Transitioning Alberta Electricity Generation using Low-Cost Ideas
We have embarked on a series of monumental changes to electricity generation in Alberta. Based on the statements of NDP government ministers, there is high risk that the government is determined to march along the same high-cost path that the governments of Ontario and Germany have already inflicted on their electrical power consumers and taxpayers.
The government appears to be acting on some of the recommendations of its consultant Terry Boston. His recommendations range from high cost to more sensible low cost as you can read in his letter to Premier Rachel Notley. Here’s my assessment.
Retirement of coal-fired electricity generation
The government has already acted on one of Terry Boston’s recommendations: “My recommendation is that voluntary payments are provided to the three generation owners for their post-2030 units”.
Last week the Alberta NDP government reached an agreement with TransAlta Corp., ATCO Ltd. and Capital Power Corp. to pay them a total of $97 million annually over 14 years, beginning in 2017 — for a total cost of almost $1.36 billion. The payments will retire the last three coal-fired electrical generation units that will still be in operation after 2030. 2030 is the target date the government has set for the end of all coal-fired electrical generation in Alberta. The other coal-fired electrical generation units operating today will all have reached their end-of-life before 2030.
While this government payment of $1.36 billion clearly advances the government’s climate change plan, we have thereby rejected the low-cost path of simply letting these plants produce to their normal end-of-life. That path would have cost taxpayers nothing while reducing greenhouse gas emissions more slowly between 2030 and 2061.
Oil sands co-generation
Terry Boston stated: “Oil sands have large amounts of co-generation using natural gas”. Terry is correct to point out this opportunity. A study earlier this year by the Canadian Energy Systems Analysis Research (CESAR) described the same opportunity in more detail.
Why is this low-cost and low-risk idea for creating more electricity generation with no additional greenhouse gas emissions not part of the government’s transition plan?
Hydro development
Terry Boston stated: “potential for further hydro development exists”. Alberta has the potential to generate at least 42,000 gigawatt-hours a year on its five main river systems, mainly in the north of the province, according to a 2010 report commissioned by the Alberta Utilities Commission. That potential compares with less than 2,000 gigawatt-hours being generated annually by existing hydro electrical generation units in the province.
Hydro electrical generation units require more capital than gas-fired units to build but have a much longer operating life. Why is this well understood and low-risk idea for creating more renewable electricity generation not part of the government’s transition plan?
Transmission upgrade
Terry Boston stated that Alberta operates a “strong transmission system, although some upgrading and new infrastructure may be required to accommodate additional renewables”.
The experience of the governments of Ontario and Germany suggests that the cost of the required transmission system upgrade to accommodate significant amounts of wind and solar electricity generation, due to their high variability, is substantial.
I hope that Terry Boston’s observation is correct because our electricity transmission system is much smaller than that of Ontario or Germany. If he’s just being polite to his government customer, Alberta taxpayers are facing a high-cost item.
Transition capital investment
Terry Boston stated that: “This transition will require $20 billion to $30 billion of investment in new gas-fired generation and renewables”.
To attract this significant sum of investment money, Alberta must instill confidence in capital markets that it is an attractive place to do business. The PPA lawsuit that the NDP government initiated seriously undermined that confidence. I’m encouraged that confidence may return because the government recently announced a settlement with one of the parties to the PPA lawsuit.
This huge sum of investment money should motivate each of us conserve more energy to reduce our individual consumption and therefore our individual energy cost. I think it’s time many of us installed roof-top solar generation units to reduce the amount of electricity we buy from our supplier.
Capacity payment construct
Terry Boston stated that this transition will require: “a capacity payment construct to ensure adequate supply of electricity”.
This short, innocuous statement implies a massive change from Alberta’s energy-only deregulated market for electricity to a more regulated market.
This change will create considerable upheaval. It is widely accepted that a capacity payment construct leads to higher electric system reliability due to increased stand-by capacity. There is some evidence that this construct leads to a higher average cost of electricity as well.
Given all the effort that was applied to moving Alberta to a deregulated market and every indication that this market is working, I struggle to see how a major change will produce a net benefit for Albertans. I worry this change is an elaborate smoke screen to obfuscate the high cost of the government’s rapid transition to increased renewable electricity generation.
Energy efficiency
Terry Boston recommended Alberta: “Encourage demand-side management and energy efficiency to be larger contributors to the market”.
To achieve really significant gains in reducing greenhouse gases, every Albertan needs to take action by reducing their individual energy consumption by:
- Driving smaller cars and driving fewer kilometers per year.
