Federal tax credits could boost clean energy in SE Alberta

By COLLIN GALLANT on March 30, 2023.

cgallant@medicinehatnews.com@CollinGallant

New tax credits offered in the federal budget could build up further steam in efforts to produce hydrogen fuel and renewable energy in southeast Alberta, say industry associations.

The Liberal government’s financial plan for 2023-24 includes billions in tax offsets toward new wind, solar and battery storage facilities. As well, money is set aside to defray the cost of building hydrogen capacity or installing carbon-capture systems at existing plants.

The City of Medicine Hat’s main industrial attraction strategy involves creating both a local hydrogen production economy and hub to collect and store carbon dioxide deep underground from its own power plant and from private-sector partners in the region.

On Wednesday, city officials were still evaluating the potential effects of the budget, tabled one day earlier.

The Chemistry Association of Canada – which includes local plant operators Methanex and CF Industries as members – said the move by Ottawa would “reshape the industrial landscape and Canada’s economy for decades to come.”

Medicine Hat-Cardston-Warner MP Glen Motz told the News on Wednesday that the examination of the strategy is still underway.

“Those in the industries may be encouraged,” said Motz, who has called on Ottawa to strongly support Alberta government and the City of Medicine Hat’s carbon-capture proposals.

New hydrogen production investments could receive a sliding scale tax credit of between 15 and 40 per cent based on carbon emissions from production. That would provide higher rates for so-called “green hydrogen” made from water using renewable energy, and less for “blue hydrogen” made from natural gas.

“Decarbonizing this supply chain will require significant new investments, including research and development, which will ultimately lead to a net-zero industrial transformation,” said Bob Masterson, the head of the Chemistry Association of Canada.

Green power producers said the budget would “significantly accelerate” wind and solar construction that is already booming in the province.

“(The budget) announcements are a strong and necessary step, accelerating our progress toward net zero,” said Victoria Bellissimo, the Alberta-based president of the Canadian Renewable Energy Association.

“Canadian investment tax credits will stabilize investment opportunities, while safeguarding affordability for Canadians.”

Up to $55 billion will be available until 2034 to pay a tax credit of between 15 and 40 per cent on the cost of equipment to produce low-carbon hydrogen or no-emission power. Another $29 billion was allocated last year to entice industrial manufacturers to install carbon dioxide capturing equipment. That credit equals up to 50 per cent of the capital costs.

The package compares to US$369 billion in support for green power development in the U.S. laid out in the “Inflation Reduction Act” last fall.

“Our friends and partners around the world, chief among them the United States, are investing heavily to build clean economies,” said Finance Minister Chrystia Freeland during her budget address Tuesday.

The CANREA expects lower cost generation from wind and solar to continue outpacing new gas-fired capacity based on the business case.

New credits apply to project across Canada, but last year, 90 per cent of the new solar construction in the nation occurred in Alberta.

In the region around Medicine Hat, renewable generating capacity is already set to more than double over the next two years, not including a host of major projects now before regulators or recently approved.

They include the Jurassic Solar Plant (near Dinosaur Park), Midnight Solar (another by the same developer in Cypress County), the Saamis Solar Park (proposed for north Medicine Hat), the Aria Solar Park (south of Seven Persons), Brooks Solar (west of that city), as well as three advanced wind farm proposals.

Those could take advantage of tax credits of up to 30 per cent of capital construction costs for wind, solar or battery storage projects starting immediately.

A 15 per cent equivalent program would be afforded to municipalities and Crown corporations, which pay no tax, if they add wind or solar production.

Ottawa will also begin consultations on measures to support net-zero transmission systems and creating intraprovincial power grids, such as is happening in Atlantic Canada.

On the green grid issue, First Nations and publicly owned power grids will be able to access $10 billion in financing through the Canada Infrastructure Bank.

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