Power to Change, Pembina Institute

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James Glave and Ben Thibault

Power to Change How Alberta Can Green its Grid and Embrace Clean Energy



Power to ChangeHow Alberta Can Green its Grid and Embrace Clean Energy

James Glave and Ben Thibault

May 2014

© 2014 The Pembina Foundation and the Pembina Institute

All rights reserved. Permission is granted to reproduce all or part of this publication fornon-commercial purposes, as long as the source is cited.

This report was prepared by the Pembina Institute (pembina.org) under thedirection of the Pembina Foundation for Environmental Research and Education (pembinafoundation.org), a national registered charitable organization that enters intoagreements with environmental research and education experts, such as the PembinaInstitute, to deliver on its work. Responsibility for and ownership of this work rests withthe Pembina Foundation.

Clean Energy Canada (cleanenergycanada.org) is a solutions-focused initiative workingto accelerate Canada’s transition to an energy-e cient, ecologically responsible, andprosperous low-carbon economy.

Available at cleanenergycanada.org/powertochange and pembinafoundation.org

Acknowledgments The authors would like to thank Marlo Raynolds of BluEarth Renewables and Tim Weis ofthe Canadian Wind Energy Association for their feedback on a draft version. We would alsolike to recognize Leonard Olien and Paula McGarrigle from Solas Energy Consulting Inc.,who developed the cost modelling for this report.



Table of Contents

Executive summary 1

About this report 2

The lay of the land: How Alberta sources its power 3

The main barrier to renewable power in Alberta 5

A power system primed for change 6

A growing need for power: Mind the supply gap 7

The risks of business as usual 8

One promising path: A renewable energy policy framework 9Methodology 11

Scenario 1: Continued Fossil Reliance 11

Scenario 2: Clean Power Transition 12

Scenario 3: Clean Power Transformation 14

Results 16

Recommendations 19

Appendix 20

E ective capacity 20

Price modelling 20

Greenhouse gas analysis 21

Sources 22



1 Power to Change: How Alberta Can Green its Grid and Embrace Clean Energy

Executive summaryWithin 20 years, Alberta could reduce itsheavy reliance on fossil fuel energy andinstead supply the province’s electricitymostly from clean and renewable energy.In doing so, the province would:

• Cut air and carbon pollution

• Improve air quality, leading to lowerpublic health costs

• Reduce exposure to the economic andsecurity risks that come with relyingtoo heavily on a single fuel source andoverly centralized power grid

• Kick-start a new industry

With e ective policy, the province couldcut the percentage of grid electricity thatis supplied from coal energy from over60 per cent today to less than four percent by 2033. It can do this without simplythrowing the switch over to natural gas,which is where the power sector is nowheaded. While natural gas burns cleanerthan coal, it is also subject to price spikesand long-term price risks that can hurt

customers. A large-scale shift to renewablepower would reduce the electricity sector’scarbon pollution by 69 per cent relative tothe wide-scale switch to natural gas powergeneration expected under business asusual.

Further, Alberta could make this majorpower shift without creating hiccups onthe grid, and without hitting citizens andbusinesses hard in the pocketbook.

Though Alberta’s oilsands sector attractsa great deal of critical attention both athome and abroad, the province’s electricitysector generates almost the same quantityof carbon pollution. This is due, in largepart, to the province’s continued relianceon coal. At present, Alberta burns morecoal for electricity than all other provinces

combined. On an annual basis, Alberta’scoal- red electricity releases roughly thesame quantity of greenhouse gases as halfof all the passenger vehicles on the roadsin the entire country, in addition to health-damaging sulphur and nitrogen oxides,mercury and par ticulate matter.

Fortunately, the solution is close at hand.

Alberta enjoys some of Canada’s mostabundant and reliable renewable energyresources—including 150 gigawatts(GW) of potential wind power, 11 GW ofpotential hydroelectricity, and 120 GWof potential demonstrated geothermalpower (Canadian Wind Energy Association,2013; Alberta Utilities Commission, 2010;Canadian Geothermal Energy Association,2013). As for solar photovoltaics, it wouldbe possible to meet Alberta’s annualelectrical energy needs with solar panelsalone; doing so would require 1,746km 2—or 0.26 per cent—of the province’stotal land area (Kelly, 2014). Myriadopportunities also exist to use electricitymuch more e ciently.

