Mixed Signals: Renewables Pause in Alberta While Feds Unveil Canada’s 2035 Net Zero Draft Policy
The podcast is back after a summer break! This week, Vittoria Bellissimo, President and CEO of the Canadian Renewable Energy Association (CanREA) joins the podcast to discuss the recent developments in Canada’s electricity markets.
On August 4th the Alberta government announced that Alberta is pausing new approvals for large-scale wind and solar projects for six months. Peter and Jackie asked Vittoria about the industry’s reaction to this news and if a pause was required to address the concerns raised by the government, such as the impact on pristine landscapes, reclamation security requirements, and the implications for the reliability of the power grid.
A week later, the Canadian federal government released draft Clean Electricity Regulations. The policy aims to create a net zero electricity system in Canada by 2035. Starting in 2025, the draft rules require all new power generation assets to have low emissions (limit of 30 tonnes of CO2/GWh) by 2035. Natural gas generation is permitted if the emissions are captured or if the facility is used for short periods or in emergencies. Natural gas power plants built before 2025 can continue to operate with unabated emissions until they are 20 years old. Peter and Jackie discuss the draft policy, including the negative response from provinces with high-emitting power systems, including Alberta and Saskatchewan.
Content referenced on this podcast:
- Canada’s Draft Clean Electricity Regulation (released August 10, 2023)
- Electricity Transformation Canada Conference is being held October 23-25 in Calgary
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Episode 207 transcript.
Speaker 1:
The information and opinions presented in this ARC ENERGY IDEAS podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Speaker 2:
This is the ARC ENERGY IDEAS Podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC ENERGY IDEAS Podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian. And welcome back. Well actually, how long has it been, Jackie? Six weeks, I don’t know?
Jackie Forrest:
Yeah, something like that.
Peter Tertzakian:
I thought it was a good break. We’ve had a chance to recoup, relax. I know you’ve been on vacation in Europe. I had a staycation, it was lovely here. I had a lot of time to read, and you just look at the headlines go by on a daily, weekly basis in the world of energy and the changes and sort of itching to want to record a podcast because everything from rising oil prices, the UK now allowing drilling in the North Sea. We’ve got some interesting news on the potential of room temperature superconductors, LNG strikes in Australia, of course the moratorium here in Alberta, and we’re going to talk about that, right?
Jackie Forrest:
Mm-hmm.
Peter Tertzakian:
And of course, the Clean Electricity Regulations and so on and so forth.
Jackie Forrest:
There’s also been those wildfires and the tragic situation in-
Peter Tertzakian:
Yeah, it’s just been absolutely tragic.
Jackie Forrest:
… in Maui, even deaths here in Canada fighting the fires. So definitely it’s brought-
Peter Tertzakian:
Yeah.
Jackie Forrest:
… climate change concerns to the forefront this summer.
Peter Tertzakian:
Yeah, yeah. But how about that pet show that you went to?
Jackie Forrest:
Yeah, well, I put Molly in a pet pageant this weekend.
Peter Tertzakian:
That’s your dog, yeah.
Jackie Forrest:
Yeah. Very disappointing though. She got two sevens and a six and I think there was a bias to small dogs and people that had way better costumes. So next year, we’re going to have a better chance.
Peter Tertzakian:
Were there dogs that got nines and tens?
Jackie Forrest:
There was a few, yeah. I think there were some bias judges there because Molly was definitely the cutest dog by far.
Peter Tertzakian:
Right, by far.
Jackie Forrest:
But anyway, it was fun.
Peter Tertzakian:
I love dogs. We had a dog for 15 years and those are the sorts of things are really fun to go to, but onto more serious matters.
And we talked about some of the big news here in Alberta, which was the moratorium on the development of new renewables, as well as the federal government releasing the Gazette 1 as it’s called for the draft Clean Electricity Regulations. We want to talk about that, but we don’t want to talk about those subjects alone. And that’s why we are delighted and happy to have as our special guest, Vittoria Bellissimo. Vittoria is the CEO, the President of the Canadian Renewables Energy Association, otherwise known as CanREA. Welcome, Vittoria.
Vittoria Bellissimo:
Peter and Jackie, thank you very much for having me.
Jackie Forrest:
Well, hey, let’s start off. We got lots to talk about with this pause on new approvals for large scale wind and solar projects in Alberta. But first, tell us a bit about CanREA and yourself. I hear you’re having a big conference too; I want to hear about that.
