Written by Thomas McInerney, Vivek Warrier and Sylvan Lange
On June 2, 2021, Natural Resources Canada (NRCan) announced its Smart Renewables and Electrification Pathways Program (SREPs) in support of Canada's ongoing effort to reach net-zero emissions by 2050.
The $964-million commitment will reduce greenhouse gas emissions over four years by encouraging the replacement of fossil-fuel generated electricity with cleaner energy technologies, such as wind and hydro. To facilitate this transformation to Canada's electric grid, SREPs offers financial assistance to eligible projects during the construction phase. This investment in smart renewable energy and grid modernization projects will make clean, affordable electricity more accessible in communities across the country and improve the connectivity and efficiency of Canada's existing electrical infrastructure.
Projects must use market-ready technologies and will be expected to demonstrate a commitment to workplace equity, diversity and inclusion. SREPs is showing additional support for Indigenous communities by allotting a minimum percentage of total program funds to Indigenous-led projects, which may qualify for greater funding.
What Projects Are Eligible?
SREPs provides funding to projects under the following streams:
- established renewables (e.g., onshore wind, solar photovoltaic);
- emerging technologies (e.g., energy storage, geothermal, tidal);
- grid modernization (e.g., micro-grids, virtual power plants); and
- Strategic Dialogue Linked Projects (SDLPs).
Projects under established renewables and emerging technologies capable of supplying electricity must also provide grid services that synchronous generators (i.e., hydro, natural gas, coal, or nuclear) have ordinarily supplied in the jurisdiction where the project is located.
Grid modernization projects must contribute to a broader range of grid services and value streams, including asset utilization and efficiency, reliability and resiliency, system flexibility and enabling renewable integration.
SDLPs may fit under any of the other three project streams, and are described as being part of an ongoing dialogue between federal and provincial/territorial jurisdictions through a Memorandum of Understanding, or projects linked to negotiations between the federal and provincial/territorial governments.
What Is the Funding Limit for Each Project Stream?
Funding limits are based on a percentage of total project costs. This percentage varies according to project stream, with a $50-million cap on any single project. The maximum eligible percentage of total project costs for each stream is as follows: 10 percent of established renewables; 30 percent of emerging technologies; and 50 percent of grid modernization. Maximum eligible funding for SDLPs will follow that of the most fitting of the other three streams.
Where a project falls under multiple streams, the maximum funding percentage will be determined according to the proportion of eligible expenditures in each stream. Final project funding percentages will be assessed according to demonstrated need.
Applicants are encouraged to stack financial assistance from other funding sources. The maximum level of total Canadian government funding authorized under SREPs is 75 percent of total project costs when the applicant is a for-profit organization. Provincial, territorial and municipal governments, as well as Indigenous applicants and non-profit organizations, may receive up to 100 percent of total project costs from government funding sources.
What Expenses Are Eligible for Reimbursement?
SREPs will reimburse a portion of expenditures incurred for the execution of each project. These expenses include: (i) employee salaries and benefits; (ii) contracting services; (iii) travel, meals, and accommodation; (iv) GST, PST, or HST; (v) capital expenses; (vi) select overhead expenses; and (vii) miscellaneous expenses.
The total amount of program funding paid to a recipient will not exceed the eligible expenditures actually incurred by the recipient.
What Contribution Funds Are Repayable?
Funds distributed to for-profit organizations (intended to generate profits) will be repayable. These projects will be monitored for five years following their completion to determine the repayment amount. If a profit is generated within this period, the recipient must repay the funds based on profit multiplied by the proportion of the government's contribution towards total project costs, with a maximum repayment equal to SREPs' contribution.
The following recipients qualify for non-repayable contribution agreements: (i) Indigenous projects; (ii) provincial, territorial and municipal governments; (iii) projects that qualify for less than $100,000 in contribution funding; and (iv) non-profit organizations.
What Is the Application Process?
The process includes the following steps: (1) Project Registration; (2) Technical and Financial Project Application; and (3) Project Evaluation.
Project approval is based on the principle of "first in construction, first served," encouraging applicants to demonstrate project readiness. Where multiple projects submit planned start dates within the same period, priority will be given to projects in coal-generating provinces, followed by Indigenous-owned projects.
Additional information about SREPs can be found on the Government of Canada website.
To see if your business can benefit from SREPs, contact one of the authors or a member of our Power & Renewables group.