U.S. energy leaders crossed the virtual border to Canada last week to share regional and federal updates with the Association of Power Producers of Ontario (APPrO) at its annual energy and networking conference.

“Every jurisdiction has its own peculiarities and specific assets … so everybody’s going to have a slightly different view, but I suspect the issues probably are very similar,” APPrO CEO David Butters said.

Nancy Bagot, senior vice president of the D.C.-based Electric Power Supply Association, said decarbonization goals create “a lot of tension in the energy space” because they were not considered in the current energy market construct.

“I think the path forward is a national economy-wide carbon price,” Bagot said. “That’s the most effective tool to get us to our target as a nation that may be more likely under a Biden administration.”

Bagot said there are “disparate interests and perspectives” on exactly how to achieve decarbonization targets without a clear federal policy.

FERC took “an important first step” with its technical conference on carbon pricing in September, Bagot said. She added that NYISO has worked on developing a carbon price approach with stakeholders, and she hopes it can eventually file a proposal with FERC.

Gavin Donohue, CEO of the Independent Power Producers of New York (IPPNY), said that carbon pricing “has been our number one issue” since before the COVID-19 pandemic.

“We want to see carbon pricing. Obviously, we’d like to see an economy-wide approach, [and] the NYISO has developed a carbon pricing proposal that is ready to go; Tariff language is drafted,” Donohue said. “We need the state of New York to step up to indicate that they’re willing to use this market fix as a way to get to the next generation of resources to comply with the” New York Climate Leadership and Community Protection Act.

Dan Dolan, president of the New England Power Generators Association (NEPGA), said the ISO-NE region is comparable to “most other jurisdictions on the U.S. or the Canadian side.”

“Clearly, the most straightforward and economically efficient solution is a carbon price,” Dolan said. “Our view is that should happen, and it needs to be a carbon price that is sufficient to both support investment of the new clean energy that’s necessary as well as to support the retention and the re-integration of those resources on the systems that are providing those services as well.”

Evan Bahry, executive director of the Independent Power Producers Society of Alberta, said his province is the “most attractive jurisdiction” in Canada to add renewables as solar and wind prices have fallen. There are provincial and national carbon taxes in Canada, and in Alberta, next year half of the cost of electricity will be a carbon tax, Bahry said. Alberta is also the heart of the Canadian oil and gas industry, but the province does not have nuclear or hydropower.

Bahry said the challenge of meeting net-zero emissions by 2050 as laid out by the Paris Agreement is “a very large promise for our government to make on our behalf.”

“But like anyone else in our business, we like our challenges; we like our puzzles,” Bahry said. “We’re going to see how we can maintain reliability and open markets and achieve progressively more ambitious climate challenges.”

Butters said, “If it is all going to be electricity — and of course there are other technologies out there that people are looking at like hydrogen — I just find it frustrating that so much weight seems to be put on electricity carrying water for decarbonization.”

Navigating the Minefield

Dolan agreed with Butters and said there have been similar analyses in New England but added that the challenge also represents an opportunity.

“If we can get these two prongs right about getting the right services and monetized options for the services that are going to be necessary, and the financial structure within a market context to drive these new investments, it’s a tremendous opportunity for the companies that we all collectively represent, and for the next wave of companies that come in,” Dolan said. “It’s about trying to create that more sustainable market structure that has durability to it, to be able to both integrate and withstand the policy pressures that are right now the existential crisis we’re all wrestling.”

Donohue said that to have an honest discussion, “you can’t sit here and just say, ‘Hey, we’re going to do all this stuff,’ and not talk about carbon capture sequestration, not talk about offsets, not talk about the need for natural gas to back up the system in New York City.”

“What I’m trying to do is make sure that New York doesn’t sleepwalk itself into a California situation, because you can talk about all this wonderful stuff you’re going to do. … 9,000 MW of offshore wind and 6,000 MW of solar sounds great, but New York is a unique place,” he said. “We need to be honest with the public on what we need to do to keep the lights on and affordable. We fail to do that in New York. We just say we’re going to do things, and then when it comes to how you deal with building emissions, transportation systems and manufacturing from a carbon perspective, there are no details. There’s no discussion. It’s ‘Let’s go back to no more natural gas,’ so we’ve got to start having honest discussions with the people in our jurisdictions.”

Bahry surmised that the panelists have “spent much of our careers trying to explain to politicians unintended consequences.”

“We’re concerned about wealth transfer as a carbon tax rises in our jurisdiction and inflates the market price. How much wealth transfer are we contributing to jurisdictions around us? There’s a lot of unintended consequences that can occur in the electricity system if you’re not open to the landscape and know where the mines are on the minefield.”