UCP wins the Alberta Election
The United Conservative Party (UCP) and its leader, Danielle Smith won a majority in the Alberta election on May 29, 2023. Jackie and Peter start the podcast by reviewing the election results and the outlook for energy policy.
Next, the conversation moves to Texas. The Lone Star State has witnessed big growth in wind and solar energy, but now Republican lawmakers in Texas are trying to impede renewables growth. Peter and Jackie talk about the shift in sentiment, and if it could spread beyond Texas.
Finally, Jackie and Peter review some recent listener feedback, including Tesla, small modular reactors (SMR), and residential solar economics.
Content referenced in this episode:
- ARC is hiring a Senior Energy Research Analyst, check out the posting
- Peter’s art exhibit is running June 10 to 30, 2023 at Elevation Gallery. The opening reception is on June 10. Learn more here
- Chris Varcoe from the Calgary Herald: “Q&A: As Alberta Energy Sector Transforms, Danielle Smith Weighs in on Industry’s Future” (May 25, 2023)
- CTV Article with Danielle Smith Comments on Wind and Solar: “We Are a Natural Gas Province: Smith Says Alberta Needs Power Plants, Not Wind and Solar” (March 22, 2023)
- Wall Street Journal: “Texas, a Clean-Energy Pioneer, Turns Against Renewables” (May 26, 2023)
Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/
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LinkedIn: @ARC Energy Research Institute
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Episode 203 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 Forest.
Peter Tertzakian:
And I’m Peter Tertzakian. Well, the day after the election.
Jackie Forrest:
We’re all a little bit tired because those votes took forever to come in.
Peter Tertzakian:
I don’t know what it is. We’ve got all this AI talk and modern computational science and we can’t seem to get election results. I don’t know. There was scanning the ballots on some fancy machine and-
Jackie Forrest:
I thought it was going to be faster because of that, but not, but we did eventually get an answer. Although I think the final numbers are still aren’t going to come in over the next few days.
Peter Tertzakian:
We’re going to talk about the election, right? What else are we talking about? We’re talking about what’s going on in Texas. We’re talking about, well, we’re hiring someone.
Jackie Forrest:
ARC is hiring. We’re looking for a senior research analyst to lead our oil and gas research. Canadian focus. Of course, we believe there’s a dual track to the energy transition. There’ll be a lot of investment in clean energy, but oil and gas will be needed for a long time too. So we’re looking for someone to help us to track everything that’s going on with Canadian oil and gas, which is quite a lot.
Peter Tertzakian:
So you’ll post that on the…
Jackie Forrest:
Yeah, I’ll put a link to the job posting in the show notes and please check it out or send it to those in your network that might be interested. We’d appreciate your help. In other news, Peter’s an artist.
Peter Tertzakian:
I am. I can now add that to my resume. I’m having a show at Elevation Gallery in Canmore, on June 10th. The show’s going to be up for three weeks showcasing my collection of vintage light bulbs and the art that has been produced from it. So if you’re in Canmore on the 10th, it’s a Saturday, three o’clock, I’ll be presenting on it and the show and the artwork will be up for three weeks.
Jackie Forrest:
Well, I will be there, but we all have this question. Peter, how do you have time to do all this stuff that you do?
Peter Tertzakian:
Well, there are 26 hours in a day, Jackie.
Jackie Forrest:
I know need to figure out how to use those hours that I’m sleeping the way you do. All right. Well, talking about not sleeping during the election, Daniel Smith UCP wins a majority last night. Now the numbers can change a little bit, but the last I saw, UCP had about 49 seats confirmed, and the NDP 38 and Edmonton were all orange. Calgary was a slightly more NDP than UCP, almost half-and-half, but just a little bit more for the NDP. However, not enough seats there for the NDP to get the majority they needed in Calgary. And the rural outside of the major cities with just a few exceptions was all UCP.
