It’s Time to Build Canada Into an Energy Superpower
Canadians voted for Mark Carney and the Liberal government on April 28th, 2025. In his victory speech, Prime Minister Carney asserted, “It’s time to build Canada into an energy superpower in both clean and conventional energy.”
This week’s podcast delves into the election results and its potential impact on Canadian energy with guest Greg Lyle, the founder and President of Innovative Research Group, a full-service market research firm with offices in Vancouver and Toronto.
Peter and Jackie discussed several topics with Greg, including surprises in the election results, how the Liberal minority government could collaborate with other parties to pass legislation, and the potential future direction of energy policy based on the Liberal platform and Prime Minister Carney’s post-election statements. They also explored possible support for LNG export facilities, clean energy initiatives, and carbon capture and storage (CCS) projects like the Oil Sands Pathways Alliance project. Additionally, they considered proposals from the Liberals and industry to amend the Impact Assessment Act (Bill C-69), aiming to expedite decision timelines for project approvals.
Content referenced in this podcast:
- Letter from Canadian energy CEO’s to Mark Carney (April 30, 2025) “Build Canada Now: Energy CEOS to the Prime Minster of Canada: An Urgent Action Plan to Strengthen Economic Sovereignty”
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Episode 283 transcript
Disclosure:
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.
Announcer:
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. Welcome back post-election. So, we now know who the new Prime Minister of Canada is.
Jackie Forrest:
That’s right.
Peter Tertzakian:
It’s Mark Carney, unless you’ve been asleep. Not a majority, a near majority. So, we want to talk about that here in a few moments, but first of all, there’s some key dates that are coming up, Jackie, right?
Jackie Forrest:
Yeah, so we’re recording on Monday, May 5th, and tomorrow Prime Minister Mark Carney is going to meet with Trump in the Oval Office. So, I think that will be very important to understand what goes on there. We’ve been told that there was a press conference on last Friday that a new cabinet will be picked on May 12th. We’ll talk about what we’ll be looking for at that, and Parliament will be recalled on May 21st. King Charles will be there delivering a speech. So, lots of important dates coming over the next month.
Peter Tertzakian:
If it wasn’t difficult enough to decode the political situation, which we’re going to attempt to do, but as if that wasn’t difficult enough, we also now have to contend with news out of the oil world where OPEC plus group of countries are upping their production yet again, and the price of oil has fallen yet again. Well, on the latest news, it’s a few dollars, but we are now definitively under $60 a barrel, so we want to talk about that as well.
Jackie Forrest:
Yeah, so OPEC surprised… Well, I think it was a lot of people expected even late last week that this might happen, and that’s part of why I think price started falling even before the news. But just to put in perspective, they had this plan to bring back 2.2 million barrels a day over the course of a year, but now they’ve decided to accelerate that. So, if I looked at their original plan for May and June cumulatively, they would have added back about 360,000 barrels a day. With this new announcement, it’s more like they’re adding back a million barrels a day in that timeframe.
So, this is not helpful news in a market that is concerned by recession, outlooks for demand are being scaled back, and there was already an outlook for oversupply in the market. So, this is obviously a big topic, and even just the changing strategy here of OPEC. We will talk about this in a lot of detail. Next week, we’re going to have an oil-focused podcast.
Peter Tertzakian:
We’re going to have an oil… It’s consequential even to the discussion about the political situation and the new Prime Minister and his government’s desire to build out energy infrastructure. This has consequence because somebody has to pay for it all. The impact of going from $70 a barrel to the high $50s is not billions, but it’s tens of billions of dollars. It’s that consequential. So, we want to talk about not only the global dynamics of oil and oil prices and then bring it back home to Canada and what it means to our local economy.
We’re going to have some good numbers in terms of that. But for now, as I said, trying to decode the day-by-day things that are going on is still difficult. So, I feel like it’s… What was that TV show where you phone a friend to try and get answers? What was that?
Jackie Forrest:
I don’t remember.
Peter Tertzakian:
I don’t remember either. Anyway, whatever it was, we are phoning a friend and we want to welcome back Greg Lyle, founder and president of Innovative Research Group, Inc. Greg hails to us from Vancouver. If you don’t remember from the last time we had him, Greg’s a pollster, an analyst, political analyst, and just overall uber expert on the Canadian political scene. So, welcome back, Greg.
Greg Lyle:
Thanks so much.
Jackie Forrest:
Great. Greg, are you from Vancouver or was it Vancouver Island?
Greg Lyle:
I’m from Vancouver, but I live actually in Gibsons now. So, anyone that’s listening that remembers The Beachcombers, I live about three minutes away from Molly’s Reach.
Jackie Forrest:
Okay. I knew there was something unique about that-
Peter Tertzakian:
Is Molly’s Reach actually still there?
Greg Lyle:
Yeah. Ironically, it was not a restaurant when the show was shot, but it is now a restaurant.
Peter Tertzakian:
Right. Well, unfortunately, Bruno Gerussi and I think Relic have both passed since those days, and we’re probably talking beyond the memory of most people on this podcast audience.
Greg Lyle:
Yeah, exactly. Anyone under 60 is like, “What are you talking about?”
Peter Tertzakian:
Yeah, what are you talking about? Anyway.
Jackie Forrest:
Including me. No, I did watch the show, but I wouldn’t know the character names. That’s impressive. Okay, so we want to talk about two things quickly. Election results, lots has been said in the last week, so I don’t think we need to spend too much time, but we really want to focus more on energy policy and what it may look like under the new liberal Mark Carney government. So, let’s just start a bit with the election results. So, we got a minority government. It keeps changing a little bit. I think the last numbers were 168 seats when they need 172. So, they will still need some help to get legislation passed in the House of Commons. But let’s start off, Greg, based on your expectations from polling, were there some surprises in the actual results?
Greg Lyle:
Yeah, at the end of the day, I don’t think that there were any big shocks. So, we had talked before the election that we thought that the liberal vote efficiency that we’d seen in previous elections probably wasn’t going to be seen this time for a variety of reasons. That was not expected. I think the one thing that took everyone a little bit by surprise was how deep the NDP fall was. Everyone knew the NDP was going to be down, everyone knew they were going to be at a historic low, but I don’t think anyone predicted the winning 6% of the vote. That was a shock pretty much to everybody. But ironically, even though they are the fourth party in the house, they are actually the swing vote. So, actually right now, it’s 169 for the liberals, and if you put the Block and the Tories together, it’s 166.
So, the NDP basically get to decide if the government’s in power. Now, it’s not that the government has no other options. So, if the NDP wanted to defeat the government, but the government could convince either the Block or the conservatives to sit this one out, then there wouldn’t be any way of stopping the liberals either. The indication right now is that they’re not going to repeat the deal that they did in the past with the NDP that they will manage this issue by issue. There’s lots of precedent for that to work. Certainly, so long as the Trump issue is alive, it’s not very likely any of the parties are going to want an election anytime soon. Certainly not the Block or the NDP.
Peter Tertzakian:
Yeah, I mean the NDP really don’t have a lot of leverage even though they have technically the balance of power, but they can ill afford to call another election lest they go fewer than seven seats. Is that the thinking?
Greg Lyle:
It is hard to imagine it could get worse, but clearly, they’re going to want to have their leadership race because their leader has resigned and they need to get that in order. So, no one’s expecting an election anytime soon.
Peter Tertzakian:
On that note, did it surprise you that Jagmeet Singh actually came in third, I think not even second in his riding?
Greg Lyle:
No, it was a tough riding from the beginning and it wasn’t really a surprise that he got taken out there. It had a large Chinese vote in our polling prior to the election. The BC Chinese vote was moving to the conservatives. It was never an easy seat. He won it for the NDP in the by-election, and last election, he only won it by 10 points.
Peter Tertzakian:
Actually, while we’re on the subject of BC, I don’t want to leave it because one of the things that I noticed as I looked at the electoral map post-election was the swing of BC to the conservatives. Now you may say that’s not a surprise because the provincial vote also went dramatically conservative. They almost won a majority. But what I noticed, even on ridings like Vancouver Island, they didn’t go from orange NDP to liberal red. It went from orange NDP all the way straight through to conservative.
Greg Lyle:
Sure. Although we’ve seen that before on the island, right? So if you go back to the ’90s, those seats that are blue in this election tended to be reformed green in the 1990s. There is that reform NDP swing voter, and there was also some good vote splits for the conservatives. So, the NDP didn’t completely disappear up there and the liberals couldn’t catch up to the conservatives. So, it’s not like the conservatives have become a dominant force out there. One of the worries for the conservatives is if the election were relatively soon and those people that had kept voting NDP thinking the NDP was the best hope to beat the conservatives and those people swing over to the liberals, they may be harder to keep than they were to win.
Jackie Forrest:
Okay. Well, you talked about it’s unlikely an election anytime soon and I think from the NDP perspective, but also from the Conservative Party of Canada, because although they did win more seats, their leader didn’t win his seat. So, now there’s some uncertainty in terms of leadership there. Now I want to talk about this minority government. I think it’s really important to think about how this could work. May 2nd, last Friday, Mark Carney held a press conference, his first press conference, and he said he would not create a pact to govern with the NDP, as you alluded to already, Greg. He also said he’ll have no games with the conservatives and quickly run a by-election if Pierre Poilievre would like to run.
We just learned over the weekend that it looks like there’ll be a riding in Alberta that opens up for him. There was plenty of overlap, not only in his May 2nd speech, but even in the platforms of the two parties, things like fighting crime, reducing middle class taxes, slowing the growth of the public sector, boosting the military. It got me thinking, could we actually see some cooperation between the conservatives and liberals instead of the NDP being the swing vote? Do you think there’s many prospects for that? I mean, they had a lot of good things to say I thought on last Friday.
