Green Giants – Episode 36

Kevin Mehi (01:47)

Yeah, so I guess I’ll go first. I don’t know if there’s any particular moment that really sparked my interest in the field, but I come from a science background. I’ve actually got an undergraduate degree in chemistry. So as part of that program, I took a few courses about clean technology, green chemistry, learned about hybrid vehicles, that type of thing. So I think the interest in anything sort of green, clean technology really started for me back then. And I’m happy to kind of have fallen into a career in that field as well.

Wes Ashworth (02:33)

Yeah, I love it. What about you, Brady?

Brady Chapman (02:35)

Yeah, started working, I think my interest in renewable energy started when I was working at Natural Resources Canada, so for the federal government. I worked in a science communications role, and in that role I worked with a lot of scientists doing research on every like, entomologist, you know, bug researchers and forest fire researchers and pipeline material scientists. It was kind of like a broad spectrum. And so what I was doing was helping them communicate their research. And I think through that, a lot of it was climate related research because that was just what everyone was doing regardless of the fields.

So moving out of that, I knew I wanted to go into law and I think I quickly determined when I entered into the law that a climate policy is an energy policy and an energy policy is a climate policy. And in many ways, my interest in renewables came from that, just as looking at transition and some of the big problems that we have in Canada and around the world on transitioning our energy infrastructure.

Wes Ashworth (03:19)

Yeah. Yeah, absolutely. And you guys can both chime in on this one, looking back over your career so far, just focused on this space in particular, is there a single project or case that you can discus, I guess you feel most proud of, in terms of its impact on renewable energy development?

Kevin Mehi (03:46)

Yeah, it’s, not to be the boring lawyer, but we’ve obviously got confidentiality and solicitor client privilege to respect. For me, what’s publicly out there, we have permission from this client to disclose this, is I’ve worked with the First in Alberta called Montana First Nation, who are really getting into the renewable energy market. They’re in the process of building, they’re almost completed construction on a 22 and a half megawatt solar project. This is their second one, they built a smaller one megawatt on reserve project as well. To me, even though the capacity isn’t the biggest by any means in Canada or around the world, it’s that intersection of helping an indigenous community with its economic development, getting it into the market, and it’s pure renewable energy as well. So it’s in a field that I find totally fascinating and fun.

Wes Ashworth (04:36)

Yeah, I love it.

Brady Chapman (04:36)

Yeah, I’d say similarly for me the projects I’d say I’m most proud of are smaller projects as well. Like we work on some large utility scale 100 megawatt, 200, 250 megawatt projects, but the ones I think I’m most proud of are two smaller distribution connected projects where I was really in the weeds on permitting and regulatory and everything else related to the projects. Kind of understanding the nitty gritty on what, you know, the financial models for these projects, how they can actually get off the ground. I think as lawyers sometimes we can, we’re involved in those discussions but we’re also oftentimes not involved in those discussions where we’re brought on just for discreet purposes. So I think the ones I’m most proud of are those ones that actually get to get in on the ground, so to speak, learn about the project in a detailed way.

Wes Ashworth (05:20)

Yeah. Yeah, absolutely. So shifting a little bit to just just thinking about the Canadian renewable energy landscape, can you provide, I guess, just a general overview, and you both can chime in, just how renewable energy development differs across Canada for those that aren’t aware, especially between Alberta’s energy-only market and other provinces for vertically integrated utilities?

Kevin Mehi (05:43)

Yeah, and again, I’ll have to be the boring lawyer. I was told to say this next part just to remind any listeners that anything we say from this point forward is of a general nature only, it’s not intended to be legal advice. Obviously, happy to chat with any listeners who want to have a chat offline. Yeah, I guess, it’s a great question, Wes. And the background for this is that energy markets in Canada are all regulated at the provincial level.

So for our non-Canadian listeners, Canada has 10 provinces. That means that each of those 10 provinces have different laws and regulations around energy generation, power generation. So seven of the 10 provinces have these vertically integrated utilities. In five of those provinces, those are owned by the government itself. The other two, it’s privately owned. In Newfoundland, which is one of the provinces on the east coast of Canada, you’ve got another government entity, a crown corporation, which is primarily responsible for generating electricity, but then the actual transmission and distributions handled by private companies. So it’s really the remaining two provinces that have a bit more of an open market. So that’s Ontario and Alberta. Ontario’s not fully open. It’s referred to by some people as a hybrid model. So it does allow for power generation by private parties, IPPs, but about half the electricity generated in the province is still generated by a government-owned entity called Ontario Power Generation.

So Alberta’s, for that reason, maybe the more interesting one because Alberta is a truly deregulated open market which does allow IPPs, private parties, to develop and operate renewable energy projects. There’s a couple caveats to that I’ll mention. IPPs, you still need various permits and approvals from different government authorities. You can’t just slap up a solar farm in your backyard any day that you feel like it. You’re subject obviously to substation and transmission line capacity if you’re trying to tie into the grid. And you can get private PPAs, private power purchase agreements in Alberta, but without one you’re looking at selling into the grid. And when you’re selling into the grid, that’s when we talk about it being an energy-only market. So regardless of what the capacity of your project is, you’re only going to get paid for what’s actually generated and delivered into the market.

