Clean Electricity Regulations

The Government of Canada’s Clean Electricity Regulations (CER) came into effect on January 1, 2025. The AESO has analyzed these regulations and concluded that they pose a significant risk to the reliability and affordability of Alberta’s electricity system in coming years.

AESO Position on the Clean Electricity Regulations

The Government of Canada’s Clean Electricity Regulations (CER) came into effect on January 1, 2025. The Alberta Electric System Operator (AESO) has analyzed these regulations and concluded that they pose a significant risk to the reliability and affordability of Alberta’s electricity system in coming years. Despite the significant reliability risk and increased cost associated with the CER, the AESO’s assessment is that the regulation will fail to deliver meaningful reductions in carbon emissions in Alberta.

Reliability Concerns

The CER will restrict the operation of existing dispatchable generation units. There are currently no economically and operationally proven low carbon emitting supply alternatives which can be added in the time frame and in the volumes which would be required to meet the regulation and maintain a reliable system. Without the addition of economically and operationally viable supply, power shortages could result by the mid-2030s. Although the regulations acknowledge the difficulties in integrating renewable energy sources such as solar and wind, they restrict the use of proven solutions that could help address these challenges.

The CER does not adequately consider the significant economic and operational difficulties associated with implementing the supply alternatives acceptable under the regulation. The impact of the CER is to essentially mandate the rapid and widespread adoption of technologies that have not been commercially tested or deployed in Alberta. This will result in increased operational risk and compromised system reliability.

The CER sets an emission limit which is unattainable with commercially viable technologies. For example, best-in-class natural gas combined-cycle technologies emit five to six times the CER limit. The CER as adopted fails to recognize practical reality. As a result, by 2038, the CER would make Alberta’s electricity system more than 100 times less reliable than the province’s supply adequacy standard.

Affordability Impacts

The CER will require existing reliable generation units to limit their operation to comply with emissions limits. Assuming developers are still willing to invest given the limitations imposed by the CER, additional and inefficient redundant capital investment will be required to meet electricity demand.

Achieving compliance with the CER while maintaining a reliable power grid would require rapid adoption of technologies that are either currently economically unfeasible or not yet commercially available:

• Currently Economically Unfeasible Technologies: Nuclear and large-scale hydroelectric generation are highly capital intensive and require long development timelines. Unlike some other Canadian provinces, Alberta is not starting from a point where these technologies are a significant part of the existing supply. While innovation and cost reductions may mean that these technologies become part of Alberta’s electricity mix in the longer term, achieving this within the CER’s timelines is unrealistic.
• Early-stage technologies: Abated natural gas and hydrogen-fired generation are still undergoing development. While promising, these early-stage technologies still involve significant cost and operational uncertainty as they mature. Forcing accelerated adoption of these technologies will increase risk and expense. This results in higher costs for these projects, which will be passed on to consumers.

Cost Impacts

• To make up for restrictions on natural gas generation resulting from the CER, the AESO forecasts $30 billion in additional capital and operating costs from 2024 to 2049.

• Between 2035 and 2050, the AESO forecasts that the CER will result in wholesale electricity prices 35 per cent higher than they would otherwise be.

Ineffective Emission Reductions

Despite the significant reliability risk and increased cost associated with the CER, the AESO’s assessment is that the regulation will fail to deliver meaningful reductions in carbon emissions in Alberta. The AESO projects that the CER will result in less than 1 megatonne of additional annual emissions reductions from Alberta’s electricity grid. The significant cost that the CER will impose on Alberta’s electricity system for minimal emissions reductions means the regulation is inefficient and ineffective. The threat to reliability resulting from the CER means that the regulation puts Alberta’s electricity grid at significant risk for little to no benefit.

Federal CER Engagement

The adopted Clean Electricity Regulations represent the conclusion of the federal government’s consultation process. The initial proposed Clean Electricity Regulations were published by the federal government in 2023. The AESO formally submitted concerns to the federal government and provided a public statement based on our assessment of the initial regulations, which can be referenced here.