Peter Tertzakian:
I mean, this is very much a rural-dominated vote. Many ministers in the UCP lost their seats, lost their seats in the cities. To be a comfortable win, I would’ve said the UCP needs 50 plus we’re at 49. You needed 44 actually to have a majority in an 87-seat parliament. It’s certainly a win, but it’s a very polarized win and I think that we’ll have some implications for energy policy, particularly oil and gas being a rurally dominated win. I would say that that speaks to the favor of a lot of the conventional oil and gas workers who are spread all across the province and their interests are likely to be well represented by the UCP.
Jackie Forrest:
No, that’s true. You can see that and some support in Calgary, which is more dominated by the oil and gas industry in terms of corporate jobs as well.
Peter Tertzakian:
Although, I mean Calgary is split. Edmonton’s completely shut out. I don’t think this is a very healthy dynamic for Edmonton to be shut out. I think we’re going to be watching obviously whom the ministers are appointed, including the energy minister and the environment minister. Those two are most relevant to the energy policy, but the bench strength for ministerial selection is a lack of experience that would strike me. Now, we’ve been there before. The NDP had a tremendous dearth of experience back when they won in the, I think it was 2015 election. I mean it’s been done before. It’s more like, “Okay, this is a new reality, going to be a new fresh government,” and then I think Danielle Smith will have a challenge without, I think a compelling majority to manage the various factions of the United Conservative Party, because this is also a big deal in many democracies right now where you have either the right or the left and within the right and the left, there’s fractures and splits and so on.
And so how that is going to be managed is going to be something that is going to be very consequential to the future of the province and certainly the energy business.
Jackie Forrest:
Well, and a strong opposition, a bigger opposition than we’ve ever had in Alberta. I mean, I don’t mind that. I mean, having a big opposition, having a lot of resources to be able to question the government, I think helps come to better answers than would be otherwise.
Peter Tertzakian:
I think the accountability is going to be far greater than in elections passed. Certainly the elections, I would say circa the late ’90s into the 2000s was a foregone conclusion the conservative party was going to win. It was just whether it was going to be a landslide, and I think even in one election, I can’t remember which one, the question was whether or not it was going to be a complete shutout. Those days are behind us. The Alberta electorate is a lot more called diverse across the political spectrum. So this split does speak to a greater opposition. I think, again, to repeat, I think the uncomfortable thing is it’s sort of a polarized opposition, very much urban versus rural.
Jackie Forrest:
We did get some sense last night from the premier speech after the results were tabulated and I do think energy will be the top of the agenda. That is one of the few things she talked about around policy. She talked about the harmful policies coming from the Trudeau government on the cap on oil and gas emissions as well as this electricity net zero by 2035. She asked the Prime Minister to halt these policies and come to Alberta and work with Alberta to make their reduction plan, which is going to be achievable reductions in a timeframe that makes sense. Also wants to include using LNG and other technologies as part of that to make those reductions. So asking the feds to put down their pens, scrap what they’ve been working on, and start anew, so we’ll see how that goes. I mean, if that could happen, that would be a great result if we could work collaboratively and find a way for things like natural gas and LNG to be part of the plan.
Peter Tertzakian:
I would say knowing what I know, there were already plenty of collaborations that were going on behind the scenes, so I think there’s going to be a continuation of that. What’s interesting, and we mentioned this on a previous podcast, is you have to think about the different parties that are in the, I’ll call it the negotiation. There’s the resource owner, which is Alberta, and now with this election behind us, the resource owner is wanting to be at the negotiating table. That was not so much the case in the final, I don’t know, we’ll call it nine months of the Kenny era because there was so much turmoil within the party that there was almost like a reality TV show watching the federal government, which is another stakeholder, and the industry itself and a subset of the industry, the oil sands segment, negotiating with each other. Now we have a multi-party situation where the resource owner, Alberta, on behalf of Albertans is definitively going to be at the negotiating table with the federal government.
And now we have the oil and gas industry also there, but the oil and gas industry has two distinct extraction modalities. One is the oil sands and the other is the conventional oil and gas, which is spread all across the rural parts of Alberta, which is why it’s significant that it was pretty much a sweep other than I think Banff-Kananaskis.
Jackie Forrest:
Lethbridge, the one seat in Lethbridge too.
Peter Tertzakian:
And the one seat in Lethbridge that was taken by the NDP.