Greg Lyle:
Yeah, I would be surprised. It would be a pretty big shift in tone from Poilievre to start cooperating with the liberal government. Although on things like let’s say that Carney was going to make a move on something, the IAA, the act that governs major project reviews in Canada, you could imagine a scenario in which the conservatives might support that move, but it would depend on what the alternative looks like.
Jackie Forrest:
Right, and that’s the Impact Assessment Act or sometimes called the Bill C-69, it’s more famously known as.
Greg Lyle:
Some have been known to call it the No More Pipelines Act.
Peter Tertzakian:
Greg, are you surprised that whereas Mr. Singh immediately resigned his seat upon losing his riding and of course, whatever it was, 14 seats or something down to seven from the 24 that Mr. Poilievre did not and in fact is determined to continue running?
Greg Lyle:
Well, there hasn’t been a conservative since Brian Mulroney who won a larger share of the vote than Pierre Poilievre. If you look at underlying party brands, both the liberal brand and the conservative brand are stronger now than they were in the last election. Essentially, it came down to Poilievre did one big thing wrong, which in an election in which we were essentially interviewing someone to be the person to stand up against Donald Trump, he went around sounding like and acting like Donald Trump. By the end of the campaign, he had changed that tone. If you watched the debate, the Pierre Poilievre that showed up for that debate was very different than the Pierre Poilievre that had the back and forth with Laura Stone talking about the size of his rally turnouts.
Peter Tertzakian:
I guess I’ll be blunt, because politics is a blunt and brutal sport, there’s a saying, second place is first place for losers. So, I don’t get it honestly.
Greg Lyle:
I get that but don’t forget that the Conservative Party signed up 600,000 members in their last leadership race, and the vast majority of those people voted for Pierre Poilievre. So, he still has that relationship with those people. Arguably, he paid for it with his seat over his position in the convoy. So, his position on the convoy may have helped him win the leadership, but then had him lose his seat. But lots of leaders have lost seats and gone on. I mean, go back to Sir John A. Macdonald. I mean he’s in fine company in terms of leaders that have lost seats and gone on to bigger and better things.
I’m not arguing for or against him because I think the big question is going to be, “Does he convince the people that will have a vote in this matter that he learned the lessons he should learn, that he will build on the best and fix the rest in terms of his style and approach to leadership?” But when you look at the numbers, it is stark how both the liberals and the conservatives have greatly improved their brand with the public. The average Canadian is a lot more likely to like both of those parties now than they were in any election we’ve looked at for a long time.
Peter Tertzakian:
And to what extent was the vote splitting? I mean, how many candidates were basically artificially put on his riding ballot? It was so many that I couldn’t-
Greg Lyle:
Yeah, I don’t think that fundamentally made a difference. I mean, the number of candidates were put on a ballot could have hurt the liberals as much as him. I think the problem there was that there were a lot of people angry over in particular the convoy protests. This is an Ottawa seat for weeks and weeks. He stood with the people that were disrupting everyday life in Ottawa, and this was a chance for people to make him pay for that. There were army of people that went out to convince their fellow Ottawa residents that they should send Poilievre a message and they won the day.
I don’t think it had a lot to do with how many names were on the ballot. There’s also an underlying issue if you’re a conservative in Ottawa, there’s always a fear that you are going to cut the size of the civil service. So, that was probably a small contributing factor, but that threat had been there for years and years. The thing that was different was the convoy.
Jackie Forrest:
Okay. Well, let’s switch to energy policy. It seems that we are going to have a Mark Carney government for a while. Minority governments don’t always last the full four years, although the last one did, but at least probably for the next year based on the situation in terms of the other parties. Now, I wanted to talk a bit about some of the things Mark Carney has said in his victory speech and on this May 2nd press conference, just some of the quotes because some of them sound actually pretty constructive for energy, although the details are missing. So, he says things like, “It’s time to build Canada into an energy superpower in both clean and conventional energy. We will do things previously thought impossible at speeds we haven’t seen in generations. We’re going to build, baby, build. We’re going to build new trade and energy corridors.”
He spoke actually on May 2nd of this being the biggest transformation of our economy since the end of World War II. So, I want to have a discussion. Are these positive signals for the oil and gas sector? I mean, he doesn’t have the details on what these nation building projects are. That’s one thing that’s really missing for me.
Greg Lyle:
I think there’s lots of reason to be nervous and some reason to be hopeful. So, I think the single biggest reason to be hopeful is that his stated goal is he wants Canada to have the strongest economy, strongest growing economy in the G7. Peter is the economist in the room here. Mark Carney has been a central banker in two G7 countries and has had to live in the real world. This is not a theoretical exercise. He understands what drives GDP. He understands what drives growth, and he’s someone that knows the numbers to look at here. If you look at the last time the Canadian economy was really growing, oil and gas was a key driver of that growth, in particular, capital investment to expand our exports was a key driver.
Although I’m always open to being educated by Peter on the details of that. It is hard to imagine any other sector that can come close to being able to create the GDP per job of the oil and gas sector in Canada today. I don’t see how he can reach his goal without the help of the sector. That being said, his team continues to include people like Steven Guilbeault. He’s added to his team Gregor Robertson, who your listeners may recall, was the mayor of Vancouver who fought the Trans Mountain Pipeline tooth and nail when honestly it didn’t even go over his land, spent probably hundreds of thousands on legal costs fighting that thing. He’s very likely to be a minister. There isn’t a minister from Vancouver right now.
They’ve elected four MPs and it’s a fairly important place. So, when you look across the team, there are people that are not fans of oil and gas, particularly oil. Of the two, I would be more bullish on natural gas. Whoever came up with the term natural gas in the first place should be getting a royalty forever because just that brand of natural gas leaves it in a much better position than oil per se. But the bottom line is that there’s a lot of wealth sitting there waiting to be tapped in the oil sands that could benefit the country as a whole. If Carney wants the growth that he’s looking for, he’s crazy to leave that sitting there and not take advantage of it.
Jackie Forrest:
Greg, I appreciate those points. I mean, there’s a lot of discussion here in Calgary obviously in the last week and a lot of skepticism I think because of the last 10 years of the liberals here and the fact that there hasn’t been a lot of support for the industry and things like the oil and gas emissions cap, which are going to constrain production. But I’m optimistic that around natural gas, we’ll see something because there is an argument in terms of the greenhouse gas benefits that provides if you look beyond our borders and possibly maybe even support things like the CCS. He talked about CCS in the platform wanting Canada to be a leader in carbon capture storage. We already are. So, I think that could bring some benefits to Alberta as well.
Peter Tertzakian:
So when are we expecting the cabinet announcements that are coming up here?
Jackie Forrest:
At the 12th of May?
Peter Tertzakian:
Twelfth of May. So, a week from now. So, Greg, what are you thinking in terms of cabinet composition?
Greg Lyle:
Well, again, I’m watching to see where Gregor Robertson shows up and I’m hoping at someplace like housing or transit as opposed to energy or natural resources. You were talking about CCS and I heard Wilkinson on CBC radio during the election aggressively supporting CCS. Someone was saying it was an unproven technology and he just shot them down, just stopped them midstream and said he was from the energy technology sector and there was no question in his mind that it worked. So, even though Wilkinson has not always been oil and gas best ally, on that particular file, his heart seems to be fully committed to it. There are some new players that I’m keeping an eye on.
So, Tim Hodgson, Tim worked with the Prime Minister in the past when he was the governor of the Bank of Canada. He’s been chair of [inaudible 00:19:37] for the past few years. He works with some of the pension funds. He has a pretty good understanding of the energy sector and I wouldn’t be surprised to see him show up. There’s a former CAC finance minister out of Quebec that I wouldn’t be surprised to see moved up. I mean, he has the ability to build a very strong economic team. Arguably, the existing cabinet of people that he’s inherited have done a reasonably good job of managing the tariff file so far.
I mean, it’s very difficult when you’re on the other side of the table from Donald Trump, but Trump will do something like say he’s going to put the tariff on car parts and then they’re able to get him to edge back from that and say, “Well, no, if the car parts are covered under USMCA, then that’s okay.” So we’ve been fairly effective at damage control. It’s very hard to win with Trump, but we’ve been fairly effective at damage control. So, I expect to see a fair number of the people that we currently see in cabinet like Champagne and others continue to be there in the future.
Peter Tertzakian:
And what about Alberta? So we have two newcomers. George Chahal was defeated I believe in Calgary and Boissonnault didn’t run again in Edmonton. Now we have Corey Hogan in Calgary and I believe it’s Eleanor Olszewski in Edmonton.
Greg Lyle:
But Hogan, he’s been around, right? He’s a pretty well-known political operative. He has had his own podcast, The Strategist. I would be surprised if he wasn’t the person that got the nod, unless there’s a really strong reason to go another way just because he has the political smarts and he will likely be effective defending the government’s position in Alberta. The other thing that’s interesting is that when you look at the almost one, right, there’s actually several more competitive seats for the liberals in Alberta. I think they’re going to hopes for that as they think about how to get to majority. It is reasonable to hope that you could add three or four more Alberta seats if you had a policy that was defensible in Alberta.
Peter Tertzakian:
What do you mean, people crossing the floor?
Greg Lyle:
No, no. I mean just like in the next election.
Peter Tertzakian:
Oh, right.
Jackie Forrest:
Yeah. So, that maybe they have some incentive to actually do some good things for Alberta. That would be good.
Peter Tertzakian:
I’m thinking about next week, not the next election.