Vittoria Bellissimo:
We are. CanREA is the voice for the wind energy, solar energy and energy storage solutions that will power Canada’s energy future. We are an industry association. We represent 350 companies active in the Canadian renewable energy and energy storage market. So this includes manufacturers, operators, developers, and service providers. And our vision is to ensure that wind, solar, and energy storage play a central role in transforming Canada’s energy mix.
Peter Tertzakian:
Mm-hmm.
Vittoria Bellissimo:
As for me, I’ve been working in electricity for almost 20 years. I took on this role at CanREA last October, but before that I spent 14 years working with large industrial power consumers in Alberta, helping them manage power costs and use. And I intervened in regulatory processes to reduce Alberta electricity costs for all customers. I’m an Albertan, I live in Calgary and I run a national electricity association from Calgary.
And you were asking about our conference. The Electricity Transformation Canada Conference is the largest national conference for renewable energy and energy storage, it’s going to be more than just that, we’re going to talk about hydrogen and efficiency, and we are going to be doing that on October 23rd to 25th in Calgary.
Jackie Forrest:
Yeah, so that conference, I’ve gone the last few years, it’s been in Toronto. It’s great to have it here in Calgary, maybe because now you’re the CEO based out of Calgary. But I’m excited to have it. We will be there. We’re actually planning to have a podcast there, so you’ll hear more about it.
Let’s start with a bit of a context about renewables in Alberta, because maybe not all our audience knows. Just give us a sense of how much wind and solar capacity was added in Alberta last year in 2022 and how much was expected this year before we learned about this pause on new permits.
Vittoria Bellissimo:
Yeah, it’s been a very big success story in Alberta. Last year, 2022, we added 402 megawatts of solar, 1,349 megawatts of wind and 20 megawatts of energy storage. In our annual data release, we did mention that 75% of all Canadian renewable energy projects were built in Alberta last year. So that again, big success story here. In terms of what is capacity that’s under construction, we are looking at 2,500 megawatts additional by the end of 2023, and before the moratorium, likely 3,500 megawatts before the end of 2024.
Peter Tertzakian:
Can you give us a sense of scale here? 402 of solar, 1,340, what did you say, 49 of wind, it’s about 1.75 gigawatts. What is that as a fraction of all of Alberta’s… Is that small, is that big?
Vittoria Bellissimo:
Yeah, I mean there’s two ways to look at it, one is energy and one is capacity. Let’s look at energy first. Renewables last year contributed about 12% of the net to grid generation in the market if you don’t count hydro. If you do count hydro, it’s a bit higher than that.
Jackie Forrest:
All right, well tell us how much capex was being spent in 2023 before the news of the pause? How much capital was being invested? And we can maybe put that in perspective with the oil sands, which are going to spend about 11 or 12 billion this year.
Vittoria Bellissimo:
Yeah, so if you look back to 2022 for 402 megawatts of solar, that’s about $500 million. For 1,349 megawatts of wind, that’s about 2.4 billion. We don’t know what the end of 2023 will look like yet, but I am assuming it’ll be somewhere around $4 billion, possibly north of that, it will depend on in-service dates for those new facilities.
Jackie Forrest:
And many of those facilities under construction are continuing, right? This was just a pause on new permits, so I imagine there’ll still be a lot of construction this year, even with this pause?
Vittoria Bellissimo:
Yes, there will be.
Jackie Forrest:
Okay. But just to give people an idea of that is basically one third of all oil sand spending. So it is significant in terms of the jobs and economic activity, and I think also it’s mostly happening in the southern part of the province where maybe there aren’t as many other things generating jobs and things like that. So regionally, I think it’s important as well.
Peter Tertzakian:
From a spending perspective, yeah. So, were you surprised by this announcement, the moratorium?
Vittoria Bellissimo:
Yes, and more than surprised, I was extremely disappointed and very, very concerned. Renewable energy development is a fast-moving global marketplace, and we have labour mobility and an international supply chain for these technologies, and international investors can and will target their capital to other provinces and countries that allow for revenue stability and investor certainty. So there are lots of provinces in Canada that are looking to buy renewables or are actively buying renewables right now. Our neighbors are competing with us. We’ve got British Columbia, Saskatchewan, Manitoba, Ontario, Quebec, and Nova Scotia. There are long-term commitments available in these provinces through RFP processes. We really need to work together as Albertans to safeguard the ongoing interests of Alberta-based development, because we’re competing. And I haven’t even mentioned America at this point, that’s just competition within Canada.
Peter Tertzakian:
Mm-hmm. So do you buy any of the arguments that the provincial government put forth in terms of, well, whoa, wait a minute, not all surface rights, in other words, landowners, are on board with all this stuff. We’ve got to take a look at that. We’ve got issues of backup natural gas, which also overlaps with what we’re going to talk about shortly, which is the Clean Electricity Regulations. Do you think that any of the provincial government’s arguments have merit?
