Clean Energy Archives : VCIB

Commercial/Industrial Solar: An Untapped Clean Energy Opportunity Begins to Emerge

Posted on December 10, 2024 by Priya Prasad

Large industrial building, solar panels and trucks aerial view

It’s one of the biggest untapped opportunities in the Canadian renewable energy market.

A well-established but under-utilized pathway for developers and investors to generate steady cash flow with projects that also contribute to local resilience and business continuity, and for governments at all levels to help them get the job done.

And with interest in commercial/industrial solar on the rise and new financing solutions becoming available, it may be coming soon to an existing building, new construction site, or residential complex near you.

The market segment known as commercial/industrial (C/I) or mid-market solar consists of four- to 50-megawatt installations that are smaller than a utility-scale solar farm but bigger than a home rooftop array. They can be set up to feed electricity directly to the grid. But they’re also the right size to supply distributed, behind-the-meter power where provincial regulations allow them to.

Either way, a well-designed C/I project can provide steady cash flow for investors and greater flexibility for utilities. Behind-the-meter projects can also give building owners and occupants a decisive advantage by stabilizing and reducing their energy costs while reducing operating emissions. Often an even more important driver, they deliver resilience for buildings and communities and better safety for occupants by keeping the lights on and equipment running when a heatwave, wildfire, or severe storm takes the power grid offline.

By replacing electricity generated by fossil fuels, commercial/industrial solar projects help governments keep their promises to reduce the greenhouse gas emissions that drive an accelerating global climate emergency while enabling the private sector to make decisions and investments for resilience, economic benefit and environmental performance. All of these advantages demonstrate that the shift to renewable energy is about opportunity and gain, not loss and pain.

There are no reliable public figures for the number, size, or output of commercial/industrial solar installations in Canada. In the United States, commercial and community solar represented just small slivers of the more than 200 gigawatts (GW) of solar capacity installed nation-wide through June, 2024, according to the U.S. Solar Energy Industry Association.

But with a new federal tax credit now in place in Canada, commercial/industrial solar has never been more practical or affordable.

Team of engineers measguring solar panels on a rooftop using a tape measure — Team of engineers measuring solar panels on a rooftop using a tape measure

A Serious Prospect for Owners and Developers

Commercial/industrial solar is just beginning to gain recognition as a serious prospect for building owners and solar developers. It’s an obvious consideration for new greenfield development, especially as Canada and other countries move into an intensive period of new home construction. It’s also an opportunity worth exploring for any existing property with roof space, a parking lot, or any other open expanse where it might make sense to install solar panels for commercial/industrial applications.

And in provinces where net metering programs apply to commercial/industrial solar, developers can send their surplus power back to the grid and receive a credit on their electricity bills.

In late 2020, energy market analysts at Wood Mackenzie estimated the U.S. potential for new commercial solar capacity at 145 GW. At the time, only 3.5% of commercial buildings were equipped with solar arrays, while another 1% had connected to community solar.

In 2023, a study for the Canadian Renewable Energy Association (CanREA) found [pdf] that behind-the-meter solar could grow 20- to 40-fold by mid-century, enough to produce 18.8 GW of electricity per year, given the right financial and policy supports to expand the market. (A gigawatt is a billion watts of electricity, but the actual value of that output varies across the country depending on how efficiently a solar array captures energy and how efficiently it’s used. Alberta and Saskatchewan have the best solar resources of any Canadian province.)

The public release of the CanREA report didn’t differentiate between home rooftops and larger commercial, industrial, or community systems, pointing to a wider set of questions that help define the commercial/industrial potential:

How many warehouses are there in Canada? How many big-box supermarkets or department stores? Or parking lots? Or data centres?
How many square feet of roof space do these, and other facilities, represent, and what share of that total would be suitable for solar development?
With the country entering a new boom in home construction and renovation, where are the opportunities to install community solar systems that serve multiple homes, apartment buildings, housing co-ops, non-profit housing developments, or condominiums/stratas, including the large percentage of homes that are locked out of rooftop solar?