In a variety of forums and media articles,the Government of Alberta continues todevelop an Alternative and Renewable

Energy Policy Framework— rst suggestedby an industry and NGO working groupin 2005. In once again committing to theframework in early 2014, the province saidthe framework would empower consumersto exercise choice within the market-basedelectricity system.

Meaningful policy is badly needed. Itcould lower barriers to clean energydevelopment and unlock opportunitiesto harvest the abundant and largelyoverlooked renewable resources that shinedown, grow from, emerge from, ow over,and blow across the province.



2Power to Change: How Alberta Can Green its Grid and Embrace Clean Energy

About this reportPower to Change: How Alberta Can Green itsGrid and Embrace Clean Energy outlines twoscenarios under which the province couldcut air pollution and greenhouse gaseswhile reducing the energy security andeconomic risks associated with relying tooheavily on a single source of electricity.

This document outlines how quickly—andto what degree—Alberta can reduce itsrisky reliance on a single source of fuel,be it coal (historically and present day) or,increasingly, natural gas. While this reportstops short of prescribing a particularpolicy, it does identify the main barrier toincreased renewable energy adoption in

the province and supports policy measuresdesigned to overcome it.

We produced Power to Change to informAlbertans that they have the resources,the know-how and the opportunity tobecome clean energy leaders. We alsohope to inspire provincial electricity-policyleadership and set the bar of ambitionfor what a prospective Alternative andRenewable Energy Policy Frameworkshould look like.

Most of all, the results demonstrate thatAlberta can reduce its heavy relianceon fossil fuels for electricity supply,diversifying its grid with a stronger mix ofclean renewable sources. A clean electricitytransition and transformation is possible,practical, a ordable and in the interests ofAlbertans.

Albertans have theresources, the know-howand the opportunity tobecome clean energy

leaders

Photos on this page: David Dodge, Pembina Institute




The Lay of the Land:How Alberta sourcesits powerIn early 2009, the Pembina Institutereleased Greening the Grid: Powering

Alberta’s Future with Renewable Energy . Thereport outlined how the province coulduse proven technologies to harvest itsabundant solar, wind, hydro, and biomassenergy resources. It concluded that theprovince could transition its grid from onebased on coal, to one based on cleanerand more diverse supply, including theserenewable resources, within 20 years.

Five years later, Alberta has made someprogress in diversifying its electricitysystem and cutting energy waste.

Since 2009 the province has almostdoubled its installed wind power—addingmore than 500 MW of capacity to reach1,120 MW of operating capacity (withanother 300 MW to begin operation in2014), and supplying more than ve percent of the electrons sent over the wires in2013. While Alberta still has no utility-scalesolar generation, more than 700 small-scale systems have been installed under aregulation that allows Albertans to installtheir own solar systems. While this onlyaccounts for 2–3 MW of supply on a 14,000MW system, the amount has increasedseveral times over in the past ve years.

The Alberta Electric System Operator(AESO) proved an early leader in facilitatinggrid access for wind. But it has takenmore than this to bring turbines to the

province. Because of the way that theprovince’s deregulated electricity marketis structured, many wind farms would notexist without targeted support, which is nolonger available.

For example, in 2011 Calgary-basedGreengate Power signed a 20-yearpurchase agreement that provided aCalifornia power utility with renewableenergy credits. The agreement helped tonance a 150 MW wind farm in centralAlberta and another separate 300 MWproject southeast of Calgary.

Ottawa also provided support. Between2002 and 2012, two federal governmentprograms helped bring most of theprovince’s other wind projects online.Those federal programs have sinceexpired, while California credits are nolonger practically available for new projectsin Alberta.

Biomass has also played a modest role.Since 2009, Alberta power developershave connected around 72 MW worthof biomass energy onto the grid. Again,those projects bene tted from a provincialproduction incentive that is no longeravailable.

Alberta has also made progress onenergy e ciency. For example, since2010 the Climate Change and Emissions

David Dodge, Pembina Institut




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Management Corporation—an arm’s-length government organization charteredto reinvest the proceeds of a carbon levyon major industrial polluters—has investedapproximately $37 million in support ofenergy e ciency initiatives in the province.

