A Hurry-up Offense for Energy Transition and Clean Growth Projects

There was a lesson for Canada in what a German politician had to say about the gas market disruption in the months following the Russian invasion of Ukraine. “We have a good chance to do what is normally impossible in Germany,” Economy and Climate Minister Robert Habeck said about Germany’s ambitious timeline for developing LNG import terminals. The pressures from geopolitical upheaval and the cascading catastrophes of climate change now challenge all countries to turn the normally impossible into a new normal.

Canada requires a breathtaking buildout to hit its net zero goal by 2050. According to the Canada Energy Regulator’s analysis,^[1] Canada will need to add 5,000 MW of offshore and 77,000 MW of onshore wind to its grid capacity. That’s something around 500 offshore and 30,000 more onshore wind turbines.^[2] This number is 25,500 MW for utility-scale solar, which means 8,500 new PV solar farms using the industry average of 1-5 MW per utility-scale power plant. It’s true that the industry has gained huge momentum only in the past few years. But to put those numbers into perspective, so far and in more than three decades, we have only developed 17,000 MW capacity of onshore wind, 0 MW of offshore wind, and 4,600 MW of solar. At least 40,000 kilometres of high-voltage transmission lines (enough to wrap around the earth) will also be required with the very conservative estimate of a double-sized electricity system. The list can go on and on with all the necessary carbon capture projects, carbon pipelines, small modular or large nuclear reactors, and storage capacity from utility-scale batteries to pumped hydro, which are all crucial under every single scenario that gets us to net zero by 2050.

We need to build all these at a pace like never before, and this requires a change in our game plan: from ‘ragging the puck’^[3] to ‘hurry-up offense.’^[4]

Canada’s energy transition needs to gather speed. Some matters, like technology development, are beyond our influence. Others, like sluggish and tangled assessment and permitting processes, are totally within our control. Back in 2006, we were ranked fourth by the World Bank for ease of doing business, but by 2019, we’d fallen to 22nd place, second worst in OECD, for the pace of permitting. This red tape is more than just an annoyance. It’s costing us big — literally, as revealed by Natural Resources Canada’s annual inventory of major projects. From 2015 to 2023, the real value of active (planned and under-construction) major projects dropped by 20 percent (from $711 billion to $572 billion). For context, a $100 billion decline in the annual pace of capital investment represents approximately 4.5 percent of Canada’s gross domestic product. The number of completed projects has also plummeted 36 percent, from 88 in 2015 to 56 in 2023.

What this tells us is that we’re stuck in a system that’s not keeping up.

As we have heard repeatedly in the Energy Future Forum, most failed energy projects aren’t cancelled over environmental criteria, or because they can’t be built. They suffer death by a thousand delays. If we could ever afford inefficient regulatory and permitting processes — the reviews, permits, and approvals required before a major project can go ahead — those days are long gone. There’s just too much to be built, too much competition for capital and too little room for error in keeping investors onside.

This is why governments and regulatory bodies around the world are heightening their focus on identifying and streamlining the wasteful aspects of approval processes. The 2023 federal budget stated: “If Canada does not keep pace, we will be left behind. If we are left behind, it will mean less investment in our communities and fewer jobs for an entire generation of Canadians. We will not be left behind.” The bottom line is that a jurisdiction cannot be truly serious about an energy transition if it is not equally serious about expediting everything needed to make it happen.

As noted in the EFF’s 2023 Project of the Century report: “The good news is that, unlike many issues, such as the pace of technological change or supply chain accessibility, fixing regulatory inertia lies totally within our control”. The better news is that we can see some progress being made on streamlining processes in other parts of the world, which provides valuable lessons to draw upon. The recent Supreme Court of Canada ruling on the unconstitutionality of parts of the Impact Assessment Act creates an opportunity for a meaningful revision of the broader impact assessment process in Canada instead of surgically addressing narrow legal issues.