Vittoria Bellissimo:
I think there’s lots of things we as an industry can work on and are working on, but I don’t think any of it warrants a moratorium on development. We are working on all sorts of problems. For example, a lot of the concerns that were raised are based on the way landowners’ rights have been impacted by orphan wells and the idea that people will be left with something on their land if a company goes bust. And these are perfectly valid concerns, I’m Albertan and I have these concerns as well. But our members have been working to address this through practices like project bonding and remediation agreements, and I would say it’s an ongoing process and it’s hard to undo decades of mistrust.
We’ve done a survey of members and the vast majority of them provide landowners with funds like bonds, letters of credit or cash escrow. And in fact, many of them started to offer these forms of securities because they are aware of the ongoing situation on the ground and concerns around orphan wells. There are a series of other things that we are working on, and we need to work on as an industry. I’ll just list a couple of them for you now and we can go into it further if you’d like. We’ve talked about land use concerns, recycling and reclamation, agrivoltaics, figuring out a way to make land serve multiple purposes at once, energy storage, addressing transmission constraints. There are a lot of issues in the market that we’ve been working on actively, and I am looking forward to finding solutions to some of them.
Jackie Forrest:
So what you’re saying, Vittoria, though, is that these are issues that have been known for a while and could we not work on them and create new rules or requirements, but at the same time allow permits to still move forward. We’ve seen that in other industries; a good example would be the oil sands. In that 2009 period, we had a lot of investment. In some ways it’s like, “Hey, we have a good problem here in that a lot of people want to come to Alberta and spend money on these projects,” and we had that issue with the oil sands. Back in ’09, we were giving too many allocations for water out of the Athabasca River. There were issues with how much area was going to be strip mined, but we didn’t stop new permits, but we did do consultation and over time change some of the rules. That’s where a lot of those cumulative management processes came in. So we could still do something like that where we solve these problems and we continued to allow capital to be invested.
Peter Tertzakian:
But let me offer the view that builds on one of the comments that you made, Vittoria, which was that this industry is moving very fast. And I would argue that, especially here in Alberta where we have a deregulated market, which is conducive to rapid investment, that the renewables industry is moving faster than the government can actually build the regulatory infrastructure or has historically in the last few years built up its regulatory infrastructure and rules. You’re moving way faster than the government can handle the multidimensional issues it’s trying to deal with. So the perspective would be, okay, let’s put the brakes on this for a minute until we catch up to what you’re doing.
Vittoria Bellissimo:
That’s one way to look at it. The other way to look at it is that we’ve had wind in Alberta since the 1990s, the early 1990s.
Peter Tertzakian:
But it wasn’t growing as fast as it’s growing now. I mean, you just quoted all the rapidly growth numbers. It’s just huge.
Vittoria Bellissimo:
It is growing very quickly right now, but it’s an energy only market, and our resources are competing against everything else in the energy only market and winning on price. So my view would be we are here, we’ve been at the table the entire time. Our members are working very hard to try to come up with solutions to these problems. And we can absolutely do that without sending a chill through the industry.
Jackie Forrest:
So Vittoria, do you think it would’ve been possible to go forward with this sort of process without having a pause?
Vittoria Bellissimo:
Absolutely. In fact, if you review the AUC’s letter regarding this inquiry, they never suggest a pause on approvals. The AUC’s letter, which was written on July 21st, really addresses two main concerns. Number one is the development of power plants on high value agricultural lands and number two is the lack of mandatory reclamation security requirements for power plants. It’s important to note that the AUC’s letter refers to power plants in general, not just renewable power projects.
Secondly, at no point does the letter actually call for a pause or a moratorium on the AUC’s consideration of new renewable power projects. There is no suggestion in the letter that the AUC has any concerns with respect to the reliability of Alberta’s electricity supply. And then when you turn to the AESO’s letter, the Alberta Electric System Operator’s letter, which was also dated July 21st, it merely states that it will support the AUC, and I’m quoting here, “The AESO will support the AUC in its implementation of a government directed six-month temporary pause.” According to these two documents, neither agency was requesting a pause on AUC approvals at all.
Peter Tertzakian:
You mentioned price sending a chill through the industry. You are sending a chill through the industry, the establishment. I’m just as a color commentator here, I’m just observing what I’m seeing, that that chill creates a deflationary environment for price, which you could say, well, that’s great for consumers or whatever, but actually it’s quite upsetting to the way the whole commerce of electricity works in the province. And that’s such rapid shocks, and you go from almost nothing to 12% and you’re going to double it maybe to 25% of all electricity bringing on all these electrons, and basically the whole commerce model is assaulted. And that’s what the government is trying say, “Whoa, just a minute.”