A quick data scan indicates nearly two billion square feet of industrial and logistics sites in Canada (though they aren’t all single-storey), 493 department stores, 71 to 97 million parking spaces, and 336 data centres.
Those numbers don’t easily translate into a sudden avalanche of project activity. Each site is unique, with its own possibilities, needs, and constraints. But they do point to the opportunity to work from the ground up, building successful projects where owners see the benefits, developers are ready to deliver, and responsive financing is available to seal the deal.

Getting From Here to There

For any renewable energy project, developers have to put in the time and effort to get the best energy output from a site, anticipate and minimize impacts on the environment, habitats, and natural heritage, and build a strong base of public support for their plans.

“Renewable energy project development relies on innovative vision, careful planning, and a lot of hard work,” CanREA writes.

“This applies both to consumers looking to generate and store power at their own property, and to multinational companies wanting to invest in a utility-scale development project.”

But commercial/industrial solar projects face their own special challenges compared to rooftop projects that can be standardized and templated, or utility-scale solar farms that are big, expensive, and profitable enough to warrant one-off contracts and specialized technical and financing arrangements.

“By contrast, middle market projects don’t have a consistent approach to soft cost management,” one analyst writes. “They lack the standardization of residential projects and the scale of utility projects.” That means “soft costs”, from installation to sales and service, can soak up a much larger share of a budget than they would with a larger project.

But there are still compelling opportunities to be found, even though they vary from one site to the next. “In this space, the motivation for going solar is often financial, and payback periods are heavily dependent on incentives and utility rate structures,” explains one U.S. solar company. Warehouse owners in one province or state might pay twice as much for peak-period electricity as their counterparts 200 or 2,000 kilometers away. Adding battery storage to a commercial/industrial solar system might unlock big savings on grid electricity from one project or make another one down the road too expensive to build.

Financing Makes the Difference

All of which points back to the need for a developer that can navigate the opportunities and complexities at each site. And for a community finance partner like Vancity Community Investment Bank that understands the underlying “why” of renewable energy development, knows the market, and has the patience and flexibility to help structure a deal that delivers on the promised benefits for building owners, developers, and investors.

In an owner-occupied site, the value proposition for onsite solar might be to reduce and stabilize energy costs and safeguard the many millions of dollars per hour that a large enough business can lose if the power goes out. If the building is leased to commercial or industrial tenants, the owner might try to make their commercial property more valuable in a competitive market by selling reliable, affordable power back to tenants.

For privately financed solar projects, the federal government’s new Clean Technology Investment Tax Credit offers a rebate for up to 30% of capital costs for investments taking place between March 28, 2023, and December 31, 2034. So, there’s never been a better time for developers and site owners to take a close look at the commercial/industrial solar opportunity.

Because of the market niche that commercial/industrial solar occupies—large enough to require custom design and financing, but too often considered too small to warrant the deeper investment and bespoke attention that go into a utility-scale development—a successful project depends on developers and lenders that are prepared to sweat the details and work through the hurdles. It’s easier for any institution to justify that extra effort when it is laser-focused on impact—from local economic gain and resilience, to big-picture emission reductions.

That’s how Vancity Community Investment Bank, as Canada’s only values-driven bank, can deliver the creativity and commitment to support the investments that make a difference for local businesses and communities.

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If you would like to learn more about VCIB’s Climate Finance solar products, please reach out to Alfred Lee, Manager, Climate Finance at alee@vcib.ca.

Financial partnership powers multi-residential geo-exchange installations

Posted on September 12, 2024December 10, 2024 by Cecilia Bermeo

September 12, 2024, Traditional territory of multiple Indigenous nations, including the Haudenosaunee and the treaty territory of the Mississaugas of the Credit/Toronto, ON – Vancity Community Investment Bank (“VCIB”), Subterra Renewables (“Subterra”) and Forum Asset Management (“Forum”) are pleased to announce the closing of a new credit financing partnership that will support the installation of geo-exchange systems at multiple new residential towers in Ontario. This is the second VCIB credit facility in support of Forum and Subterra’s innovative partnership that works to integrate geo-exchange technology into new buildings.

