Friday, 22 May 2015

Alberta: The Potential of Clean Energy, Economic Diversification and the Reduction of GHGs

In her speech on election night, Rachel Notley,spoke of her ambition to a) diversify the economy of Alberta, including the diversification of the energy sector, b) be partners with the energy industry and c) be a partner with the federal government for a national strategy on the environment.

Is all this possible?  The answer is a resounding yes!

Alberta's Clean Energy Potential and 
the Reduction of Greenhouse Gas Emissions
First, the theoretical wind power production potential of Alberta is equivalent to all the electrical production needs of every province West of Québec.

Second, the potential for wind power to reduce Alberta's emissions is especially significant in that fossil fuels represent the lion's share of energy sources consumed for electricity production in the province.  

Coal represents 6258 megawatts (MW), 42% of the electrical power generation sources in the province, and 40% of total electricity use if one takes into account 1,200 MW of imported electricity, out of a total of 15,798 MW produced to meet Alberta's needs.  

Natural gas accounts for 5812 MW or 40% of the electricity produced in the province and 37% of the total provincial consumption of electricity.

In the larger context of global trends, while global wind energy capacity is growing at 20%/year and solar energy at 50%/year over the past 10 to 15 years, US coal consumption has declined 21% between 2007 and 2014.  In the last 5 years more than one third of the US coal-fired generating plants have either closed down or have been the object of announcements of closures to come.  This trend will accelerate for the purposes of complying with US Environmental Protection Agency requirements to reduce CO2 emissions from the electrical power plant sector by 30% by 2030 over 2005 levels.

And then there is the astounding example of the world's largest energy and coal consumer, China, which consumes more coal than the rest of the world combined. China, which is now by far the world's largest investor in clean energy technologies -- with 1.58M jobs in its solar energy sector and 356,000 working in its wind sector -- saw it's coal consumption decline in 2014!

Surely, if the world's largest consumers of coal are reducing their use of this energy source, it may be time for Alberta to be in-step with the world leaders and acquire a more positive international energy profile.

Partnerships, Energy Sector Diversification and Clean Energy Production
To make the shift to clean electricity happen, the petroleum sector could play an important role.

Specifically, in the event that the new Notley government and energy sector engage in a joint review of fiscal and policy options, a strategy could be developed to facilitate energy diversification among the fossil fuel sectors to become bigger players in the clean energy fields.   Indeed, there are already models for doing so. 

The new CEO of Norway's Statoil, Eldar Sætre, a man with a Statoil renewables background, recently announced that the company will be putting a new emphasis on renewables and low carbon activities. To this end, Statoil has set up a new division to do so, New Energy Solutions.  To quote the new CEO, "We will strengthen our efforts in the transition to a low carbon society" making this new thrust one of the three pillars of the company's strategy."

As worth noting, Dong Energy, 60% owned by the Danish Pension Fund, and the world's largest investor in offshore wind farms, has a target to shift from 85% fossil investments and 15% in renewable energy, to that of reversing this ratio by 2040.

Energy Sector Diversification, Manufacturing and the Supply Chain
Equally important, Notley can go beyond home grown clean energy production to include job creation and economic diversification in the province's energy manufacturing sector.

That is, this could be achieved with the right policy environment for clean energy projects -- such as local manufacturing content stipulations in exchange for wind farm contracts and/or financing, as per the Québec and Brazilian models -- and possibly including additional incentives for some oil technology firms to become part of a local clean tech supply chain. -- In short, there may be opportunities for Alberta to manufacture and export clean technologies, as well as produce clean energy for local use.

This is not that far outside of the box.  A case in point is that of Brazil's WEG, a new entry into the wind turbine manufacturing sector, thanks to Brazil's incrementally increasing local content rules for wind power projects, which will reach 60% by January 2016.

These Brazilian domestic content requirements -- applied under an auction process that is managed and favourably financed to about 60% to 65% of projects' value by the country's business development bank -- have given rise to WEG diversifying into the business of developing its own wind turbines.-- Now what makes this interesting is WEG is a Brazilian home grown domestic technology supplier that has traditionally served the oil, gas, industrial and power sectors.

WEG has already started operating a first turbine prototype and plans to launch it's 3.3 MW model in 2017.  Working with local suppliers and testing their components, WEG expects to achieve 80% local content and include technologies specifically designed for Brazil's tropical and sub-tropical temperatures.  In this instance, WEG relies on its local R & D capacity to turn out designs more in-tune with local environments.  WEG also plans to export its technologies to Latin America and Africa.

Transposing the WEG model to Alberta, suppliers to the energy sector would design Nordic components for an Alberta supply chain and export its products to Nordic regions.

A "win-wind model" for Alberta?
All of the aforementioned considerations could be among the starting points for Alberta participation in a national strategy on the environment, and a provincial policy on economic and energy diversification, as per Notley's goals.

In the words of the late Jack Layton, "Don't let them tell you it can't be done!"

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