Vittoria Bellissimo:
Well, I mean, that wasn’t in the list of government concerns. And I would say also that the prices in Alberta have been very high. Last year’s wholesale market price was $162 a megawatt hour. We’re looking at $150 megawatt hour power year-to-date this year. So we haven’t seen a collapse in price.
Peter Tertzakian:
Yeah. We haven’t. But I think that volatility is something that is being encountered in other markets that have adopted a lot of renewables, especially unregulated. And the question is whether that volatility is positive or negative, what that does to investment. Over capitalization of any industry is also problematic because of deflation and what it can do. I’m just throwing out lists of potential unintended consequences, but I just come back to the notion that you’re moving way faster than civil society’s infrastructure regulations and that’s why the government stepped in. And we can debate whether that’s right or wrong, but I think that’s what’s going on.
Vittoria Bellissimo:
I mean, we absolutely should debate whether or not that’s right or wrong. Let’s take on the challenge of variability. So your concern is, and let’s bring it back to what the government has said. They’re looking at the impact of renewable growth on supply mix and the reliability of the power grid. And I would just start this conversation by saying that the paradigm really has shifted and power system operators all over the world right now are learning to adjust. We now live in a very different world. It’s a world of abundant and affordable variable electricity, and we’re learning how to integrate more variable resources into our grids with great success. I’ve got an example for you, and here is something from the SPP website.
The Southwest Power Pool set several renewable records on March 28th and 29th, 2022. SPP set a new renewable energy penetration record of 90.2%. This means that SPP served 90.2% of the demand for electricity across its 14 state service territory with renewable energy resources. If you look back to last year in August, Alberta maybe reached 27%. So we have quite a ways to go, and we need to look to other jurisdictions around the world that are successfully integrating more variable resources to do it better. And let’s look at how the market and the supply mix will look going forward. In the future, renewables will not be the only supply source. They will be part of the solution. We’ll have mixes of resources that provide what we need to run an electricity grid, so capacity, energy and ancillary services. And we will be able to ensure a reliable power system.
We will have long-term storage, combustion turbines with new fuels, demand response, short-term storage such as batteries. We’ll have DERs, distributed energy resources. We’ll have transmission to enable geographic diversification of resources. We’ll have interties. Maybe we’ll even have nuclear if it doesn’t have to compete on price in the energy market. We have solutions to today’s problems today. For example, we need fast frequency response in our grid because we’re integrating all these inverter-based resources, but we can get that from energy storage, like batteries. And our members provide storage coast to coast and are happy to show up in Alberta and provide the storage that we need. But what we do right now in Alberta is we don’t even let storage come to play.
Jackie Forrest:
Well, I think that’s a good point though. There’s barriers for storage in Alberta, which could help back up some of these renewables and extend the time that they generate into other parts of the day. So I think those are good points. I think first of all that we are at fairly small amounts. I think that’s a very important point, 12%. And I think when you look at forecasts, we might get to 30% by mid 2020s.
Vittoria Bellissimo:
We might. We’ll certainly hit it before 2030.
Jackie Forrest:
I think the concern is when we get into that 30% range that we’ll start to see some more of these issues. But I would come back to the fact that we could study this right now and we don’t necessarily need to have a pause on permits, because I think a lot of the issues are a little bit further into the future. Would you agree with that?
Vittoria Bellissimo:
Yeah, I would. And we haven’t even tapped the solutions. That’s the part that I’d like to bring forward here is we have solutions that are ready today and we’re not letting them come to the table.
Peter Tertzakian:
So talk about the solutions getting back to storage, because you quoted this example where they achieved 90.2%. And I know other places have even touched on 100% on some days, so I’m not debating that. But then the argument that is made is, okay, that’s great, but what about when it’s 0% and it’s minus 35 outside? That’s when I’m concerned. Because at the margin, 12% doesn’t sound like much, but 12% is a lot at the margin when all of a sudden that 12%’s not there and you need that 12%.
Vittoria Bellissimo:
Yeah. I guess I would just go back to say that we have an energy only market in Alberta right now, which means you come to the market, and you bring your energy, and you get paid for energy. A couple of years ago, we talked about having a capacity market and paying for capacity. The UCP government did an analysis and did a review of that and decided they didn’t want that. They wanted an energy only market, so we pay for energy. There’s no advanced commitment to provide that energy. And we buy energy in real time on behalf of consumers. If we want to change that structure, that’s a whole different conversation than what we’re having today. So that’s the first point on this. I previously gave a list of all sorts of technologies that can help integrate renewables, and I did mention that it won’t be the only supply source.