While these are positive steps, most ofAlberta’s renewable energy resources liefallow. The grid remains around 85 percent fossil fuel powered—and most of thatpower comes from burning coal.

The numbers are arresting. Alberta’s 18coal power units make the province’selectricity the highest polluting in thecountry—contributing more than half ofthe total carbon pollution from electricitygeneration in all of Canada. The plantsalso release nearly the same volumeof greenhouse gases as the province’soilsands sector, as shown in Figure 1.

In 2011, Alberta coal power plantsproduced 113,000 tonnes per day ofgreenhouse gas pollution (measured asCO2 equivalent). Each year, that adds upto over 40 megatonnes. That’s the sameamount produced by roughly half of allcars on the road in Canada today.

Some people in Alberta’s government andelectricity industry occasionally defendthe sector’s pollution record by pointingto the United States—where coal remainsa leading source of power generation.But the data shows the U.S.’s coal power

reliance is falling considerably faster thanAlberta’s.

Last year, coal power generation supplied39.1 per cent of the electricity in the UnitedStates, whereas it generated 63.7 per centof electricity in Alberta’s grid. Between2007 and 2013, total coal power generationin the United States decreased by 21.3 percent; over the same period, it decreased inAlberta by 13 per cent.

Meanwhile, following a contractualobligation, in late 2013, generationcompany TransAlta returned a pair ofidled coal units to service. As a result,coal power generation actually grew from2012 to 2013, and could grow further yet,before it shrinks. Our analysis indicatesthat coal power generation in Albertacould nearly return to peak 2007 levels(with all units red up) before federal ruleskick in that will eventually require thedecommissioning of older plants.

What’s the result? For a given gigawatt-hour of electricity generated, Alberta’sgrid emits about 800 tonnes of equivalentgreenhouse gases; the United States’national grid emits 500.

In contrast, an Alberta grid powered primarilyby renewable energy could diversify theeconomy, bu er customers from future priceshocks, provide rural economic developmentopportunities, and of course reduce pollutionand greenhouse gases.

Figure 1:Share of industrialGHG emissions bymajor sector in

Alberta




The main barrier to renewable powerin AlbertaSimply put, it is extremely di cult to nance a wind or solar farm—or, for that matter, ahydroelectricity or geothermal power plant—in Alberta.

Renewable energy is a capital-intensive business. Once a given wind or solar farm is built,the developer can supply electricity at a very low operating cost for the life of the project—

but in Alberta the rst hurdle is the highest.The province’s deregulated market o ers generators both pros and cons. On one hand,a supplier of any kind can directly contract with a customer, and any generator can riskmaking an investment and sell directly to the market. On the other, the market does notadequately support the bene ts of renewable energy; the societal costs of fossil fuelpower are inadequately priced with a cap of $15/tonne for carbon and no air quality capand trade program. Further, there are very few long-term power-purchase contractsavailable.

So, while renewable energy technologies may be competitive against any other newgeneration source on an apples-to-apples cost basis—for example, wind energy’s levelizedcost of electricity is as low as any other energy source—the revenue uncertainty thwarts adeveloper’s ability to attract nancing to a project.

This nancing barrier remains the most signi cant barrier to renewable power in Albertatoday. As KPMG recently determined, “Providing debt nancing to a wind farm … willcontinue to be challenging unless some market mechanism can be introduced to managedownside risk, or some level of contracting can be arranged” (KPMG, 2014).







A growing need forpower: Mind the

supply gapAlberta’s appetite for electricity will growin lockstep with its oilsands sector. TheAlberta Electric System Operator predictsthat 6,190 MW of new electricity generationcapacity will be needed by 2022, and that12,965 MW more will needed by 2032(Alberta Electric System Operator, 2012).

When it comes to signi cantly reducinggreenhouse gas emissions while meetingincreasing supply needs, non-emittingrenewable electricity is hands-down themost competitive and e ective solution.Once a grid is cleaned up, it can enableemissions reductions in other sectors(such as transportation via electricvehicles). Many technologies for carbonsequestration and transformation of wasteCO2 into valuable products hinge on low-emitting electricity sources. A cleaner gridenables these technologies and acceleratesgreenhouse-gas reductions.

