IN DEPTH: Cleaning up Canada’s dirtiest province, Recharge News, By Karl-Erik Stromsta in Calgary Updated: Monday, October 05 2015
Fort McMurray, in the heart of Alberta's tar sands country
Standing at the Blackspring Ridge wind farm 200km outside of Calgary, its 166 Vestas turbines tracing giant circles in the prairie sky, there’s a sense of being at the gateway to a new energy future for Canada’s oil-sands province.By Karl-Erik Stromsta in Calgary
Friday, September 25 2015
Updated: Monday, October 05 2015
Here, after all, is a province with enormous wind and solar resources, cheap land, an enterprising spirit, growing demand for power courtesy of Alberta’s controversial tar sands, and a large and clever energy industry keen to invest in renewables (while also greening its image).
Yet in reality Alberta’s renewables market is in pitiful shape. The 300MW Blackspring Ridge is something of an anomaly, a result of now-defunct support mechanisms. Just a handful of mostly small wind farms are being built in the province and the queue of development-stage projects awaiting interconnection is dwindling as frustrated developers walk away. And with just 5MW of PV capacity, Alberta’s solar market never got started in the first place.
Thankfully, a possible saviour has appeared in the form of newly elected premier Rachel Notley, whose left-leaning New Democratic Party (NDP) won a shock victory in this spring’s provincial election on a pledge to clean up and diversify Alberta’s hydrocarbon-dependent economy. Notley’s win ended 44 consecutive years of provincial rule by the centre-right, oil-mad Conservatives, the party of Canadian Prime Minister Stephen Harper.
Although the NDP ran on unambiguous pledges to phase out coal while encouraging renewables, Notley has been short on specifics since taking office. Her government is readying a series of major climate and energy announcements set to coincide with the high-stakes UN climate talks this year in Paris.
Predictably, Notley has been met with a wail of warnings about undermining Alberta’s oil sector, the province’s long-time paymaster.
No-one knows exactly how the chips will fall. But it’s clear that big changes are afoot in Alberta, politically and perhaps culturally too, and in almost any scenario renewable energy stands to be a beneficiary.
There are many reasons why Alberta is a hostile place for renewables developers today, starting with the province’s deregulated power market — which is unique in Canada.
Unlike the other large provinces, whose power markets all have state-run procurement bodies at their centre, Alberta runs a purely competitive wholesale electricity market. It has no feed-in tariff, no renewable portfolio standard (RPS), and a carbon price that is laughably low.
It is difficult for renewables developers to secure off-take agreements in Alberta, which in turn makes it difficult to finance projects, industry sources say. Unsurprisingly, then, coal and natural gas supply about 90% of Alberta’s electricity.
Enbridge, the Calgary-based pipeline giant, owns Blackspring Ridge with EDF EN Canada, and would like to build more renewables in Alberta. But it doesn’t make sense to do so in the current market, says Lino Luison, vice-president for green power, transmission and emerging technology.
“Texas is a deregulated market, too, but there are plenty of off-takers there who will sign long-term contracts for renewable projects,” Luison tells Recharge. “That’s what’s missing here in Alberta.”
Alberta has a respectable 1.5GW of wind in place today, the third-highest among Canada’s provinces, and more than neighbouring British Columbia, which has a larger and more green-minded population.
Yet nearly all of Alberta’s wind was built on the back of support mechanisms that no longer exist — including a lapsed federal wind incentive — and, as in the cases of Blackspring Ridge and the 150MW Halkirk, Alberta’s two largest wind farms, the ability to generate renewable-energy credits and sell them in California.
Compounding the challenges of Alberta’s spot market is the fact that most of the province’s 950 or so wind turbines were built across the same windy region in the south. That means they come on line and generate power simultaneously — flooding the wholesale market and further depressing prices.
Until the election, Alberta’s government was largely indifferent to the plight of renewables. The Conservatives paid lip service to the sector, but much of their plan to “green the grid” centred on fantasies of carbon capture and storage (CCS).
“It’s fair to say that you couldn’t have done less for renewables than what was done in the past by the provincial government,” says Grant Arnold, chief executive of Calgary-based developer BluEarth Renewables.
A new threat has emerged recently in the form of depressed oil prices, which have hit Alberta’s economy hard and clouded the picture for future power demand.
Taken together, such factors paint a bleak picture for renewables in Canada’s “energy province”.
There used to be more than 5GW of development-stage wind waiting for a grid connection in Alberta, says Robert Hornung, chief executive of the Canadian Wind Energy Association. Today the figure is down to about 1.5GW.
The shrinking pipeline is “a reflection of investors either feeling like they have better opportunities elsewhere or just lacking confidence that they’ll be able to find a way to finance and build projects in Alberta”, he says.
“As a destination for wind investment, Alberta has become less attractive over time.”
Turning things around will not be easy, but many of the necessary pieces seem to be falling into place.
To spark a vibrant large-scale renewables market, developers need some way to secure bankable power-purchase agreements. Many in the industry believe an RPS would be the simplest way of making that happen; others talk of a stiff carbon tax.
In normal times, one would laugh at such suggestions, but these are not normal times in Alberta.
The provincial election has been described as one of the worst electoral defeats in Canadian history. After more than four decades in charge, the Conservatives’ share of seats in the legislature fell from 70% to 10%. The NDP held four seats in the provincial legislature beforehand; now they hold 54 seats — or 62% of the total.
