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Smart Renewables and Electrification Pathways Program: Canada’s Vision for an Equitable Energy Transition

Fasken
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Energy Bulletin

On June 2, 2021, the Government of Canada launched the Smart Renewables and Electrification Pathways Program (SREPs). The program is administered by Natural Resources Canada and provides a maximum of $964 million over four years for smart renewable energy and grid modernization projects.

The program is intended to significantly reduce Canada’s greenhouse gas emissions by incentivizing the replacement of fossil-fuel generation with renewables, while incorporating funding requirements that are intended to foster an equitable transition to a more electrified economy. SREPs is open to for-profit or not-for-profit project proponents (incorporated or registered in Canada), provincial, territorial, regional and municipal governments, and Indigenous communities, governments and organizations.

In the sections below, we provide an overview of the program’s key components, including how the program differs as between types of applicants and its potential implications for Canada’s ongoing energy transition.

Eligible Projects and Funding Streams

SREPs includes four program funding streams, each of which has distinct requirements that projects must meet in order to be eligible for funding. These streams, which broadly align with certain technologies, market maturity and project types, are as follows:

SREPs Streams Description Examples
Established Renewables
  • Funding Limits: 10% of total project costs (up to a maximum of $50 million).
  • Available to utilities, system operators and non-utilities (including Indigenous-owned projects).
  • Produces renewable energy for sale in Canada, subject to certain minimum net installed capacity requirements.
  • Have been successfully deployed at the utility scale and are commercially viable in Canada.
  • Capable of providing grid/essential reliability services.
  • Onshore wind
  • Photovoltaic solar
  • Small hydro
Emerging Technologies
  • Funding Limits: 30% of total project costs (up to a maximum of $50 million).
  • Available to utilities, system operators and non-utilities (including Indigenous-owned projects).
  • Capable of delivering renewable energy for sale or use in Canada, subject to certain minimum net installed capacity requirements.
  • Have been successfully deployed at the utility scale in other countries, or have been successfully demonstrated in Canada but are not yet commercially deployed.
  • Capable of providing grid/essential reliability services.
  • Concentrated solar
  • Energy storage
  • Geothermal (heat and/or electricity)
  • Non-utility led grid modernization projects
  • Offshore wind
  • Retrofits to enable grid services on existing renewable energy plants
  • Water current, tidal or wave
Grid Modernization
  • Funding Limits: 30% of total project costs (up to a maximum of $50 million).
  • This stream is only available to utilities and system operators (including those with Indigenous ownership).
  • Eligible activities must support the deployment of grid modernization technologies (such as those listed in the rightmost column).
  • Projects must be integrated into utility operational processes (i.e., not a single technology deployment).
  • Data management and communication
  • Demand management
  • Electric vehicle (EV) integration
  • Electricity market innovation
  • Grid monitoring and automation
  • Hardware or software retrofits to an existing renewable energy
  • Microgrids
  • Residential and building integrated renewable energy
  • Software or hardware to enable aggregating DERs of 500 kW AC or more (e.g., virtual power plant)
  • Utility system software and hardware upgrades
Strategic Dialogue Linked Projects
  • Projects that fall into any of the other three streams, but that are part of an established federal-provincial/territorial dialogue.
See examples of eligible projects in the streams above.

Indigenous-Owned Projects

The program also encourages economic opportunities for Indigenous peoples by: (1) providing a greater percentage of funding to Indigenous-owned projects; (2) accommodating smaller-scale projects; and (3) supporting capacity building activities.

First, where an established renewables or emerging technology project has Indigenous ownership of between 25% and 49.9%, the applicant is eligible to recover a maximum of 50% of the total project costs (up to a maximum of $50 million). Projects with Indigenous ownership of 50% or more are eligible to recover a maximum of 75% of the total project costs (up to a maximum of $50 million).

Second, eligible Indigenous-owned projects can be of a smaller scale, with a lower installed capacity. An established renewable generating project need only have a capacity of 500 kW (versus 4 MW for non-Indigenous-owned projects), while an emerging technology generating project need only have an alternating current of 500 kW (versus 4 MW for non-Indigenous-owned projects).

Finally, SREPs addresses the need to support capacity building activities for applicants that require assistance to participate in the program and fulfill the application requirements. This includes grant funding to undertake Indigenous engagement activities.

Ineligible Projects and Costs and the Reimbursement of Profits

Certain types of projects are ineligible for this program, including: renewable fuel production projects, non-organic waste to power, demonstration projects, and technologies below “Technical Readiness Level 8”. [1] The program also distinguishes between eligible expenditures, which form part of a project’s total cost, and expenditures that cannot be reimbursed and do not form part of a project’s total cost (e.g., land acquisition/leasing costs, costs associated with the protection of intellectual property, and legal fees).

Applicants that are for-profit organizations (intending to generate profits from an eligible project) will be monitored for a period of five years after the project is commissioned or completed. If a profit is generated, a proportion of Canada’s contribution towards the project’s total costs will need to be repaid, up to a maximum equal to funding provided under the program.

Eligibility for Other Government Funding

SREPs applicants may also apply for support under other Government of Canada initiatives, including the Energy Innovation Program and the Canada Infrastructure Bank. However, the “stacking of assistance” in this way is subject to funding caps – which vary by applicant type. Governments, their departments and agencies, as well as Indigenous recipients and non-profit organizations may be fully subsidized from government funding sources (excluding ineligible costs).

Program Reporting, Outcomes and Performance Data

SREPs funding requires regular public reporting during the life of a project, and for five years following project commissioning or completion. This includes sharing performance data, in an aggregated form, to support decision-making in the broader energy sector and in order to facilitate investment in similar projects.

The program also includes requirements designed to support the program’s objective for advancing equity, diversity and inclusion in the energy sector, including increasing the representation of certain groups. Applicants must either submit an Equity, Diversity and Inclusion Plan, or sign a public commitment at the regional, provincial, federal or sector-level (e.g., reducing barriers to entry into the workforce or setting goals for representation in the workplace and leadership).

Conclusion

SREPs represents a significant funding commitment by the Government of Canada in smart renewable energy and grid modernization, reflecting the importance of innovation as the production, storage and delivery of energy continues to evolve in Canada and worldwide. The importance of equity is apparent throughout the program’s structure, including distinct requirements and support for projects with Indigenous ownership and consideration of inclusion and diversity in the energy industry as whole. SREPs presents an opportunity for existing participants in the energy and utility sectors to collaborate with Indigenous communities, not-for-profits and various levels of government to progress development in these areas.

Additional information regarding the program can be found in the SREPs Applicant Guide.

 


 

[1] A description of the various technical readiness levels can be accessed here.

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