And Brady, I’m sure you have a lot to add on this as well.

Brady Chapman (07:56)

The one thing I would say just for listeners is how different Canada is among the provinces. And I know in the states where a few listeners will be, it’s a similar situation. But just to give an overview, if you’re going east to west, Ontario has a lot of nuclear, Quebec has a ton of hydro power, Manitoba has a ton of hydro as well, and then you hit the provinces Saskatchewan and Alberta where it’s primarily and historically, has been coal and natural gas that’s providing energy. And so we see renewable build out there, and then into BC as well, it’s a lot of hydro. So the energy mix in the provinces are very, very different which also means the renewable build out in those provinces are quite different.

You would almost think that the build out would be more aggressive in places like Alberta and Saskatchewan where we have a lot of natural gas and coal, but, you know, it’s quite political actually in those provinces unsurprisingly – we can get into that in a little bit – but we’re actually seeing a lot of opportunities in the other provinces that have these solid base load sources, whether it’s nuclear or whether it’s hydro, places like Ontario, Quebec, British Columbia, Manitoba where they’re seeing opportunities for renewables that can come alongside kind of that pre-existing energy storage that comes from some of these larger hydro projects. So it’s an interesting landscape and it’s certainly different amongst all the provinces.

Wes Ashworth (09:13)

Yeah, no, interesting for sure. In thinking about those differences, but sort of between the provinces, can you give just a little overview in terms of how that influences the pace of renewable energy adoption kind of in those different regions?

Brady Chapman (09:28)

Yeah, maybe I’ll take this, Kevin. I think the biggest thing right now would be, like I said, is looking at how you get renewables into the energy mix. It is easier in provinces where they already have good base load sources. And that’s, we’re seeing advances obviously in energy storage. And so in a province like Alberta, where we don’t have a lot of hydro, we don’t have nuclear, we’re relying a lot on natural gas for energy, that’s the base load that you go back to. But it’s also a very important industry in Alberta with the oil and gas sector. So it’s kind of, reiterating the same point I made, I think right now it’s really coming down to a lot of these vertically integrated utilities like Manitoba Hydro, BC Hydro.

They’re looking at adding renewables as a way to increase their energy mix because they have the ability to put the solar or the wind on the market when it’s sunny and when it’s windy and start to build up reserves with the hydro to use that at a later date. We don’t really see that in Alberta and Saskatchewan and so there’s a lot more sensitivities in those provinces, Alberta and Saskatchewan in particular, when it comes to what the energy mix looks like and the need for ensuring that the energy mix between renewables and the other existing sources doesn’t result in issues.

Transmission congestion is a problem across the world, North America in particular. I know the US has a lot of transmission. It’s the same thing in Canada as well. You have massive transmission lines in some of these places with hydro projects that are running more north-south. But in Alberta now and Saskatchewan, pretty much in every province, you’re seeing issues on needing to build out transmission to be able to get the power from renewables, like the supply and the demand are in different places. Like where we would need the renewable generation or the renewable generators to be located is not necessarily where the demand is, and that remains a huge problem really across the country, but specifically when we start to look at the western provinces.

Wes Ashworth (11:24)

Yeah.Iin double clicking on Alberta a little bit, which has been compared to kind of Texas, you know, for those in the US listeners in terms of the energy market. Can you elaborate on some of those unique challenges and opportunities of developing projects there versus the other provinces?

Brady Chapman (11:39)

Yeah, sure. Kevin, do you want to take a stab at that?

Kevin Mehi (11:42)

Yeah, so in those provinces where you’ve got the vertically integrated utilities, if there’s a power project to be had, it’s through a competitive procurement process, an RFP, something like that, right? So there’s some certainty in those provinces where the government needs the power. You know you’re bidding in, and if you win, you win. You’re to build the project. Alberta, because it’s an open market, there’s no RFPs being run by these crown corporations. So you’ve got the freedom to develop a project, but you’re also taking a lot of the risk that’s associated with that. So you can put in a ton of upfront costs on getting permits and approvals and licenses. And if those don’t expire or you can’t get the next approval or permit that’s needed in the process, your entire project can fall apart and, you know, frankly, you’re out the money. So I guess, Brady, you may have something to add to that as well, but to me, that’s a big piece.

Brady Chapman (12:28)

Yeah, I think I’d be remiss if I didn’t talk about what’s happening in Alberta, and you mentioned it briefly at the front end, and so I can give listeners a bit of an overview on what’s happening within the province. So Alberta has had the energy-only market. They’re currently going through a restructured energy market process right now. And that’s quite substantial and is being viewed quite negatively by renewable projects. So I’ll explain some of what’s happening in that restructured energy market.