Subterra, a leading low-carbon energy developer, brings its expertise and its Energy As A Service (EAAS) utility business model. EAAS reduces costs and risk by offering residential property developers the opportunity to partner with an experienced geothermal asset manager—utilizing best practices, dedicated resources, and direct experience to unlock the value of a geothermal exchange system. Subterra’s EAAS offering provides several benefits to residential property developers including reduced upfront capital investment, alignment with green building standards for easier certification, potential access to development charge credits, and enhanced eligibility for CMHC-insured loans.

Typically, new residential buildings would be served by traditional, carbon-intensive HVAC systems. Instead, geo-exchange heating and cooling systems will be installed, avoiding carbon emissions of up to 8,500 tonnes annually. That equates to taking more than 1,800 cars off the road each year or planting more than 141,000 trees.

Installing energy efficient, low-emission geo-exchange heating and cooling systems in new buildings puts long-term sustainability at the forefront. Unlike deep geothermal energy, which uses fracking methods to access heat deep in the earth’s crust to create electricity, geo-exchange employs much shallower and less intrusive drilling methods to use the earth as a thermal battery, storing heat in the summer and extracting it in the winter. This process creates energy-efficient heating and cooling for buildings and eliminates the need for conventional, fossil fuel-based HVAC equipment.

Partnerships like this one demonstrate how collaboration can drive transformative change. “We’re excited to see geo-exchange gain traction in Canada through this financing partnership. Subterra and Forum’s approach will have a significant impact on the urban carbon footprint, advancing our low-carbon, climate-efficient transition,” said Jennifer Hutcheon, VCIB’s Vice President. “Financing energy efficient, low-emission technology is crucial in the fight against climate change and necessary to make homes more resilient.”

Subterra, and every member of its team, is dedicated to combatting climate change. “With this in mind, we expect our business partners to share our vision and values,” noted Lucie Andlauer, CEO of Subterra. “This is why partnering with VCIB was such an easy decision. VCIB has a long history of positively impacting communities and the climate. Their financing allows Subterra to build renewable and sustainable geothermal heating and cooling solutions for new developments and provides significant value to developers, building owners and tenants, supporting our ethos that making the right choice for the environment does not need to cost more than the status quo.”

“Forum is committed to delivering Extraordinary Outcomes™ to its stakeholders. Our partnership with Subterra and financing relationship with VCIB demonstrate our ability to partner with and drive value for Canada’s leading entrepreneurs,” added Rob Kaplan, Partner at Forum Asset Management. “This investment represents Forum’s third in sustainable infrastructure and HVAC services companies. We are proud of our role in setting a new standard for energy efficiency in Canada.”

About Vancity Community Investment Bank (VCIB)

Vancity Community Investment Bank is an Ontario-based bank and a subsidiary of the Vancity Group. VCIB provides specialized financing solutions for impactful projects like social purpose real estate and clean energy projects. For purpose-driven businesses and organizations, VCIB offers banking, investing, and financing solutions tailor-made to increase their growth and impact. VCIB is a Certified B Corporation and a member of the Global Alliance for Banking on Values.

About Subterra Renewables

Subterra Renewables is a geothermal exchange utility company with access to the largest drilling fleet in North America, operating the most energy-efficient and resilient heating and cooling technology in the world. Subterra is a fully vertically integrated company that custom engineers, installs, owns and operates first-of-its-kind geothermal exchange systems. As a leader in the sustainability and decarbonization movement, its best practices align with government ESG initiatives, expedite building approvals, and accelerate a path to net-zero.

About Forum Asset Management

Forum is a North American investor, developer and asset manager. Our core purpose is to deliver Extraordinary Outcomes™ to our stakeholders. Our adaptable, agile, and dynamic team is committed to sustainability and responsible investing, creating value that benefits the communities in which we invest. Our investment focus includes real estate, private equity, and infrastructure. The enterprise value of our assets under management exceeds C$1.7 billion. We’re proud to have delivered top-tier alternative asset returns since 2002, while positively impacting over 10,600 lives.