Greg Lyle:
But the nature of politics is that you start thinking about the next election as soon as the other election is over. Now the other point that you raised, and we should just note, is that the government is close enough three seats away from a majority. That one of the things that could well happen in the next couple of weeks is a couple of opposition members being wooed over to join the liberals. Well, the first big moment for that is the cabinet, right? Because the best thing you have to offer someone who’s crossing the floor is a cabinet position. It doesn’t necessarily stop them.
For instance, let’s say that the conservatives end up having a tussle and Poilievre remains in charge, but unrepentant and continues to do the things that people mourn towards the center within the conservative ranks. Don’t appreciate the idea that a couple of them might at the end of the day say, “Screw this, I’m not putting up with this anymore. I’m going to go over to the liberals.” It’s a real possibility. Then you’ve got a four-year government.
Jackie Forrest:
So lots of surprises may be still on the horizon, although it is not that common to see that crossing of-
Greg Lyle:
Yeah, it doesn’t happen all that often, but it does happen.
Jackie Forrest:
Yeah. Okay, let’s talk a bit about clean energy. That’s one area where they have been quite clear that they support it. So, I’d like to have seen more clear support for oil and gas other than using the term conventional energy. So, we all have to wonder exactly what they mean by that. But clean energy was actually mentioned seven times in the liberal platform. They were very specific that they’re going to keep and strengthen many of our clean energy policies, whether they be the investment tax credits or keep the Canadian Growth Fund and even make our manufacturing incentives more competitive with the Americans. It was noteworthy actually that Mark Carney mentioned the Pathways Alliance project during the debate specifically.
So, just a bit of a discussion. I was looking at the situation, Peter, on the US side of the border, we’ve really had been behind. It’s been hard for us to compete for clean energy investment because the investment tax credits were so generous, it made it tough to get the same return here in Canada. Could we see a turning of the tide here where it might look better to invest in clean energy in Canada because we’ve got a bit more policy certainty now? I know it’s a minority government, but the policies are mostly in place. In America, while they still have the IRA, there’s a lot of belief that that’s going to change here over the course of the next year.
Peter Tertzakian:
Whereas I think we have a little more certainty with the election behind us and some of the policies to be more clean energy focused, maintained. I still think we’ve got a long way to go before it cleans up. What I mean by clean up, I said it in prior podcasts, we need to address this issue of the fractured carbon markets, the layering pancaking chaining of policies at a federal provincial level. It’s still too confusing for enough capital to come in to make a big difference in my opinion. Now, as I said, it’s nice to get the election out of the way, but I think there’s a lot of work to be done with Mr. Carney’s new cabinet to figure out how we can stimulate the investment not only in things like infrastructure, like pipes and wires, but in the clean energy technologies that are adjunct to those.
Jackie Forrest:
He has talked about strengthening the industrial carbon tax, but also creating more linkages amongst the various carbon markets that we have and getting rid of the volatility and the oversupply. So, hey, maybe there’s something to come there. Let’s talk about the project approval process. He is talking about shortening approvals on major projects from five years to two years and moving to one project, one review, which he has talked about targeting six months to get this one window set up with the provinces. So, that a project proponent can come and have one process and not have to go through various layers of government. Now going from five years to two years, we talked about this on our last podcast. That sounds good.
However, the Conservative Party of Canada talked about six months and that sounds even better. What does the industry think? Well, we don’t have to wonder because shortly after the election, almost 40 CEOs from the energy industry wrote a letter to Mark Carney that said it had five points of things he needs to do to get money flowing back into the sector. In fact, the title of the letter was Build It Now: An Urgent Action Plan to Strengthen Economic Sovereignty. They wanted to kill the oil and gas emissions cap, which was importantly was not mentioned in the liberal platform. But Carney has told the press he would put it in. They want to repeal the federal carbon tax.
They also said that two years is positive but insufficient and they need the six-month timeframe to get the capital flowing back into Canada. So, what are your thoughts on that? Do you think that Mark Carney is going to be flexible to make some adjustments to what he put out in his platform?
Peter Tertzakian:
Well, I think we’re going to have to also wait and see Danielle Smith’s response, which is again, we have to timestamp our podcast. We’re recording early afternoon on May the fifth, and she’s going to give an address at 3:00 and see what she has to say as well in this regard because it’s not just what the industry says. It’s really what the province has to say. Greg, maybe over to you, what do you make of the federal government as it relates to government of Canada versus province of Alberta relationship?
Greg Lyle:
Well, I think that that’s a podcast in and of itself. Bringing in the separatist rhetoric is definitely taking the whole issue and putting it on boil. That doesn’t always play well for Alberta and the rest of the country. It can come across as a bit petulant, which isn’t necessarily helpful. So, we’ll have to see how that plays out. I think one of the issues that I would just flag in this whole discussion about the two levels of government working together and making cleaner approval processes, I think that you can do a lot of that without necessarily rewriting laws. So, through cabinet order, you can change criteria for project to get review. You can have agreements on a project by project basis to have certain projects dealt with at one level of government rather than the other level of government.
If you think about the many incremental pipeline projects, put aside an Energy East like proposal for a moment that clearly would require federal government approval because it goes across multiple provinces, there are lots of smaller pipeline projects that could just be delegated to Alberta to approve that would increase transportation capacity within the sector. So, there’s potential to expand even more the Trans Mountain Pipeline, although at the moment it’s not even at capacity. So, I would come back to the issue of the emissions cap. I mean, how do you go to shareholders and say, “We want to invest more in oil and gas production,” when you don’t know if you’re going to be able to actually fully implement it because you may be limited by the emissions cap?
So I think that issue is going to have to be dealt with pretty quickly. I think it’s going to be a hard one for the Prime Minister because he has such a broad coalition. So, we break Canada into six different value groups and there’s only one value cluster he didn’t win in. That was the populist conservatives. Even among deferential conservatives, like the old PC party, the Brian Mulroney type conservatives. The liberals did very well and he was seen as the better prime minister than Poilievre. Then right across though he got twice as many votes among people that have social democratic values as the NDP. Those people are deeply committed to things like energy transition and fighting climate change. So, that emissions cap issue becomes challenging for him.
One of the reasons why I’m relatively bullish on clean energy is having a strong clean energy agenda provides some insulation, the counterbalance to being able to do things like say we’re not going to proceed with the emissions cap, which I think is going to be pretty important to convince markets that it’s a safe bet to bet on Canadian oil and gas.
Jackie Forrest:
I have one grand compromise, which is pretty obvious to me is if they go ahead with the Oil Sands Pathways project, that will really reduce the damage of the oil and gas cap. I wouldn’t say we’d still want it, but it will be less of a problem in terms of reducing production levels overall because that will take a lot of emissions out of the system. So, maybe that could be something where the Pathways is supported by the federal government and that allows the oil and gas cap to have less impact.
Greg Lyle:
Well, I think the other thing that’s frustrating is I can’t ever recall hearing someone from Ottawa acknowledge Alberta’s success in moving off of coal well ahead of schedule with the reduction of emissions that came from that and the success of the industry in reducing the methane emissions, which has been very significant. I think it would go a long way if the Prime Minister were to recognize that Alberta has actually done quite a bit. If you look at where emissions have been reduced in Canada in the past five years, most of the major emissions reductions have come from Alberta.
Jackie Forrest:
Well, if you look at the oil and gas cap, if you just reduce methane in line with this goal of 75% reduction by 2030, which is another policy and you do the Oil Sands Pathways, you pretty much achieve what the oil and gas cap was trying to achieve. So, you don’t need it if you go ahead with both of those-
Peter Tertzakian:
The thing is that most people don’t understand. This is I think a challenge to the Prime Minister is how to tell the story that the emissions cap is actually layered on top of an alphabet soup of policies, GGPPA, CER, CFR, and the list goes on at the provincial levels and then the methane regs. It’s just like one thing on top of another, on top of another, on top of another that just complicates matters.
Greg Lyle:
I mean, what I love about this is that you could now have a conversation with people like Tim Hodgson and the Prime Minister of Canada, and they would understand what you’re saying. Actually, they have done due diligence on people making energy investments. They understand pancaking. They understand you can describe the problem and they will immediately understand it. If he is serious about reaching his goal of economic growth and if he’s serious about being seen to make big changes, then that is an obvious area where the average person really has no idea what’s going on.
There’s very little stickiness to that issue in terms of public. So, he could clean house in that area. He could re-engineer the whole thing and the public would not really know the difference and it could make a big difference for the sector.
Peter Tertzakian:
I think you’re right. I think that is the challenge is to do that because there’s a lot of cleaning up to do.
Greg Lyle:
Well, just the one thing I would watch for is that he’s talking about three different priorities in terms of dealing with the United States, fight, protect, and build. So, protect is basically programs that we do to help auto workers that are laid off, whatever. We have an infrastructure for that. We have an understanding how to deal with that from COVID. That’s something that the existing ministerial team can deal with. The fight, we’ve been doing okay with that. He’s got lots of ideas of his own. We have a pretty good team for that. What I’m looking for is who’s his build team?
If you think about fighting and responding to Trump as today’s issue, building a stronger Canada is tomorrow’s issue. If you have the same people dealing with today’s issue and tomorrow’s issue, today always wins. But if you have a team focused on tomorrow and a team focused on today, then you have a real chance of making a difference. That’s where I think who gets into the economic portfolios. I hate to keep coming back to Tim Hodgson, but he’s just like unique among elected people.
Peter Tertzakian:
Can you just for our audience who don’t know Tim Hodgson, give us the thumbnail of who he is?
Greg Lyle:
Sure. So, he’s trained as an accountant. He spent the past few years as chair of Hydro One in Ontario, which is a partially privatized electricity utility that runs almost all the transmission in Ontario and also runs a quarter of the distribution. I think he’s on the board of teachers, if I recall, on one of the big pension funds in Canada. So, he’s basically a capital markets guy who is very familiar with at least the electricity side of energy.