To gain a better understanding of howrenewables can ll the anticipateddemand, we tabulated all the generationcapacity currently in place or underconstruction, and forecasted generationfrom these sources out to 2033. We thencompared this total with the anticipateddemand, based on our analysis of datafrom both the industry and the AlbertaElectric System Operator (EDC Associates,2013, and Alberta Electric System Operator,2014). The analysis (see Figure 2) showsa “gap” between existing and committedgeneration and projected demand.

In September 2012, Canada’s federalgovernment introduced regulations thatlimit the operational lives of coal powerplants to a maximum of 50 years. The ruleswill very gradually reduce Alberta’s relianceon coal over the next ve decades. The lastof Alberta’s coal- red power plants couldstill operate—without any requirement toreduce carbon pollution—through 2061.

Clearly, these existing federal regulationswill not spark the province’s energytransition and transformation in the near-to-medium term.

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Figure 2: Existing power generation in Alberta and forecast demand




The risks of businessas usual

Alberta’s power industry is of course wellaware of the looming demand-supplygap, and has a solution in mind: naturalgas. As outlined in Scenario 1 on page11, the industry expects to ramp up gasgeneration in the coming years. However,though it may be economic today, gas is farfrom the panacea that the power industryis holding it up to be.

History shows that natural gas prices arenotoriously volatile. The fuel is currentlycheap, but with increased demand in theUnited States and a move to export naturalgas through lique ed natural gas terminals,it is very plausible that its price will rise andfall unpredictably.

It’s happened before. North Americannatural gas prices rode a roller coasterbetween 2001 and 2008 when a lack ofspare productive capacity led to tightmarket conditions (National Energy Board,2013). More recently, things have settleddown—the result of rapidly growing shale

and other unconventional gas production.Add in depressed demand in the wake ofthe 2008 recession, and you end up withthe low and relatively stable price that wehear so much about these days.

But as Calgary-based energy economistPeter Tertzakian has noted, potentialsupply-side constraints could easily kickin—for example, challenges in gainingand retaining social licence for drilling andfracking, and the growing awareness of theimpacts of all fossil fuels (Tertzakian, 2014).Similarly, unexpected shifts on the demandside, such as a cold winter followed bya hot summer, could easily drive upconsumption. A Citi Group analysis notedthat natural gas prices have recently risen,as has price volatility (Citi Research, 2014).

Other industry watchers have expressedconcern about production decline ratesfrom shale gas and the impact thatlique ed natural gas exports could have onnatural gas prices and associated volatility,both of which would be likely to increase(Roche, 2014).

Renewable energy sources present anopportunity to mitigate these price risksby diversifying supply and addressing thesupply-demand gap with secure xed-costgeneration.





One promising path:A renewable energy

policy frameworkAlberta’s generation-demand gap presentsthe province with an unprecedentedopportunity to seriously slash greenhousegas emissions, lower public healthcarecosts, and create new business andinvestment opportunities.

Around the world, a number of economic,environmental, and security imperativesare accelerating the global adoption ofrenewable energy. Last year, investorspoured $254 billion into solar, wind,and other clean power sources. (Pew/Bloomberg New Energy Finance, 2014).In large part due to massive and ongoingclean energy investments in China, windand solar—once expensive boutiquetechnologies—are now competitive withfossil fuels in many jurisdictions.

Solar module prices have plunged about80 per cent since 2008. Total system costsfor global best-in-class utility-scale solar

installations now run $1.55 per watt,and are expected to continue falling.Meanwhile, global wind turbine pricesdipped roughly 35 per cent between2009 and 2013—a 23 per cent decline inthe levelized cost of electricity for wind(Business Council for Sustainable Energy/Bloomberg New Energy Finance, 2014).

Though total worldwide investment inrenewable energy declined last year, itcontinued to grow in Canada—45 per cent,in fact, from 2012, to reach $6.5 billionin 2013. This made Canada the second-fastest growing market for clean energyinvestment in the G-20 (Pew/BloombergNew Energy Finance, 2014). Unfortunately,as one of the very few jurisdictions inNorth America to lack a renewable energy

policy, Alberta received very little of thisnew investment.

