Nick Clark
There are tough and very expensive choices to make, which we will have to live with for decades. How much money is needed to rejig the power generation fleet? Where to spend the new tax revenue? These are major political decisions. The Canada West Foundation offers a non-partisan voice, free of ideologies, and puts forth a few independent ideas that may help our readers better understand some of the options that we hope our political leaders will be considering.
A note of thanks to Naomi for a well-researched perspective. Cheers, Nick
Alberta is nothing if not ambitious. Plans to shift completely away from coal-fired electricity leaves just more than a decade to plan, permit and build new generation capacity. With 30% of the province’s electricity mandated to come from renewables by 2030, Albertans want to know which technologies are best suited to provide clean, reliable power at a reasonable cost.Likewise, investors are waiting for details of the government’s promised Renewable Electricity Program, under development to incent the entry of renewables onto the grid. While the Climate Leadership Panel and Alberta Electric System Operator (AESO) both recommended any renewable subsidy take a fuel neutral approach, the provincial government appears to favour wind as the primary replacement for coal.
A new report by the Canada West Foundation recommends the province create rules that do not disadvantage investment in any one technology over another. Power Up: The hydro option further suggests Alberta take a fresh look at hydro, including bringing it in from our western neighbours. Analysis in the report finds that, of all renewable energy options, over the long term hydro is the lowest cost and most reliable option.
Hydro: Reliable as coal
Industry is the largest consumer of electricity in Alberta, using more than half the power generated in the province. The industries that drive Alberta’s economy also require large amounts of baseload electricity to power 24/7 operations.
Hydro provides clean baseload power that can be dispatched on demand. Wind and solar need a backup to avoid brownouts when the weather doesn’t co-operate.
In Alberta, nearly all our electricity (95%) comes from baseload sources – mainly coal and natural gas. Our baseload demand sits at about 56% of generating capacity, with peak demand closer to 70%. As the province moves entirely away from coal by 2030, the government is mandating at least two-thirds of the electricity supplied by coal be replaced with renewables. If all the renewable additions come from intermittent sources like wind or solar, Alberta’s baseload capacity would be about 75%. This will cover the average baseload demand in 2030 (expected to be about 60%), but will be uncomfortably close to our peak baseload requirement.
Ensuring Alberta has enough baseload supply to keep our economy humming as we move away from coal will be an important consideration as choices are made about adding renewables to the system.
Cost drives choice for electricity
Albertans, looking east to Ontarians who now pay about 70% more for electricity than they did a decade ago, deserve a frank discussion about the costs associated with retiring coal. While Alberta’s energy-only market structure should prevent the kinds of overpayments for electricity we’ve seen in Ontario, costs associated with various renewable options will have an impact on us.
There is no perfect way to compare the costs of different generation options. Levelized cost (LCOE) is most often used. LCOE is supposed to take into account the distinct costs (like capital and operating and maintenance), lifespans and capacity factors (how much electricity can be produced over a set timeframe) of different technologies. Levelized cost estimates can vary significantly, depending on the assumptions used. Many levelized cost estimates, including AESOs, show wind as the least expensive renewable option. However, these don’t reflect the different lifespans or production levels of different renewables. Shifting Alberta’s grid away from coal is a long-term transformation and costs over real time frames should be considered.
Power Up looked at levelized costs based on realistic operating lifespans and capacity factors. (See
below.)
The long lifespan of hydro makes it the least expensive option over the long run. While a hydro facility can feasibly operate for 80 to 100 years, Canada’s first commercial wind farm, near Pincher Creek, was recently decommissioned after 23 years in service. If a hydro and a wind facility were built at the same time, the wind turbines would need to be replaced four times during the life of the hydro plant.
There is potential to develop hydro within Alberta, but a barrier to investment is its high upfront capital costs. For example, it is estimated a facility on the Slave River in northeastern Alberta would cost as much as $10 billion. Importing hydro from B.C. or Manitoba could be more time- and cost-effective than building internal capacity. Power Up looks at a couple of options for doing so, such as upgrading the existing intertie between Alberta and B.C., connecting to northern B.C.’s Site C, or working with Saskatchewan to link to Manitoba’s hydro resources. The federal government, as part of its push to spend on green infrastructure, is open to spending on interprovincial transmission lines carrying renewable electricity.
Alberta has the third most installed wind capacity of all provinces in Canada. However, its intermittent nature means it can be difficult to predict how much electricity, and therefore profit, a wind farm will generate. Blakes law firm recently noted the average revenue for wind to be economically viable is about $80/MWh. In the last decade, the average pool price of electricity has been about $64/MWh. Wind with a natural gas backup could very well be the most cost-effective option in some parts of the province, but it would be faulty to consider wind the lowest cost option in every scenario.
Solar is an attractive option for distributed generation. Large scale solar is nearly non-existent in Canada, but solar is often used for small scale requirements, such as road signs and residences. Solar costs have declined somewhat, and today are close to peakelectricity prices in Alberta. The challenge is that solar cannot be dispatched on demand during periods of peak pricing.
All the renewable options that could step up to replace coal-fired electricity should be examined, particularly when it comes to cost and reliability. The goal is clean, reliable power that keeps the lights on without crippling the economy. And, with $3.4 billion pledged by the province for large scale renewable projects, all Albertans have skin in the game.