The topic of renewable energy in Alberta again recently made major headlines across the province and country. As we outlined in our earlier blogs Pause on Renewable Project Approvals Part 1 and Pause on Renewable Project Approvals Part 2, a surprise August 2023 announcement from the Alberta’s Minister of Affordability and Utilities (“Minister”) pausing the issuance of approvals for renewable energy projects (“Approval Pause”) and subsequent launch of an associated Alberta Utilities Commission (“AUC”) inquiry (“Inquiry”), previously garnered wide spread press coverage. Having completed Module A of the Inquiry, on January 31, 2024 the AUC delivered its findings to the Minister (“Module A Report”)^[1] and approximately a month-later on February 28, 2024, and day before the Approval Pause was set to lift, the Minister provided Policy Guidance to the AUC commenting on the Module A Report. Concurrently, on February 28, 2024, the AUC issued Bulletin 2024-03 which updates the AUC application review process for renewable projects following the Approval Pause.

Notwithstanding that with the issuance of the Policy Guidance and Bulletin 2024-03 the Approval Pause has been lifted, the second part of the Inquiry – Module B – is still ongoing and given this, the uncertainty created by the Approval Pause and Inquiry will continue to linger.

The Approval Pause, Inquiry and Policy Guidance

The Inquiry was divided into two modules, Module A^[2] and Module B^[3]. Module A considered the following:

1. Development of power plants on specific types or classes of agricultural or environmental land;
2. The impact of power plant development on Alberta’s pristine viewscapes;
3. Implementing mandatory reclamation security requirements for power plants; and
4. Development of power plants on provincial Crown land.

Having received the Module A Report, and a day prior to the end of the Approval Pause, the Minister provided a policy guidance letter to the AUC (“Policy Guidance”), commenting on the Module A Report. In doing so, it is apparent that the government’s intention is to advance and formalize what it views as necessary policy, legislative and regulatory changes before the end of 2024. These changes include:

• The AUC is to take an “Agriculture First” approach and renewable generation development will not be permitted on Class 1 and 2 lands, unless a proponent can demonstrate the ability for both crops and/or livestock and renewable generation to co-exist. Land classification in Alberta (and elsewhere in Canada) is determined through the Land Suitability Rating System, which assesses soil-climate-landscape potential. The Minister has expressed support for the AUC’s commitment to exploring requirements for proponents to provide soil field verification early in the power plant application process.
• The provincial government will develop and implement policy and legislation to ensure developers are responsible for reclamation costs. The reclamation costs may be paid directly to the provincial government or to landowners. These new requirements will apply to all approvals issued on or after March 1, 2024.
• The provincial government will develop and implement policy and legislation to establish buffer zones, of at least 35km, around protected areas or other “pristine viewscapes” designated by the province where new wind projects will not be permitted. Other proposed developments within the buffer zone may require a visual impact assessment.
• The provincial government will develop and implement policy and legislation to allow development of renewable generation on Crown Lands on a case by case basis. New legislative changes will come into force in late 2025.
• The AUC is to conduct a proceeding or other process to consider appropriate setbacks of renewable infrastructure from neighboring residences and other important infrastructure. The AUC is also to develop rules for mandatory site visits by the AUC for proposed renewable generation projects.
• Amendments will be made to the Transmission Regulation and renewable projects should expect changes to the allocation of transmission costs.

Additionally, the Minister expressed strong support for various AUC commitments, including automatically granting participation rights to municipalities in hearings and enhancing the existing visual impact assessment requirements to include a more structured visual impact assessment methodology within the application process.

Anticipated Impacts:

The “Agriculture First” Approach and the Likely Growth of Agrivoltaic Energy Projects

Project proponents will need to determine if they want to pursue a renewables development on Class 1 and 2 lands despite the approval uncertainty associated with the “Agriculture First” policy. While some regulatory directives or guidelines may be introduced to provide more certainty to project proponents, in the short-term it remains unclear what requirements a proponent will need to meet to demonstrate that crops and/or livestock and renewable generation can co-exist on any proposed project lands. Depending on whether any regulatory directives or guidelines are introduced, as well as the timing and nature of any such directives or guidelines, it is likely that Alberta – in at least the short-term – will see a material drop in the number of renewable projects being pursued – including projects that are currently well along the development arc - on Class 1 and 2 lands. It is also very likely that Agrivoltaics will play a significant role in Alberta renewable energy development projects going forward.