Climate and energy may not have been Notley’s top priorities during the election, but the NDP did not hide its feelings on the matters. Among its explicit campaign promises were reducing Alberta’s greenhouse gas emissions, reviewing the amount of tax paid by oil companies, accelerating the phase-out of coal, and boosting renewables. They also promised to stop spending public money on lobbying for controversial pipeline projects such as Keystone XL and Northern Gateway, and to end the Conservatives’ “costly and ineffective CCS experiment” — diverting the money instead towards public transport.
Almost immediately after taking power, the NDP announced that Alberta’s carbon price will double by 2017, a symbolically important gesture even if the price will still be too low to result in meaningful emissions reductions.
Most importantly, Notley convened a panel of stakeholders and experts to undertake a wholesale rethink of Alberta’s carbon strategy. The results will be revealed in time for the UN climate talks in Paris in December, with new policies likely to be in place by early 2016. Canada’s wind and solar sectors are working furiously behind the scenes to press their case for a central role in Alberta’s energy future.
Vestas, the dominant supplier of wind turbines in Alberta, has had recent meetings in the province, says David Hardy, the company’s senior vice-president for sales, based in Portland, Oregon. “There’s a lot of optimism,” he says.
For all the excitement over Alberta’s new leadership, it’s important to keep realistic expectations. Notley is not going to disembowel the oil sands: the economic opportunity they represent is simply too large, and issues she cares deeply about, such as healthcare and childcare, benefit from a thriving oil sector.
Even accounting for recent low oil prices, market researcher IHS predicts production from the oil sands will rise 30% by 2020, reaching 2.9 million barrels per day — nearly twice as much as Norway produces today.
Yet bringing major changes to Alberta’s energy sector may not be as difficult as it would first appear.
For starters, low oil prices actually give the NDP some political cover. Albertans are tired of their boom-and-bust oil economy, and crave economic diversification. The 20 permanent jobs created by the Blackspring Ridge wind farm may not sound like much, but they count for enough in nearby Carmangay (population 367) that a turbine blade sits in the middle of the village like a war-hero statue.
Albertans are also sick of being cast as climate villains. The province’s climate infamy is not undeserved: its per-capita emissions are five times higher than Ontario’s, and by 2020 its emissions may equal those from Ontario, Quebec and British Columbia combined.
Alberta has two options for making a meaningful dent in its emissions in the medium term, says Ben Thibault, programme director for electricity at the Pembina Institute, a Calgary-based clean-energy think-tank. It can scrap its money-spinning oil sands, or it can clean up its own electricity mix.
Put like that, replacing Alberta’s coal-fired plants with renewables seems an obvious choice. “Even the previous government may have been starting to recognise that, but they just took forever to do anything about it,” Thibault says.
In pivoting towards renewables, Notley will not face the kind of uniform corporate opposition that might be expected in Alberta. One distinctive feature of Canada’s renewables industry is that many of its largest players are also major fossil-fuel companies — including TransCanada, Suncor, TransAlta and Enbridge.
Companies that own large coal plants in Alberta — such as TransAlta and Capital Power — may not be happy to see the province quit coal, even if they’re investing heavily in renewables elsewhere in Canada. But other large Alberta-based energy companies, including those knee-deep in the oil sands, may quietly welcome the change.
In addition to seeing an opportunity for new investment, such companies may have an ulterior motive: Some energy experts believe that a greening of Alberta’s grid could help the province open up export markets for its fossil fuels.
With the NDP in power, “no-one will accuse Alberta of having a tight partnership between government and industry”, Bob Page, former vice-president for sustainability at TransAlta, told the Canadian Broadcasting Corporation. “I think that will help speed regulatory approvals for projects like [TransCanada’s] East Energy pipeline.”
Even Notley, speaking on election night, said her aim was not to dismantle Alberta’s energy sector but to re-angle it so “we build bridges and we open markets, instead of having a black eye”.
With the right policy signals finally in place, Alberta’s renewables market — both wind and solar — could take off quickly.
“There’s a lot of megawatts out there that are partially developed, if you will,” says Arnold. “The cost of wind power is competitive with virtually any newbuild in the market. And solar has moved radically in price. We think it will be competitive in Alberta in the near term.”
Oil prices will rebound at some point, and with them Alberta’s growing demand for power. The oil sands — the world’s third-largest proven reserve of crude — are “very much a tailwind” for renewables, says Luison.
Many of the problems plaguing Alberta’s wind sector will soften over time. The challenge of geographic concentration, for example, is waning as specialist low-wind turbines come to market, allowing developers to conquer new regions.
Even Alberta’s spot market may eventually be a boon for renewables, allowing developers to build projects whenever they’re deemed competitive, without having to wait for bid-in rounds like those now favoured by Ontario.
Meanwhile, the uncertainty hanging over other Canadian provincial wind markets will steer developers towards Alberta, says Hornung. “If Alberta emerges as a market with a well-defined opportunity, people will gravitate towards that.”
For now, all eyes are on Notley and Alberta’s upcoming climate strategy. “We’re hopeful,” says Arnold, a born and bred Albertan who once worked for Suncor.
“There’s tremendous opportunity in Alberta,” he says. “We’ll be here when the market’s ready.”