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The perks of buying PPAs in clean energy jurisdictions

Wind turbines

By Margret Nellissery, BRC-Canada Analyst

June 25, 2024

You wouldn’t think that organizations with sustainability goals would need to buy additional clean power in provinces already boasting a plentiful clean energy supply.

Yet buyers would have plenty of reasons to pursue power purchase agreements (PPAs) in jurisdictions like Ontario, Quebec and B.C, if the regulatory environment allowed them to do so. 

It’s undeniable that to this point in time, Alberta has been at the forefront of PPA procurement in Canada. The province’s deregulated market, coupled with emissions policy and corporate environmental, social and governance (ESG) drivers, helped Alberta dominate renewable energy development in the 2020s. 

Buyers are often interested in the carbon displacement value — the amount of carbon emissions the renewable energy project they buy from can remove from the grid. Alberta has a grid emissions intensity of 0.51 tonnes of CO2 equivalent per megawatt-hour (tCO2eq/MWh) electricity generated, making it one of the most carbon-intensive grids in the country and attractive for buyers looking to make an impact on grid emissions. Thanks to this buyer interest and the renewable energy projects the buyers help bring to fruition, PPAs have become a great tool in decarbonizing the grid. 

With a grid emissions intensity of only 0.014 tCO2eq/MWh of electricity generated, British Columbia is one of the leaders in North America when it comes to clean energy. B.C. Hydro, the province's utility provider, generates 98 per cent of its power from renewable resources. 

Similarly, Quebec generates over 99 per cent of its electricity from renewable sources. It has an even lower grid emission intensity of only 0.0013 g tCO2eq/MWh electricity generated, making it the cleanest grid in Canada. Likewise, Ontario is another province that generates 87 per cent of its electricity using non-emitting energy, including nuclear, hydro, solar, and wind.

You might think that there’s no role for PPAs on these clean grids. However, that is not necessarily the case. While it is not possible in these provinces yet, here are a couple of reasons why buyers are interested in direct clean energy procurement if these markets open for business. 

Securing clean energy amidst growing grids

Due to the increasing economic and population growth, coupled with a need to switch from fossil fuels to clean electricity across homes, businesses, and industries, B.C. expects a 15 per cent increase in electricity demand by 2030. In April 2024, BC Hydro announced its first call for power in 15 years which is expected to be among many more to come in efforts to electrify B.C.'s growing economy. 

Similarly, in a previous blog entitled “Quebec begins a red-carpet roll-out for renewable energy” we spoke about how Quebec is spending $110 billion to generate and transport renewable energy to further the growth of clean energy and support the increasing demand of electricity. 

The same could be said of Ontario when they came forward with their new procurement process focusing on renewable electricity to support the growing economy and grid decarbonization efforts. The province anticipates electricity demand to double by 2050, posing a challenging problem to bring new supply onboard.

The three biggest provinces in Canada are coming forward with an urgent need to meet the growing electricity demand, introducing a risk that non-renewable electricity generation is added to the grid. This would alter the grid composition and change its emissions intensity, leading to higher Scope 2 emissions for users in that jurisdiction. This has already occurred in Ontario, where non-fossil fuel electricity sources accounted for 94 per cent of annual production as recently as 2019, only to drop to 87 per cent in 2023. If the market allowed for it, buyers could reduce this risk by contracting renewable energy directly through PPAs which would also secure long-term clean power that meets their decarbonization goals.

Buying where the energy is used

Although the emissions intensities of grids in B.C., Ontario and Quebec are low, they are not zero. Buyers may have ambitious sustainability goals to entirely eliminate Scope 2 emissions or achieve 100 per cent renewable energy. Power purchase agreements would give them the ability to close the gap while adding additional clean energy supply.

And while they could secure a PPA in Alberta to achieve these goals, there would be a strong appetite to do it in these other provinces. B.C., Ontario and Quebec are major hubs for many of Canada's industries, including manufacturing, technology, forestry, and construction. The provinces are also home to the headquarters of many companies in Canada. With regulations and public expectations around environmental attributes ratcheting higher, buyers strive to purchase energy from projects located in the same jurisdiction as their load. 

Furthermore, policies at the provincial levels might give rise to certain advantages in having PPAs in specific provinces. For example, in Ontario, Industrial Conservation Initiative (ICI) participants could potentially reduce their global adjustment charges — shared fees that support electricity system costs — if they enter into PPAs with renewable energy developers. Policy and regulatory changes like this can signal the feasibility of having PPAs in other jurisdictions.

Advance social objectives

Engaging in a PPA provides buyers the opportunity to advance social objectives, including advancing reconciliation with Indigenous Peoples. Depending on their desired objectives, buyers can opt to purchase from projects that are Indigenous-owned, provide specific benefits to communities, or prioritize employment from underrepresented groups. The direct connection to a clean energy project makes progress on these objectives possible. Equity partnerships, community benefits and participation are valued among buyer organizations and have recently been considered a priority when partnering with developers on PPAs. 

Now that we know that despite having cleaner grids than Alberta, Ontario, B.C., and Quebec offer a variety of favourable reasons for procuring PPAs, all that remains is to wait for the markets to open for buyers!