MARKHAM, ONT. — Canada Growth Fund Inc. (CGF) and Markham District Energy Inc. (MDE), an operator of district energy networks in the City of Markham, Ont., have entered a financial hedge to enable new investment in the energy sector in Ontario.
The 10-year contract for difference (CfD) enables MDE’s investment in a new heat pump system that will provide residents in Markham with low carbon energy services.
MDE is building a heat pump system that harnesses the steady temperature of a nearby sewer as a heat sink for thermal energy and replaces existing technologies that burn natural gas, indicates a release.
The project is estimated to support up to 200 jobs in Ontario during the construction period and has the potential to reduce about 177,400 tonnes of CO2 emissions over the 10-year CfD term.
The transaction advances important heating and cooling technologies, which could unlock further decarbonization opportunities across Canada in the hard-to-abate low-grade heat sector, states the release,.
Transaction highlights include:
- A carbon policy CfD is a financial instrument that provides certainty related to the financial impact of future carbon policy prices, measured against specified volumes of carbon emissions reductions.
- The benchmark for the CfD is based on the Ontario industrial carbon pricing system, known as the Emissions Performance Standards.
- The carbon policy CfD is structured as a two-way contract, which means if the actual carbon policy price exceeds the specified strike price, MDE will make payments to CGF. Conversely, if the carbon policy price falls below the strike price, CGF will pay MDE for the difference.
- The CfD is set at an initial strike price of $100 per tonne of CO2 with escalation, for a 10-year term commencing at the project’s commercial operation date.
- The project utilizes Noventa Energy Partners Inc.’s Wastewater Energy Transfer (WET) technology, a solution for extracting thermal energy from wastewater.
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