Prime Minister Justin Trudeau’s decision to prorogue parliament has cast uncertainty over a proposed clean energy tax credit that was meant to level the playing field between public and privately-owned utilities.
The Clean economy investment tax credits (ITCs) introduced in the 2023 federal budget, represent C$93 billion in federal incentives over the next decade, making them an important affordability tool to help build out Canada’s grid and other infrastructure, Mike Powell, vice president of government relations at Electricity Canada, told The Energy Mix. They help cover capital costs for transitioning the economy to net-zero emissions. Most ITCs—for hydrogen, carbon capture, and technology manufacturing—are already in place. The government also offers a 30% ITC for investments by private companies in non-emitting power sources like wind, solar, energy storage, and small modular nuclear reactors.
But another proposed clean technology ITC—offering a 15% tax credit to publicly-owned utilities and Indigenous corporations for those same capital costs, and for costs tied to hydropower and large-scale nuclear—isn’t in place yet. This proposed ITC was drafted after the first one, when it became apparent that private companies were given an edge over the public and Indigenous energy suppliers that many Canadians rely on.
“In Canada, many of the largest electricity operators are our Crown corporations owned by provincial governments,” Powell said. But because they are publicly owned, they don’t pay taxes in the same way as a private company, so tax credits would not benefit them as much.
This creates a problem in provinces that receive most of their electricity from large public utilities, and for Indigenous corporations that are now required partners for major energy projects in many provinces. The second clean technology ITC was meant to be introduced in the 2024 Fall Economic Statement, but now it is unclear if that legislation will be taken up again when Parliament resumes in March, or if a new governing party would return to it after an election. The Conservative Party Opposition, which is leading in the polls, has not indicated its plans, reports The Globe and Mail.
“The impact of prorogation is not that the bill died, it’s that one was never introduced,” Powell said.
“I think the challenge has been that it’s taken the Government of Canada a long time to get these ITCs up and available. And for this one, the clock has sort of run out.”
But Canada still has a “dramatic demand” for more electricity that some provinces, like Quebec, are addressing by pursuing large-scale projects to increase publicly-owned generation capacity. Failing to implement this ITC would make those projects more expensive and increase the cost burden for Canadians in those provinces.
“Our hope is that when Parliament resumes, if we don’t run into an election right away, that we see some greater clarity on what might happen with these ITCs,” Powell said. “Nothing is changing with the need to build out the electricity system.”
