By Robert Hornung, John Gorman, Jacob Irving and Alison Thompson
Falling oil prices are creating a new reality for Alberta’s long-term economic health. As the province looks for new markets for its oil and gas, it must also accelerate the diversification of its energy economy and demonstrate environmental leadership.
With greenhouse gas emissions increasingly considered the key metric to demonstrate environmental progress, the Alberta government’s new climate change policy will be a critical opportunity for Alberta to pursue new economic opportunities and make its case to the world.
Of all the greenhouse gas emissions that result from electricity generation in Canada, over half of them come from Alberta. As a result, Alberta’s electricity sector needs to make meaningful and sustainable emissions reductions by significantly increasing its use of renewable energy.
The good news is that there are multiple commercially mature technologies ready to tap into the province’s vast renewable resources. Alberta is one of Canada’s sunniest provinces, placing it in good stead to take advantage of the rapidly falling price of solar photovoltaics. In addition, photovoltaic efficiency increases in cold weather, so much so, that the same solar technology placed in Calgary will produce more electricity than it would in Rome.
Alberta also has one of the best wind resources in all of North America. Canada’s first wind farm was built in Alberta over 20 years ago, giving Alberta the longest-standing experience with wind energy in the country. While Alberta is no longer Canada’s leader in wind energy, wind does supply over five per cent of the entire electricity market in the province annually.
Hydropower provides over 60 per cent of all the electricity in Canada, but only three per cent in Alberta, the lowest proportion of any province. This is not because the province is lacking in prospects of this resource. In fact, Alberta’s undeveloped hydropower resources are comparable to those of its Prairie neighbour, Manitoba, which is not only an established hydro leader within its own borders, but is also helping to enable greater wind power generation in neighbouring American states.
On the geothermal front, once again, Alberta has been endowed with excellent resources, as documented by the Geological Survey of Canada and the Canadian Geothermal Energy Association. In addition to hot springs, the hot sedimentary aquifers that the oil and gas industry currently work in offer easily accessible geothermal heat that can be used with proven technology. Alberta has no shortage of the drilling and geoscience know-how needed to tap into these resources, yet there isn’t even a permitting system in the province for geothermal electricity.
In addition to emissions reductions, one common benefit all these technologies offer is that they have the ability to offer long-term stable prices because they have no fuel costs. But the uncertainty that investors face in Alberta’s electricity market discourages investment in capital-intensive renewable energy projects. So much so that current market forecasts expect Alberta’s electricity system to be just over 10 per cent renewable two decades from now, virtually the same percentage as today.
Recognizing the unique financial characteristics of renewable energy technologies, the majority of American states and Canadian provinces have instituted policies to create a stable investment climate. In Alberta, however, there are no mechanisms that facilitate and encourage the long-term contracts that enable capital-intensive renewable energy projects.
As a result, Alberta is becoming an increasingly unattractive province for new renewable projects as companies can choose to invest in more predictable markets across North America.
By unlocking its renewable energy resources, Alberta would produce a more diverse energy portfolio as it reduces emissions. This diversity will ensure that emissions reductions that are gained as coal plants retire are not lost due to growing demand, while also protecting ratepayers from the volatility of future gas prices.
The United States provides a helpful lesson in this regard. Research from the American Wind Energy Association shows that American states with the highest proportion of wind energy have seen lower electricity price increases in recent years, just as provinces that have consistently invested in hydro tend to have the lowest electricity prices today.
The problem facing renewable energy investment in Alberta today is eminently solvable. Alberta has shown through the development of the oilsands that it can create policy frameworks that are competitive and will attract significant investment. As it develops its renewed climate change strategy, the provincial government has a chance to remove investment obstacles for renewable energy and unlock the province’s vast renewable energy potential for the benefit of all Albertans.
Robert Hornung is president of the Canadian Wind Energy Association. John Gorman is president of the Canadian Solar Industries Association. Jacob Irving is president of the Canadian Hydropower Association and Alison Thompson is chair of the Canadian Geothermal Energy Association.