The farms and ranches in southern Alberta may not seem like fertile ground for the early adoption of new energy technology. However, southern Alberta is where Canada’s commercial wind energy industry got its start.
Recently, other provinces have offered lucrative long-term contracts to attract renewable energy. Although Alberta has great wind and solar resources, a combination of low power prices and lack of such incentives has made it difficult to develop renewable-energy projects in the province. With new policies, can Alberta, Canada’s renewable energy pioneer, get back in the saddle?
Alberta moved to a deregulated electricity market in the 1990s to encourage efficiencies in electricity generation by introducing competition. Private electricity generators are paid only for the energy they produce, with wholesale electricity prices set in real time based on supply and demand.
With few available incentives, building renewable-energy projects in Alberta’s market requires resourcefulness.
Companies proposing wind and solar projects often searched for customers willing to sign long-term power purchase agreements within the deregulated market. BluEarth Renewables Inc. entered into a long-term agreement to supply the power from its Bull Creek wind project to a consortium of Alberta schools that were seeking to reduce their exposure to volatile energy costs. SkyFire Energy built the first utility-scale solar project in Alberta without incentives. It worked with a farming community to amortize the cost of the solar panels and save on power costs over the long-term.
Proponents in Alberta also sold environmental credits across the continent to finance their projects. The 300 MW Blackspring Ridge wind project in southern Alberta represents the largest investment in wind energy in Western Canada. It generated credits that are contracted to Pacific Gas and Electric Company, a California utility, under a long-term purchase agreement.
Long-term agreements are the common thread through these made-in-Alberta success stories. There is an opportunity to expand renewables to create a strong industry. But the government needs to be industry’s long-term and reliable partner.
Last fall, the Alberta government announced its climate-leadership plan. Coal-fired electricity will be phased out and replaced by renewable energy and natural-gas-fired power by 2030. By that year, renewable sources are expected to account for up to 30 per cent of electricity generation. A competitive process is being developed to bring new renewable generation capacity to the grid.
The government’s expert panel recommended an auction-based clean-power call with financial support to projects up to a modest maximum amount. It’s anticipated that any government support will cover a portion of the cost of renewable energy projects, leaving developers to finance the rest.
Even with limited incentives, it may be difficult to obtain financing for major new wind or solar projects due to Alberta’s low electricity prices and a lack of certainty regarding the government’s new policies. For example, the government has yet to announce the schedule for the phase-out of existing coal plants. The procurement of new renewable energy, and the price of power, will depend in part on precisely when coal plants are phased out, and the level of incentives offered for new renewable energy generation.
Solar companies hope for a dedicated competition for large solar projects. The government has made no such commitment and it has been recommended that the renewable energy competition be technology-neutral. Without a “carve out” for solar, wind projects will likely obtain all government financial incentives offered through a competitive process, because their upfront costs typically are lower. However, solar power offers unique benefits, such as generating power closer to when and where people use it.
Phasing out coal while ramping up renewables will require careful planning to keep the lights reliably on and electricity bills in check. The government’s role is to implement its policies in a manner that minimizes uncertainty, attracts investment and ensures that Albertans have a reliable, sustainable and affordable electricity system. To achieve this, the government should confirm the details regarding its renewable energy competition, including any specifics for solar, and coal phase-out plans, as soon as possible.
The government’s plan to transform the province’s electricity generation system rapidly within its competitive market will be complex, and is unprecedented within Canada. That said, this is not Alberta’s first rodeo. The province first established Canada’s commercial wind industry, and its companies have decades of experience building projects in spite of challenges. Alberta needs to become a successful trailblazer once again.
By Jeremy Barretto, Osler, Hoskin & Harcourt LLP
Jeremy’s article originally appeared in The Globe and Mail on June 3, 2016.
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