So right now we have a real time market as a part of the restructured energy market. They’re considering moving to a mandatory day ahead market, which obviously for renewables causes issues in terms of being able to bid in with power at a certain price. They’re also looking at changing to a negative pricing market as well. Right now in the market, the pricing goes anywhere from $0 to $1,000. They’re looking at it adding in, they’re looking actually on moving both ends. So the top end will be $3,000 and the bottom end will be negative pricing. Again for renewables that typically bid in at $0 and take whatever market price, there’s issues there as well, without batteries and can get into that in a minute, some of the ways that that’s being mitigated. That’s a problem.

They’re also looking in Alberta right now as a part of this restructured energy market on changing the transmission regulation. So who’s actually paying for the cost of transmission and whether or not generators should be bearing more of that cost. So if you had a wind or solar project located in the south of the province, but most of the demand is in the north, then should that winter solar project be paying a proportionately higher amount for transmission than they would otherwise be paying.

So there’s a lot happening, a lot of the genesis for those market reform changes right now in Alberta are related to the government trying to have better reliability and better pricing. We have massive fluctuations similar to what you might see in in parts of like Texas for instance because of it being an energy-only market, and so they’re trying to they’re trying to do what they can to make sure we have that base load power and make sure that the base load power stays, and really that’s natural gas at this point.

So that’s on the one side, is kind of a restructured energy market. On the other hand, in the end of 2022 they also declared a moratorium on our power plant approvals for renewable projects, and they went through an exercise of determining whether the permitting and regulatory process was appropriate or not and that included things like looking at how it’s impacting agricultural operations, local municipalities, reclamation on land, something called viewscapes, which is basically how these projects look against the backdrop of the Canadian Rockies, which is very important for certain constituents in the province.

And so as a result of that there was a moratorium on handing out power plant approvals. They’ve since lifted the moratorium, but there’s now new regulations in place specifically for renewable projects, wind and solar projects, where they’re restricted on being located in certain areas based on viewscapes. So there’s certain areas in the province where you actually can’t locate wind projects. Unfortunately, some of those areas are actually high resource areas as well.

And they also have things like restrictions on certain types of classes of land in terms of their soil classifications. So class one and two lands and some form of class three lands are restricted in certain parts of the province. And they’re really taking this agricultural-first approach is what they’re calling it, ensuring that these projects are being located in areas where there is lower class of land and the land is not otherwise being used for agriculture. So, and I mean, that’s kind of only a handful of the changes that are being made.

So we kind of see this dual, there’s two things happening. There’s both the restructured energy market that’s causing significant issues in the province and then there’s also a lot of what’s happening as well on some of the signals that are coming through the regulatory changes. I think collectively that’s created a bit of a damper.

In some parts of the industry, there’s a lot of positives happening in data centers. We can get into some of that, but certainly that’s kind of what’s happened in Alberta in the last, I’d say, 24 months. That’s changed the landscape from what it looks like in 2021 or 2022 if you’re coming to the province.

Wes Ashworth (16:18)

Yeah. And you’re seeing some of that, sort of like, negative sentiments coming out or people are a bit worried or concerned about some of the changes and things like that going on. I’m always curious with that and maybe just from your perspective or opinion, should they be as concerned as some are? What should they really know? What is maybe not quite as bad as people are saying it is? Like if you were to just kind of take it, distill it and provide more of a, “This is from our perspective. This is kind of where we think, yeah, here’s some concerns, some negatives, but also, you know, it’s not quite as bad than we make it out to be.” And usually that’s the case, but curious to hear your thoughts.

Brady Chapman (17:07)

Yeah, Kevin and I both deal with this a lot. We deal with a lot of clients that are based out of Canada and all they see is the news clipping is coming from Canada. So we spend a lot of time working with clients to say, I know that’s what it said, but let’s actually look practically with what the requirements are and how we can manage this.

I think, and maybe I’ll defer here to, this is more on the economic side, so I’ll defer to kind of the Canadian, CanREA, the Canadian Renewable Energy Association, and their main concern when it comes to the market reform changes is how it impacts existing projects. So like one of the changes, for instance, in the restructured energy market is we’ve had, the approach has always been that they will build transmission if it’s required. So you always had a right to access the grid, basically. So the example I’ve heard them use before is, it’s kind of like a car in highways. If there’s so many cars on the highway, they’ll build out the highway larger. Some of the restructured energy market changes that they’re looking at now would result in more curtailment because they’re going to carefully select the locations where these projects should be located or provide mechanisms so that these projects should be located in certain places. Now of course that has massive impacts on existing projects in the province who made commitments for their projects based on no curtailment and based on transmission being built out if there was going to be curtailment. So that is a significant issue and I think that also is an issue that can cause kind of investor confidence generally for projects moving forward. So the restructured energy piece I’d say is the big one to look at that there are substantial concerns there.

Now there are ways that can be mitigated, right? If we look at day ahead market or negative pricing, batteries for instance are pretty much necessary now for any renewable project. It’s co-located battery with a renewable project now, especially in Alberta, which kind of lets you hedge against some of the concerns with negative pricing and mandatory day ahead market. And then as well I think PPAs have been quite stagnant, but it’s hard to see that they won’t pick up again based on how low pricing is right now and seeing some purchasers wanting to lock in pricing, like it’s a bit surprising, I think, so that’s kind of on that side.

