Alberta Government Provides Updated Policy Guidance for Renewable Development

March 04, 2024

Written By Martin Ignasiak, Jessica Kennedy, David Macaulay, Larissa Lees and Nathan Green

Alberta to Implement New Policies for Renewable Development

Alberta’s pause on issuing approvals for renewable energy projects (Pause) ended on February 29, 2024. Immediately prior, the Alberta government issued a news release with updated policy guidance on developing renewable power projects in Alberta. This policy guidance addresses issues related to the use of agricultural lands, reclamation security, viewscape impacts, Crown lands and municipal engagement that were considered during the Pause.¹

The new policies are intended to apply to new renewable projects as of March 1, 2024, including all currently proposed projects that have applied for but not yet received regulatory approval from the Alberta Utilities Commission (AUC). They may also have implications for other power projects and industrial developments.

The guidance was released following consideration of a yet-to-be publicly released report from the AUC following Module A of its inquiry into the ongoing economic, orderly and efficient development of electricity generation in Alberta (Inquiry) and the related Pause, which we addressed in our previous blog posts: Alberta's Pause on Renewable Projects: What We Know So Far, Update on Alberta's Renewables Pause: AUC Inquiry and Interim Requirements and Update on Alberta's Renewables Pause: Expert Recommendations Provided on Module A Land Impact Issues.

The Alberta government also signaled that additional policy direction will be sent to the AUC once it has reviewed the AUC’s second report (Module B) in respect of the Inquiry, stating that "[r]enewable projects should expect changes in how transmission costs are allocated."

Agricultural Lands

The government has directed the AUC to take an "agriculture first" approach when evaluating the best use of lands proposed for renewable development. This aligns with the approach taken in the reports commissioned by the AUC in Module A of the Inquiry, which made agricultural land use recommendations based on the implementation of an "agriculture first" approach to mitigating impacts.

Alberta will no longer permit renewable generation developments on Class 1 and 2 lands, as classified by the Alberta Land Suitability Rating System (LSRS), "unless the proponent can demonstrate the ability for both crops and/or livestock to coexist with the renewable generation project". This restriction has the potential to impact solar projects the most, as agricultural land uses are generally considered compatible with wind power and other developments with smaller, isolated footprints. However, early indications suggest solar developments may be permitted where sheep grazing is permitted among solar panel arrays, which is becoming a more common industry practice. The nature of agricultural uses and extent to which a proponent must demonstrate such uses can or will occur during a project’s life remain unknown. Clarification on these points will be important for those projects affected by this new restriction.

The map below highlights the presence of LSRS Class 1 and 2 lands in green for representative purposes only.² Project development restrictions on a given property are expected to be based on the dominant land type found on the lands in question. It remains unclear whether the AUC may have regard to the current actual status of soils on and use of lands under consideration for renewable development.

More specific and accurate information regarding a specific parcel's agricultural land classification can be obtained from the Alberta Government's Soil Information Viewer here.

Reclamation Security

Developers will be responsible for reclamation costs via bond or security. The reclamation costs will either be provided directly to the Alberta government or may be negotiated with landowners. In the latter case, sufficient evidence of the adequacy of reclamation security committed to the landowner must be provided to, and deemed adequate by, the AUC.

The Alberta government has indicated that it is continuing to evaluate and determine what specific reclamation security requirements proponents will be subject to, with Premier Smith suggesting that a phased "environmental income trust" system where proponents incrementally post security amounts over the life of the project may be favoured.

The government's online announcement indicated that specific standards will be determined by the end of 2024.³ These new requirements will apply retroactively to all projects approved on or after March 1, 2024. Given there is generally a practice among industry participants of agreeing to some form of reclamation security as part of their leasing arrangements, it remains to be seen how and to what degree the specific requirements will impact project proponents and their negotiations with landowners.

Viewscapes

The government indicated that buffer zones of a minimum of 35 kilometres will be established around protected areas and other "pristine viewscapes" as designated by the province. New wind projects will no longer be permitted within those buffer zones, and other proposed developments located within the buffer zone may be subject to a visual impact assessment before approval.

This requirement creates significant uncertainty. Given the significant size and number of federal and provincial parks in Alberta, an expansive definition of "pristine viewscapes" and "protected areas" could render large swathes of the province unavailable for new wind project development. A map of the various categories of protected areas in Alberta, including national and provincial parks, wildlands, ecological reserves and other natural areas, is available at this link. Early indications suggest the emphasis will be on protecting viewscapes in the Rocky Mountains and Foothills. Further detail about exactly which protected areas will be designated as requiring a 35 kilometre buffer zone is needed.

