Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
Issue link: https://digital.carswellmedia.com/i/1480511
www.lexpert.ca 13 would spend $319 million over seven years for the research, development, and advance- ment of the commercial viability of CCUS technologies. e 2022 federal budget also proposed a tax credit for businesses investing in CCUS. e credit would cover 60 percent of the cost of eligible equipment used in direct air capture, 50 percent of the cost of all other eligible capture equipment, and 37.5 percent of the cost of eligible equipment for transportation, storage, and use. Ottawa expects the credit will cost $2.6 billion for the next five years and then $1.5 billion annually until 2030. e tax credit does not apply to all CCUS projects, says Duncanson. One challenge for these measures, he says, is where the incen- tives are directed. It is not typically the emitter that captures, transports, and sequesters the carbon dioxide. Duncanson sees "more of a hub model" currently in operation, where a third party provides that service. ese third parties need customers to sign long-term agreements to build these projects. But for the customers – the emitters – there is not currently a suffi- cient economic rationale to enter into that type of commitment, says Duncanson. "Right now, there's so much uncertainty in the market. at is – in most cases – meaning that the emitters or potential customers are not coming forward to underpin those proj- ects. And without those underpinnings, those projects will not proceed much farther in their development than they are right now." "It's kind of this catch-22," he says. "We have to move extremely quickly if we want to hit those 2030 targets. But without more short-term incentive for the emitters to get behind these projects, that's likely not going to happen." It is not only governments who have emissions reduction targets. Multinational corporations, including in the oil and gas sector, also aim for net zero. Power purchase agreements (PPAs) are one method compa- nies use to lower their emissions profile. ey continue to be a significant driver of renewable electricity generation, says Vivek Bakshi, global energy sector leader at Dentons Canada LLP. e market for PPAs in Canada – and Alberta, in particular – is "really buoyant," he says. For most of his 15 years practising, John Vellone, a partner at Borden Ladner Gervais LLP in Toronto, has been advising govern- ments, utilities, and system operators on various physical and financial PPAs. He says that interest has recently accelerated, driven partly by investors and other stakeholders pursuing net-zero emissions and building ESG offerings. A power purchase agreement (PPA) is a contract between an energy developer and a buyer – typically a utility – to receive power generated from energy assets. VPPAs (virtual power purchase agreements) differ in that they are "fundamentally financial agreements" and "do not require a direct physical electrical interconnection," according to "Renewable VPPAs and ESG: What you need to know before you buy," an article written by Vellone and Shane Freitag. Electricity consumers can use VPPAs as a commodity hedge to fix energy prices and avoid sudden price increases, while electricity generators can use them to avoid sudden price drops. Renewable VPPAs, which are tied to the electric output of one or more renew- able electricity–generating facilities, can also include environmental attributes, most commonly renewable energ y certif- icates. With these certificates, companies can reduce their greenhouse gas emissions profile and further their net-zero goals, write Vellone and Freitag. "Initially, the first movers were corporations like Amazon, Microso, and Google as their server and data warehouses require a signifi- cant amount of power," says Vellone. "Other large, publicly listed companies are now following suit. ese organizations tend to be brand-conscious, and their interest in VPPAs is driven by shareholder pressure and activism to some extent. And this trend is rippling down even to small and mid-sized companies." In recent years, all the action on renewable PPAs has occurred in Alberta, says Kimberly Howard, a partner in McCarthy Tétrault's energy and infrastructure group in Calgary. Alberta does not have a central public utility like Hydro Quebec or Saskatchewan's SaskPower. Anyone can build generation, and they do not need to rely on a central utility to sell power into the grid. But there has been a resurgence in other prov- inces, with Nova Scotia, Ontario, and Quebec currently going through public procurements of PPAs, she says. e federal government is also working on a plan to bring emissions from Canada's energy grid to net zero by 2035. With significant "renewable penetration" and the broad use of hydroelectricity, Canada is well positioned in this mission, says Bakshi. Canada has one of the world's cleanest electricity grids, with 82 percent of its elec- tricity coming from "non-emitting sources," according to Environment and Climate Change Canada. Pairing renewable resources with hydrogen "ENERGY STORAGE HAS PICKED UP AN INCREDIBLE AMOUNT OF MOMENTUM IN 2022" John Vellone, BORDEN LADNER GERVAIS LLP EMISSIONS REDUCTION IN THE OIL AND GAS SECTOR In its 2030 Emissions Reduction Plan, the federal government is calling on the industry to: • lower emissions 31 percent below 2005 levels or 42 percent below 2019 levels • reduce oil and gas methane by 75 percent