On the regulatory side, there have been projects that have been canceled because they were located, or prospective projects that have been canceled because they were located in certain areas. I think we finally have clarity now though, more so, it’s not exact, but we have some clarity in regulation on what are the no-go zones, what are the classifications.

And that’s really important, obviously, that we were in a bit of a gray area there where we knew there would be an agricultural first approach. We didn’t really know what that means. We’ve also had more decisions come out from the regulator on if you are going to build on a higher class agricultural land, what they’ll be looking at in terms of your agrovoltaic plan to justify building that project on those lands.

So we’re slowly getting more information that allows us to advise clients on that regulatory side. So, and I appreciate that probably it is it an “It depends” question, the way I respond to that is classic lawyer, I didn’t give a straight answer. But I will say it’s not necessarily all doom and gloom like anything, it’s just, you’ve got to navigate it and you’ve got to, and I mean, part of the job that Kevin and I have is really just staying on top of decisions that are coming out, regulations that are being enacted, whispers in hallways on what’s happening in order to be able to advise clients on existing and prospective projects.

Wes Ashworth (20:19)

Right. Yeah, no, good. It’s helpful at least just to hear some of that insight and just your take on it as well. Yeah, but it often comes down to that. It’s usually not as bad as people make it out to be. And I think the industry as a whole is resilient. They call it the solar coaster for a reason. And there’s a lot of different things that come up within the greater industry that is constantly evolving and changing and hurdles popping up and regulatory changes and everything else under the sun.

Good to get clarity on that. You mentioned battery. I’ll use that as a segue. Talk about battery storage a little bit. I know in a previous conversation, we talked about the battery storage really being crucial in Alberta and maybe not in some of the other areas. I guess, can you explain why and how this impacts project financing and development overall?

Kevin Mehi (21:08)

Yeah, and I’ll just build maybe a little bit on what Brady was talking about. And it goes back to Alberta being an energy only market. So as Brady mentioned a couple of minutes ago, presently we’ve got real time bidding in Alberta. That could change when some of this market reform comes through. We could go to day head bidding. But with the real time bidding right now, without a battery, obviously you’re beholden to when your power is being generated. So by adding that battery component, you can take advantage of peak demand times, you can take advantage of higher priced times. In Alberta, like most places, we’ve got peak hours in the evening. Just based on where we are geographically though, those peak hours are happening after the sun goes down. So if you’ve got a solar project, obviously that’s a big problem. You’re not going to be able to sell into the market if it’s dark out. So batteries, important for that reason.

With the potential market reform as well though, when we’re going to this potential day ahead market, Brady alluded to this a minute ago, you really need that flexibility to bid in if you’re committing to a fixed price for 24 hours. So to use another example, if you’re running a wind project, you’re trying to guess whether you’re going to have that generation 24 hours from now. What if you don’t? Battery’s gonna give you that flexibility to bid into that as well.

So in terms of how it affects financing and development, we are seeing a lot more battery storage now than in previous years. It’s becoming an almost must-have in Alberta. And it’s helping on financing as well. So Brady almost answered your question before you even asked it. He touched on all these points, but it’s getting more difficult in Alberta to get a private PPA. So we’re seeing a lot more merchant market projects, which means in turn lenders are a little less willing to finance projects without those PPAs, without those certainties. You’ve obviously got to meet your debt obligations, your debt service ratios, et cetera. When you add that battery component and now you’re able to time shift the energy output and sell at higher prices, lenders are looking at that. They like that a lot more. Additionally, again, with the market reform, lenders are going to like it more if you’ve got that flexibility to, the certainty to sell 24 hours in advance.

Brady talked about congestion studies as well. So congestion studies look totally different for a project that has a battery versus one that doesn’t. So typically that’s going to make it more attractive to a lender as well. Brady, anything you want to add on this?

Brady Chapman (23:24)

Yeah, I will say, I think, Kevin, you mentioned there’s more merchant than PPAs. I think there’s not much happening right now because there’s a lot of uncertainty. I’ll say that generally, I’d say actually there’s more parties looking, developers are looking to not have merchant because of some of the risks in energy pricing now and the unknowns. So it does change. Everything that’s happened has changed the mix between how much of a project will be a merchant, how much of a project will be involved in that PPA. And then obviously the battery, if you kind of layer financing onto that and what a lender would require, batteries obviously allow you to deal with that shift a little easier, depending on how much is going to be under the PPA or how much you might have under a merchant for a single project.

Kevin Mehi (24:02)

And all this might go out the window entirely when the market reform comes. So yeah, take everything we just said with a giant tablespoon of salt.

Wes Ashworth (24:11)

Yeah, pretty much always. Shifting gears a little bit to a hot topic I know a lot of people are asking about and talking about. So thinking about data centers and how that’s impacting the industry, how is this trend shaping the renewable energy landscape? And what does the future look like for integrating renewables with data infrastructure, I guess, from your perspective?