Long-term storage is something that lots of entities are working on. And interties is something that America is working on very hard right now. And geographic diversification of resources is something that everyone is working on right now. I will just say that we have answers to the vast majority of the problems that were specified when the moratorium was put in place, and we weren’t even invited to bring those answers forward without doing it through the AUC process, which we will participate in. But it doesn’t help the industry to put pause on anything. It scares away investment, it puts jobs at risk. And we have an advantage in Alberta. We are leading the country. We have arguably the best wind regime and the best solar regime in the entire country. Why would we put that at risk? Why wouldn’t we just say, yes, we’re leaders and we’re going to lead?
Jackie Forrest:
All right, those are good points, Vittoria, and I think there’s a lot of reasons. I’m a believer that we could probably solve these problems in parallel with continuing with permits. But I did want to address, there are a few other issues. One is the impact on pristine landscapes. If you followed my Twitter feed this summer, I did a road trip to the Travers solar panel farm, and man, that thing is big. It’s 13 kilometers squared. It’s 465 megawatts. Is there a concern about putting all of these solar panels on agricultural land and covering such large areas? And especially when you look at the queue, there are a lot more solar projects coming. I mean, it’s relatively small today, but there’s a lot of solar capacity coming. How much of a concern are those issues in this process, in your view?
Vittoria Bellissimo:
Okay. Well, let’s start by saying I’ve visited Travers too. It’s pretty exciting road trip. I do think it’s less controversial and people should go and take a look. When it comes to pristine landscapes and nimbyism, I’ll just say that this will all come out in the Alberta Utilities Commission inquiry. But to start with, there is no formal definition of what constitutes a pristine landscape. As I said previously, I’m Albertan and I can easily agree that we are spoiled for beautiful scenery here. And as an industry, as a renewable energy industry, we will work within the rules for development, but there should be some consistency between this and other industries. Are pristine landscapes something that apply only to renewables or are we going to apply that to all industries within the province of Alberta?
Jackie Forrest:
So you’re saying we strip mine, we do coal mining, and so why would solar not be able to have some impact on the landscape?
Vittoria Bellissimo:
Yeah. All industry in Alberta is going to need to know what that means. And I would emphasize that pristine landscapes apply to everybody, not just renewables. And there’s no need to pause development while we figure out what that means.
Peter Tertzakian:
Okay, so the moratorium is in place. What is the time fees on this thing? Six months, is that what it is?
Jackie Forrest:
Yeah, it’s a bit like eight.
Vittoria Bellissimo:
February.
Peter Tertzakian:
Eight, okay. You were surprised, so that tells me like many things that I see today that there was a lack of communication between industry, whether it’s oil, gas, or any other industry, and government, whether it’s federal, provincial, and I think this is problematic but that’s a whole separate issue. Tell us what your involvement is now. Is there a healthy dialogue happening in terms of trying to work out the concerns of the government so that we can get back to investing ASAP?
Vittoria Bellissimo:
Yeah, so when the announcement came in, we were actually in a meeting with Minister Neudorf, and as I said earlier, it’s very disappointing that this is the approach the government has taken and we are going to work hard to try to minimize the pause and get on with leading the country in renewables. We are going to have regular check-ins with the government, we are going to participate in the Alberta Utilities Commission process, and I do think we need to tell our story better. Renewables in Alberta is an Albertan success story and our industry competes in an open market, and we’re leading the country in renewable energy development and we need to sing that from the rooftops.
Jackie Forrest:
I will say one thing before we go to the next topic. Another piece of news, Peter, that happened, is we no longer call it Twitter. It’s called X now. I was on X and I put some pro-wind and solar tweets out associated with this pause, and I did get quite a response. And what I learned from that, and I’ve spent some time looking at some of the other things that are being said, there is quite a bit of misinformation in my view and misunderstanding of renewables. A very common one that came back to me is all these renewables projects are subsidized by the government, so good riddance as Alberta doesn’t need to keep paying for this stuff. Vittoria, none of this is coming from the government. This is all private capital.
Vittoria Bellissimo:
Yeah, that is a very misleading message, and it is disappointing to hear. Renewables in Alberta compete in the open market. They are not receiving subsidies. They have a tier regime and we have the open energy only market, and they’re competing on price and they’re winning because they’re the most affordable new sources of generation in the world today. And you can see that globally, it’s not just an Alberta situation.