Jackie Forrest:
Now. That rural and conventional industry is going to factor in here. I did want to mention to Chris Varcoe from the Calgary Herald did have an interview with Danielle Smith late last week after our podcast, and there was some new information about the future direction of policy. One of the questions we talked about last week is are they going to pay for carbon capture storage, the Alberta government? Danielle Smith said in that interview, they want to expand the petrochemical incentive program to include CCS, and they plan to use more TIER funding. They don’t want this to come out of general tax revenue, so they don’t want to give tax incentives the way the federal government did, but they want to see how they can use that. So we’ll learn more about that.
We did also learn that, remember that a hundred million dollars for the R-star, which was a way to create an incentive for oil and gas companies to clean up their wells. She did say that that’s on hold for now. The existing system that the UCP put in place of spending 3% of your liability, reducing that each year by 3% is what they’re going to continue with, and they’re going to monitor that and see if that’s working.
Peter Tertzakian:
Well, I hope they leave it alone because I don’t… well, I’m speaking from my personal experience with the Royalty Review. The Royalty Review led to a fiscal policy construct that was, I’ve called it fairly comprehensive, fairly focused, and completely re-engineered from the 1937 onward fiscal policies. And I think messing around with it and complicating it again into a patchwork quilt would be a mistake. Whether it’s for cleaning up abandoned wells or whether it’s messing around with the royalty formulas to accommodate carbon capture and so on. Those should be treated as separate policies, and I think the royalty policy should be kept pure.
Jackie Forrest:
All right. Well, hey, then it looks like that’s the direction for now, assuming that the current system does work to reduce the liabilities. The other thing I wanted to mention was renewables. Now, Danielle Smith made some comments during the election with favorable views for natural gas that we need to have more natural gas generation in the province because it makes sense and it creates reliability. She also made some comments about renewables that she’s supportive of solar and wind projects where they make sense. But she says, “I can tell you from my conversations with people in my community that putting solar panels on prime agricultural land does not make sense.” So we’ll wait and see what happens in the power system if there are some changes there. I mean, right now we have an open system that doesn’t sort of dictate that we need to build a certain amount of natural gas or wind or solar, and we’ll see if that changes.
Peter Tertzakian:
I don’t think Danielle Smith’s government is anti-renewables more than it is supportive of natural gas or baseload generation. I think this issue of landowners, farmers, ranchers, and others being against the use of their land being taken up by solar panels and wind farms is a big issue, and we’re going to talk about that because it’s already starting to have some sort of a backlash in Texas.
Jackie Forrest:
I mean, that’s all I had. We’re going to see what the UCP has. I think it’s going to be continuing with our work. A lot of that is outlined in that emissions reduction and energy development plan, including plans to work on hydrogen and geothermal, and even some talk in there that we might start looking at things like blending a certain amount of renewable natural gas into our gas. So we’ll wait and see. I think we’re going to see more about those plans over time, but let’s switch topics to what’s going on in Texas.
Now, Texas has been a clean energy pioneer, a lot like Alberta. There’s been a lot of growth in renewables there, and they welcomed wind and solar for many years, but recently that’s changed. Now the state Republican politicians are putting forward new legislation that would disadvantage wind and solar. Yesterday, Monday, May 29th, was the last day of their legislative session, and many of these bills didn’t make it through, but a few did. So they’ve gone forward with a bill that would add transmission costs to certain renewable projects.
It would require renewables to subsidize the construction of new fossil plants called firming plants, and it would make renewables pay higher fees for ancillary services. So some more harmful measures were proposed, like a more difficult permitting program for renewables and other types of energy development that didn’t go through. But I think we wanted to talk about what’s changed in Texas and what compared to before when they were very renewable, what has changed, and what that might mean for other jurisdictions when we think about rolling out over the rest of the US and even into areas of Canada. And this is based on this Wall Street Journal article, which we will put a link to in the show notes.