Brady Chapman (24:32)

So I’ll speak maybe to Alberta first, because Alberta is very, very keen on data centers. They put out a, just before the holidays, put out a plan on data centers and how they intend to attract investments. And I think it’s useful asking and answering the question, why data centers in Alberta? Obviously the energy-only market is a positive for that. Kind of the flexibility to have behind-the-fence solutions exist in Alberta that wouldn’t necessarily exist in other provinces. So the ability to co-locate multiple types of energy, whether that’s geothermal, with natural gas, with solar, with battery. These projects were obviously data centers that require massive amounts of energy. We have really good infrastructure in Alberta. Transmission, no, that’s gonna be a massive issue, but we still have, we have the workforce, we have the technical infrastructure for the actual data centers, we have the land and we’re also a cold climate, which is very important as well. Even in the middle of, even in summer Alberta can drop down to, well, I was going to say one degree Celsius, but I don’t know what that would be in Fahrenheit to translate that, but very cold. Very cold. Yeah.

So there’s obviously, there’s lots of positives for why Alberta. And I think that’s actually even on both sides, on the data center side, if you look at, kind of, hyperscalers and you look at the renewable side as well, it’s being viewed as a way, as a marriage between those two parties in Alberta to keep the industry going. How that actually plays out is it remains to be seen. My understanding from data centers is that they require a lot of contingencies still. They already are connected to the grid, then they already have backup power if they need it. And so with the amount of transmission congestion that we currently have and the amount of demand that these data centers have, I think that’s a big question mark right now. Alberta, similar to other jurisdictions around the world, has basically said you’re welcome to come, data centers, and we encourage it, but you need to bring your own energy. And I think that’s what we’re seeing in Alberta.

In other provinces, I haven’t heard as much on data centers, and I think as with most places in the world, all of the system operators and vertically integrated utilities are looking and saying, demand is only going to increase and we need more energy. So I would suggest that the messaging for data centers is probably going to be the same across the board in Canada as it is everywhere else. It’s just in a place like Alberta there may be more opportunities for funding programs and you certainly have the ear of the government right now to enter into the market for that.

Wes Ashworth (26:57)

Yeah, great insight. Kevin, anything to add on that topic?

Kevin Mehi (27:00)

Just anecdotally, in Canada we’ve got a TV show called Dragon’s Den, which is the Canadian equivalent of Shark Tank. And one of the, quote-unquote, dragons that was on the show for a long time is a business man named Kevin O’Leary. And last month he put out a video of a proposed data center in Alberta, which I would encourage anyone listening to go check out. It’s the most over the top, incredible video you’ll ever see. Check it out, Kevin O’Leary data center.

Wes Ashworth (27:24)

Yeah, I’ll link it in the show notes for anybody interested. Shifting gears to a couple other topics. So, you know, we talked about First Nations partnerships. I do want to get into that. So you’ve emphasized the importance of First Nations partnerships outside of Alberta. Can you discuss why these partnerships are critical and how they impact project timelines and success?

Kevin Mehi (27:27)

Yeah, and I’ll maybe tackle this one because it’s been a pretty big part of my practice for the last couple of years. And it’s important nationwide, really, from a social perspective. So the underpin to all of this is helping First Nations with their economic development. First Nations, obviously, much like in the States, have been historically disadvantaged for a long time in Canada. A lot of this is just truth and reconciliation, to, again, boost their economies and get them back on a level playing field. So from a social perspective, it’s important from a legal perspective, though, because Alberta is an open market, you don’t have any type of legal requirement for First Nation participation in a project. So as an IPP, I can go set up a solar farm, can set up a wind farm. I don’t need to have a First Nation involved or another Indigenous community involved. I could have that involvement for internal ESG purposes, but there’s no law that says I have to do that.

Now, when you go to another province, the RFP requirements from different provinces, so recently we’ve seen RFPs in British Columbia that had this, Saskatchewan, there’s an upcoming one in Manitoba that’ll be released in the near future that will have this as well. They all say that there’s some percentage of equity that needs to be owned by a First Nation or some other Indigenous community. So it varies from Saskatchewan, which is 10%, up to the upcoming one in Manitoba, which is 51% indigenous ownership. Again, that purposes its economic development for the First Nation, but part of it as well is capacity building. We’re trying to use renewable energy projects to teach these First Nations about project development, project management, how to get their own energy projects going, part of its community benefits. So if you’ve got particular First Nation members who are skilled, and let’s say you’ve got an electrician that’s needed on site, you can go hire that First Nation band member to act as your electrician, et cetera. So a lot of reasons for it.

In terms of how it impacts project timelines, I think the biggest thing is a lot of IPPs developers, a lot of them don’t appreciate, a lot of them should appreciate just how long it takes to build that relationship with the First Nation to get your project structuring in place. So it’s not like you’re knocking on a First Nation’s door and two days later you’ve got a signed partnership, right? Meet and greet and build that relationship with them. There’s trust that has to be built. And then there’s negotiating the partnership agreement back and forth. So I’ve seen this take six months, I’ve seen it take 12 months. So for any IPP who’s looking at partnering with the First Nation, factor that into the timeline for your project.

