Electricity Canada on Federal Budget 2023: Funding for electrification is good news

On March 28, Deputy Prime Minister and Minister of Finance Chrystia Freeland released the much-anticipated 2023 Federal Budget, A Made-in-Canada Plan: Strong Middle Class, Affordable Economy, Healthy Future. Normally, a budget would have a few references to electricity scattered throughout. This year, investing in clean electricity was a whole section of the budget as part of the government’s clean energy mandate. This was backed up by funding, with almost $1 in every $8 of anticipated new spending going to clean electricity projects through a variety of means.

In light of these important developments, Current Affairs talked to Vice-President of Government Relations Michael Powell for his perspective on the gains made by the budget, and what’s next.

Hi Mike. What were the big “wins” in the budget for Electricity Canada members?

The biggest win is a commitment to create a new electricity-focused investment tax credit, which will cover interprovincial transmission and most clean generation sources and be accessible to basically every kind of electricity company, be they tax paying, non-tax paying, indigenous-owned, pension plan-owned, etc. That will be for 15%, which means take 15% off the top of capital costs of those sorts of projects. In addition, we saw top-ups for funding programs like things like the Strategic Renewable Electrification Pathways Program (SREPs) and smart grid funding. There were also more details on how the government is going to move forward on things like the Canada Growth Fund, as well as more money for the Canada Infrastructure Bank, and a commitment to figure out how we can build things faster.

All of that gets to what we have been asking for in terms of our Canadian Electricity Strategy. These are all elements of our three pillars of the strategy, which are the funding, the certainty and then the picking up the pace. It was a good day.

Speaking of the Canadian Electricity Strategy, were there hints of such a thing in the budget?

Yeah, it touches on those three pillars that we've been identifying, which again are figuring out the funding side of things – both in terms of access to capital, but also the tax dollars to help reduce costs for customers. And we saw both of those things. With elements of certainty, we have the continuation of the Canada Growth Fund and even more opportunities, it seems, for so-called “carbon contracts for differences” which will de-risk some questions around carbon pricing. When it comes to pace, we have a reaffirmation of the billion and a half dollars or thereabouts for organizations like the Impact Assessment Agency, but also on a commitment by the end of the year to have a plan to make these organizations move faster on approvals.

What initiatives do you think are going to be the most impactful for customers in all this?

I think the biggest one in the long term will be not just the new electricity investment tax credit, but the suite that has been coming along for clean technology, for carbon capture and for hydrogen production, all of which will allow our members to build new electricity infrastructure and reduce their costs.

What initiatives do you think are going to be the most impactful for customers in all this?

I think the biggest one in the long term will be not just the new electricity investment tax credit, but the suite that has been coming along for clean technology, for carbon capture and for hydrogen production, all of which will allow our members and electricity companies to build new electricity infrastructure and reduce their costs.

It's interesting with the new electricity investment tax credit, the government actually ties that to a reduction in price for consumers so that the dollars that are put in by the federal government are passed on to consumers through whatever mechanism, be that rate design or other means. I think that what that means is that as we figure out how we build the system to build a decarbonized grid for 2035 – and meet the needs of economy-wide electrification as we go towards 2050 – and as we double or triple the amount of electricity we need, the federal government will be putting dollars into the pile so those costs don’t end up on the bills that customers get each month.

You mentioned about increasing grid capacity 2-3 times before 2050. Are we closer to building things faster?

I think so. There's a couple of pieces to that. One is our members are able to make the investment decisions that will even get into the question about whether you start putting shovels in the ground. I think the tax credits do that. I think additional dollars from the Canada Infrastructure Bank will help firm up some of the financing around that. And ultimately, the whole point of the Canada Growth Fund and the forthcoming contracts for differences regime will help make it easier for our members to get financing for these sorts of long-term commitments.

The big one to watch, I think, though, is that the government acknowledged that it's hard to get major projects done and signalled a commitment to roll up the sleeves work with all parties and really think about how we can pick up the pace. Ultimately, I think what the tone of the budget is—and, admittedly, there's a lot of work to do yet—is that they’re trying to address the concerns we've been raising about the barriers we see to building from the government side. They're trying to answer them so that it is now on us to get going. That's a better spot to be than it was on Monday of this week [before the budget was announced]!

What is the main takeaway for the electricity sector from this budget?

I think the main takeaway is that the federal government sees a role for itself in helping build out electricity infrastructure. Historically, we talked about electricity being a provincial responsibility. But there's lots of things that are provincial responsibilities where the federal government has decided they have a role in funding. It's even in the budget document itself: there are eight pages after the electricity stuff, there is a map of Canada where they highlight places where they are investing in things like twinning a highway in Nova Scotia, which is very much a traditional provincial responsibility, but it’s now the kind of thing we think the federal government would pony up money for. Transit is another example of that.

I think the big lesson here is that going forward, the “table stakes” will be that where there is a desire for the federal government to build cleaner and faster, they put money in to facilitate that, particularly on a lens of how it makes it affordable for Canadians.