3.3. Replacing the 30 tCO2e/GWh emissions intensity standard with a “To Be Determined” unit-specific annual emissions limit

3.3.1. The Draft CERs – an emissions intensity limit

Under the Draft CERs, as of 1 January 2035 any gas plant that begins to generate electricity on or after 1 January 2025 must not emit more than 30 tonnes of CO2-equivalent GHGs per Gigawatt-hour of electricity generated (i.e. 30 tCO2e/GWh), unless one of several exceptions applies.^[96] In other words, instead of limiting the amount of GHGs that an electricity-generating unit could emit, the Draft CERs would have limited the “emissions intensity”, or the amount of GHG emissions per unit of electricity generated.^[97]

ECCC determined the 30 tCO2e/GWh emissions intensity standard by considering what the best-in-class gas plants, utilizing the best-in-class Carbon Capture and Storage (“CCS”) technology, could achieve.^[98] By contrast, the 2018 Regulations Limiting Carbon Dioxide Emissions from Natural Gas-fired Generation of Electricity set a limit of 420 tCO2e/GWh.^[99] The emissions intensity of Canada’s electricity grid as a whole was 110 tCO2e/GWh in 2020.  This was an average of the totality of the generation sources that were effectively zero emissions, such as hydro, wind, and solar, as well as all the others, including gas, oil, and what remained of the coal generating stations.^[100]

The emissions intensity limit outlined in the Draft CERs would have had the effect of, “requiring fossil fuel-fired generation to be abated in order to provide baseload generation.”^[101] Gas plants would not be able to meet the limit without deploying CCS to capture and store the vast majority of the plant’s GHG emissions.

3.3.2 Reaction to the Draft CERs

Provinces and utilities argued that the 30 t/GWh performance standard would be difficult to achieve for plants not operating as base load generators. They also worried that the Draft CERs could unintentionally disincentivize investments in CCS. The Public Update summarizes these views as follows:

Almost all provinces and utilities asserted that a 30 t/GWh performance standard would be difficult to achieve by natural gas units equipped with CCS that are “load following”. When load-following, the unit ramps up and down to fill in when renewables are not producing or when demand is very high. This almost inevitably results in a facility operating at a higher emissions intensity than if the same unit were operated on a continuous steady-state basis. Many commentators observed that a natural gas facility with CCS would only be able to achieve an emissions intensity of 30 t/GWh if it operated as baseload. This would limit the ability of utilities to retrofit existing gas plants with CCS for the purpose of playing a back-up or load-following function and would be an undesirable result because an approach that allows natural gas with CCS to load-follow could be an effective way to support the integration of variable renewables onto the grid.

More generally, a lot of feedback warned that high uncertainty about the ability of CCS to achieve the draft regulation’s performance standard could have the unintended effect of disincentivizing investments in this important, emerging technology.^[102]

In their joint submission on the Draft CERs, Clean Energy Canada and the Canadian Climate Institute foresaw this issue and suggested increasing the emissions standard from 30 tCO2e/GWh to 60 tCO2e/GWh:

Recommendation: Increase the performance standard to no more than 60 tonnes of CO2 per GWh.

Given the binary nature of the CER, where a unit either achieves the standard or is required to shut down, it is also important that the performance standard is set at a level that is ambitious but achievable for an average high-efficiency combined cycle fossil gas unit (either with a high rate of capture via carbon capture technology or via high levels of low-carbon hydrogen or bioenergy blending).

We commend the federal government’s emissions reduction ambition in proposing a standard of 30 tonnes of CO2 per GWh. But we’re concerned that that physical standard will be too high for many fossil gas generators—including the highly-efficient ones—to achieve without further compliance flexibilities…

… Under the currently proposed CER requirements, a 30 tonne of CO2 per GWh standard would require a capture rate of roughly 95% through carbon capture.

It is unclear whether this rate of capture is achievable within the timelines of the CER. One prominent study has shown capture rates greater than 90% to be both technically and  economically feasible (although not without cost).  On the other hand, CCS has so far failed to cost-effectively achieve this rate of capture in practice. And given the binary nature of the CER, the risk of companies forgoing the investment altogether cannot be ignored.

Therefore, we propose adopting a CER performance standard of not more than 60 tonnes of CO2 per GWh, which would correspond with a 90% capture rate for a fossil gas plant performing at this “attainable” standard (i.e. of 420 tonnes of CO2 per GWh), striking a better balance between a performance standard that is ambitious yet achievable.. [Footnotes omitted.]