Peter Tertzakian:
Well, it’s not only the Wall Street Journal, there are many other articles. And so I have to defer to the articles because I have not been down in Texas and have not talked with the legislators or others, but I think this is an issue that is beyond Texas. It’s something that’s happening more broadly in terms of pushback against renewables because of the landowners or people with a view. They don’t want wind turbines off the coast or in the pristine mountain foothills where the wind blows and we put these things up. And so I think that this sentiment that is brewing and of course gets latched onto by more of the pro-fossil fuel sides of political governments wherever they may be in the Western world. I think this is a broader trend and puts forth a limiting factor on the rate of renewable growth.
So what am I saying is that, you look at every projection for the growth of renewables up until now, and it’s like a hockey stick going straight upward. And that’s somewhat justifiable because it does look like a hockey stick between say, circa 2009 to today. However, the extrapolation of that as exponential growth is not necessarily warranted because there are limiting factors, and in this case, pushback by landowners and others that don’t want to see this stuff either take up arable land or ruin their view or make too much sound or too many lights at night because there are all sorts of flashing lights on a wind turbine, et cetera, et cetera.
Jackie Forrest:
Well, and I think there’s… well, in Texas, I think there’s a big part of it, the opposition from local landowners. I think there are some other nuances too. The Texas power crisis in 2021, which we covered on the podcast, was blamed maybe rightly or wrongly, I think somewhat wrongly on renewable energy, so I think that’s part of it. But I also think there’s this sort of Anti-ESG movement that was already taking hold in places like Texas. For example, the government has declared pension funds can no longer invest in any ESG-focused funds, and they’ve got even a list of organizations you can’t be investing in anymore. And I think wind and solar might be getting caught up with that. It’s almost like clean energy is now associated with being democratic-
Peter Tertzakian:
It’s a symbol of the Anti-ESG movement.
Jackie Forrest:
So, if you’re into oil and gas, then you’re against everything else, that sort of movement. And so, I think that’s a little concerning too. But let’s go through that one about the local landowners. We did just talk about Danielle Smith’s comments leading up to the election, and I would just say that isn’t a situation that is unique to Texas. And I think the thing with Texas is as they’re getting more and more land footprint taken up by wind and solar, you’re starting to see more concerns. There was a quote in this Wall Street Journal article that said, “These solar farms look like absolute crap.” And if you have a wind turbine that you can see from your property, it reduces the land value, those are some of the sentiments in that article. And we had a project near High River here in Alberta that was turned down by the Alberta Utilities Commission, and a lot of that was rejected because of concerns about the impact on bird life and the footprint of the project. So, this is not an issue that’s only in Texas.
Peter Tertzakian:
Well, I was going to say, it’s not only in Texas, but it’s also not only in Alberta, it’s all across the continent and beyond, because anywhere where there is pristine land and you want to take that land and convert it into a solar farm or a wind farm, there’s a certain amount of land that is willingly offered for the development of these projects, and then all of a sudden you start running into the landowners that say, “Wait a minute, I don’t want this.” So, I think you’re going to see more resistance to this kind of thing, which has the potential to slow the curve. And also, then on top of it, I would say, the Anti-ESG movement just picks up on all this.
Jackie Forrest:
Sure, you could put your wind or solar farm on different land, maybe land that is further away and doesn’t conflict so much with agricultural land, but it always costs more. Now you need bigger transmission lines to come from further distances, so it slows things down and likely causes them to cost more. I think that we need to start thinking about putting, especially things like solar on urban landscapes, that we’ve already impacted the land footprint. However, those generally cost quite a bit more than just laying them out like Lego pieces on big tracks of land. The Texas power crisis I think is unique, but it does get to some of the comments made by Danielle Smith around the reliability and the concerns as we increase the amount of renewables, are we going to have a reliable power market? And what they’re discussing in Texas is a capacity market where, regardless of how much they produce, certain types of generators are going to get capacity payments.
And the NDP had suggested this in Alberta before they lost to the UCP in 2019, and it may be needed as we get higher and higher rates of renewables, and the price of power maybe gets driven down because of that. Other types of generators may not want to build ones that can be available 24/7. So, the idea is you give them a certain amount of money just to be there to be on standby. But there are a lot of concerns with this in that, especially in a hundred percent free market. Well, it’s no longer a hundred percent free market, so it can give an advantage to generators that get the firm payment. It can have unintended consequences such as less clean energy coming in because it doesn’t have the same return as the types of generation that get these capacity payments.