Wes Ashworth (30:19)

Yeah, follow up question. What are some of the best practices you’ve seen for building meaningful and equitable partnerships with First Nations communities?

Kevin Mehi (30:28)

Yeah, it’s, I would say respect is the number one most important thing. So all of the First Nations in Canada, and we have Metis groups and Inuit communities as well. I’ll just talk specifically about First Nations because they’re the most prominent, more of them than the other groups. Every First Nation has a chief and council. So understanding that structure, understanding that chief and council are there sort of as a board, for lack of better word, representing the First Nation. You know, there’s the respect that’s needed. In-person meetings go a long way, constant touch points, not treating them, you know, not talking down to them. Even though a lot of these IPPs come in as the industry experts, they’re the ones with all the experience and the expertise on how to develop a renewable energy project. And a lot of times the First Nations don’t have that, but, you know, don’t talk down. Everyone’s on an equal playing field. So I think those would be my best tips.

Brady Chapman (31:18)

I would also just say that there are some very very sophisticated First Nations now and like First Nation development companies, so that’s one thing to note is that the experience and expertise is vastly different between different nations. And recognizing that there are some nations now, ones that Kevin and I work with, who don’t rely on anyone else. They have First Nation-owned entity and they do everything from EPC, O&M work. They truly would be more experienced even than, say, an IPP that’s coming in for an RFP from Europe or the US. They know more about the jurisdiction. They understand more about weather-related constraints in Canada which are real things. Anyways, that would be my other kind of remark as well, is understanding who you’re working with, and then to Kevin’s point taking the time, the face-to-face time is very important to build that relationship so that you do understand that as well.

Wes Ashworth (32:09)

Yeah, no great insight there. And shifting gears a little bit, just thinking about developers, international developers or other companies, just entering the Canadian market from your perspective. What are some of those common pitfalls they face? What key insights would have saved them or can save them time and resources and heartache and everything else?

Kevin Mehi (32:29)

Wow, how much time do we have? We’ve actually, we’ve acted for a number of international developers over the past couple of years, and there’s a lot of recurring issues that come up almost every single time. So foreign ownership requirements is one that I immediately think of. So again, this is all regulated at the provincial level and each province is different, but each province has some form of foreign ownership laws which may partially, or in some cases fully, restrict an international developer from coming in and owning a project from start to finish. So that’s something these developers need to be aware of, not trying to put up a project somewhere where it’s not going to be feasible from that perspective. Again, we just talked about First Nations. So understanding how to work with these First Nations, understanding what capacity they have and what experience and knowledge that they have.

Brady, maybe I’ll just turn it over to you and add a couple of points.

Brady Chapman (33:22)

Yeah, I would say, we talked about weather, maybe we’ll get into that briefly. There is a big difference developing a project in Canada compared to Spain or elsewhere, even South America, we see some developers coming from. And what is that? Things like build time, you can’t, there are just certain months in certain parts of Canada that you cannot construct. The ground is too hard, or you could, but it’s gonna be cost prohibitive to construct or to drill piles during that time, for instance. That’s one thing. Snow is obviously big. The hail that we see in Alberta is quite similar to the hail that you see in Texas, where they’re starting to create thicker glass panes. So I’d say as well, like, understanding the local weather in Canada is very important.

Then what I’d say is Canada is still in its infancy in terms of renewables compared to elsewhere in the world. And that comes out in terms of the number of service providers that are available and even things like the number of parties that are able to provide on market pricing. There’s going to be a limited number looking at negotiations that you may have with a vertically integrated utility, keeping in mind that this may only be the second or third time they’ve ever negotiated PPA for a renewable project, and it’s not like places in Europe. We see some pinch points there specifically with, say, a European developer coming over where they’re like, “How does X party not understand this point that’s not commercial” or what have you. And those are some of the difficulties that international developers should face.

And just really, it’s just realizing that coming into the market that there’s sometimes even just ways in which there’s lessons that need to be taught during a negotiation depending on the counterparty. And I shouldn’t say it’s a very sophisticated market, there’s a lot of service providers and what have you, but relative to other places you might find limitations.

And then as well, I’d say on the supply and equipment procurement side, if you’re looking at the channel of even domestic production that you see in the US now in terms of renewables, we don’t have the same thing in Canada and there are border constraints similar to, so there are border constraints similar to what you may see in the US, but we don’t necessarily have that domestic supply chain that you would see in the US. So that can also cause issues when it comes to procuring inverters and modules and everything else. We often, often Canada will mirror export and import controls that come from the US, but again, we don’t have domestic manufacturing and panelling like you’re going to see in parts of the US, or like you might see moving forward. So, it’s something for developers coming to Canada to be aware of.