Jackie Forrest:
Okay, and understands how all of these overlapping policies could be a barrier. Well, let’s talk about this LNG. You said natural gas might be more interesting, but we didn’t even see LNG mentioned in the liberal platform. I’m not sure I’ve heard Mark Carney even mention the word LNG or natural gas. He’s talked about conventional energy. We all have to wonder what that is, but I actually think there’s a good argument why he would support LNG. I think there’s greater public support in general for energy infrastructure.
I’d like to get your opinion on that, Greg, but also there’s this argument about natural gas being cleaner than other sources and our gas being cleaner than American gas and reducing the use of coal in China. So, just some thoughts, Greg, on would those two arguments help win the day so that he could navigate concerns around climate with trying to grow the economy?
Greg Lyle:
Well, I mean, even the David Eby government has become more bullish on natural gas development and they’ve been open to the incremental projects that are on deck in BC. It’s hard to imagine that the federal liberal government wouldn’t go arm in arm with the Eby NDP government to take advantage of that opportunity, especially when your goal is to grow the economy and to diversify our exports offshore. To that regard, I think that the recent trips that Danielle Smith did could be helpful in that regard. I’m curious to what degree, and I guess we’re going to hear very shortly that that came up in her conversation with the Prime Minister and that she’s encouraged by that. But I think the door’s wide open to more of that work.
I know that there’s going to be resistance from environmental groups who are concerned. One of the things I’m wondering about is the Prime Minister has talked about federal budgeting as a capital budget and an operations budgeting. It’s going to be tough on the operating budget, but he’s going to increase spending in the capital budget. I’m wondering to what degree he’s prepared to take a similar framework to emissions and say, “If we look at domestic emissions, Canada’s committed to be a leader and continue to bring those domestic emissions down.”
But when you think about energy exports, we want to look at the impact of our exports in the world and ask ourselves, if we don’t meet that need, is the alternative going to create more harm than our supply would? I think for most cases, the answer is 100%. If we don’t supply our natural gas to the world, if we don’t supply our oil to the world, the alternatives are very likely to be worse for the environment and quite possibly end up generating funding that supports oppressive governments or actually aggressive governments that are creating national security issues around the world.
Peter Tertzakian:
So what does the latest polling say on that? As I understand, you’ve done some recent-
Greg Lyle:
Yeah, the polling on infrastructure is up on everything. A really good example of this is support for oil pipelines. So, across the country as a whole, there’s now more than 20% more people that support than oppose oil pipelines. If you think about times like the Kalamazoo spill, support for oil pipelines was negative, but it’s never been higher than we’ve seen right now. Even in Quebec, there’s 10% more people that support building more pipelines, more oil pipelines in Quebec today than there are Quebecers opposed to it. Arguably, there have been times in the past where Quebec residents have been open to the argument, but the leadership in Quebec has had the point of view that it’s a no go. So, they wouldn’t go there regardless of the polls that they saw.
We now see that the elites in Quebec are willing to talk about it. That doesn’t necessarily mean that at the end of the day, there’ll be a business case for it, but the fact they’re open to it now. One thing that I’m watching for is when will the elites in Ontario and Quebec understand that the vast majority of the oil they get, almost all the oil in Ontario comes through the United States, and that if we want to play silly beggars with the Americans cutting off our supply of oil to them, they can shut down the Ontario economy within weeks by shutting off the oil. You just have to look at a map. That’s like not a state secret. You can see where the oil goes. So, for some reason, the rest of Canada hasn’t totally woken up to that. We’ll see if and when they do. But I still think when you look across the board, it’s never been a better time to propose a fossil fuel energy project in Canada.
Peter Tertzakian:
Can you just expand on elite? Who are they? What do you mean by elites?
Greg Lyle:
Media commentators, elected officials, think tank people. You see more and more comments now in the media panels, all the rest of that about the idea that Quebec might be willing to accept new pipelines. In the past, they would just say that it was a no-go, that you couldn’t talk about. It wasn’t doable. Even the premier of Quebec has opened the door to that discussion, although he’s not embraced it.
Jackie Forrest:
Well, Greg, well, it’s good that they’re open to infrastructure. I would just say I don’t even think we have to worry too much about building pipelines through Quebec. I think we should focus on these LNG projects. By my count, when you look at the projects that are being developed by private capital, Carney made a comment on Friday about for this big building thing, biggest since World War II, there’s going to be some public spending here. You don’t need public spending. You just need to show these proponents of these projects that Canada’s, as you were saying, Peter, open for business, that Mark Carney will support these projects and help pave the way, speed things up, get it done.
Four BCF per day of potential exports of LNG that we don’t have on our map today, that’s incredible. We only produce about 18 BCF per day of gas. So, an additional four BCF per day, that would be tens of billions of dollars of investment. I think that could be done well before 2030 and we should get it done.
Greg Lyle:
Well, and if you had made that same point to the previous Prime Minister, I’m not sure we would’ve understood the value of leveraging private capital over public capital and how that frees up the public capital to do other things. But I don’t have any doubt at all that Mark Carney would be all ears to that. If he knew that he could get closer to his goal of being the fastest growing economy in the G7 just by getting out of the way of the private capital that wants to deploy and you’ve got a provincial government in BC that is more open to that than they’ve been for several years.
Again, not counting our chickens before the hatch, but it’s all lining up quite well. I mean, the one thing I would just flag for everyone is that none of these projects happen without working with indigenous communities and the six-month deadlines, things like that when you’re talking about indigenous communities, if they’re on the proponent side, well, then that’s a doable thing. But if they’re not on the proponent side, I don’t think we’re getting six-month approvals. I would just flag though that on the referendum file earlier in the past couple of days, there was some initial pushback from indigenous communities. I thought the Premier was very quick to make the case that they have their own relationship with the federal government and that she is not challenging that in any way.
I think that’ll be a good refresher for her that when she’s talking about deadlines and processes, that we’ll likely get ourselves into a process fight if we start trying to put deadlines on the indigenous exercise of constitutionally protected rights. That’s just not a productive place to go. The right place to go is try and find a win-win deal that works for everyone, do it with projects that are well-engineered, well-considered, with appropriate mitigation and make sure that governments in their processes proceed speedily.
Jackie Forrest:
I think there’s a compromise there too though, Greg, I think one of the biggest issues with the industry is this political decision that comes at the end of the process. So, maybe you could have that political decision upfront and then the consultation could take a bit longer, take the time it needs to take to ensure that all of the consultation is done in the right way. So, hey, maybe there’s a way we can do it.
Greg Lyle:
I 100% agree that if you look at, for instance, how the theory of electricity planning in Ontario is that the provincial government sets up a plan that says, we’re going to build these types of things, and then the regulatory bodies determine which of those types of things get done, so the regulatory decision and the political decision are separate. So, the issue here is that the government has a fiduciary duty to First Nations on these infrastructure projects.
If the government can simply say, we have an export goal, for instance, that we want to increase the amount of natural gas exports by X amount and so pipelines that enable that, that have been approved by the CER will be approved by us, that type of policy, that all works. They just have to be very clear that they don’t do something that is interpreted the wrong way in terms of their responsibility to protect the constitutional rights of indigenous people.
Peter Tertzakian:
Well, Greg, it’s always a delight talking with you. I think we need to wrap up here very quickly, but maybe we can just ask you one more question about CCS, carbon capture, and is there any polling or what are any insights you have on that?
Greg Lyle:
Yeah, CCS is a very popular thing. I mean, you could see it in frankly, the conservative platform, right? The conservatives said technology, not taxes. That is what Canadians are looking for. They take the issue of climate change seriously. That hasn’t gone away. It’s just that they put priority right now on economic security. So, if there’s a trade-off and they have to choose, they choose economic security, but they would like both. They see technology as a way to deliver that. Again, as I mentioned before, you even have ministers that have been skeptical in the past, like Jonathan Wilkinson saying, “This is a proven technology. It will work. This is a good thing for us.”
Peter Tertzakian:
Well, wonderful talking with you. Thanks a lot, Greg. At the beginning of the podcast, we said we needed to phone a friend to try and decode our political fortunes in this country. So, thanks for helping us. I learned a lot as I always do talking with you. So, Jackie, I think we’ve decoded some of the election, energy policy, and what to watch for going forward. Thanks very much, Greg.
Greg Lyle:
Thank you.
Jackie Forrest:
And thanks to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
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Electricity Demand, AI, and Market Reform: A Conversation with John Kousinioris, President and CEO TransAlta
This week, our guest is John Kousinioris, President and CEO of TransAlta, one of Canada’s largest power generators. TransAlta owns, operates, and develops a diverse fleet of electrical power generation assets in Canada, the US, and Western Australia, producing electricity from renewable sources and thermal generation.
Here are some of the questions Jackie and Peter asked John: What are the reasons behind TransAlta’s merger with TransAlta Renewables? What are your expectations for electricity load growth in North America, and how will AI data centers impact demand? Does TransAlta have plans for new investments to meet data center demand? Are there risks to electric system reliability due to fast data center growth? Are there supply chain bottlenecks for new generation projects, and do tariffs compound the issue? What are your perspectives on Alberta’s plan to redesign its electricity market? Do you see merit in building an east-west electricity grid in Canada?
Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/
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Episode 282 transcript
Disclosure:
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.
Announcer:
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:
I’m Peter Tertzakian. Welcome back. Well, we have to timestamp again this podcast. It is April 28th, 11:45 AM Mountain. It is election day, so we don’t know obviously the results. It’s a very exciting and consequential day and we will talk about the election next time, when we convene, Jackie and I, we’ll run through it. You’re going to find out before we finish this podcast, right?
