Albertans are middle-of-the-pack when it comes to electricity prices. We pay more than hydro-endowed provinces like Quebec and B.C., but less than just about everyone else. Most of our electricity comes from large, coal-fired power plants, with natural gas providing most of the rest and just about nine per cent coming from renewables.
That mix is going to change, and quickly. Last November, the Alberta government announced its sweeping climate change plan, promising, among other things, to shutter the province’s coal-fired power plants by 2030 (with two-thirds of the replacement capacity to be filled by renewable power) and to bring in a broadly based carbon tax. It’s an ambitious plan and “greening the grid” is an important part of it, as the electricity sector accounts for about 17 per cent of Alberta’s total greenhouse gas emissions.
But replacing 6,258 megawatts of coal-fired generating capacity – which provided 55 per cent of the electricity Albertans consumed in 2014 – in 14 years will be no easy task. With memories of Ontario’s incredibly expensive efforts to green its grid fresh in everyone’s mind, Alberta is heading into a policy minefield that will have major repercussions on the prices we all pay for electricity for decades to come.
Evan Bahry is the executive director of the Independent Power Producers Society of Alberta, the umbrella group representing virtually all power producers in the province, and his members are concerned. At present, he points out, we have a power market and, like any other market, it’s driven by supply, demand and price point. Power generating companies will decide to invest when the price dictates and not before. When public policy gets involved, that balance is shifted. “The price signal will continue, but the government is introducing central planning principles of designing the supply fleet,” he says, not sounding terribly confident about the exercise. He identifies four dynamics that will have to be juggled as green-grid policy is developed and implemented. “How they will juggle market sanctity, system reliability and the addition of renewables,” he says, “and the fourth one in an open market is consumer choice, which you don’t see in other jurisdictions.”
One of the big outstanding questions, Bahry says, is how much renewable capacity will be needed to replace that 6,258 MW of coal generation? Because solar and wind are dependent on the sun being out and the wind being up, respectively, they’re not as dependable as a coal or natural gas plant to provide your base load. “Wind only produces power 35 per cent of the time,” Bahry says, “so you need that much more capacity to get the same amount of energy that you would get from a dispatchable plant like coal or gas.” So you have to overbuild the renewable capacity. “I’ve seen numbers as low as 4,200 MW of renewables to around 10,000 or 12,000,” Bahry says. “It depends how you calculate the ‘up to 30 per cent of energy by renewables’ number. Is it 30 per cent of the fleet’s capacity, or 30 per cent of our energy production?”
David Vonesch, the COO of solar-energy company Skyfire Energy, agrees that dramatic change is coming down the wires on a few fronts, but points out that a lot of the coal fleet was mandated to be phased out by 2030 anyways: existing federal regulations relating to GHG emissions will see 12 of Alberta’s 18 coal-fired plants retired by that date. “We’re just phasing out the portion that was to be left after 2030, and it’s completely manageable,” Vonesch says. “If we start pulling off large generators really quickly and really soon, then absolutely there could be challenges in keeping up to fill that void.”
He points out that Alberta is starting from a position of strength, with reserve margins in the range of 30 or 40 per cent, meaning that we have had a major overbuild of generation in the recent past, especially with Enmax’s 873 MW Shephard natural gas plant coming online in 2014. “We have an excess of generation now, so it’s a nice buffer to be starting with,” Vonesch says. “We see that in the market prices with the prices very low right now.”
And it’s not as if renewables are the risky option they once were. In fact, the world has reached a tipping point, now adding more renewable-power capacity each year than it does coal, natural gas and oil combined. The trend continued in 2015, despite crashing fossil fuel prices, and was led by China, which spent $111 billion on clean energy infrastructure last year. David Dodge is an environmental journalist and the producer of Green Energy Futures, a storytelling project documenting the clean energy revolution. He credits the technological changes over the past decade for the change. “The reduction in prices, the robustness of the technologies and the desire to do this differently, to have lower emissions, has been almost mindboggling,” he says.
Wind is the most economic renewable at present in Alberta, and Bahry expects it will make up the vast majority of new renewables. But solar is also in play. Right now, solar barely registers in Alberta, with just nine megawatts of power, or about .01 per cent of the total. But Vonesch, who was recently lead engineer on a two MW solar array built by the Green Acres Hutterite community east of Calgary, sees a brighter future for it. The Green Acres facility is the largest array in Western Canada and is almost 10 times larger than the next biggest system in Alberta. It was built entirely without subsidies. “They had an existing electrical expense, and they’ve turned it into an equity piece that provides a return,” Vonesch says. “The economics work in the right situation.” He says Ontario added 2,000 MW of solar in just a few years. Yes, that’s a bigger market, but he thinks 2,000 MW of solar in
Alberta by 2030 is “very doable.”
Aside from that solar success, Ontario is generally not considered a good example of greening your grid. The province’s auditor general recently found that Ontarians have paid $37 billion more than market price for electricity over the past eight years and will pay another $133 billion extra by 2032, primarily as a result of poor planning and political meddling. Electricity prices for consumers and small businesses jumped 70 per cent – from 5.32 cents per kilowatt hour to 9.06 cents – between 2006 and 2014.
But Vonesch says he keeps telling people Alberta is not Ontario. “The majority of cost increases that they’ve seen on their bills is not due to solar and wind. It’s due to nuclear refurbishment and the billion dollar gas boondoggle,” he says. “They have some very expensive contracts for hydro and biomass, so solar and wind are a piece of that, but they’re not even the majority of the cost increases they’ve seen.” On top of that, Alberta has superior wind and solar resources to Ontario, and the government intends to use a competitive procurement process, something Ontario has been criticized for failing to do.
The Alberta government will soon appoint a facilitator to determine the schedule for retiring the coal plants and the compensation owed to owners of capacity that comes offline before the end of its natural life. That will help determine the speed at which renewable capacity needs to come online.
“Industry is thirsting for details from the government about how this plan will work and if the price signal will still be strong enough to drive future supply,” Bahry says. “The challenge is, if investors are concerned about the health of the market going forward, some may opt not to build. Then, if you have a concern over our ability to meet demand, will the government start issuing contracts for other supply like they did in Ontario?”
All fair questions that policymakers will have to grapple with during this transition, but Vonesch says we should be looking at this change as an opportunity. “We could see the lowest price renewables in Canada, without question, for both solar and wind because our resources are so good,” he says. “We’re coming at it at the right time.”
Dodge says the design of the grid will be key. “There needs to be recognition that there are public policy objectives in the electricity market. You can’t be completely hands off with it,” he says. “If you agree with that premise then it’s pretty easy to have different sources of electricity play different roles in the grid. They do anyways. For example, natural gas can be a facilitator of renewable energy or it can be a competitor with it.”
And he says the public can be brought on board. “If I’ve learned one thing in four years travelling the country telling stories about this kind of stuff, it’s that people want to see this change, and they’re ready to work hard and roll up their sleeves and make this happen,” he says.
Generating capacity in Alberta (MW)
*While coal provides 38.5 per cent of generating capacity, it’s the cheapest source so is operated the most. It provided 55 per cent of the electricity consumed in 2014.