Media Relations
Vancity Group
mediarelations@vancity.com
778-837-0394

Subterra Renewables
Victoria Hunt
victoria@subterrarenewables.com

Paving the way for electric fleets

Posted on March 25, 2024April 16, 2025 by Cecilia Bermeo

Owning vs. leasing electric trucks vcib

Electric fleets offer a great opportunity to significantly reduce the emissions of Canada’s road transportation sector (which roughly accounts for 22% of the country’s total greenhouse gas emissions).

The challenge: Electrifying truck fleets requires support from a whole ecosystem of actors – from getting the right manufacturer and project developer, to accessing financing.

In 2022, Vancity Community Investment Bank (VCIB) formed a values-aligned partnership with Seven Generation Capital (7Gen), an organization that works to remove barriers to electrification for medium and heavy-duty commercial fleets.

VCIB’s first round of financing with 7Gen supported the acquisition of ten electric trucks and the required fast chargers, to be leased to GoBolt, a growth logistics firm that offers secure storage and e-commerce fulfillment to big retailers.

“7Gen’s electric vehicle (EV) and charger leasing model makes all the difference for businesses looking to make the switch to clean energy,” said Alfred Lee, Manager, Climate Finance at VCIB.

According to 7Gen’s projections, this EV fleet is estimated to reduce CO2 emissions by 4,140 tonnes over the trucks’ seven-year lease period, which accounts for an annual reduction of 491 tonnes compared to trucks using internal combustion engines.

While similar business models have been used to finance technologies like solar panels, this loan was one of the first of its kind in Canada for EVs.

Leading the charge in EV fleet adoption

In 2023, VCIB provided additional financing to help 7Gen lease 21 EVs and 37 chargers at multiple GoBolt locations across Canada (in Vancouver, Toronto, and Calgary). Last year, VCIB’s financing recently supported 7Gen in leasing over 50 EVs that are helping electrify fleets for leading logistics and delivery companies across the country.

“To make these projects work, we need a lender who’s pragmatic and willing to work with us to figure out the details,” says Frans Tjallingii, 7Gen’s CEO.

“Financing is not just about the money, it’s about value alignment and finding a financing partner who shares your goals.”

As part of the Vancity Group, VCIB is committed to becoming net-zero by 2040 across its lending portfolio. 7Gen’s service model and VCIB’s specialized financing reveals a new business model that can facilitate Canada’s EV fleet transition.

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If you would like to learn more about VCIB’s climate finance products, get in touch.

Climate-ready homes, empowered owners: SwitchPACE CIC’s winning combo 

Posted on February 27, 2024April 16, 2025 by Cecilia Bermeo

Corey Cadeau double thumbs up with double heat pumps outdoors scaled

The residential sector is a significant source of greenhouse gas emissions, making improving the energy efficiency of Canada’s housing stock crucial for climate change mitigation. However, improving energy efficiency often requires homeowners to invest in expensive retrofit projects, which not everyone can afford.

For SwitchPACE CIC. – a Community Interest Corporation based in Halifax, Nova Scotia – the answer lies in an innovative solution: Property Assessed Clean Energy (PACE) financing.

Often offered by municipalities or non-profit organizations, PACE loans provide flexible, low-cost financing for homeowners to carry out energy efficiency upgrades on their properties with no upfront costs.

“Home energy retrofits go a long way in mitigating the negative effects of climate change, like health concerns stemming from extreme heat,” says Alfred Lee, Climate Finance Manager at Vancity Community Investment Bank (VCIB). “But PACE programs haven’t been implemented at a large scale in Canada yet.”

With a mandate to scale up carbon reductions, SwitchPACE CIC. is turning the tide by becoming a leader in PACE program development and execution.

