Nova Scotia endorses selling renewable power

Competitive generators will be licensed to sell directly to customers
Monday, April 28, 2014
By Barbara Carss

Recent legislation creates the potential for licensed competitors in Nova Scotia to start selling renewable power and share the electricity market with the provincial utility, Nova Scotia Power Inc (NSPI).

The Electricity Reform Act – the first bill in the fall of 2013 for Premier Stephen McNeil’s newly elected government – has a two-part agenda to allow provincially based generators of low-impact renewable electricity to sell directly to consumers, and to establish parameters for a comprehensive review of the electricity system.

“As our province moves toward cleaner and more innovative energy sources, we want to have an open and frank conversation about Nova Scotia’s electricity future,” Minister of Energy Andrew Younger said earlier this year.

Nova Scotia’s renewable electricity standard, enacted by the previous government in 2010, already mandates that 40 per cent of the electricity supply must come from renewable sources by 2020. Nova Scotia Power and the six municipal utilities that serve rural areas in the province also have aggressive phase-in targets that will jump from the current 10 per cent minimum to 25 per cent of electricity supply from renewable sources in 2015.

A feed-in tariff system is part of the scheme to stimulate investment in renewable generation. Notably, in late 2013, the Nova Scotia Utility and Review Board approved a feed-in tariff rate for tidal energy projects with generating capacity greater than 500 kilowatts (kW). There is also a community feed-in tariff (COMFIT) program, requiring at least 50 per cent “community ownership” as defined in regulation, for wind, run-of-the-river, in-stream tidal and biomass projects with generating capacity no greater than 500 kW.

“Nova Scotia Power, as it currently stands, is required to either build or obtain renewable electricity that it then delivers to its customers. The new program introduced by the Electricity Reform Act is something different, which would allow other producers to come into the market and start selling directly to customers,” explains Matthew Clarke, a partner and energy specialist with McInnes Cooper Lawyers in Halifax. “It’s not a feed-in tariff. The idea is that this is going be competitive.”

Only the commodity would be subject to competitive pricing. Customers would still pay regulated transmission and distribution costs since all electricity would be delivered via the incumbent utilities’ system.

Many of the program details are yet to be released, so it is not known if departing customers would have to carry a share of the former monopoly utility’s fixed generation costs. If so, that would go on top of what’s expected to be a pricier commodity than Nova Scotia Power’s still predominantly non-renewable supply.

“I think there are going to be challenges to meet or beat NSPI’s cost of electricity generation,” Clarke says. “If there is a stranded cost charge applied to customers switching from NSPI to a competitor, that’s going to make the decision to leave and go to another power producer even more cost-prohibitive.”

Yet customers are advised to prepare for higher prices regardless of their supplier. “The price of electricity has been creeping up, partly because the utility is legally mandated by electricity regulations to supply renewable electricity,” he adds.

The new legislation provides flexibility that may become more advantageous for competitive generators as market conditions change. Prospective producers foresee a range of business opportunities, including: contracts with Nova Scotia Power that will be under pressure to comply with the renewable electricity standard; direct sales to end-users in Nova Scotia; and possible access to a much larger market in the northeast United States.

“There is so much change because of the transition away from the traditional coal-powered industry, the opening up of the possible ‘maritime link’ and access to hydroelectric development in Labrador and the unknowns around future energy demand with economic recovery in the U.S.,” says Chris Campbell, executive director of Marine Renewables Canada. “One of the big questions out there is whether the current focus on natural gas for electricity in the U.S. is likely to be the solution for the U.S. energy requirements or, if that fails as a solution, what’s next.”

The Nova Scotia government has said that the regulations to guide renewable electricity transactions will be in place by late 2015. Meanwhile, technical studies and analysis related to the electricity system review are in progress.

This work is divided into three separate tasks focusing on: emerging technologies, including generation, conservation, efficiency, smart grid and storage; commodity market design; and organization and governance of electricity delivery. Resulting findings, options and proposals will be released for public consultation in the spring and summer of 2014.

Those are issues that other Canadian provinces and U.S. jurisdictions are also pondering and re-examining after forays of varying success in utility deconsolidation, open markets and renewable energy strategies.

“We commend the government for trying to take a holistic look at this whole situation,” Campbell says. “A lot of brilliant ideas have been tried in the electricity field in the last decade that, in hindsight, have turned out not to be so brilliant. Nova Scotia, perhaps, is in a sweet spot to examine a decade of experimentation in large and small systems and find something that’s good for Nova Scotia.”

Barbara Carss is the editor-in-chief of Building Strategies & Sustainability. 

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