Jackie Forrest:
Okay, well, let’s switch. This is going to be a bit longer episode. We’re going to switch to the Clean Electricity Regulations, which is being called the CER, which I really don’t like because as you know, we also have a Canadian Energy Regulator, so I really wish this acronym wasn’t taking hold because I’m getting confused about what we’re talking about, but we’ll call it the Electricity Regulations for this podcast, not to get confused. So we’re going to go through some of the broad strokes of this draft regulation that came out on Thursday or Friday of last week. Vittoria, will get you to comment on the end in terms of your perspective on it, but we thought it would be useful to just go over what it is.
I will say that this has been long delayed. We actually expected it early in 2023, so we’ve been waiting a long time. Lots of people worried about it. In fact, that was actually one comment made about this pause on renewable development, was it was related to the concerns that we couldn’t have any more natural gas in the province because of this regulation and therefore we needed to hold up our renewables development, so it has even maybe impacted renewables with this latest development.
In terms of what it said, we finally know. It says, projects built after 2025 must be very low carbon. It’s giving a threshold of 30 tons of CO2 per gigawatt hour. It allows natural gas, but it must be backed by carbon capture storage. I think possibly maybe using renewable natural gas or hydrogen may be an option as well, although that wasn’t totally clear to me.
If you do go the route of carbon capture storage, you do need to sequester the vast majority of the emissions, maybe about 95%, by my calculations. And for existing projects, maybe this was the good news, it will allow existing projects that were built prior to 2025 to operate for 20 more years unabated. So that does provide some ability to not, as of 2035, everything just turns off here that’s gas in Alberta.
Now for people that built these projects, often when you build these projects, you think they’re going to run for 45 years. So, that may not be totally good news in that it really curtails the life of your asset. But the good news is, we still will have a lot of natural gas in provinces that require it.
By the way, this is federal. This is affecting every province in Canada. I do want to say that, not just Alberta. Another thing is, it will allow natural gas peakers. These are the units that run very short times and they’re very helpful maybe for renewables because when renewables goes off, when this wind starts blowing, they can very quickly ramp up and offset the loss of generation from some of the wind and solar projects. They allow them to operate unabated so they can have CO2, but for a very short amount of time, like 18 days a year, they’re estimating, which would be about 5% of the time, much lower utilization than what these units get today.
And a couple other important points that I wanted to mention is it does allow emergency running of generation that emits, like natural gas generation. In the case that there’s an issue on the grid and we’re going to have the lights go off, you’re allowed to not have CCS backup your natural gas, so that’s I think important. It also allows small fossil fuel generators that aren’t backed by CCS up to 25 megawatts, so that’s really helpful in small communities. I do also want to say though that one other thing that’s in there is it doesn’t allow offsets, so you must comply with this. It’s not clear exactly what will happen if you don’t, but it does mention that this does fall under the Canadian Environmental Protection Act and criminal prosecution is an option. So there’s not a lot of flexibility here for people that are operating these plants to not follow these rules.
Peter Tertzakian:
Well, I think that this is a potential unintended consequence, is people who are working for a utility or the CEO or the board of directors, in the document they refer to the responsible officer or responsible person, who wants to be that person? The level of accountability on whether it’s an individual or the board or some other constituent within the company that’s running these plants all of a sudden is ratcheted up to the point where qualified people may say, “Hey, I don’t want to expose myself personally to this.”
Jackie Forrest:
Yes. Well, and you know this is a draft, so maybe this is an area that there’ll be a lot of feedback on because it really didn’t have a lot of details. And I think there are a lot of concerns about what are the implications if you aren’t able to meet these. We can get into some of the nuances, and Peter, I want you to comment too, but I would just say, the good news is it allows natural gas. There were some concerns that there’d be no natural gas. However, it’s going to cost more money to put CCS on all these projects and to have a shorter operating life for the existing, and to run peakers at such low utilization rates. So I do think when we do need that natural gas generation in provinces that are impacted, which would be Alberta, Saskatchewan, Nova Scotia, who have met a lot of-
Peter Tertzakian:
And New Brunswick too.
Jackie Forrest:
And New Brunswick, yeah. So just for context, Alberta’s 85% of our generation is emitting. Saskatchewan, it’s 78%. Nova Scotia is 79, and New Brunswick is something like 30. So these are the provinces that are really going to be impacted. And to me, all things the same, when you need to use these emitting sources, it will cost more.