“The municipal PACE efficiency programming we run really empowers residents in the fight against climate change,” says Julian Boyle, President at SwitchPACE CIC. “Climate is such a large, complex global issue, but bringing it down to the local level to help homeowners save energy and save the planet is really exciting.”

Breaking the entry barrier with values-aligned financing

Earlier this year, Switch Pace CIC. launched a new program with financing support from VCIB – the Switch Program – Switch West Hants.

Through this program, homeowners within Nova Scotia’s West Hants municipality can finance almost any project that saves energy, increases comfort, and reduces greenhouse gas emissions – including geothermal heat pumps, air heat pumps, solar panels, window upgrades, insulation, and air sealing, amongst others.

Solar system installment on a Nova Scotia property. Photo courtesy of SwitchPACE CIC.

“Financing highly collaborative approaches like SwitchPACE CIC’s programs are core to VCIB’s mission,” says Alfred. “Through these programs, SwitchPACE CIC. is making home energy upgrades accessible by covering the upfront cost of the contractors and offering homeowners a 10-year payback period.”

Through PACE, homeowners can also repay the loan through a surcharge via their property tax bills.

A pathway towards a net-zero future

Through deep energy retrofits, SwitchPACE CIC’s municipal programs are reducing an average of 50 to 70% greenhouse gas emissions per year and have a market uptake of 2 to 5% of the housing stock.

“A large portion of all energy consumed in Canada comes from buildings, which creates great economic opportunity to invest in energy efficiency and solar,” adds Julian. “If we are to have a shot in building a net-zero future, we need to mobilize more low-cost private capital to enable 3 to 4 times more energy efficiency investments in buildings.”

With seven active programs across Nova Scotia, SwitchPACE CIC. is looking to launch 20 more programs across Canada within the next 2 years.

“VCIB has been very supportive of our program developments” says Julian. “We are looking forward to working with the climate finance team more in the future to scale efficiency financing across Canada.”

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Learn more about VCIB’s climate financing in our website. If you’re looking to finance a specific project, get in touch.

Unlocking the power of geoexchange: What every developer needs to know  

Geoexchange systems can decrease a building’s energy use by 33%, greenhouse gas (GHG) emissions by 47%, and are as much as 400% more efficient than conventional HVAC systems 

Posted on August 17, 2023April 16, 2025 by Cecilia Bermeo

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Besides transportation and electricity supply, one of the main challenges of decarbonizing a city is the heating and cooling of buildings. Outside of a manufacturing facility, heating and cooling systems are the top contributor to a building’s carbon footprint. In Canada alone, buildings take up nearly 30% of all energy consumed and are responsible for 26% of greenhouse gas (GHG) emissions.

Fortunately, the way buildings are being constructed in Canada is changing for the better. With the strengthening of Municipal building codes, real estate/condo developers have increased their focus on energy efficiency. If a developer is looking to meet (or exceed) city or building energy code requirements, implementing a geoexchange system is one of the best ways to do it.

What is the difference between geothermal and geoexchange?

The term “geothermal energy” points to a wide range of technologies. For example, when people talk about conventional geothermal technology they’re often referring to deep-drilled geothermal systems that extract high-temperature heat from kilometers below the earth’s surface – usually seen in industrial geothermal power plants.

Conversely, geoexchange is a form of shallow geothermal technology typically used to heat and cool commercial and residential buildings and houses.

How does a geoexchange system work?

Geoexchange systems use ground-source heat pumps to tap into temperature differentials just below the earth’s surface, typically at a depth between 45 to 120 meters (150 to 600 feet). During the winter, heat (energy) travels through a series of fluid-circulating pipes in contact with the ground.

The pipes use fluids (like water or glycerol) to carry heat from the Earth to the building, providing warmth through a duct system. In the summer, the heat of the building is transferred to the ground and then dissipated through the system’s loops, generating cool air in the process.

What are the benefits of a geoexchange system?