Jackie Forrest:
Right. By the time you hear this, the results will probably be out because we’ll release this on Tuesday. We will be talking about it once the dust has settled next Tuesday podcast.
But today, I wanted to talk a bit about the power markets and there’s a few updates. Remember when we had Duane Reid-Carlson on the podcast, Peter, on March 25th? We explained the negative feedback from stakeholders on Alberta’s proposed changes to the electricity market. There was some real concerns there.
Peter Tertzakian:
Yeah.
Jackie Forrest:
I have some good news to report. As far as I know, the AESO has announced they are going to make some changes to the design. They’re going to push the back date back a little bit, in terms of when they’re going to finalize it. However, they are still planning to bypass the Alberta Utilities Commission in reviewing the design. But still, positive that there have been some changes proposed.
Also, one other piece of news that’s related. On April 10th, Bill 52, Energy and Utilities Statues Amendment Act. This bill allows the AESO to make changes directly to the electricity markets without a regulator.
Peter Tertzakian:
Okay. Well, we can talk more about that. In fact, we can talk more about electrical power. Why don’t we? I’m delighted to introduce our guest, who is none other than the President and CEO of TransAlta. John Kousinioris, President and CEO.
Welcome, John.
John Kousinioris:
Thanks so much, Peter and Jackie, for having me.
Jackie Forrest:
Yeah. Lots to talk about in power markets across Canada and the US. But first, let’s start about TransAlta. I think almost every Albertan knows your brand name, it’s on a lot of things in this province. Just tell us a bit about the company. I just noticed you’re over 100-years-old, so that’s unusual.
John Kousinioris:
We are. I’ll apologize a little bit in advance here for my voice, I’ve been struggling a little bit with it.
Our story is a company is really largely the story of the province in terms of development. We began with our Horseshoe facility, which is a hydroelectric facility on The Bow just west of the city of Calgary in 1911. Actually, before the Stampede began, we just beat the Stampede in terms of timing. We’re a 114-year-old company, began initially as Calgary Power. Over the years, have diversified into all different types of generation and have grown as the province of Alberta has grown.
Our evolution, especially over the last 20 years or so, has been pretty significant. I would say, Jackie, not just in terms of the change in generation mix that we have, but also in terms of our environmental footprint. I often reflect and it’s amazing, if you go back to 2005, 2010, our company was probably responsible for about 5% of Canadian emissions, CO2 emissions in aggregate. A pretty significant footprint. Roll forward to us today for a bunch of reasons, largely due to the evolution of coal generation towards gas, that footprint is down about 70% from what it used to be. We often muse about this, but our company’s actually contributed about 10% of Canada’s Paris commitments, in terms of a decarbonization target. That’s been interesting to do while ensuring that we’re contributing to affordability and reliability of power in the province. It’s a great history.
When I think back to the early foundations of the company, people like R. B. Bennett, and Lord Beaverbrook, and even A. E. Cross, names that I think if you’re a history buff, especially somebody that knows this part of the world, are pretty big names. Characters and individuals that were really foundational to where we are today. It’s really, really great.
Peter Tertzakian:
Yeah. Well, Jackie, when you first said 100-years-old, I thought you meant John was 100-years-old.
John Kousinioris:
That’s how I feel. That’s how I feel.
Peter Tertzakian:
But, no, it’s an amazing history.
Why don’t we just rewind back to 2013? When TransAlta had originally spun out the renewables business, but in 2023, you reacquired it. Why did you decide to reverse the decision to bring in the renewables into the power business, into your power business?
John Kousinioris:
Yeah, I actually joined the company in December 2012, so it was actually the first major thing that I worked on, Peter, in 2013. At the time, TransAlta had a number of contracted assets. It wasn’t just renewables. People often forget about TransAlta Renewables was probably about 40 to 45 percent natural gas fire generation, but it was contracted generation. These were assets, they were probably somewhere in the range of just under 30% of the EBITDA let’s say of the company, highly valuable, highly reliable. We had very predictable cashflows.
The parent company heavily into coal fire generation. We just commissioned a coal plant in 2011 expected it to run well into the 2060s. Probably carrying a bit more debt at the time, a higher dividend. It was a way to actually try to surface value on assets that were hidden. And also, to set the stage to de-lever essentially the parent company.
Peter, to your point, roll forward 10 years and a lot of those things were actually done. We were essentially well on the way to … Well, we had actually stopped essentially coal fire generation in Canada. In terms of growth, the strategies of the two companies had begun to converge. We were looking at renewables and gas for both the parent company and for TransAlta Renewables. The parent company had de-levered pretty significantly. We had readjusted our dividend rate. You actually had a complexity in our capital structure with converging strategies with a yield co that had a growth imperative, but also a high payout ratio in terms of what its dividend was.
Given the scale and size of the company, it made sense to put the two together and just simplify who we were. And essentially bring the family back together again, which is what we did at that point in time.
Peter Tertzakian:
Yeah, because also, you got brand confusion and all those sorts of things under the same corporate name.
John Kousinioris:
We did. For a company of our scale and size, I would say, Peter, it made us more complex for people in the capital markets to actually assess. It’s one thing if you’re a $50 billion market cap company, people will do the work. But if you’re not that, it’s just harder, just being honest about it. Simplicity I think had value.
Jackie Forrest:
Greater market cap. Now your footprint is beyond Alberta. Maybe for those that don’t know, tell us a little bit about where you have generation assets and other types of businesses.
John Kousinioris:
It is. We’ve got 88 facilities and they’re scattered in three different countries. Canada, the United States, and Australia. In Canada, we’re in Alberta, British Columbia, Ontario, Quebec, New Brunswick. In the US, Washington State, Wyoming, Michigan, Pennsylvania, I’m just giving you a flavor, New Hampshire, Massachusetts, North Carolina, Minnesota. Then in Australia, we’re in Western Australia where we’ve been operating for I think it’s approaching 25 years now in that jurisdiction.
Quite a mix of generation, I would say. We have hydro, gas fired generation, wind and solar generation, so quite a mix of facilities. About 35 wind facilities, 25 or so hydro facilities, and the balance would be natural gas fired generation scattered in the country. Quite a bit of diversity.
Jackie Forrest:
Like you said, you have 88 generation facilities. How big is Alberta in part of that? Is it still the majority?
John Kousinioris:
Alberta is, in terms of the installed capacity, around 58%, so just under 60% of the total installed capacity. And about 70% of that would be merchants. Our contracted business is largely outside of Alberta. Our more merchant-exposed business would be in the province of Alberta. Rather than looking at the actual megawatts, we tend to think in terms of where does our EBITDA come from. Alberta would be just less than half of the EBITDA of the company. Then the rest of the world, if I can use that expression even though it’s Canada, would be the rest. It’s probably that rest of the world, if I can call it, that’s actually growing more rapidly than certainly the intra-Alberta businesses.
Jackie Forrest:
Right. We’ll talk a bit about Alberta as well.
Peter Tertzakian:
All the buzz last year was about AI, and data centers, and the growth. That was only displaced by tariff chaos, which we’re still somewhat experiencing. But the AI story certainly hasn’t gone away. Jackie and I on the podcast talk extensively about the fantastical numbers behind the electricity load growth in data centers. Three, four months have gone by since the whole Trump election and the tariff chaos, as I call it. Where are we at in terms of the whole data load growth expectations, both here in Canada and in the United States, and more broadly?
John Kousinioris:
It’s a super fascinating question, Peter. Look, I’ll digress for 10 seconds. What a lot of people don’t realize is if you go back about 20 years ago, we were actually, because of efficiency and whatnot, actually seeing load per capita, or the amount of consumption that people were using on an individualized basis actually decline over time, only to see that level up. And now, move into a place where you’re seeing higher growth.
I would say traditionally, certainly in the Canadian context and in Alberta for example, one, one-and-a-half percent a year growth wouldn’t have been a bad number in terms of a longterm average. What we’re thinking of now … Look, we do a lot of fundamental forecasting internally in our company. It’s up quite a bit, so we’re thinking two, three now, and that excludes data centers. Just in terms of efficiency measures, general economic growth, population growth, and depending on the jurisdiction you can see that nudge to four. In fact, I think load growth last year, so 2024 globally, was 4.4%. A pretty big number. That wasn’t a North American number, but it’s a pretty big number to deal with.
Then that would be excluding data centers. If we put data centers into the mix … And I agree with you, Peter, there’s been a lot of fantastical, I think is the only way to describe it, numbers that you hear from people. You could see anywhere, if you look at forecasting and let’s just take them at face value, you could see data centers going from effectively a very small component of load today to something in the 10 to 15 percent rage by 2030 timeframes if people are correct. That would be not just in Canada, but in the United States.
Just to give you context of what that means. We’ve seen forecasts of load growth for data centers alone anywhere between 40 gigawatts to 100 gigawatts by a 2029, 2030 timeframe. Imagine building 50 to 100 large-scale nuclear facilities. Think of a gigawatt as a really large nuke. I don’t know how you do it. We can talk about the supply chain too during the call, because I’m just being a realist, I’m not sure how you do that. But even if you cut it in half or cut it by two-thirds, it’s still a huge number and a number that is going to take a lot of work. Both from industry, customers, and frankly regulators to be able to meet the need for it. It’s that grim.
Peter Tertzakian:
Yeah. If we say a nuke is, okay, a gigawatt.
John Kousinioris:
Call it a gig. Call it a gig.
Peter Tertzakian:
If you need 100 gigawatts, it’s 100 nuclear plants. The average natural gas fired power plant is typically, what, a third of a gig, right?
John Kousinioris:
Sure.
Peter Tertzakian:
It’s 3, 400 megawatts?
John Kousinioris:
Call it 400 megawatts, just to make it simple.
Peter Tertzakian:
The equivalent number would be then 300 equivalent natural gas fired power plants, which is just huge.