Peter Tertzakian:
Well, it will. And not every province has the geology that is conducive to CCS like Nova Scotia and New Brunswick. And even within Alberta and Saskatchewan, the reservoirs that are being mentioned, saline aquifers or depleted oil reservoirs, these are mentioned in the policy which by the way we’ll post on the podcast website, there’s a lot of high-level thinking that has gone into this document. But when you actually get to figuring out how we are going to decarbonize the electrical grid in this country, the last 15%, because by the acknowledgement of the Clean Electricity Regulations, 85% of the country is already non-emitting, dominantly hydro.
Jackie Forrest:
But just for context and in terms of provinces, Quebec, 1% of their generation is emitting, Ontario, 6%, Manitoba, 0%, BC, 3%. So those provinces, this is kind of not affecting them very much-
Peter Tertzakian:
Well, not affecting them today. There’s also the notion and I don’t want to get too far into it, but as population grows, immigration, as the economy grows, you need more electricity, I think by the acknowledgement of the document, another 40%. You can’t necessarily build out more hydro as fast as the economy’s growing, so where is it going to come from? Vittoria, we know we’ve got renewables of course, but then there’s a whole argument about base load, peaking, yada yada, and then can nuclear be built out fast enough and so on and so forth. So it’s all very complicated. I’ve read the whole thing. I need more time to digest it. I can tell you that there’s some issues. The arguments in the document that I think we need to talk about, we have already talked about it as price. Will price go up? The document basically says that electricity prices are not going to go up that much. What is it, 4% or something?
Vittoria Bellissimo:
Yeah.
Peter Tertzakian:
It’s not necessarily the average price that’s the issue. It’s the volatility. And also, I think there are plenty of people, including myself, that will argue the price is going to go up because ultimately somebody has to pay for this. And if it doesn’t go up directly, it goes up indirectly through broad taxation because somebody has to pay for it. So that aside, what it does though is, the arguments back and forth, back and forth, back and forth, is it going to make price go up? Is it not? Is it going to create an environment of uncertainty without a resolution which leaves the person who is working on the spreadsheet in a cubicle somewhere confused? That ultimately leads into investment decisions, and this is something I’ve talked about before, it just leads to investment paralysis.
Jackie Forrest:
But I do want to say, talking about your uncertainty around future investment, right away, we’ve already heard from Premier Danielle Smith and Premier Scott Moe from Saskatchewan, very unhappy. And they are saying that this proposed mandate is unconstitutional, and are worried about the impact it’s going to have on people’s utility bills and basically every other good and service because power prices filter through to the costs of every business in Alberta and that potentially causes some inflation. As you know, the power is under the jurisdiction of the provinces, so I think there’s a real likelihood that this will have a challenge at the Supreme Court and that’s going to slow down anyone investing because of the uncertainty around that-
Peter Tertzakian:
Well, this is it, I kind of think of Canada as a house and imagine that there are people that are potential investors that are coming to the house for dinner and they come up to the front door and they hear everybody yelling and screaming and arguing and taking each other to court. I don’t think they’re going to ring the doorbell. I think they’re just going to walk away and say, “You know what? Let them sort out their issues and then I’ll come back.”
And that’s where we’re at, and I think that is the travesty of this whole policy, is that these issues that are addressed actually in the Clean Electricity Regulations, because it’s actually the federal government in publishing this did address a lot of the objections, affordability, reliability, et cetera, et cetera. But there’s no agreement on it. It should have been actually agreed upon before this thing went to a gazette, in my opinion.
Jackie Forrest:
All right. Vittoria, what do you think?
Vittoria Bellissimo:
Well, I mean, as you said, it’s been expected for quite a while, so I do believe these regulations will create a clear market signal for the further deployment of renewable electricity.
Peter, with regard to what you said, there is certainly a lack of policy alignment between the province of Alberta and the country of Canada. And if that means we’re going to have problems when people come to our house party and see that we’re not agreeing, then yeah, we need to work on that.
One of the areas that hasn’t been talked about so much with the CER is that it does come with $40 billion worth of incentives, and there is the ability for Alberta to take advantage of that. We need lots of things for our power grid. We need more transmission lines. We will need the ability to have interties between us and our neighbors. We will need help with our electricity market in general, and there is an ability to get some of that through this mechanism. I do hope that our provincial government and our federal government can communicate on this-
Peter Tertzakian:
But I guess as a Canadian, and I’m Canadian first, yeah, there’s $40 billion, but this is still, as a Canadian is my money. It’s our money. I want industry and foreign investors to come here and pay for it because actually, if you look at our energy infrastructure, certainly our oil and gas infrastructure, by my estimation, well over half, if not potentially even up to 70% of it over the last hundred years has been paid by foreign investment, dominantly, multinational companies coming from the United States and Europe that have come here and built out our infrastructure. Now we have to basically renovate the house. It’s going to cost a lot. This is overwhelmingly a policy driven transition, not a technology driven transition. And it is, I think it’s problematic.