This announcement also raises questions regarding whether large-scale resource development projects in other sectors may be subject to visual impact assessments, and how extensive the requirements of those assessments may be. The letter from the Minister of Affordability and Utilities to the AUC states that "other developments" within the established buffer zones "could trigger the need for a visual impact assessment to be provided to the appropriate regulating party for consideration before project approval," suggesting that other AUC-regulated facilities (e.g., transmission lines) and those regulated by other agencies (e.g., oil and gas infrastructure) may be subject to new requirements due to the government’s recent emphasis on protecting "viewscapes". Additional clarity is required to properly ascertain the full extent and impact of this new regulatory requirement.

Finally, the government has directed the AUC to develop rules for mandatory site visits for proposed renewable generation projects. Such rules would formalize what has become a common practice at the AUC in relation to contested project applications.

Crown Lands

Further engagement will be required before any policy changes for projects on Crown lands and would not come into effect until late 2025. To date, renewable power projects have not been permitted on Crown lands. The government indicated that any development of renewable projects on Crown lands will be considered on a case-by-case basis, and that it will implement the necessary legislative tools to allow such flexibility going forward.

Municipalities

The government indicated that it will automatically grant municipalities the right to participate in AUC hearings on renewable power projects. Municipalities will also be eligible to request cost recovery for participation from proponents.

The AUC had previously applied a similar test for standing to other participants in the context of renewable project applications, requiring participants to demonstrate a legal right that may be directly and adversely affected by the application. Nevertheless, the AUC had a practice of granting full participation rights to municipalities regardless, although without the opportunity for cost recovery, meaning the announced change will clarify the process and enhance municipal participation rights going forward.

Although municipal considerations are likely to play a more central role in AUC processes as a result, the right to participate and to be heard in such proceedings does not give municipalities the authority to deny projects. Based on information available thus far, the final approval authority for all power projects is expected to remain with the AUC.

Transmission Regulation

Significant changes to Alberta's Transmission Regulation and associated rules and market frameworks are expected in the coming months, as discussed in our prior post: Change on the Horizon for Alberta's Electricity Regulatory Regime in 2024.

The recent government announcement states that renewable projects should expect changes in how transmission costs are allocated, meaning they will likely be required to contribute funds to cover the costs of regional transmission system expansion projects required to accommodate growing renewable generation capacity. This change would be a significant departure from Alberta's historical "load pays" policy, where system expansion needs are included in end-use rates for power consumers, with limited exceptions. Depending on the extent and timing of such costs, these upcoming changes may have material impacts on power project economics.

Further Stakeholder Engagement

The AUC released Bulletin 2024-03 on February 28, 2024, confirming that the interim information requirements provided in September 2023 (Bulletin 2023-005, discussed here) continue to apply. Those interim requirements address the same matters as those considered in Module A and addressed in the new policy announcements. The AUC indicated in the Bulletin that another stakeholder consultation would be initiated on revisions to Rule 007 information requirements for new power plant applications, with further details to be released "in due course." The AUC will consider whether some or all of the interim requirements for renewables power projects will be made permanent.

In addition, the government has directed the AUC to "conduct a proceeding or other process" to consider appropriate setbacks for renewable infrastructure from residences and other infrastructure. While residential setbacks have previously been implemented pursuant to AUC Rule 012: Noise Control, this direction suggests further setbacks will be established. No further information regarding the timing of this process or associated requirements was provided.

Conclusion: Additional Complexity and Uncertainty for Proponents

While the extent of the impact remains to be seen, the new requirements surely add another layer of regulatory complexity to renewable power project siting and investment decisions. Site selection involves a multifaceted evaluation of many factors, including renewable (e.g., solar/wind) resource availability, topography, proximity to transmission infrastructure, and environmental and stakeholder considerations. Proponents will now need to consider how these additional requirements may impact project plans before making decisions.

Moreover, the scope of the impact beyond utility-scale wind and solar projects remains unclear. For instance, the information published does not specify the size or type of renewable projects affected, creating uncertainty for small-scale projects and those using other renewable resources (such as geothermal or hydro power). While the Inquiry was not focused on battery energy storage projects or conventional thermal power generation projects, the interim Rule 007 requirements apply to all power plant applications and it is conceivable that some or all of the newly-announced requirements will be applied more broadly to all power generation and energy storage projects.

Additional clarity on these matters is expected to unfold in the coming weeks and months as the government and regulators tackle significant shifts in electricity regulation arising from the energy transition. We continue to monitor the continuously evolving landscape of regulatory requirements related to power project developments in Alberta. If you have any questions about the potential impact of these new requirements on your business, please contact one of the authors of this post or a member of the firm's Energy Regulatory practice group.

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