- Using public transportation and shared transportation services more.
- Insulating houses better and keeping the interior temperature a little lower in the winter.
By changing our behavior toward being more energy-conscious and proactively conserving energy we can reduce the government’s urge to spend large amounts of taxpayer dollars to achieve similar goals.
The NDP government is showing a single-minded determination to eliminate coal-fired electricity generation as a source of greenhouse gases. While that is commendable, little or no leadership is apparent in encouraging Albertans toward improved energy efficiency which can produce a similar reduction in greenhouse gases.
Converting to natural gas
Terry Boston recommended converting about half of Alberta’s 18 coal-fired electricity generation units to natural gas.
This well understood and low-cost idea for reducing greenhouse gases from existing coal-fired electricity generation units also appears to be a lower cost alternative than paying to turn off three units, whose normal end-of-life extends beyond 2030, before the end of their useful life.
I hope the government of the day will embark on this path before 2030 when there will be three major opportunities to employ this conversion. I wish this ideas were on the current government’s transition radar screen.
Please contact your MLA to urge a cheaper, more thoughtful approach to transitioning Alberta to significant renewable electricity generation.
Retired
8 年One objection: A move towards a system that bills both on the basis of capacity and energy consumed is probably a good thing. It is however a huge change from the direction we are headed now. Pricing purely on a cost per kwhr undervalues the capabilities to meet peak power usage and overvalues in intermittent energy sources which do not contribute to capacity. Some of the original electricity problems in Ontario started with a market system based on energy and I see similar issues in the eastern US. This would also take out large amounts of variability from energy rates. Ideologically, I believe in the power of free markets however as a project manager the contracted cost structure also has to parallel the effort, risks, and costs of the supplier.
Retired... but still alive and kicking!
8 年Hey Yogi, An interesting quick assessment of the state of our provinces initiatives pertaining to Climate Change. Leaving the legitimacy of the underlying science off the table for a minute, and whilst I agree with few of the NDP macro-policy position, if I was to support one, it would be phasing our of coal-fired electrical generation. Despite the claims of "clean coal" advanced emission filtering, I continue to believe that coal-fired facilities emit more than just CO2...that is, soot. Clearly soot is an atmospheric pollutant, and whilst not as egregious an acid rain, unquestionable negative for our environment. If any province does, Alberta has the raw natural resources to move beyond coal. In this point, I reluctantly agree with the Rachel Notley's team.
Senior Consultant | Energy Transition, Renewable Energy, Oil & Gas Decarbonisation
8 年Great post, Yogi. Yes, low-cost ideas, but not low-cost in practicality for some of the points mentioned, such as hydropower and increasing the network to allow for renewable energy. Some of the points are downright idealistic, such as driving smaller cars and fewer kilometers. For many of us, this is not feasible or practical. We have larger houses and families, and live in Calgary where I need to drive 50-60km round-trip everyday in order to get to work and back to a home that I can afford based on my monthly mortgage payments, let alone pay tens of thousands of dollars out of pocket to insulate my house better and install finicky solar panels on my roof. Especially as the efficiency of those panels in winter is approximately 35-40%, if you are lucky. Don't get me wrong, I am a big proponent of the transition to reducing our carbon footprint, but may of the ideas I've seen and heard are far more complex than everyone thinks and to phase out coal and transition renewables reliably and without cost in the next 14 years is an impossible task according to economic principles.
Chief Technology Officer at tveon
8 年We have a government that feels they have no fiscal constraints, because they were left with the best balance sheet in the entire country. In the recent fiscal update by the province they project a 10.8 billion dollar deficit for 2016. Extrapolate that based on the fact that we only have 4 million people in the province and I am guessing only a million people that actually pay provincial taxes. Also consider this, there is more then 36 million people in Canada. So our provincial government is spending at a rate that would be equivalent to the Federal Government running a 97 billion dollar deficit. In terms of how that impacts us as Albertans it equates to about 10,800 for every person who pays provincial tax, and 2700 dollars for every living, breathing human being in this province. So really what the government needs if for all us tax paying Albertans is to pay another 10800 dollars each so they can balance the budget. They have no fiscal constraints, and a limited mandate, so their spending urgency equates to us giving them a 4 year credit card with no credit limit. They are operating without public support, and only the support of big business, who has entered the political arena with public support on increased taxes for Albertans. The largest emitter support the spreading around of Carbon Taxes. All these action are idealistic in nature and have no bounds of fiscal constraint or common sense for that matter.