Vittoria Bellissimo:
I would argue that it’s both. It will be a technology driven transition as well, because the price of the new clean technologies that will help our electricity system has plummeted. The cost of renewables has plummeted, the cost of storage has plummeted. EVs are going to be competitive with internal combustion engines. We’re all probably, if we’re still driving one, and I know you’re not, we are all driving our last internal combustion engine right now. It’s a game changer. Will internal combustion engine vehicles even be available? Electricity is the thing that we can use to decarbonize not just our own sector, but buildings and transportation and heavy industry. We could be downbeat about the lack of policy alignment in the country, or we can get on with the monumental task that we have in front of us of building our electricity grid so that we can build everything else.
Peter Tertzakian:
Yeah, I guess I’m espousing here a call for simplification and clarity of policy alignment, as you called it, Vittoria. I totally agree. That’s what we need.
Jackie Forrest:
Well, Peter, I agree. It’s getting more complex all the time. This policy is pretty complex. We both read it and even we had some different interpretations of it.
Peter Tertzakian:
Read the first 20 pages.
Jackie Forrest:
Hey, I do think this is probably here. I think they’ll potentially be a court challenge, but I think that the reality is that the government government’s goal is to reduce emissions in electricity faster than the rest of the economy. Rest of the economy, it’s 2050. With the electricity sector, it’s 2035. So I do think you need some special policy here to accelerate the reduction of emissions in this one particular sector. We can argue if this is the right policy. I do think all things the same, we should see a greater build out of clean energy because of policies like this. Would you agree with that, Vittoria?
Vittoria Bellissimo:
Yeah, I mean, I would start by saying that renewables are competitive and renewables are the most affordable new type of generation.
Peter Tertzakian:
So why do we need policy?
Vittoria Bellissimo:
Because we need to accelerate the change. This is about the pace of the change, and as Jackie said, the federal government is looking at net-zero electricity by 2035, and there are lots of items with regard to flexibility for fossil fuel fired generators in the CER, and I think it was actually more than probably what industry was expecting. But the federal government is on a track to get a net-zero electricity grid by 2035, and they need to increase the pace of clean resources on the grid.
Peter Tertzakian:
This is a bit of a contradiction that I’d like to point out is that a lot of people, including myself, will say technology is going to surprise us, and technology is going to drive better batteries, more efficient solar panels and better wind turbines and all sorts of other renewable things at much lower prices. And if that’s true, the market’s going to take care of it and we’re going to get to where we want to get, so just leave it alone. If you start pounding it with policy that nobody can understand, it just confuses people and actually acts as an inhibitor to getting things done.
Jackie Forrest:
All right, well, with that, maybe we’re going to wrap it up, because we have gone over.
First of all, I think you’re right. I think you’re both right. I think that this policy, the controversy around it, the potential for legal challenges, unfortunately, I think it will slow down the investment in the near term, even for things like renewables. Forget about the pause, but the uncertainty associated with this is another factor. However, as we think out 10 years from now, if we can get this all worked out, I think it will mean that we move to a cleaner grid faster than if we didn’t have this policy.
Vittoria Bellissimo:
I would just say that I think the federal government’s intent was to provide policy stability, and this for renewables is more policy stability than what we’re seeing in Alberta with a moratorium on development, or at least on AUC project approvals. I would like policy alignment and I would just emphasize that investors need policy certainty in order to make investments, and we’re not seeing that from the province right now, and we need to be seeing more of it soon.
Jackie Forrest:
Right. If we want to keep seeing that $4 billion and probably growing capex investment.
Peter Tertzakian:
Yeah.
Vittoria Bellissimo:
Yes.
Peter Tertzakian:
By the way, I’m not disagreeing with anyone, to be honest with you. I think we largely agree. I’m somewhat, I have a lot of consternation about the state of affairs. That’s my issue as a, I always like to say a color commentator observing the situation.
Jackie Forrest:
And I think that’s fair too. All right, well hey, well, this was a good first podcast back. You guys will get a sense of what this new year of podcasts will be. We’ll be back more regularly in August, although we will get back to our real regular cadence after the September long weekend. We hope you’ve all had a great summer. Thanks for tuning in for this conversation. Lots of important topics happening in Alberta around electricity markets and Canada this summer. With that, thank you Vittoria for joining our podcast.
Vittoria Bellissimo:
Thank you. Thank you for your interest.
Jackie Forrest:
And thank you to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
Speaker 3:
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