John Kousinioris:
Let alone setting up the wires to move the power around effectively from the way that you need it done. It’s easy to put out the numbers, you know what I mean, Peter?
Peter Tertzakian:
Yeah.
John Kousinioris:
When you break it down to what it actually means, it’s staggering.
Jackie Forrest:
Yeah. Well, here, just for example, in Alberta there’s something like 12 gigawatts of projects in the AESO load queue, which is the equivalent of our average consumption for the year if they were all running.
John Kousinioris:
It’s peak, actually.
Jackie Forrest:
Yeah, peak.
John Kousinioris:
That’s peak.
Jackie Forrest:
Yeah.
John Kousinioris:
Yeah.
Jackie Forrest:
I know that’s not all true. Now I know TransAlta has some projects as well in that.
John Kousinioris:
We do.
Jackie Forrest:
Maybe you could talk a bit about those. But also, as an Albertan, we’ll get into the Alberta power market, I’m getting concerned about are the right incentives going to be there with this new design for people to invest. Meanwhile, we have maybe some of this generation being moved over to serving data centers. What does that mean for the reliability of power in the province?
John Kousinioris:
Yeah, we could probably spend I think probably three hours on this one alone. I’m going to try to break it down. Look, we can just chat it through.
It is a tremendous opportunity for companies like ours and the province, we’re focused on our Keephills facility in particular as being a center where we would have data centers come in. When you think of natural gas, speed to power is critically important. There’s existing infrastructure in Alberta that is under-utilized now, and that includes a number of our facilities that maybe 10 years ago would have been running call it 80% of the time, and now we’re running call it 30% of the time. The ability to repurpose some of that to meet incremental load that comes in I think is probably a first place that we should be looking at when you think about reliability going forward.
But Alberta’s blessed with good temperatures, a good workforce. We’re long power right now, generally speaking. We’re blessed with plentiful natural gas supplies that are, from a North American perspective, very well priced. And we have a government that is supportive, generally speaking, of moving it forward. There’s a lot of work that’s being done. I know sometimes there’s some patience with our investors of, “Why can’t you do it in a week or so?” It does take a lot of time to get it done. But I would say the broader environment in the province of Alberta is a very good prospective one for data centers, when you think of it going forward.
But we do need to do it thoughtfully. 12 gigawatts, I don’t know how we do it. Peter, just going back to the conversations we were having on the build required, not sure how you do that. I’m not sure it’s all real, candidly, because it doesn’t take much to put an application and get in the queue. I think they’ll come. Then I think there is an amount that I think you can bring in using existing generation that maintains reliability of the system. The AESO is doing that work now, we’re looking for them to confirm that next month actually, in May.
Our view is it’s probably some number less than two gigawatts that you can bring in and manage. Think of it as one-and-a-half to two, given transmission and reliability constraints. Then thereafter, you’re going to need to be thoughtful about overall reliability on the system. To get the kind of reliability that a lot of these data centers are going to need, I think they will be looking to grid interconnection, so you’ll have generation that will be onsite to supply them that tier four 99.999 that some of them may need. Having the ability to backstop 5%, 10%, whatever your needs are, off the grid is important, so being thoughtful about that. Being thoughtful about what it means to pricing in the province, and reliability is going to take a little bit of work for sure.
Peter Tertzakian:
Right. Just to elaborate on that, a lot of these data centers are proposing to have a dedicated, say natural gas fired power plant.
John Kousinioris:
Right.
Peter Tertzakian:
That is not connected to the big transmission lines, in other words the grid. But that your power from TransAlta would be fed into these data centers as backup and at times, to provide that 99.999% reliability that they need over and above their dedicated power plant.
John Kousinioris:
That is right. When I think of our proposal and the way we’re thinking of it, Peter, our facility would be able to go both ways. We’d be able to supply chain the data center, and if for whatever reason there was excess, our ability to excess generate power beyond their needs, we could put it onto the grid to supply things that way. But I think you’ve described it very well.
Jackie Forrest:
Okay. Another constraint to this whole thing will be at some point, not just here in Alberta, in every jurisdiction, you’re going to need some new generation to serve all of this load.
John Kousinioris:
You will.
Jackie Forrest:
We understand that it’s very hard to get natural gas generation equipment because there’s long lead times and they’re sold out. On top of that, I think tariffs are probably complicating the whole situation. If you import equipment from China, it got a lot more expensive. If you’re in Canada and you’re bringing in some goods from the US, they suddenly have tariffs potentially on them. How are tariffs impacting that? The situation was bad before, but are tariffs making it worse?
John Kousinioris:
On the tariff piece, I think there’s really two pieces there. We actually do export power into the US, so there was initially a concern about tariffs just impacting power flows between the two countries. That doesn’t appear to be a major issue, it being more of a service than an item, a good. Right now, I think that’s less of an issue.
Your point on the supply chain is exactly right. If we’re building a wind farm, I just think of the wind farms that we just built in Oklahoma for example, we had components that were coming into the US there that were made in the US, in Mexico, in Belgium, in Denmark. In the past, having blades coming from China or other parts of Europe weren’t uncommon. Gas fire generation, we would be typically, for example GE, looking at US supply for that. Steel can come from both sides of the border. We do get a lot steel here, produced here in Canada. But then, there’s breakers, and transformers, and fuses, all of those kinds of things.
There is a lot of uncertainty right now. It makes it very hard to plan. It makes it very, very hard to price. I would say it’s compounding a tight supply chain to begin with. I’ll give you a sense of what that looks like. You used to be able to get a transformer, say in 50 weeks. You may now need 120.
Jackie Forrest:
Wow.
John Kousinioris:
The price of the transformer has gone up 60 to 80 percent. If you need a high voltage transformer, you won’t get it in 120, you may need 200 to get it. It could take four years for you to get the transformer, a 500 kV. Copper prices are up. Electrical steel prices are up pretty dramatically. You used to be able to reserve your slot from a manufacturing perspective, including for turbines. Hard to do that now. They want firm commitments, you’re going to have to actually make a financial commitment. You may need to prepay 30% of the price of that today to make sure that you’ll be able to get the hardware that you need, call ti two to four years from now, to be able to get something done. Then you add to that the vagaries from a tariff perspective, it’s hard. It is super hard.
Peter, going back to the discussion on data centers, imagine building out those kind of … Very difficult to do. It’s just a practical matter.
Peter Tertzakian:
Yeah.
John Kousinioris:
Very, very challenging to do today because everything is elongated. It’s hard for the supply chain to respond.
Peter Tertzakian:
Yeah.
John Kousinioris:
Just being straight up about it.
Peter Tertzakian:
Yeah. Even steel prices for transmission towers, and all that stuff.
John Kousinioris:
All of it is up. If I go back five years ago, we would often talk about a million-and-a-half dollars a megawatt, rough price, Canadian. It didn’t matter what the generation type was. Honestly, whether it was solar, or gas, or wind, broadly the same. 100 megawatts would cost you call it 150 million. It wouldn’t surprise me if that’s 300 million today. That one-and-a-half in a relatively short period of time has gone to three million a meg. Depending on what you’re doing, it can easily nudge up well beyond that. We’ve seen some projects being proposed that are more in the four range.
The power prices you need to basically justify a return of a non-capital and justify doing that project, they’re higher. It’s harder to get that.
Peter Tertzakian:
Yeah, yeah.
John Kousinioris:
I’m not even talking about transmit. I just wanted to give you a flavor of what that … Now, they might come down as we get through this supply chain issue that we’ve got. But if you assume the load growing the way that we’re talking about it growing, I think we’re in this for quite some time in terms of tightness.
Jackie Forrest:
Well, you talked about you have to make decisions early, but with all these tariffs-
John Kousinioris:
Hard to do.
Jackie Forrest:
… that may or may not be there, how can you make decisions?
John Kousinioris:
Very difficult to do.
Jackie Forrest:
Because you’re like, “Maybe I wait six months and there isn’t a tariff.” It puts everything on hold, doesn’t it? Yeah.
John Kousinioris:
It’s hard for our customers too, because they’re trying to figure out what they’re pricing is going to be as well. It’s challenging, no question.
Peter Tertzakian:
Yeah, I think there’s going to be a data center reality check coming here at some point. Because these things compete with the ability of people to turn the lights on, or turn the stove on, or the hairdryer, or whatever. Having even talked about electric cars, because they’re still growing in the background.
John Kousinioris:
They are.
Peter Tertzakian:
There’s just a sense of unrealism.
Let’s migrate to Canada here, or bring it home to Canada, and talk specifically about the opportunities here. What are you seeing in the different provinces and what’s underway? There’s some nuclear in Ontario.
John Kousinioris:
Yeah.
Peter Tertzakian:
There’s renewables in Quebec here or there.
John Kousinioris:
Yeah.
Peter Tertzakian:
What’s going on?
John Kousinioris:
It’s interesting. When you look at Canada, you can go west to east. You look at BC, they’re going to be short power. You look at Saskatchewan, they’re going to be short. Manitoba’s going to be short. Ontario’s short. Quebec’s going to be short. Look, you look at Manitoba and even Ontario and Quebec, BC, jurisdictions, Crown corps generally, or significant Crown corps in the markets, with a lot of hydro, just blessed with all these great resources. There is a sense that some of their needs from a supply perspective are going to be and are being met by calls for power, contracted, arrangements through RFPs and whatnot going forward. We are seeing growth across the country in pockets and in areas where traditionally the Crown corporation would have done it by itself just given with the capital requirements are. There are opportunities.