Some fixes are obvious and should be considered the table stakes of any regulatory reform plan. These include better coordination of reviewing and permitting processes across all relevant jurisdictions or agencies, reducing duplication among different levels of governments or the same old dream of “one project, one assessment,” and earlier engagement with key project stakeholders and rightsholders. These and several others have been touched upon in the recent statement released by the Ministerial Working Group on Regulatory Efficiency for Clean Growth Projects, a committee of nine federal ministers that plans to keep working to put in place concrete action plans for regulatory reform throughout Spring 2024.

As vital as these may be, the task at hand demands more. In that spirit, PPF has looked around the world for inspiration. Some may not be easily transferable. Either way, here are some of the early returns:

Two of the most populous states in the United States have adopted a ’nothing like a deadline to concentrate the mind’ approach to a faster and more predictable permitting process. The hope is it will attract more investment and innovation in the clean energy sector in support of their ambitious climate goals.

If the authorities fail to meet the deadline for permitting large-scale renewable energy projects, they get approved by default. This is the simple, clear and radical essence of laws passed by New York and California intended to reduce the delays and uncertainties faced by renewable energy developers. The laws are known as the Accelerated Renewable Energy Growth and Community Benefits Act in New York and Assembly Bill 205 in California. The Act in New York, for example, creates a first-of-its-kind Office of Renewable Energy Siting as a single-stop shop with a statutory time limit for all environmental review and construction permits of the applicable projects. The office needs to make a completion determination within 60 days of receiving the application, and then, on behalf of both state and local authorities, it will issue a final permitting decision no later than one year. This timeframe is six months for former commercial or industrial landfills, former power plants, and abandoned or underutilized sites.

Court challenges have also proved to be among the hurdles that can be streamlined. One of the most critical parts of the Bill in California is trying to do just that by making changes to the California Environmental Quality Act (CEQA). Some of the changes include (1) trimming the paperwork and administrative process of a judicial review by excluding non-substantive matters from the record; (2) giving agencies the power to reject requests by CEQA petitioners or plaintiffs to prepare the record of proceedings, which is the collection of documents and evidence used in CEQA lawsuits; (3) allowing an expedited judicial review by setting a 270-day deadline for resolving a judicial action, to the extent feasible.

These measures apply to a range of clean energy projects, such as solar, wind, battery storage, and transmission lines.

Similarly, the Western Australian government is speeding up the approval of renewable energy projects by designating promotion zones for critical clean projects, including wind and solar projects, green hydrogen, lithium mining, critical minerals processing as well as manufacturing of renewable energy products such as batteries, electrolyzers, solar panels and wind turbines. This streamlining effort essentially enables the government to bypass environmental assessments and lease Crown land before the environmental protection authority approves the proposal. This allows the siting process and accessing Crown lands to precede final approvals, putting greater emphasis on the public interest nature of these projects. This approach provides confidence for investors and developers by telescoping different stages and allowing previously consecutive parts of the process to be carried out in parallel.

In addition to what was discussed above, New York also created a Build-Ready program that allows the private sector to proactively identify and nominate brownfield sites for renewable energy development—sites that have, at some point in the past, received project approvals (for example, a retired industrial plant). If deemed viable, the New York State Energy and Research and Development Authority works closely with municipalities to advance the permitting and interconnection process. Once the site is fully permitted and approved, it is auctioned off to private renewable energy developers.

Similarly, in the wake of the Russian invasion of Ukraine, the European Union agreed on targeted amendments to its Renewable Energy Directive proposed under the REPowerEU plan. The amendments require member-states to design dedicated “go-to areas” for renewables where lower environmental risks are deemed to exist. These projects would be accorded shortened and simplified permitting processes. In go-to-areas, individual projects for renewable energy would not require dedicated impact assessments if they comply with a set of specified rules. The “go-to areas” will also limit the grounds for legal objection to new installations by presuming they are of overriding public interest. Spain and Portugal have independently taken a similar approach.