This amounts to a tremendous lostopportunity. Alberta’s abundant renewableenergy resources o er not only a potentialmulti-billion dollar investment, but also—when combined with energy e ciencymeasures—some of the most cost-e ective pollution reduction opportunitiesavailable. With projected growth in carbonpollution from other sectors, the provincecannot leave electricity sector greenhousegas reduction opportunities on thetable. As demonstrated by this analysis,transitioning Alberta’s electricity supplyto clean and renewable sources o ers theprovince substantial and much-neededcarbon pollution reductions.

As noted above, however, Alberta doesnot yet o er a competitive renewableenergy investment climate under thecurrent market design. Wind and solarpower developers—including somebased in Alberta—pursue more attractiveinvestment opportunities elsewhere,including in other Canadian and U.S.

jurisdictions. To grasp this opportunity, theprovince needs to take concerted action.

An Alternative and Renewable EnergyPolicy Framework could set the stagefor the clean power transition andtransformation outlined below. Provincialleaders have been mulling such aframework for many years. We trace its

An Alternative andRenewable Energy PolicyFramework could setthe stage for the cleanpower transition andtransformation.




origins to the Clean Air Strategic Alliance’sAlternative and Renewable Energy ProjectTeam—a multi-stakeholder group formedin 2002 that included representatives fromindustry, government, and civil society.As early as 2005, the team recommendedthat the province develop just such aframework—advice the team reiteratedin its 2007 nal report (Clean Air StrategicAlliance, 2007).

In the years since, the governmentcommitted—and recommitted—to theframework, and did some work on it.But the project largely sat on the back

burner until this past December, whenthe province appointed its rst associateminister of electricity and renewableenergy—a position since vacated. Severalmonths later, the March 2014 Speech fromthe Throne reiterated the government’sintent to introduce the renewable energyframework.

Though the appetite for leadership onreducing fossil-powered electricity andincreasing renewable energy remainsuncertain, the opportunity for Albertato diversify its energy mix and reducepollution is as clear as ever.

Roberta Franchuk, Pembina Institute




MethodologyTo understand the degree to which provincial policies could reduce coal’s share of Alberta’spower-generation mix, we modelled three scenarios, which we have called ContinuedFossil Reliance, Clean Power Transition, and Clean Power Transformation. We will discusseach of these, along with their results and impacts. For a discussion of our approach toe ective capacity, price modelling, and greenhouse gas projection, please refer to theAppendix.

Scenario 1: Continued Fossil Reliance

Our Continued Fossil Reliance scenario assumes a business-as-usual approach to powerdemand and production in Alberta. We have based it on two publicly available forecastsof electricity demand and generation supply—those of the Independent Power ProducersSociety of Alberta (the trade association representing the province’s power generators) andthe Alberta Electric System Operator (the organization that operates Alberta’s electricitygrid).

This scenario sees annual electricity demand growing by around 53 per cent by 2033 andsees the province continuing to rely on coal (20 per cent) and natural gas (64 per cent)to supply the majority of its electricity needs. As Figure 3 shows, in this scenario Albertaexchanges its current heavy reliance on coal for natural gas, a more price-volatile fossilfuel.

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Figure 3: Projection of annual generation by fuel source under theContinued Fossil Reliance scenario






Meanwhile, we allocated moderategrowth for geothermal and storage—thelatter is a basket of technologies andsolutions that balance electricity supplyand demand across intervals ranging frommilliseconds to hours. Though neither ofthese currently exists in Alberta, they do inother North American jurisdictions, and itis unrealistic to assume neither will comeinto commercial feasibility over the next20 years. Each is increasingly positionedto play a growing role in Alberta’s futureenergy mix.

We then re ned installed capacities basedon a number of parameters, includingthe need to meet minimum annual

projected generation demand and systemrequirements for e ective capacity, asestablished by AESO (see Appendix). Wemodelled a generation mix that includedvariable-output sources, such as windpower, with rapid-dispatch sources, suchas peaking natural gas. We added somecombined-cycle natural gas capacity to thegap analysis. We also added more peakingnatural gas than under the ContinuedFossil Reliance scenario—to complementintermittent renewables.