Geoexchange systems use the earth’s temperature to distribute heating and cooling, therefore they don’t require the burning of fossil fuels or any materials to operate. Once installed, the piping doesn’t need maintenance and the above-ground portions of the system require less maintenance than traditional systems.

These systems offer not only environmental benefits but also ensure safety with their odorless, flameless, and carbon dioxide-free operation, eliminating any fire hazards. The comfort of tenants is also enhanced since they provide a well-balanced distribution of heating and cooling, eliminating the common issue of uneven temperatures experienced with conventional systems.

What’s more, a geoexchange system can decrease a building’s energy use by 33%, greenhouse gas (GHG) emissions by 47%, and are as much as 400% more efficient than conventional HVAC systems – which translates into lower electric bills every month.

Breaking the cost barrier

One of the main reasons why geoexchange systems aren’t more commonly implemented is traditional HVAC systems are cheaper to install. Or at least they are initially; given the energy savings, geoexchange systems pay for themselves over time with demonstrated paybacks of between 5 to 7 years.

Targeted financing from the government and government agencies in Canada can also help pay for geoexchange projects. In Toronto, for example, the Toronto Green Standard Development Charge Rebate is available to projects that achieve higher levels of energy and carbon performance. For developers that want to own and finance their system, the Government of Canada provides business income tax incentives under Classes 43.1 and 43.2 in Schedule II of the Income Tax Regulations.

If developers wish to avoid the cost of installing the system altogether, they can engage clean energy utilities or third-party providers like Subterra Renewables, a leading low-carbon district energy developer, to be the owner/operator of the system.

Partnerships to unlock geoexchange potential

Through a construction financing partnership with Forum Equity Partners and Vancity Community Investment Bank (VCIB), Subterra Renewables has supported multiple geoexchange systems in the Greater Toronto Area.

“Despite the clear benefits, residential-scale geoexchange projects are usually too small to attract infrastructure financing from banks or pension funds who are searching for deals of $20 million or more,” explained Alfred Lee, Manager of Climate Finance at VCIB.

“Specialized suppliers of geothermal energy are essential, and we’re stepping up with the financing to help them succeed.”

After financing a half-dozen geoexchange projects, VCIB is a leading Canadian financier for a maturing market that’s ready to take the spotlight.

Financing for every stage of the geoexchange life cycle

VCIB’s financing covers geoexchange projects across a range of asset classes, types, and geographies — from new builds to refinancing successful projects as they move into the next operational life cycle, and from single-family homes and subdivisions to large condo complexes.

Trish Nixon, Managing Director of Climate Finance at VCIB, comments; “We’re seeing a large growth in interest for residential geoexchange as a way to improve residents’ homes. To reduce construction costs, many developers opt for a third-party financing model where a geo utility owns and operates the system.”

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For more information about geoexchange systems, including common barriers and misconceptions, read this recent study by Urban Equation for Sustainable Buildings Canada. If you’re a real estate developer or clean energy utility looking to finance a geoexchange project, get in touch.

$83 Billion in Cleantech Incentives Headline 2023 Federal Budget

Posted on April 4, 2023April 16, 2025 by Sheila Van Vliet-de Peuter

Wind Newsletter

With an estimated $83 billion in mostly clean economy incentives, the 2023 federal budget makes a big bet on private sector investment to decarbonize the grid, build strong manufacturing sectors and supply chains for electric vehicles and batteries, jump-start hydrogen production, and seize Canada’s place in a burgeoning global green economy. This is welcome news for VCIB, who offers financing solutions to project developers, installers and building owners driving the low-carbon transition.

In the weeks leading up to Budget 2023, much of the discussion swirled around how or whether Canada would be able to compete with the US$369 billion the Biden administration had poured into climate and clean energy incentives through the August, 2022 Inflation Reduction Act.¹ On March 28, Deputy Prime Minister and Finance Minister Chrystia Freeland set out to meet the moment with a $491-billion budget featuring future-forward investments to advance Canada’s net-zero economy.