Wes Ashworth (35:41)

Yeah, all great insights there and good, good info. Shifting to a couple of different topics as we get closer to time, we discussed a little bit of just agrivoltaics land use in Canada. I know, you know, there’s some regulatory decisions that are affecting land use that we briefly touched on there. How is agrivoltaics as a whole evolving in Canada, particularly in Alberta? And what are those recent regulatory decisions that are affecting land use? I know we touched on a little bit, but just wanted to dive into that a bit further.

Brady Chapman (36:13)

So I’d say, across the country, it’s become an important point on dual use of land. I’ve had, like as an example, I was working with a client with a vertically integrated utility that had to even, and actually it was really to foreign ownership, that had to even show them how much land is actually used to install a turbine, for instance, and brought pictures from projects in Europe to say, this is the agricultural operation happening alongside. So I’d say that’s one piece, it’s just the education piece is quite important for some places. In a place like Alberta, they have decided through these new regulatory changes to take what they’re calling an agricultural-first approach. And so if you want to build on class one or class two lands and some class three lands in certain jurisdictions, you have to have a robust plan.

And I guess what I’m trying to say is that sheep grazing may not be sufficient. Like some of the decisions that have come out recently have actually looked at, from the utilities commission have said, what is the yield that could otherwise be the yield from the crops that would otherwise be grown on the land, and then what is the yield of the crops that you’re considering growing under the panels, and are those comparable or not in terms of class one and class two lands?

So it’s a very, which is a tough standard to meet obviously, like the technology, we don’t necessarily have the technology there, our growing seasons are less, and so I’d say that’s, in Alberta, a really important point right now to look at, is you can’t just consider I’ll put a cover crop on that’s got some, you know, that helps pollinators, or I’ll do sheep grazing because that might not be sufficient if you’re dealing with a higher class land in certain parts of Alberta. Now the one thing just to note is that a lot of those high class lands are also the same places where we have some of the best resources specifically for solar, so this really is an issue that’s kind of, you know, coming to head right now with a lot of parties in Alberta.

Wes Ashworth (37:55)

Yeah. How do you see that, I guess, evolving, or what do you feel like if you were to try to predict the future a bit in terms of what’s going to evolve over the next three, five, ten years and that, like, what are your, what are your predictions?

Brady Chapman (38:16)

Like personal thoughts, if you look at, and the listeners interested, I provided the actual information, but if you look statistically on how large our agriculture industry is and even on our best case scenario for building out renewables, we’re still talking about renewables taking up a nominal amount of land relative to our agricultural operations. And so I think there was a little bit of a playing to a political base with some of these changes that have been made. And so long term, I’m also curious to see how that evolves when we start to just look practically at how much it matters in the short term.

I think developers that are looking to develop projects, investors that are looking to invest or purchase projects really need to scrutinize that agrivoltaic plan. You need to know what class of land you’re building on. If you’re looking to green-fill the project and acquire land, it’s probably recommended that you find land that’s not class one or two or three land if you can, underused land so that this is not a non-issue entirely. I think the reality is, we don’t actually know, and I think it’s part of the problem that we’re seeing some of these regulatory changes and why it remains in flux is even that decision that came up recently from the Utilities Commission that talked about yield differences between with panels or without panels was a bit of a surprise to the industry. Kind of a lack of recognition that that land is dual-use land. Like it’s not necessarily fair to compare what the yield would be without the panels because the reality is that there are panels and that creates economic opportunities for the community. So I think we’re going to see that.

I think we’re also going to see there was a lot of these rural municipalities that make a lot of tax revenue or have tax revenue opportunities from these projects, from solar and wind projects, especially in the south of the province. They may come around at some point realizing the missed opportunities that are coming as well by not having these. There’s one or two municipalities 45-50% of their tax revenue was coming from a handful of wind projects in the municipalities. So if we see less development, we may actually see projects that get decommissioned and they’re not extended or what have you, because of these changes. You may actually, looking forward, see some of those rural areas start to change their tune a bit on whether or not they want these projects there. Because right now I think general consensus is, there’s quite a bit of misinformation you might call it, or what have you, in rural areas about wind and solar and lot of pushback in those rural areas against those without kind of looking at the bigger picture and what they can do to keep those industries alive.

Wes Ashworth (40:34)

Yeah, absolutely. So what emerging trends or technologies, kind of getting into that further, just do you see playing a significant role in shaping Canada’s renewable energy future? And in second to that, so what should stakeholders be aware of in the coming years?

Kevin Mehi (40:47)

Yeah, so I think right off the hop, we’ve got a federal election coming later this year in October. I’ve mentioned a few times that renewables are regulated at the provincial level, but there are a few federal pieces that I think developers need to be aware of. The first is investment tax credits, which have been a hot topic for about the last year and a half, have made their way into the financial models for most projects. So that, you know, I would say any change in government brings uncertainty as to whether the previous government’s tax policies such as these ITCs will remain in force. Carbon pricing as well is set at the federal level, so that could change very significantly. And that trickles down to provincial carbon credits and carbon offsets as well, particularly in Alberta, where developers are probably building those into their financial models as well.