As Figure 4 shows, a much wider diversityof energy sources meets Alberta’sprojected demand, reducing reliance onany single fuel source.

Ben Thibault, Pembina Institute




Scenario 3: Clean PowerTransformation

As its name suggests, the Clean PowerTransformation scenario representsa more ambitious change in Alberta’selectricity generation landscape. It relieson a mix of policies and approaches

that would all but eliminate coal powergeneration from the Alberta grid by theyear 2033 in favour of cleaner alternatives.

We used the same general methods asin previous scenarios to develop thisscenario—including the same level ofenergy e ciency—but we employed moreaggressive targets for alternative andrenewable sources.

In this scenario, we assumed governmentwill adopt policies to considerablyaccelerate clean energy deployment—while still keeping them well withinresource potentials—and pro-rated themto match the growth seen or targeted inleading renewable-energy jurisdictionsacross similar time spans. By adding alarger share of renewable energy to themix—including rm renewable power such

as large hydro, biomass, geothermal, andstorage—we reduced the need for bothcombined cycle and peaking on-demandnatural gas plants, relative to the Transitionscenario.

Alberta’s extensive northernhydroelectricity resource o ers the largestknown potential for rm energy supply

with proven technology and could furtherdisplace emitting sources (Government ofAlberta, 2013.) However, we moderatedthis development because of the di cultyof nancing the very high capital costs oflarge hydro in the province.

For this scenario, we simulated a muchmore aggressive timeline of coal plantshutdowns. We started again with 47-yearoperating-lifetime limits on the oldestplants to moderate near-term shutdownrates, and reduced this to 37 years for theprovince’s third-newest facility.

Recognizing that shuttering a plant earlierthan anticipated presents an economicburden, we targeted the province’s twonewest coal units—federal regulations willallow them to operate beyond 2050—forbiomass co- ring. Under this scenario,









A summary of the methodology isprovided in the Appendix. The assessmentyielded wholesale energy prices and per-MWh revenues for various generationtechnologies.

We worked with Solas to adjust generationmix scenarios. In particular, the modellingrelied on an iterative process to ensurea su cient rate of return to supportnew builds in gas, hydro and renewablegeneration. In some scenarios, energyrevenue alone was not su cient tostimulate renewable development, and apolicy-based incentive would be required.The cost of the incentive is included inthe resulting wholesale cost of powerpresented in Figure 8.

As Figure 8 shows, as we replace existinggeneration sources with new capitalinvestments, electricity prices will riseunder any scenario—i.e., regardless ofwhat new generation sources we choose.With an acceleration of coal unit closures in

the Clean Power scenarios, and the upfrontcosts of new capital investment in a greaterdiversity of generation sources, there isa small increase in the wholesale energyprices in the medium-term (year 2023).

However, in the long-term (year 2033) wesee the payo from investing in renewableenergy, which is insulated from fuel costincreases. By the end of our scenarioprojections, we see clean electricity supplyreducing consumer energy costs.

Moreover, both the Clean Power Transitionand Clean Power Transformation scenariossigni cantly diversify the province’s energymix. They avoid the projected continuedreliance on fossil fuels that would resultunder the business-as-usual ContinuedFossil Reliance scenario. That scenarioprojects a simple switch from relying 64per cent on coal and around 20 per centon natural gas annually as we do today,to relying 64 per cent on natural gasgeneration and 20 per cent on coal in 2033.

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Figure 7: Annual greenhouse gas emissions under di erent scenarios




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That business-as-usual projection is rife with risk for Alberta residents, schools,businesses, and industry alike. Natural gas power generation sets the market price morethan its proportional contribution to supply—a result of the way in which natural gaspower generators bid their energy into the market. As its supply to the generation mixgrows, this price-setting dominance will only increase (Beblow, 2013).

When natural gas fuel prices rise, the consumer will bear the brunt of the increases—especially if the province begins to lean heavily on the fuel, as it would in the ContinuedFossil Reliance scenario. This can explain why new natural gas generation is currently suchan attractive investment—at least, for electricity generation companies. However, thissingle fuel reliance also presents a major risk to Alberta electricity consumers over thelonger term.

