With the federal budget now officially passed, Canada has taken a step toward the shift to clean energy by passing the highly-anticipated Clean Electricity Investment Tax Credit (CEITC). It means municipalities, Indigenous corporations, crown corporations, utilities, and pension funds can now take advantage of a powerful, refundable incentive designed to lower capital costs and support the build‑out of a net‑zero grid by 2035.
Although the federal government noted that detailed guidance is still to be published, the fundamentals are clear enough for cities and other eligible groups to get started.
Why the CEITC adds unique value
Electrifying Canada requires massive investment in clean generation, storage, and interprovincial transmission — as well as the refurbishment of existing assets. The CEITC directly targets these needs by offering a 15% refundable tax credit on eligible capital investments.
This credit is available to both taxable and non‑taxable entities, including municipalities, utilities, and Indigenous‑owned corporations. That makes it fundamentally different from most federal tax credits and opens new opportunities for public‑sector leadership in clean‑energy development.
Eligible assets include:
- New or significantly refurbished clean electricity generation (solar, wind, hydro, geothermal, biomass)
- Energy storage
- Interprovincial transmission infrastructure
- Major refurbishments of existing clean assets
This distinguishes the CEITC from the Clean Technology Investment Tax Credit (CTITC), which focuses on specific technologies rather than system‑level electricity infrastructure. The CEITC is about building the backbone of a clean grid.
A catalyst for municipal resilience and Community Energy Plans
Municipalities across Ontario are working hard to implement their Community Energy Plans, strengthen resilience, and prepare for climate-related emergencies. Local clean electricity generation and storage infrastructure are essential to these efforts.
The CEITC materially reduces the cost of these investments. It is also retroactive for construction that began after March 28, 2023, meaning projects already underway may qualify.
The credit can also be used together with other funding sources that are available:
- SaveONEnergy incentives can be combined with the CEITC, although they reduce the eligible capital base.
- Canada Growth Fund investments do not reduce eligible capital, allowing full CEITC value.
It’s still to be determined, but likely that utilities can incorporate the CEITC directly into benefit‑cost ratios, improving the economics of grid modernization and distributed energy projects. And for municipalities exploring local solar, the CEITC strengthens the financial case for community‑scale clean energy.
Indigenous clean energy leadership
Indigenous‑owned clean energy projects are central to Canada’s clean energy future. The CEITC supports new or refurbished generation and storage assets owned by First Nations, Inuit, and Métis corporations — including large‑scale storage projects like the Oneida Battery Project which provides long term revenue and supports Indigenous energy sovereignty.
How to get started
To receive the full credit, projects must meet federal apprenticeship and prevailing wage requirements, and it is prudent to consult tax and legal experts to assist municipalities navigate these requirements.
With CEITC secured and implementation details on the way, these tax credits are poised to reshape how municipalities, Indigenous partners and utilities invest in clean electricity.
Now is the time to prepare projects, partnerships, and investment strategies that will shape the grid for decades to come.
Wastewater!
There has been at least on major bankruptcy because the CTITC did not include wastewater systems.
If this new tax credit excludes wastewater then I ask TAF to lobby for a change in regulations.
Thanks for your comment Don! The federal government updated rules for waste biomass in Bill C-15 (which included the CEITC).
I’m mistaken. I was referring to wastewater’s role in thermal energy. Not the same thing.
I’m struggling to see the difference between the CTITC and CEITC. Can you elaborate more?
I can understand your confusion as the CTITC and the CEITC do have a number of similarities – for instance, they can both be used for the purchase of new clean generation technologies like solar. Two of the key differences are that the credit level is different (30% for CTITC versus 15% for CEITC), and the entities that are eligible to claim the credit are different (only taxable entities for CTITC versus non-taxable entities for CEITC). The CEITC can also apply to refurbishments of existing equipment in certain circumstances.
Thank you for this helpful overview of the CEITC. One item in the eligible asset list requires serious challenge: the inclusion of hydroelectric generation as a clean energy technology.
Contrary to a century of greenwashing, new hydroelectric generation is not clean energy. Hydroelectric reservoirs in boreal conditions, which describe the majority of new Ontario waterpower proposals, emit methane from decomposing flooded organic matter. Peer-reviewed research has documented these emissions reaching intensities that rival gas-fired generation. This is not a difference of degree from solar and wind; it places boreal reservoir hydro in an entirely different emissions category. Treating these facilities as equivalent to solar panels and wind turbines in a federal clean electricity framework is scientifically indefensible.
The environmental harm does not stop at the atmosphere. Reservoirs degrade water quality through thermal stratification, anoxic conditions, and methylmercury production, which bioaccumulates through the aquatic food chain, threatening fish-dependent communities and Indigenous food sovereignty. Peaking operations, storing water and releasing it over hours or days to meet grid demand, create artificial flood-and-drought cycles that obliterate riparian and aquatic habitat downstream.
Nor is new hydropower a sound long-term public investment. Ontario’s regional climate projections (Ontario Climate Change Impact Assessment, 2023) document increasing drought frequency and declining summer flows. The IESO has documented northern Ontario hydroelectric facilities operating at 15–30% of nameplate capacity during drought—conditions that are intensifying. Manitoba Hydro posted a $157-million net loss in fiscal 2024, directly attributable to drought. Extending 15% federal tax credits to 40-year investments in a resource whose performance is declining is not sound fiscal policy.
Solar, wind, and storage are clean, climate-resilient, and cost-competitive. The CEITC should accelerate them—not entrench ecological and fiscal risk on Ontario’s rivers under the banner of clean energy.
Consider this: there are 224 hydroelectric facilities in Ontario, and only 2 have operating fish passage. The Class EA for Waterpower does not guarantee public consultation—it’s risk-based, and the proponent decides whether the public has any input at all. Does that sound like a clean and sustainable investment?
Linda Heron, Chair, Ontario Rivers Alliance
Thanks for sharing this important perspective, Linda. We agree that it is critical to consider the benefits and impacts of energy technologies over their life cycle to determine which ones to prioritize.