We are both jurisdictionally I would say and technologically agnostic. What we care about is returns. How competitive are processes? We actually don’t have a lot of contractual arrangements with government entities. Most of our customers, it’s either the wholesale market or it’s really industry. Commercial and industrial players that we serve, so it’s a little bit different. Our team looks at these opportunities and we consider whether it makes sense for us to participate in them or not. But I don’t see us right now, just meaning for our company, focused a lot on meeting the Canadian RFPs that we’re seeing. We’re more focused on the Western US and some of the opportunities that we’re seeing in Western Australia. In part because our near-term growth opportunities which were in Alberta, we’ve paused because some of the uncertainty around the market redesign. It’s just very hard to be building in this market right now, pending a bit more clarity in terms of how things are going to go.
We are focused a little bit more outside of our borders. Look, the US is a huge market. The opportunity set is significant, and candidly significantly bigger than ours as a country. There are opportunities for sure and I think we’re going to see more of them over time as things get tighter.
Jackie Forrest:
I want to come back to your thoughts on Alberta.
John Kousinioris:
Sure.
Jackie Forrest:
But just before we leave this Crown corp procurements, because they seem like they’re risk-free in that they’re backed by the government versus a corporation, but they’re quite competitive. I know a lot of them have binding prices. When you look at the uncertainty right now, we just talked about it, what are the price of this equipment really going to be?
John Kousinioris:
Yeah.
Jackie Forrest:
Are there going to be tariffs on it?
John Kousinioris:
Yeah.
Jackie Forrest:
We’re going to I guess find out with the election, but there’s concerns around ITCs.
John Kousinioris:
Yeah.
Jackie Forrest:
Now, CBC did clarify on their platform, which by the day did come out after our podcast last week, that they will keep the ITCs. But there was uncertainty around carbon price, is it going to be in our out?
John Kousinioris:
Yeah.
Jackie Forrest:
You can win these bids and then find out-
John Kousinioris:
Coal and electricity regulations, all of it.
Jackie Forrest:
… all your assumptions are wrong, right?
John Kousinioris:
Yeah.
Jackie Forrest:
Yeah.
John Kousinioris:
In fact, we saw it when we saw wind procurement here in the province of Alberta. There was a number of parties that won, but they didn’t actually end up building the projects. They just bid them at prices that were unrealistic and you were unable to get them done. They’re challenging processes, for sure. There are supply chain risks. There’s timeline risks, too. A lot of them have relatively aggressive timeframes to get things done, and permitted, and actually constructed in what is a relatively turbulent environment. Look, they can be very good counterparties and I think you can do well with them, but eyes wide open, there can be challenges as well.
Going in and renegotiating a contract with a government entity if things have gone sideways, I suspect is harder than doing it with maybe a private sector. There’s actually been evidence of that, that it’s just hard.
Jackie Forrest:
Right, yeah. And more uncertainty than ever-
John Kousinioris:
For sure.
Jackie Forrest:
… in terms of these bidding processes.
John Kousinioris:
Yeah.
Peter Tertzakian:
Jackie, first of all, I want to issue you a warning from the jargon police here. ITC, that’s investment tax credit. And specifically, the investment tax credits for decarbonization, things like CCS, carbon capture and sequestration. Indeed, we have to see what the new federal government’s view is going to be on these ITCs because they’re highly consequential.
Jackie Forrest:
Yeah. Also, for clean generation. But it does actually look like the Conservatives are going to keep it, and of course the Liberals as well. I think that one’s a little less risky. Like John brought up, there’s other policies, too.
Peter Tertzakian:
Right.
Jackie Forrest:
Like the clean electricity reg. Yeah, it can affect your costs.
Peter Tertzakian:
I think it’ll depend upon what sort of budget is brought down. But anyway, that’s post-election talk.
Let’s bring it home to Alberta, John. Tell us what’s happening here, talk about the redesign changes the way transmission is charged, all that kind of stuff. Because we are the only deregulated province in the country, all of the other provinces have basically state-owned utilities, like BC Hydro, Ontario Hydro, Hydro Quebec, et cetera, et cetera.
John Kousinioris:
Sask Power, and the rest. Yeah, for sure. I would say our jurisdiction has gone through a remarkable transformation. We went from a period not very long ago, Peter, roll back eight years ago maybe, where we had think of it as 17,000 megawatts of installed capacity to deal with an 11,000 megawatt peaking load. Roll forward to today, it’s more like 25,000 megawatts of installed capacity to deal with a 12,000 megawatt load.
Effectively, because we were the only deregulated market in Canada, if for whatever reason, ESG obligations that companies establish … If you’re, pick a Canadian big bank and you wanted to notionally say, “I’m going to decarbonize my branch system in the province of Ontario,” you would procure to have your wind farm built in Alberta essentially to notionally power that load. Those electrons weren’t migrating to Ontario, by the way, there’s no way to get them there. The build happened here largely. We had a very vibrant … Look, we build wind farms, too. It was a very vibrant marketplace and a lot of things were built.
Now, the build out that occurred in the province had nothing to do with fundamental supply and demand within the province. It was this was the jurisdiction that you built things because it was pretty much the only jurisdiction where you could in a similar sort of way.
Roll forward to today. Look, I think the government is trying to … It’s not just our government, you see it all over the world. People are struggling with, “How do I balance affordability, reliability, and responsible decarbonization in a way that makes sense?” We often talk about a three-legged stool. If one of the legs is broken, the whole thing tips. You got to do it right. Over the last number of years, there was a lot of discussion around decarbonization, not a lot on reliability, and a bit on affordability. Reliability matters.
What’s been interesting is, as the intermittency from the renewable build out has occurred, our systems in many cases are becoming less reliable. It’s becoming more challenging to actually make sure that the lights stay on because, in any given hour, you might see multiple thousands of megawatts of change in supply and you need the system to respond to that. Today, I know I woke up this morning only to see that the grid was down in Spain and Portugal. I’m just like, “Oh my God.” These two countries have big blackouts, national blackouts, which is staggering to see what they’re dealing with.
I think the idea was let’s look at the system we have today and try to address a bunch of different issues. One of which was what is the impact that renewables are having on reliability in the marketplace? How are they, for lack of a better way of expressing it, displacing maybe natural gas fired generation? And making it hard to be economic going forward.
I think what compounds things is a sense that certainly in Alberta, but other jurisdictions are grappling with this. If you just have a spot price for your power, you expect everything to be paid out of that. For example, there is a ton of value in fast-start capability. There is a ton of value in being able to load follow. There’s a ton of value in ancillary services. There’s a ton of value in inertia. All of these constituent components have value. Not all generation can meet all of these things. Natural gas fired generation is particularly good at meeting all of these attributes. Look, we’re one of the country’s largest wind generators, wind is not. It just isn’t in terms of doing all of that. Yet, they’re all basically receiving the same price, if you see what I’m saying.
It is challenging. We’re at a $38 a megawatt I think is what our average price is so far Canadian in Alberta this year and that is challenging. That is not a price that certainly incents new generation in a province like ours. And is a price that at times will be challenging to keep gas in the market to ensure reliability. I think the government’s trying to address that. I think we tend to like simplicity in the province. A lot of the commentary was “it’s too complicated,” and whatnot. Fair enough. But we are going to have to address reliability and make sure that all of the various elements are getting paid appropriately.
One of the things we observe is, over time, the electrons are becoming less valuable and it’s all of the ancillary elements that keep the system working and the lights on that are becoming more valuable. The question becomes how do you ensure that value is recognized and compensated for to make sure that our system works? Not an easy thing to do and not an easy thing to do in a way that is simple. I can’t point to a single jurisdiction in the world, and we look at them. We look at everything from Ireland to Singapore, from Germany to PJM, from the CAISO to ISO New England, everywhere to see every jurisdiction has challenges and every jurisdiction has limitations in terms of doing what it needs to do. But they’re all fussing with the same kinds of issues.
Jackie Forrest:
Right. Well, it sounds like you’re optimistic. There needs to be change. But you did say that you’re not investing in Alberta right now.
John Kousinioris:
We’re not.
Jackie Forrest:
Yeah.
John Kousinioris:
We’re one of the companies that do think the market does need to evolve in an appropriate way. Whether what was on the table is the right thing or there are better ways to do it is a different discussion all together. I’m not sure a system that was developed 25 years ago … We at times were enamored with the status quo, but I’m not sure it was going to get us to where we needed to get to in the future.
For us, we had probably about 600, $650 million of growth projects, our latest stage growth projects, wind farm, peaking gas. We had a very large battery project tied to our hydro west of Calgary. We did put that all on pause in I think it was mid-2023 when some of the market redesign was done. It’s just too uncertain for us. I was going to say risky, but it’s not so much the risk. We need to understand the risk. Do you see what I’m saying? Landing the construct of the make redesign is important at least for our company to understand where will it actually settle.
Then at least for us, I want to see what is the fidelity of the pricing? Is it investible or not? Does it make sense for us to make the kind of investments that we need to make in the province, given the new construct? It’s hard to predict that today, we still have work to do. In fact, the AESO has pivoted a little bit from what it was proposing to do to something that’s a bit more streamlined. We had a large modeling team that was working on the design that was on the table. We’ve had to pivot now over the course of the last couple of weeks to reimagine what that looks like for our unit. It’s more getting an element of certainty, frankly,
Jackie Forrest:
Right.
John Kousinioris:
… in order for us to be confident on the investments. Remember-
Peter Tertzakian:
Yeah.
John Kousinioris:
… our capital competes with other jurisdictions, too. If there’s other jurisdictions that are more certain, it’s just easier to put it there.
Peter Tertzakian:
I just want to ask about, well, as an independent corporation, TransAlta, it’s all about competition, competition for capital, investability, listening to price signals. The price signal right now as you said is $3.80 a megawatt hour or 3.8 cents a kilowatt-hour, which is not really very much because in many jurisdictions it could be five times that easily.
