Market Snapshot: Electricity from Canadian Non-Emitting Sources Qualify Under the U.S. EPA’s Final Clean Power Plan

Release date: 2015-08-20

Electricity exports from Canada are included among the greenhouse gas (GHG) reduction options available to U.S. states under the final version of the Clean Power Plan (CPP), released by the U.S. Environmental Protection Agency (EPA) on 3 August 2015. The final CPP allows states to count imports from non-emitting sources toward their targets if the sources were developed after 2012.^Footnote 1 This allowance is in step with the EPA’s objective of maximizing flexibility and options for the states to achieve the reductions, and is supportive of additional electricity trade between Canadian utilities and U.S. states looking to reduce the GHG intensity of its electricity sector.^Footnote 2

Proposed Canadian Hydro Projects and U.S. States Target Emissions Cuts by 2030 (in percentages)

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Figure Sources and Description

Sources: EPA, provincial utility websites and plans, NEB

Description: The map shows emissions reduction goals (the relative difference between the 2030 emissions goal and the 2012 emissions) for 47 U.S. states in percentage terms and the location of nine major Canadian hydroelectric projects under construction or under consideration.

The EPA presented specific goals for 47 states^Footnote 3 in terms of total CO₂ emissions to be reduced, and as a percentage of emissions to be cut by fossil fuel power plants. States can choose between the two goals. The targets for some states imply greater reductions in percentage terms relative to 2012 emission rates. Many of the states that have higher implied reduction rates are located in the Midwest and these states could be especially interested in purchasing electricity from proposed hydro projects in Manitoba or from wind and solar projects in Ontario. In fact, analysis by the North American Electric Reliability Council suggested that Canadian exports to the U.S. would see a three-fold increase as a result of the CPP’s implementation, with most of the increase sent to the Midwest states.

Some of the Midwest states are already amongst the largest purchasers of Canadian electricity: each year since 2012, over 85 per cent of Canadian electricity exports have been sold in just seven states: New York, Vermont, Michigan, California, Maine, Minnesota and North Dakota.

While almost two-thirds of Canada’s electricity supply comes from hydro-electric facilities, nearly all of the exports (about 96-98 percent) are sourced from four provinces with large hydro-electric capacities (i.e. Quebec, Ontario, Manitoba, and British Columbia).^Footnote 4 Each of these provinces have proposals to build significant amounts of non-emitting generators, including hydro, wind, solar and possibly nuclear plants. It is possible that incremental exports used to support the states’ emission reductions may be sourced from surplus generation from hydro projects, such as B.C.’s Site C, Manitoba’s Keeyask, Quebec’s La Romaine, or Labrador’s Muskrat Falls.

Footnotes

Footnote 1

In addition to the post 2012 in-service date, there are other criteria that must be met for new or incremental sources of non-emitting generation: “all Evaluation, Measurement and Verification (EM&V) standards must be met”, and “there must be a power purchase agreement or other contract for delivery of the power with an entity in the U.S.”

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Footnote 2

Whether imported power would qualify for the emission reduction targets under the CPP was one of many details that was reviewed during the EPA’s comment period. In its comments on the initial CPP proposal, the CEA urged the U.S. EPA to “recognize and leverage the integrated nature of the North American electricity grid” by allowing states to utilize imported power to meet the CPP’s goals. Numerous U.S. organizations expressed support for the ability to use Canadian exports as a GHG-reduction strategy under the CPP. For example, the Center for Climate and Energy Solutions issued a policy paper on the topic.

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Footnote 3

The CPP sets emission reduction goals for 47 states based on the states’ current power generation mix and calculations for ‘average emission reduction targets’. The EPA calculated average emissions reduction targets that it believes could reasonably be achieved through three ‘building blocks’: increased efficiency of coal plants, replacing coal with gas, and ramping up use of renewable power. These ‘building blocks’ were used for the states’ target calculations, yet states have a lot of flexibility to meet their targets and can pursue other emission reduction means. Rules for Alaska and Hawaii are being drafted. Vermont and Washington, DC are exempted because they have no sizeable fossil fuel-fired generation sources.

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Footnote 4

Exports that are originally sourced in Labrador are reported as exports from Quebec, as per the contract for the power supply at Churchill Falls between Quebec and Newfoundland and Labrador.

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Date modified:: 2023-11-28

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Market Snapshot: Electricity from Canadian Non-Emitting Sources Qualify Under the U.S. EPA’s Final Clean Power Plan

Proposed Canadian Hydro Projects and U.S. States Target Emissions Cuts by 2030 (in percentages)