Peter Tertzakian:
What’s happening is the disruption of the evolution of a century of electrical power grid growth and making a radical shift in the way electricity is produced and the characteristics of that electricity. In other words, intermittency of wind and solar versus the constancy of baseload power such as natural gas-fired or coal fire generation, means that if you change the system dramatically over a short period and a short period is 10 years, then all of a sudden you introduce distortions in the market. And we’re going to talk about that. We’re going to have a guest come on and talk about all this. He’s an electricity trader and right on the ground floor of how the electricity floor, he’s going to talk about the impact of renewables on the grid here and elsewhere.
Jackie Forrest:
All right, we’ll wait for that. Okay. Well, we’ll wrap up this section. In the last section of this podcast, we want to talk about some listener feedback. We like to hear from you. And believe it or not, Peter, not everyone agrees with everything we say and-
Peter Tertzakian:
What?
Jackie Forrest:
Nope. But it’s good to hear it and we love to get that feedback and think a little bit more about our positions.
Peter Tertzakian:
Bring it on.
Jackie Forrest:
So, the first one I want to talk about is Andrew Doyle Linden on Salt Spring Island says that we’re too in love with Tesla and we’re not that objective when it comes to Tesla. And he’s referring to that May 16th podcast where we talk about Tesla’s price-cutting strategy and how that could give them a big advantage to squeeze others out. He brought forward another perspective and he sent an article that Tesla can’t sell their cars anymore. They’ve saturated their market and that’s why they need to cut-price. The article argues it’s a luxury brand, so why would it cut prices? And one of the reasons they need to cut prices potentially, and they’ve saturated the market, is they don’t have enough models to meet all the buyer’s needs. They only have the Y as the big seller now, and depending on who you are, that’s not going to be the vehicle for you.
Peter Tertzakian:
Do you want me to respond to this Tesla fanatic thing?
Jackie Forrest:
Yeah.
Peter Tertzakian:
Well, I mean I have a lot of admiration for Tesla. I love the car, but to this point, I would argue there’s been no competition. I mean, I’ve been driving a Tesla since late 2014, so now the introduction of some interesting alternatives, Audi, Mercedes, we’ve got Hyundai with some very interesting models. I think there’s a choice now. And I wouldn’t be opposed to taking a look at these other models and seeing what they’re like.
Jackie Forrest:
You forgot Ford too, by the way. But one thing I will say, and I did have a dialogue with Andy on this, is the fast-charging infrastructure is a real differentiator for Tesla, and you try to go on the road with another type of car and see what the charging infrastructure is like. Hey, I have tried it. I got the adapter so I could try a bunch of these non-Teslas. Half of them don’t work, half of them, they don’t sometimes flow at the rate that they say they’re going to flow at. And it’s not just me. I just read a couple of articles this week where people are struggling to take these cars on long distances. I thought it was interesting that Ford announced with Tesla last week that they’re going to get access to the Tesla charging and start to use their plug. And when you drive up with a Ford, just like with a Tesla, the app is just going to know it’s you and there’s no having to use your credit card or anything. I think this is going to be a huge advantage to Ford.
I’m even thinking maybe I need a Ford now because they have the bidirectional and then I’m going to get the Tesla charging infrastructure. The only problem is they have those big F-150s, which I don’t want to drive. But anyway, I think that’s a really interesting development. If that Tesla charging infrastructure gets opened up to more cars, they become more interesting to me.
Peter Tertzakian:
Having said all of this, I don’t want to take anything away from what Elon Musk and Tesla have done. I think it’s remarkable to be able to break into a century-plus-old business that many have tried to break into in the past and scale up at the rate at which this company has scaled up is just amazing. And so, I think they are pioneers in the space, and they deserve credit for that.
Jackie Forrest:
Another feedback, Keith McClain, a New Brunswicker that now resides in Toronto, had some feedback on our podcast about Atlantic Canada power markets. One of the comments was we had a discussion on small modular reactors and that New Brunswick is not going to be able to do that by 2035. And his point is, we shouldn’t just be okay with that. There’s nothing about the technology that would stop us from deploying these. It’s our regulatory system that’s taken too long. And we can’t just accept that, okay, it’ll never happen. We should be changing the regulatory system so that we can get these systems in place because Canada has a real opportunity here to be a leader in this space. And I agree with him.
