From: Issue 38
Cutting the Red Tape to Building a Pan-Canadian Electricity Superhighway
Page 2 of 3
Under this law, the Federal Energy Regulatory Commission (FERC) can issue, in certain circumstances, permits for new transmission facilities within a designated national corridor. If an applicant has not received approval from a state regulatory body to site a proposed new transmission project within a year of application, FERC may consider whether to issue a permit and authorize construction of the project.
Invoking such transmission superhighways for Canada to maximize its clean electricity generation potential, with defined provisions that ensure affected local aboriginal peoples are provided a fair stake, makes a lot of sense. This would raise some constitutional and trade issues, but nothing that couldn’t be resolved by some smart lawyers, and smoothed over with some creative financial sweeteners (via access to partial loan guarantees). Such sweeteners would have to come at minimal cost to the treasury, especially in this deficit-challenged era.
The good news is that, for all his green foibles, we currently have a prime minister who seems to get it. In line with Sir John A. Macdonald’s bold vision to connect Canada with the national railway in the 19th century and the network of fossil fuel pipelines laid down in the 20th century, Stephen Harper is sympathetic to a staged pan-Canadian HVDC electricity highway. Such a power highway would unlock what he has identified as an “unprecedented economic opportunity” for getting our abundant clean electrons to the hungry U.S. market.
In fact, probably the most significant federal contribution to reducing greenhouse gases in the past decade was Harper’s pre-election announcement of a federal loan guarantee for the Newfoundland government to support the $6.2-billion Lower Churchill hydroelectric project. Once built, much of the clean electricity from this project is expected to flow through Nova Scotia into the U.S. market, where it would replace dirty power currently generated from coal-fired plants.
In this instance, Ottawa effectively co-signed a $4.2 billion loan, guaranteeing that if either province defaults, the federal treasury would be responsible for the bank payments. Because there is almost no chance of this happening, the loan guarantee is considered cost-free, although a small percentage of it will be recorded on the federal books, according to finance department officials.
Some may wonder why this should not all be left to the private sector. While capital markets can be incredibly efficient at financing certain types of transactions (recall sub-prime mortgages), the plumbing is significantly plugged when it comes to renewable energy projects and grids that cross-cut jurisdictions.
At least in the early stages of grid development and renewable energy deployment, this kind of support is essential for many economically viable projects to go forward, due to the highly conservative Canadian banking culture that has many other opportunities to earn healthy rates of return.
Harper said this type of federal financial support will be considered for projects that meet three key criteria: they must be of “national or regional importance, have economic and financial merit, and significantly reduce greenhouse gas emissions.” He might consider one more: make availability of these loan guarantees conditional on provincial support for national interest electricity corridors.
This brings us to another big barrier standing in the way of a pan-Canadian electricity grid. Parochial by nature, the provinces have short-sightedly clung to their little pieces of the electricity export pie. The 21st century grid will require transcending historical cleavages and reframing the notion of an east-west grid in the context of a pan-Canadian enabler – a grid capable of supplying the vast U.S. electricity market.
Leadership from the federal government will be essential here. Ottawa must demonstrate to the provinces the potential for an electricity export market that is 10 times bigger than it is today. Instead of fighting over crumbs, provinces must come to realize that a pan-Canadian grid with multiple north-south chutes is a means to enhancing access to U.S. electricity markets.