Costs of Reclamation Security

Project proponents will see increased project costs as a result of the required reclamation security. At this time, it is unclear as to the amount or quantum of security that may be required, and therefore to what extent this will result in renewable developments being delayed or not proceeding. Similar to the requirements arising under the Agriculture First policy, the development and issuance of regulatory directives or guidelines on reclamation security would very likely assist in mitigating this uncertainty. Such directives or guidelines would also assist landowners who are considering working with renewable project developers and are faced with negotiating aspects of reclamation cost estimates and security.

“Pristine Viewscapes” and the Impact on Southern Alberta Wind Farm Development

“Pristine Viewscapes” are expected to include national parks, provincial parks, culturally significant areas, and recreation and tourism areas. While it is currently unclear what specific areas in Alberta will be designated as “protected areas” or “pristine viewscapes”, and where the requisite buffer zones will extend to, this prohibition may have a significant impact on the development of wind farms in southern Alberta, due to the proximity to the Rocky Mountains and Foothills. Regulatory uncertainty regarding the requirements of a visual impact assessment are also expected to dampen renewables development, at least in the short-term.

The Transmission Regulation and Allocation of Transmission Costs

In advising that changes are forthcoming to the Transmission Regulation as it relates to cost allocation for transmission, the Minister has implied that these changes may impact renewable projects and the associated cost for development. This, combined with ongoing Module B of the Inquiry, only increases uncertainty for project developers.

Next Steps:

In issuing Bulletin 2024-03, the AUC confirmed that Interim Rule 007: Applications for Power Plants, Substations, Transmission Lines, Industrial System Designations, Hydro Developments and Gas Utility Pipelines would continue to be in effect for all current and prospective applications following the end of the Approval Pause. The AUC further advised that power plant applications affected by the pause are to be assessed on their individual merits and that the AUC will issue correspondence on the record of each ongoing renewable project proceeding confirming applicable next steps for the proceeding in question. The AUC also indicated that it will be initiating stakeholder consultation on relevant topics within Rule 007, the details of which are to be released in late March 2024.

As noted, the AUC continues to conduct Module B of the Inquiry. In Module B, the AUC has been directed to consider the impact that the increasing growth of renewables has to both generation supply mix and electricity system reliability. The Module B process has largely run its course, all submissions have been made and the AUC is now preparing its report outlining its findings. That Module B report (“Module B Report”) is expected to be provided to the Minister by March 29, 2024. It is anticipated that once the Minister receives the Module B Report, the Minister will provide some form of policy guidance, much like it did for the Module A Report and that such guidance will be provided approximately one month following the Minister’s receipt of the Module B Report.

Given the general policy guidance provided by the Minister to-date, the renewable industry in Alberta awaits the formal policy, legislative, and regulatory changes which are expected to be enacted in 2024 and 2025. These changes will very likely be combined with any similar changes flowing from the pending Module B Report and resulting government policy guidance, which is anticipated in late April 2024.

As we indicated in our Part 1 and Part 2 blogs on the Approval Pause, the associated Inquiry and resulting Policy Guidance has resulted in some welcome regulatory direction and some certainty. However, with all such policy development processes, new uncertainties arise and time is required for government to formally implement policy change and for stakeholders to then address the implications and act. Despite good intentions, the unfortunate outcome is continued uncertainty for developers and other stakeholders active in the Alberta renewable energy development space.

Stikeman Elliott’s regulatory team will continue to monitor developments related to the Policy Guidance and the Inquiry and pending Module B Report and any related additional policy guidance which is anticipated in late April 2024.

[1] As of the date of this blog, the Module A Report has not been released publicly.

[2] AUC Proceeding 28501.

[3] AUC Proceeding 28542.

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