It’s not that Canada is unfamiliar with this concept. While it didn’t get approved, one of the main ideas of an initiative called Canada’s Western Energy Corridor was to establish a set of pre-approved rights-of-way — a pathway that has already been rigorously assessed and approved by regulatory authorities. A corridor can accommodate multiple energy infrastructure projects, like transmission lines, pipelines, or even electricity generation facilities along its way, with a significantly streamlined assessment process and reduced duplications.

A regional power company has pointed out that just one individual at their regulatory agency oversees the licensing for both transmission and distribution initiatives. No matter how creatively we use the existing human resource capacity of the regulatory system and permitting bodies (that currently can be as few as one person), it’s very hard to imagine it can keep up with the number of projects that we need to see in the pipeline and the pace they need to successfully pass various regulatory tests. While the number of projects seeking approval must and will only increase, many permitting and assessment offices are already overwhelmed because of inadequate staffing.

Federal and state governments also grapple with the same issue south of the border. Being chronically under-resourced has been slowing down the environmental assessment and other aspects of the permitting process for at least two decades in the United States. The landmark Inflation Reduction Act identifies this bottleneck and includes targeted provisions to address this challenge. Chief among them is providing somewhat significant funding (USD 665 million) for the purpose of building capacity in different federal agencies responsible for a variety of review and permitting processes. This funding is deemed to be used for hiring and training of personnel, as well as purchasing technical and scientific services and new equipment that help accelerate the approval process.

This was also one of the key themes of the Biden-Harris Permitting Action Plan, which requires regulatory bodies to “assess human capital needs and, as appropriate, utilize best practices for accelerated hiring, such as using standardized job postings.”

Either through targeted funding, immigration, or working closely with training institutions, different levels of government should use all available tools to ensure adequately trained professionals can flow regularly into the system. Understaffed regulatory bodies represent a chokepoint in projects’ pre-construction lifecycle, which can relatively easily be avoided.

What’s more important than saving the life of a bird in danger of extinction? Perhaps saving hundreds of lives of that very same species and more.

Climate change is an existential threat to the biodiversity and health of natural habitats. Therefore, there is a strong argument for prioritizing our efforts to expedite the decarbonization of our economy and avert human-caused climate change. Yes, as has been said many times, the devil is in the details. There is no shortage of nuances, caveats and complexities that must be considered. But in the face of a crisis, pragmatism is key. Many jurisdictions, including California, are proposing temporary measures to “fully protected species” lists that would lift protections afforded to some endangered species. This would remove obstacles to certain types of projects (primarily wind, solar, and transmission), conditional to meeting certain mitigation and avoidance requirements.

As argued in the Hurry-Up Offense chapter of PPF’s Project of the Century report, this aspect of the regulatory system was designed to keep bad things from happening to our planet and the biodiversity it hosts; we should do whatever we can to prevent it from blocking projects needed for that purpose from being built in the first place.

In a remarkable feat of urgency following a long period of complacency, Germany pulled off what many would’ve thought was impossible. In a bid to diversify its natural gas supply, it swiftly revived shelved LNG import plans and built a floating terminal at the North Sea port of Wilhelmshaven, followed by four more before the end of 2023. In fewer than 200 days, Germany cut through decades of bureaucratic red tape. This remarkable comeback underscored the possibility of swift action and strategic planning in times of need. As Canada navigates its own regulatory reforms, it would do well to remember how Germany played ‘hurry-up offense’. After all, when the game is about the profound threat of climate change, speed to market can make all the difference.

1. Global Net-zero Scenario ↑
2. The average capacity for an onshore wind turbine is 2.5 MW. That’s 8-12 MW for offshore turbines. ↑
3. A hockey metaphor meaning to retain possession of the puck as a deliberate tactic intended to use up time. ↑
4. A football metaphor that stresses limiting or disrupting defensive strategies in the face of a clock rapidly ticking down. ↑