John Kousinioris:
Yeah.
Peter Tertzakian:
We have very cheap power here. In fact, it’s so cheap, in the near-term there’s no incentive for TransAlta to build new power. Yet in the longer term view, you look at it, from our prior discussion you said you’ve got key components that take two to four years to procure, like gas turbines or transformers, and things like that. By the time you get to four years out and you go, “Oh my God, the price has gone up five times, we’ve got to build,” and you get the right price signals. Now you got to wait four more years potentially, because of all those data center stuff that’s still probably not going away.
This is one of the problems with the deregulated system compared to the state-owned, because the state-owned can think longterm. Whereas the deregulated has other benefits, in terms of innovation, and so on. But the price signals are not sometimes strong enough to invest, there’s other structural problems. I know I’m going on and on here, but I want to understand this problem because I guess at the end of the day, the grid redesign has to try and accommodate the fact that we are not state-owned, but has to overlay a structure such that it incents longterm thinking. Is that what we’re trying to do here?
John Kousinioris:
At least from a TransAlta perspective, my short answer would be that is what we should be trying to do, Peter, just to address your last point I think.
You’re exactly right. If I were to look at, let’s just use your 400 megawatt example for a gas plant, Peter. Let’s say I want to build that in the province if Alberta. I’ve got pricing right now that is call it $38 Canadian a megawatt hour, and our expectations are that data centers aside coming in and maybe tightening our supply and demand fundamentals, we’re in a protracted period of weaker pricing. That is, pick your number, $25 US. It’s probably a bit artificially that high because there’s a carbon price component to it as well.
If I need 50, 60, $70 US to $120 US in terms of a levelized cost of building something new, I can’t do it. Then you factor that in in a merchant market where I have instability, both in terms of regulatory intervention and how things evolve because I’m going to need 15 to 20 years to get my return of a non-capital on that investment. It is really hard to do.
Going back to that 400 megawatt power plant, let’s say it costs me $3 million a megawatt. I need 1.2 billion for the plant. Now I’ve got the clean electricity regulation, so I’m worried about carbon emissions and whether the plant’s going to be able to run in the late 2040s or the 2050s. Something we always muse about is we’ve been burned as a company. One of our lessons are you tend to think that the regulatory environment is static and it doesn’t, it changes on you over time. It could change either way, but even if it stays, carbon capture is two billion more on that maybe, maybe more.
For a company like ours given our size to make a, pick your number, call it a $3 billion investment with something that has contained carbon in a merchant market in a relatively small jurisdiction like Alberta in the grand scheme of things is hard. At least, from our company. Your capital is then competing against contracted opportunities in other jurisdictions, whether it’s in Western Australia or in the United States. It’s a challenge. It’s a real challenge, just being straight up about it.
Jackie Forrest:
You talked about the potential for regulation change.
John Kousinioris:
It has.
Jackie Forrest:
Am I wrong, that the change the Alberta government just made, that makes it even more of a risk for you because it’s easier for them to make change?
John Kousinioris:
I’m not sure. Look, we spent a billion-and-a-half dollars, it was TransAlta and Capital Power, to build Keephills 3, it was commissioned in 2011. That was the plant that we were expecting to run I think it was to 2063. That plant is no longer on coal. It’s on natural gas. Will it get to 2040? I’m just being straight up about it. We had a previous government that passed legislation that resulted in coal fire generation having to be shut down by 2030, for example. We have current market redesign and that’s all happened in the space of a decade basically, all of those kinds of changes. I’m not even including things like the clean electricity regulation, and carbon pricing that is being mandated from a federal government perspective.
It’s trite to say it, but I pray for certainty. Almost like leave the rules alone for a while, do you know what I mean?
Peter Tertzakian:
Yeah.
John Kousinioris:
Just so that I have a sense of what to do, but we’re buffeted I would say.
Peter Tertzakian:
I think the word is not certainty, I think the word is stability.
John Kousinioris:
Stability is a better word, you’re right.
Peter Tertzakian:
There’s always uncertainty, it’s just managing uncertainty.
John Kousinioris:
That’s right.
Peter Tertzakian:
But if there’s no stability, then you can’t even handicap uncertainty.
John Kousinioris:
What do you model, you know what I mean, Peter?
Peter Tertzakian:
Yeah.
John Kousinioris:
And is it real?
Peter Tertzakian:
Yeah.
John Kousinioris:
In terms of where we are. Add to that a supply chain that is super challenged.
Jackie Forrest:
Well, John, this has been a great conversation. We’re running out of time. We’ve got more to ask you, but one question that’s on my mind because it’s been a big discussion in the election is this idea of an east-the-west transmission line. We want to trade electricity across our country, just like every other good. We’d have all these inter-provincial barriers. What are your thoughts on the likelihood of that? Is that a good thing or a bad thing? Especially when you consider our make-up of, what are we, 12 different electricity jurisdictions.
John Kousinioris:
Look, I wish we were talking about building more pipelines, candidly, across the country more than transmission lines. It’s a laudable thought. I think it is hard to do. I’ll tell you why and you’ve touched on it.
How does Alberta trade with Saskatchewan for example, from a power perspective, when they don’t even have a price? I have a price. BC doesn’t have a price. Manitoba doesn’t really … They’ve got Crown corps and we don’t. The seams issues between the jurisdictions are not insignificant in terms of seeing it through. I think it does require an evolution in the markets to see it through. It works well in countries that have a unified construct, we don’t. Very hard to deal with that.
Secondly, I think it’s super expensive. Building transmission from, I don’t know, Quebec through the Canadian Shield, through are Prairies, over the Rockies, we’re talking billions of dollars. And we’re talking jurisdictions that are all largely expected to be short. It’s not like we’ve got a glut of power in one jurisdiction that you can move to deal with the issues of the other one. What happens if it’s really cold in BC and Alberta, Alberta needs the power, so does BC, is BC going to actually move the power to make sure that Alberta’s needs are met? I don’t know how you deal with those kinds of issues.
Given the cost, I think it might be cheaper to just deal with the power needs of each jurisdiction within the jurisdiction, if you see what I’m saying, rather than doing a big grid that goes across the country. Just from a cost perspective, we’re talking billions of dollars. Billions!
Peter Tertzakian:
Yeah. And match the energy source to the region.
John Kousinioris:
To the supply in the region, that’s critically important.
Peter Tertzakian:
Yeah. If you got a lot of hydro, hydro makes sense.
John Kousinioris:
Totally.
Peter Tertzakian:
If you got a lot of natural gas, natural gas makes sense. Just match what makes the most sense for each region.
John Kousinioris:
That’s one of the reasons we have, and I’m going to digress for just 30 seconds, the clean electricity regulation which we talked about a little bit obliquely. Its lens is a national lens. To just touch on what Peter said, you can’t do that. You got to look at in Alberta, without natural gas, we are in serious trouble literally.
I was in investor meetings in London probably about two-and-a-half years ago. I remember … Here I am, defending Alberta. “Why don’t you guys have more renewables?” Blah, blah, blah. It was minus-30 back home. Literally, I showed them actually the AESO page. I said, “We have thousands of megawatts of wind, hydro, solar.” We’re water-poor in Alberta. Let’s be honest, we own all the hydro basically in Alberta, but it’s not going to save the province. We had three megawatts of wind that day. If it’s minus-30, there’s no wind. If it’s minus-30 and it’s night, there is no solar. Same thing if it’s plus-35, there is no wind. If we didn’t have natural gas and it’s minus-30, what are we doing here in the province?
To Peter’s point, I think you need to look at each region’s natural advantages. And when we’re thinking of decarbonization, we can’t forget about reliability and affordability. Building 10,000 megawatts of nukes in Alberta, who’s going to build that? Who’s going to pay for that? We got to look at local advantage, frankly.
Jackie Forrest:
Well, the clean electricity reg though would let you put CCS on those natural gas plants.
John Kousinioris:
Who’s going to pay? The CCS, at least based on what we know today. First of all, I am not sure because I can’t point to a single circumstance in the world today where the kind of capture rate I would need to capture on the CCS is slam dunk. The cost of the CCS is more than the power plant.
Jackie Forrest:
It’s going to definitely increase the electricity price.
John Kousinioris:
Who’s going to pay for that?
Jackie Forrest:
Yeah.
John Kousinioris:
What does it mean about the competitiveness, which we don’t talk about enough in this country, about our industries? Especially when I know we’re having a little bit of turbulence in our marriage right now with the US. The US is critical to US and we need to make sure that when we power our industry, that it is competitive with what the circumstances are there. That’s just a personal view. If we’re pricing things, whether it’s through carbon policy or whatever the industrial needs are, we will be impacting our industry. I think we need to be very thoughtful and careful about what that means in the broader global context. I don’t think we talk about that enough.
Jackie Forrest:
Right. By our math, if you want CCS on a power plant, you’re talking about electrons that are twice as expensive, maybe more.
John Kousinioris:
At least.
Jackie Forrest:
If they don’t have that, then industry probably will go there.
John Kousinioris:
I will need a certainty of revenue stream, just going back to your earlier comment, Peter, to have the confidence to be able to make that investment to get that through. What’s the construct that lets me do that?
Peter Tertzakian:
Well, John, we’ve talked about so much. It’s fascinating. We talked about electricity demand trends, tariffs, equipment shortages. We talked about this country, provincial, regional issues. It’s just been a great conversation. We hope to have you back as these things develop. The only thing we didn’t talk about was politics, but Jackie and I will take it on next week after the federal election.
Once again, John Kousinioris, President and CEO of TransAlta, thanks so much for joining us.
John Kousinioris:
Jackie, Peter, thanks so much. It was a real pleasure.
Jackie Forrest:
Thanks to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
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