Figure 8: Price of generation under di erent scenarios




RecommendationsThis report shows that it is technicallyfeasible for Alberta to eliminate its veryheavy coal reliance within 20 years,without simply switching this reliance toanother fossil fuel. It acknowledges thatnatural gas will play an important role inthe province’s electricity future, but as oneof a wide range of sources. As a critical rststep, the province must lower the barriersthat limit renewable power.

Many would-be renewable energydevelopers will not overcome thefundamental project- nancing barrieridenti ed in this report unless anduntil policy helps to mitigate the priceuncertainty in the province’s electricitymarkets.

This will mean introducing moreopportunities for long-term powerpurchase agreements—legal instrumentsused in jurisdictions across Canada andaround the world to de ne the terms forthe long-term sale of electricity. Policycould help incent long-term agreementswith creditworthy electricity usersand/or retailers through the private sector.

A series of recent reports, by KPMG andothers, have identi ed such agreementsas the “missing piece” needed to makerenewable power work in Alberta and tobegin diversifying the electricity system.

The government could turn to a widevariety of instruments to bring powerpurchase agreements to fruition. Of these,the Clean Electricity Standard—a moremarket-oriented variation of the successfulrenewable portfolio standards in theUnited States—has attracted considerableattention and support (see sidebar, “TheClean Electricity Standard”). But anynumber of policy options or take-o son the above concept could address theexisting barriers.

Ultimately, the authors of this report wouldsupport any policy options that seek to

achieve the following goals for Alberta’selectricity system:

• Level the playing eld for renewableenergy sources by accounting forthe presently hidden pollution andgreenhouse gas costs of fossil fuelgeneration

• Address the major hurdle to nancingfor renewable energy projects byproviding some degree of long-termprice certainty for the electricitygenerated

• Prepare the groundwork and dismantleregulatory barriers for the widespreadmarket penetration of new, cleangeneration technologies—such asdistributed generation and storagetechnologies that integrate renewableenergy into the grid

• Allow renewable energy sources—including distributed generationsources—to fully realize the value of theenergy they produce

The Clean ElectricityStandard

A variety of policies and regulationscould help integrate power purchaseagreements into Alberta’s electricitymarket. An Alberta version of the CleanElectricity Standard is one option thathas received broad support. Such apolicy would direct electricity retailersto obtain their electricity from a mixof lower- or non-emitting sources—without actually specifying what thosesources are. In doing so, it would lowerthe barrier to entry for renewablesproducers, correct market de cienciesthat continue to allow fossil fuels todominate the wires, and begin in earnestthe necessary transition of the electricitysystem to a modern, low-emissionsenergy source.






A demand time series was then createdfor 2023 and 2033 by increasing thedemand in each hour by the respectivedemand growth assumption. This wasdone to maintain correlation between windgeneration and demand.

Power prices were determined for eachof the six scenarios based on the dispatchand demand for each hour in 2023 and2033.

Greenhouse gas analysis

We modelled the greenhouse gas resultsof our three scenarios using empiricalor widely accepted intensity factors foreach fuel source, gathered from federalgreenhouse gas emission reportingdata and unit-generation data. Becausecogeneration produces both steam andelectricity from the fuel combustion, itposes a special allocation problem fordetermining what proportion of thecombustion emissions are allocated to

electricity generation. The IndependentPower Producers Society of Alberta’srecent report (EDC Associates, 2013) useda 0.25 t/MWh intensity for cogeneration’selectricity emissions. While not endorsingthis allocation, we employed the sameintensity for consistency in the discussionaround di erent GHG emissions fromdi erent scenarios. Moreover, 0.25 t/MWh falls within the range of intensitiesderived from di erent allocation methodsemployed by Doluweera et al. (2011).

Because of the large overall emissions andlarge variability between units, coal unitintensities were assessed individually—for each unit—using empirical data,accounting for recent or plannedincremental capacity increases to existingcoal units as e ciency improvements.

We also assigned carbon intensities to thetransmission interties connecting Albertawith British Columbia, Saskatchewan andMontana, based on the province- or state-wide carbon intensity of those jurisdictions’respective grids.

Joa




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Documents

Power to Change, Pembina Institute