Peter Tertzakian:
I agree. Canada was a leader in the 1950s and ’60s in nuclear power, a world leader with its can-do technology, and now it’s seemingly disappeared.
Jackie Forrest:
I do think we’ve got the SMR going into Ontario now with Ontario power generators, but I think there is a potential. If Canada wanted to pick this as an area that we invest in, that we put those across the country. We short accelerate the regulatory system so that we can be leaders in this space.
Peter Tertzakian:
Keith, this is a much bigger issue than just even nuclear. I mean the regulatory system is a drag on almost all types of energy infrastructural development.
Jackie Forrest:
One that was acknowledged in the budget is that government wants to consult about how to change that. It’s a big problem, but it’s a problem that needs to be solved if we’re going to have any chance of getting close to some of these reduction goals.
Peter Tertzakian:
That means that the pursuit of net zero and transitioning energy, as we’ve said many times on the podcast, is not inhibited by technology. It’s inhibited by legacy regulatory constructs and other geopolitical interprovincial issues. It’s much more of a social, psychological, and political regulatory bundle problem.
Jackie Forrest:
Not an easy problem to solve, but one that we need to fix. And I hope that this consultation is just not talking that it results in a change. Because as you know with that Bill C-69 Impact Assessment Act, we made it more complicated in many ways.
Peter Tertzakian:
And by the way, there’s nothing wrong with the regulation as long as the regulation is applied promptly. And I think that that’s what investors would be utilities or others are asking for is, “Look, I can’t go through spending hundreds of millions of dollars on our regulatory application and wait seven to 10 years to get approval and possibly no approval because if that’s the game I’m not playing.”
Jackie Forrest:
Or at the last minute, a political decision cancels your project. Right? Because we have that political check at the very end. So we need to look at that whole system and improve it. But thanks Keith, for that feedback. And I think you’re right. We shouldn’t accept the fact that we just can’t do it in that kind of timeframe.
Peter Tertzakian:
So, you got some feedback on your solar panels?
Jackie Forrest:
Yeah. There’s been more of a discussion on Twitter with some doubt about my seven-year payback on my solar panels, and it’s been good. There are a number of people that agree with me, some that don’t. But the first thing I want to say is that in every province of Canada, this can look a little different. I want to talk about a few things in Alberta, maybe they’re helping me out.
Peter Tertzakian:
Do you mean they’re not like sunny Alberta?
Jackie Forrest:
Well, there are some unique things in terms of how we get paid and that sort of thing. The second thing is older panels are less efficient. So if you installed your panels three or four years ago, you’re going to get different economics than what you can get today. You may have seen the picture of Peter and me, we toured Silfab Solar, which manufactures solar panels in Mississauga, and I found out that their lowest wattage panels now are 400 watts per panel and mine were 360. So mine are already not the most efficient.
Peter Tertzakian:
So, it’s already 10% more efficient?
Jackie Forrest:
Yeah. So that’s one other difference. But I did go back and triple-check my numbers. I do stick with my numbers. I think something that makes me unique is I’m using so much of my power for charging the electric car. I think the thing about Alberta that other provinces don’t have is we have a unique policy that I can sell my power when I’m a net exporter in the summer at quite a bit higher rate, 25 kilowatt-hours in the summer. And then when I’m a net importer in the winter, I can switch back to the cheaper rate. So that helps me a little bit in terms of my payback too. Anyway, thank you for all that dialogue though. I think it was helpful for other folks that shared information on Twitter on that as well.
Peter Tertzakian:
So, what’s the email address that people can give feedback on?
Jackie Forrest:
Well, mainly we get the feedback. People do email us. Our information is on our website, and we sometimes hear through Twitter or social media feedback.
Peter Tertzakian:
Okay, good. All right. Well until next week, thanks for joining.
Jackie Forrest:
Thanks for joining. And if you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
Announcer:
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