Here is our roundup of highlights from Budget 2023 from the lens of our Climate Finance team:

Tiered Investments Address Eight Strategic Priorities
Pre-budget commentary emphasized the need for Canada to concentrate available resources on aspects of the net-zero transition where the country can either build on its strengths or readily establish new ones. Budget 2023 lays out a tiered investment strategy that treats pollution pricing and the national Clean Fuel Regulations as a cornerstone for three levels of financing:
• An “anchor regime” of investment tax credits;
• Low-cost strategic financing through the Canada Infrastructure Bank and the Canada Growth Fund; and
• Targeted investments to meet specific sectoral needs or support projects of “national economic significance”.

These public commitments are meant to draw significant private sector investment to eight strategic priority areas: electrification, clean energy, clean manufacturing, emissions reduction, critical minerals, infrastructure, electric vehicles and batteries, and major projects.

Investment Tax Credits
The budget introduces or expands investment tax credits in the following areas.

Clean Electricity Investment Tax Credit ($6.3 billion through 2028², $19.4 billion through 2035)
Maximum 15% refundable tax credit for eligible investments in:
• Non-emitting electricity generation systems: wind, concentrated solar, solar photovoltaic, hydro (including large-scale), wave, tidal, nuclear (including large-scale and small modular reactors);
• Abated natural gas-fired electricity generation (which would be subject to an emissions intensity threshold compatible with a net-zero grid by 2035);
• Stationary electricity storage systems that do not use fossil fuels in operation, such as batteries, pumped hydroelectric storage, and compressed air storage; and
• Equipment for the transmission of electricity between provinces and territories.

Clean Hydrogen Investment Tax Credit ($5.6 billion through 2029, $12.1 billion through 2035)
15 to 40% tax credit for project costs, depending on the carbon intensity of the production process, plus a 15% tax credit for equipment to convert hydrogen to ammonia for shipping.

Clean Technology Manufacturing Investment Tax Credit ($4.5 billion through 2029, $6.6 billion through 2035)
Maximum 30% refundable tax credit for investments in new machinery and equipment to manufacture or process key clean technologies, and extract, process, or recycle key critical minerals, including:
• Extraction, processing, or recycling of critical minerals essential for clean technology supply chains, specifically: lithium, cobalt, nickel, graphite, copper, and rare earth elements;
• Manufacturing of renewable or nuclear energy equipment;
• Processing or recycling of nuclear fuels and heavy water;
• Manufacturing of grid-scale electrical energy storage equipment;
• Manufacturing of zero-emission vehicles; and
• Manufacturing or processing of certain upstream components and materials for the above activities, such as cathode materials and batteries used in electric vehicles.

Carbon Capture, Utilization, and Storage Investment Tax Credit ($520-million top-up through 2028)
Variable-rate refundable tax credit for eligible expenses, retroactive to 2022
The budget adds to the $7.1-billion CCUS investment tax credit announced in the 2022 budget and extends eligibility to projects aiming to store carbon dioxide in geological storage in British Columbia.

Clean Technology Investment Tax Credit ($6.9 billion through 2028)
30% refundable tax credit for eligible expenses

The budget extends the Clean Technology Investment Tax Credit through 2034, increases the available funds in the short term, and expands its scope to include specific types of deep geothermal projects, on the condition that they not “co-produce oil, gas, or other fossil fuels”.

The tax credits are largely conditional on employers adhering to specific labour standards: to receive the maximum funds available, they must pay prevailing union wages and assign at least 10% of tradesperson hours to registered apprentices in Red Seal trades. Firms that fall short of these standards will see their investment tax credits fall from 15 to 5%.

Reduced Tax Rates for Zero-Emission Technology Manufacturers ($1.3 billion)
The government is extending a provision from its 2021 budget that halved the corporate tax rate for zero-emission technology manufacturers, from 9 to 4.5% for small businesses and from 15 to 7.5% for larger enterprises. The reduced rates will now be available through 2034, and they will also be extended to “the manufacturing of nuclear energy equipment and the processing and recycling of nuclear fuels and heavy water,” beginning in the 2024 tax year. The tax reductions are expected to cost $20 million through 2028 and another $1.3 billion through 2035.