So that’s something if anyone, October is, I guess, nine, if I’m doing the math right, nine months from now. So something to keep aware of over the course of the next nine months. Technology, Brady, do you wanna tackle that one?

Brady Chapman (41:45)

Yeah, I mean, I think future outlook battery technology is only advancing, so I think that’s going to change the market in Alberta. I think, actually Kevin, I want to step back and make sure this point really really emphasizes that carbon is something to track in Alberta. So we have a conservative and more conservative government in Alberta right now, and then we also currently have a liberal party federally, but that’s likely going to flip conservative based on all estimates from polling.

The pricing right now, and why does that matter? Well, projects right now in Alberta, one of their main revenue streams is coming from carbon offsets where wind and solar projects can produce and sell offsets to large emitters for their compliance under the provincial regime when it comes to industrial emissions. If we start to see changes on that pricing, it could have impacts on economic models that we’re considering, say $170 pricing in a few years on those offsets where we’re only sitting at $50, $75 now.

We also see as well the current governments, federally and provincially that are conservative, very keen on things like carbon capture and storage. And if we have these carbon capture and storage projects come in, we’re also going to see an influx of CCUS credits, which are basically the same as an offset credit, could flood the market with credits and obviously dilute the pricing or the value on some of those offset credits that are being produced from wind and solar. So I think that’s, I think future outlook, I think that’s a big point that needs to be tracked if you’re coming into the market or if you’re in the market currently, on looking at how much impact that actually has in your financial model and how changes in governments are going to be impacted.

Yeah, I’d say for me that the big future outlook is batteries. How do data centers play out? Interconnections between provinces and even between the US is going to be massive now. Things like trading of carbon between provinces. We don’t actually have that in Canada. We have the ability to do it, but there needs to be government action on that.

So future outlook right now, frankly, a little bit bleak in Alberta, quite positive elsewhere in Canada, but we might see Alberta turn around if we start to see some more advancements on data centers, batteries, and what have you.

Wes Ashworth (43:47)

Yeah, fair enough. Good points there. Final closing question. So anything else you’d like to add or discuss that we didn’t cover, any key insights, stories, takeaways you want to leave our audience with, and I’ll let you both have a turn to contribute there. But anything else you’d like to add or didn’t get to chat about?

Brady Chapman (44:02)

Yeah, I’ll start, Kevin, sure. I would say, I’d say maybe it’s just reiterating a point that Canada is very vastly different from coast to coast and that if you say are a developer coming in and you’re hyper-focused on Alberta, that may be a mistake. And if you’re hyper-focused on elsewhere, that also may be a mistake. Like if you’re looking at, we see a lot of developers that come and say we have Canadian operations, but in fact they have Alberta operations. I think there is an important kind of understanding that that ebb and flow is actually probably going to happen between our capacity and our energy-only markets even based on politics. And so diversifying yourself out is one way you can kind of hedge against concerns if you’re looking at Canada as a market to enter into, or if you’re in Canada already and you’re looking at ways to hedge your existing investment.

Kevin Mehi (44:44)

That’s exactly what I was going to say, funny enough.

Wes Ashworth (44:46)

Now gotta think of something different. Any other kind of parting words of advice, things that you wish more people knew about?

Brady Chapman (44:56)

I, like you said, I think some of the headlines are really bleak right now in terms of renewables, in terms of government policies changing, but the reality is that the demand forecasts aren’t changing and haven’t been changing at all. So I don’t know, I’m quite keen on the industry, even if we see a blip here. And I think that’s an important message for those that are existing in the market. Certainly important for us as someone that helps investors and developers come in. It seems like, when things are happening like they are in Alberta, there could also be opportunities like we typically see if you’re in a down market, look for ways that you can adjust, at some point we have a lot of, we still in the Prairie Province of Saskatchewan in Alberta, we still rely on lot of emitting sources right now for our energy, and at some point that is going to have to adjust. And if you compare those provinces and how much penetration we’ve had in renewables relative to other jurisdictions in the US, in Europe, we are still at low penetration rates. So there is still a lot of opportunity there, even with our existing energy mix for renewables. It just might take a little more navigation and help from lawyers. Yeah, there you go.

Wes Ashworth (45:57)

There you go. I know a couple. Yeah, that’s good advice there. I think throughout, just really good information. Obviously, a lot of these questions are circling right now. So just good to hear your insights and perspective. And, I always love speaking to misinformation or things out there that people tend to just make assumptions, based on news articles and things like that. A clarification is always great. So with that, we’ll wrap up our conversation with Kevin and Brady.

Thank you both so much for sharing your invaluable insights into the Canadian renewable energy landscape and your critical work being done to drive progress in the field. To our listeners, as always, thank you for tuning in to Green Giants, Titans of Renewable Energy. If you enjoyed this episode, don’t forget to subscribe, leave a review and share it with your network. join us next time as we continue exploring the stories and innovation shaping the future of clean energy.