3.3.3. The Public Update – a unit-specific emissions limit

However, rather than increasing the emissions intensity standard in response to industry and provincial concerns, ECCC is instead proposing to change the approach of the CERs altogether.  The Public Update states:

The core change being considered is to move from an emissions intensity standard uniformly applied to all units to an annual emissions limit tailored to each unit’s capacity. In this approach, a unit’s limit would be set at the level of emissions in a year from a natural gas unit of the same size that operates full time and at an emissions intensity prescribed by the regulations (see #2 below). The CER would set the emissions limit for each unit according to the following formula:

A unit with a higher emissions intensity than the performance standard used to set the emissions limit would have to operate less than full time to remain under its limit. This would create an incentive to modify all units to be as efficient as possible, but would also give electricity providers considerable flexibility. Along with the potential to pool emissions limits (#3) and include offsets as a compliance option (#4), this would enable operators to decide to install CCS without the concern that the technology might not achieve the performance standard. Units could also increase the amount of time they can operate by improving equipment to increase efficiency or by blending with low-carbon fuel to reduce emissions intensity. All units would be able to manage within their annual emission limit by adjusting the amount of time they operate. [Emphasis added.]

The Public Update goes on to say, “Recognizing that the emissions intensity of 30 t/GWh proposed in the draft regulations would likely not be feasible on a load-following basis for most units equipped with CCS, an adjustment to the performance standard is under consideration.”^[103]

3.3.4. Analysis

The approach proposed in the Draft CERs has some drawbacks. Most importantly, it provides no certainty about the overall GHG emissions of the electricity sector as there is no sector-wide emissions limit. While the emissions intensity of each plant would be limited, there would be no limit on the number of plants companies could build. And the CERs would not limit emissions in the electricity generation sector at all until 2035,^[104] despite the federal target of a net-zero grid by 2035.

The changes proposed in the Public Update have the effect of replacing the emissions intensity limit proposed in the Draft CERs with an absolute limit on the emissions from each power-generating unit.

If done well, this new approach has the potential to provide greater certainty about the sector’s overall emissions, something that is very important if Canada is to achieve a net-zero grid by 2035. This would provide some of the compliance flexibility that critics of the Draft CERs are seeking in a manner that still maintains the overall goal of the CERs.

However, if the unit-specific emissions limits are not set appropriately, the CERs could deliver fewer emissions reductions by 2050 than the original proposal in the Draft CERs, lock-in more natural gas electricity generation for longer, and undermine the rapid deployment of renewables and other clean tech.

But crucially, since the Public Update does not explain what the “performance standard” component of the formula for the unit-specific emissions limits will be, it is impossible to assess the impacts of the proposed change to the CERs.

Currently, the public doesn’t know if the performance standard will continue to be 30 tCO2e/GWh as it was in the Draft CERs, or if it will be higher or lower. We don’t know if the performance standard will be the same for all power plants, or if it will vary for different classes of units (eg, baseload plants vs. peaker plants). We also don’t know whether the performance standard will vary by jurisdiction, leaving the door open for the requirements in some provinces to be more or less stringent than others.

There is no doubt that Canada will continue to need load following and peaker power generation, since the demand for electricity will continue to fluctuate on a daily and seasonal basis.

However, it is not at all clear that this need must be fulfilled by burning fossil fuels. It is true that gas power plants can be turned on or off quickly and their output can change quickly,^[105] something that is required of peaker capacity. But battery energy storage systems (“BESS”) are massive batteries capable of storing power from renewable sources such as wind and solar. They can then provide this power to the grid when renewables are not producing. As such,  the grid can use solar power saved during the day at night, and can similarly use wind power when the wind is not blowing.

Moreover, it is possible – indeed, probable – that load following and peaker plants could be designed to be more efficient, and to emit less GHGs during the short periods they operate by not being designed to function as baseload plants. When a plant is running at a “steady state” you can make sure every component is sized correctly and every temperature is ideal for being as efficient as possible. When a plant’s output must fluctuate, efficiency will go down. But since peaker plants only operate during periods when everything is necessarily fluctuating, they could be designed to emit the least GHGs possible during this function.

The CERs should set an emissions standard for peaker plants based on the best that can technically be achieved for such plants. This standard should be no more than whatever standard is adopted for baseload plants. Since the proposed formula for unit-specific emissions limits is based on a plant running 100% of the time, and peaker plants operate only for short periods of time, a strict performance standard is necessary to ensure that peaker plants are not excessively dirty.

3.3.5.  Suggestions for your submissions on the emissions intensity standard

• ECCC should promptly publish the complete formula for unit-specific emissions limits, state how many tonnes of GHG emissions will be eliminated annually and consult publicly on both. Climate-concerned citizens and ENGOs have not been adequately consulted on this potential change to the Draft CERs.
• Given the urgency to reduce GHG emissions to limit the worst effects of climate change, ECCC should ensure the unit-specific emissions limit approach will result in no less emissions reductions than the Draft CERs. This involves setting the performance standard element of the formula appropriately. Crucially, it also means companies must not be allowed to use offset credits to meet their emissions limits (see item 4.1).