September 27, 2023

By Colleen Kaiser

In the world of building clean energy infrastructure, the year 2030 is fast approaching. Orders for infrastructure such as cables and pipes must be made today to ensure projects are finished in time to achieve climate mitigation targets. However, current regulatory processes are incapable of identifying and advancing clean energy projects and infrastructure (think transmission lines and renewable energy projects) in a way that ensures stringent protections for people and the environment while moving at the speed and scale required to align with net-zero objectives.

Acknowledging this challenge, and following unprecedented clean energy stimulus packages and federal framework regulations in the United States and Canada, regulatory reform for improving agility in advancing clean energy infrastructure has risen to the top of the policy and political agenda.

However, as experiences in Canadian provinces have shown, simply speeding up regulatory approvals for clean energy projects doesn’t help. Even the ‘greenest’ energy infrastructure projects can face community backlash and stall, or even be reversed when regulatory processes do not align with more stringent environmental protection and meaningful community engagement. This experience argues against the oft-advanced view that improved community engagement and environmental protection risk lengthening regulatory approval processes, and thus run counter to the urgency felt to accelerate a low-carbon transition.  

In short, responsibly building the needed energy infrastructure to operationalize a net-zero transition at the speed and scale required to meet our climate targets — while economically and technically feasible (and in ways, supported across political lines)— will remain procedurally impossible unless regulatory processes align with more stringent environmental protection and dedicated community engagement.

This summer, US regulators took notable steps in trying to address this complex problem. Specifically, the bi-partisan U.S. Federal Energy Regulatory Commission (FERC) and the White House Council on Environmental Quality (CEQ) have considered a host of proposals over roughly the past year to address the significant clean energy generation and storage backlog in the U.S. through power market structure and permitting reform. We highlight two regulatory advances below that introduce strong measures to accelerate decision-making, but equally as important they also expand the scope of environmental reviews and advance public inclusivity objectives:

1) First, the FERC unanimously passed a new rule representing the first major reform in roughly two decades to interconnection processes (the complex process of connecting new electricity generators to the electric grid). A key change was the shift from a “first-come, first-serve” model to a “first-ready, first serve” model, where clusters of similar projects can be considered (as opposed to individually), and where the most commercially ready projects are prioritized. The rule introduces flexibility through provisions that allow new generating facilities to be added to existing requests to speed approvals, while ensuring transmission providers allow new facilities to integrate more easily into current infrastructure (such as solar and battery storage). There are also requirements aimed at incorporating technological advancements into the interconnection process, and measures to introduce stringency and predictability with new standards for transmission studies by providers.

2) Second, the White House CEQ, which is responsible for implementing National Environmental Policy Act (NEPA) regulations, moved on permitting reform — proposing changes to expedite permitting decisions, while increasing stringency around requirements to consider climate change and environmental justice effects in proposed actions. The proposed implementing regulations define environmental justice for the first time in the context of NEPA, and require its effects and cumulative impacts (which were restored to their pre-2020/Trump definition in April 2022) to be assessed on proposed actions, in addition to impacts on climate. The CEQ also recommended to agencies that they conduct early and ongoing community engagement and require public comments on draft environmental assessments and their consideration in rulemaking. At the same time, the CEQ has proposed expanding flexibility around the use of time and length restrictions for environmental reviews.

The proposed and finalized rules from the U.S. are by no means perfect and the point here isn’t to suggest that Canada should replicate the U.S. approach. For example, the proposed CEQ regulations on permitting will also apply to some fossil fuel projects, potentially accelerating climate change if that leads to increased emissions.

However, these new rules provide examples of how governments can begin to navigate the real tension between needing to build clean energy infrastructure faster, and, more responsibly. In this case, by advancing a framework to approve certain types of low-risk clean energy projects, focusing on building more flexibility and predictability into transmission interconnection processes, and defining and mandating environmental justice analysis, the U.S. has increased stringency and flexibility, while improving predictability and efficiency in rulemaking processes.

To be fair, the Canadian federal government has also focused on modernizing its regulatory system in general, as well as in the context of net-zero transitions. For example, Canada has evaluated efficiencies of impact assessments and permitting processes and considered streamlining processes for critical minerals mining. However, more immediate attention is needed on developing and implementing solutions that do not default to de-regulation or simply streamlining.

In the coming months, the Governance and Innovation Policy team at the Smart Prosperity Institute will be releasing research with exactly this aim: critically evaluating how innovative, agile regulatory strategies can support environmental and social protection, Indigenous reconciliation and inclusion, AND accelerate clean infrastructure development.

This applied research represents an initial effort to fill the many knowledge gaps in this area. Critically, past regulatory reform efforts in Canada have been critiqued for defaulting to de-regulation and reducing ‘red tape’ at the cost of failing to uphold public goods like health, safety, and environmental protection. Going forward, we must understand how to employ innovative strategies to produce a more inclusive and evidence-based regulatory system that improves environmental and social outcomes while addressing inefficient bottlenecks. Importantly, this recent wave of regulatory activity in the U.S. reminds us that these kinds of regulatory improvements and reforms can be successfully undertaken without pausing the approval of new clean energy projects.

The Smart Prosperity Institute invites interested thinkers to contact the author to engage in ongoing research discussions related to agile regulation for advancing clean energy infrastructure in Canada. Please contact the author at colleen@smartprosperity.ca.