Strategic Finance

Canada Infrastructure Bank ($20 billion)
The budget calls for the Canada Infrastructure Bank to earmark $10 billion each to clean power projects and green infrastructure. “These investments will position the Canada Infrastructure Bank as the government’s primary financing tool for supporting clean electricity generation, transmission, and storage projects, including for major projects such as the Atlantic Loop,” a large power grid megaproject in Eastern Canada for which the budget commits to further negotiations.

Canada Growth Fund ($15 billion)
Originally announced in the 2022 Fall Economic Statement, with a plan to finalize its structure by mid-2023, the $15-billion Canada Growth Fund is meant to “help attract private capital to build Canada’s clean economy by using investment instruments that absorb certain risks in order to encourage private investment in low-carbon projects, technologies, businesses, and supply chains.” Budget 2023 mandates the $225-billion Public Sector Pension Investment Board (PSP Investments) to manage the Fund and states that it will “begin investing in the first half of 2023.”

Targeted Initiatives

Strategic Innovation Fund ($500 million new, $1.5 billion existing)
The federal Strategic Innovation Fund will allocate $500 million in new funding and $1.5 billion from existing resources to projects in “clean technologies, critical minerals, and industrial transformation”. The budget notes that the Fund has created or maintained 105,000 jobs across 107 projects since 2018, using $6.9 billion in contributions to leverage $67 billion in private investment. Examples to date include:

• 200 million to Algoma Steel in Sault Ste. Marie, Ontario, to support a shift to lower-emission electric steelmaking;
• $47.5 million to Moltex Energy Canada Inc. in St. John, New Brunswick, for small modular nuclear reactor research and technology development;
• $25 million to Burnaby, B.C.-based Svante Technologies to develop carbon capture technology for heavy industrial emitters.

Clean Electricity Projects ($3 billion)
The budget earmarks $3 billion over 13 years for three categories of clean electricity projects that include the popular Smart Renewables and Electrification Pathways Program, originally an eight-year initiative that launched in 2021 and worked its way through its initial $964-million budget and a $600-million top-up in less than two years. SREP is to share the $3-billion allocation with a renewed federal Smart Grid program and new investments in science-based activities to support offshore wind development off the coasts of Nova Scotia and Newfoundland and Labrador.

Clean Fuels Fund
The budget lists potential opportunities in bioenergy development across the 10 provinces and commits to explore possible support mechanisms with the industry.

Carbon Contracts for Difference
The budget opens a discussion on carbon contracts for difference³ as a tool to make the carbon pricing that backstops future investments more predictable and help “derisk major projects that cut Canada’s emissions.” The budget document says contracts for difference “allow companies to plan ahead, supporting the growth of Canada’s clean economy by making clean projects more cost-effective than more polluting projects.” The approach has seen considerable discussion recently as a way to protect federal cleantech investments from being overturned by a future government.

VCIB Comments

On the whole, the budget has largely been seen as a transformative win and a moment of opportunity to jump-start energy transition investment in Canada.

“The federal commitments and incentives outlined in Budget 2023 will provide a much-needed boost to accelerate the deployment of decarbonization technologies”, said Trish Nixon, Managing Director of Climate Finance at VCIB. “The race to net-zero is our most urgent priority, and we are motivated to work with existing and new borrowers as well as public sector partners to finance more projects, faster.”

For more on VCIB’s climate financing or to talk to us about your clean energy project or energy efficiency retrofit, visit our website or contact us.

¹ https://www.whitehouse.gov/cleanenergy/inflation-rduction-act-guidebook/

² All time references for funding initiatives are based on the federal fiscal year, which runs from April 1 to March 31.

³The Canadian Climate Institute published an explanation of this investment tool last week: https://climateinstitute.ca/what-are-contracts-for-difference/.

*Reproduced with the permission of the Department of Finance, 2023