As we watched numerous European countries in 2022 reactivate their shuttered coal power plants. it's become apparent when push comes to shove, energy security and inflation trump emissions obligations..Ironically, Canada’s rejection of coal power over the past 15 years came about after the Europeans began (naively) to replace their base-load coal and nuclear plants with back-up natural gas power, wind and solar. Now, as Europe does everything in its power to save its citizens from the effects of these failed policies, I find myself asking has Alberta likewise given up energy security for emissions reduction by paying $1.5 billion to decommission its coal power fleet?' The answer is 'yes.' Here's what happened..First, it is crucial to highlight Rachel Notley’s NDP knew its mandated 30% wind and solar requirement for the power industry would end the longstanding power purchase agreements (PPAs) established under Ralph Klein’s administration. These PPAs were great for retail consumers, but had extremely narrow margins for producers. (Spark spread, ie the difference between the pool price and the price for natural gas.). Price and Alberta Internal Load .The Alberta Electric System Operator (AESO) data shown here comparing 2022 (pink) to 2016 (orange) illustrates just how much our power market has changed since Rachel’s wind and solar mandate was enacted. AESO shows that the Alberta Internal Load (AIL) increased by approximately 10% over the six-year time span. It also shows that natural gas, pool price and spark spread increased in both magnitude and volatility from 2016 to 2022..The increase in the spark spread, commonly used to show the profit margins for a thermal power plant running on natural gas, shows the price hike in natural gas is not the sole reason for these changes..My article from October 10 highlights the natural gas and pool price volatility in 2022 is partly attributed to TC Energy’s expansion work on its NOVA Gas Transmission system from Grande Prairie to Calgary. Between July and early September, this caused prolonged natural gas supply disruptions. This not only limited base load power production throughout Alberta, but reduced the ability of natural gas-fed plants to compensate for wind and solar intermittencies..Prior to Rachel’s 30% mandate, the backbone of our power market was thermal coal, where each plant had a coal mine within a short hauling distance. As Alberta has never had a significant thermal coal export industry, the primary cost for the coal power plant was the cost of the yellow iron used in their mining operations. Thus, geopolitics or international supply and demand for coal had minimal influence on the price of thermal coal here in Alberta. This was our energy security. .However over the past seven years, American liquefied natural gas (LNG) export capacity has exploded. .Global demand for LNG exports is so tight in 2022 that bidding wars for export capacity have become the norm. In fact, long term LNG supply contracts are sold out to 2026..With this rising demand for LNG and as Kitimat’s LNG export facility nears its commissioning date later in 2023, our new natural gas-fired power plants are faced with the prospects of further increase in fuel costs. The Kitimat facility alone will increase demand for western Canadian natural gas by approximately 10%..And just before Christmas, the Federal Energy Regulator granted a 40-year export license approval for a new $10 billion LNG floating terminal to be owned by the Nisga’a Nation at a site to be located 2 km south of the Alaska border. Likewise, Cedar LNG, also located in Kitimat is waiting for approval later this month on their LNG export facility..With talk of a federal cap on Canadian oil and gas CO2 emissions, western producers may struggle with expanding regional supply. This is a recipe for mass energy inflation..Those advocating for increased LNG export from western Canada ignore the possibility that these exports will not displace global coal consumption as long as coal is cheaper than LNG. They likewise seem to ignore that Canadian LNG exports would put upward pressure on electricity rates in western Canada..The solution to this loss of an affordable secure fuel is not embracing wind, solar and lithium battery technologies that largely benefit the Chinese Communist Party-controlled NetZero market in China. The virtual cartel that China maintains on this market is as much a future threat to Canadian energy security as Europe’s dependence on Russian natural gas..Where we go from here must first start by acknowledging social progress depends on people having affordable energy, on demand. This is especially true for lower-income demographics, for whom the return on investment for society at large is the greatest. Having grown up with limited access to power, I can attest to this simple fact..Next, it's critical we recognize all forms of energy production have negative side effects. What matters is the cost versus benefit. We don’t decommission highways or airports because of accidents and road-kill because the benefits to society far outweigh the cost..If I could reset the clock, Rachel Notley would have done everything in her power to preserve our coal power fleet. Instead of paying $1.5 billion to decommission fully functional facilities, she should have assisted in the cost of implementing carbon capture and storage (CCS) at these facilities..This was the Harper Era regulatory requirement put in place before Notley came to power: Implement CCS by 2030 or decommission..The technological feasibility of CCS in Alberta is exemplified by the TC Energy and Pembina Pipeline Carbon Grid Project, as well as the Capital Power CCS upgrade to its Genesee natural gas power plant. These projects will allow Alberta’s heavy industry to sequester vast quantities of CO2 in deep geological aquifers and to co-produce carbon nanotubes for use in advanced manufacturing industries..Additional evidence of the potential for CCS in Alberta is the oil sands industry’s $16.5 billion investment in the Pathways Alliance Project, which will capture and sequester millions of tonnes of CO2 per year in a geological formation in the Cold Lake region..Last, but most definitely not least, Notley could have kick-started the advanced nuclear renaissance that we are now witnessing in Canada, thanks in large part to Conservative leadership. Early in 2022, a memorandum of understanding for the development of small modular reactor (SMR) advanced nuclear technologies was signed by Ontario, Alberta, Saskatchewan and New Brunswick..More on Canadian advanced nuclear technology development in the new year. In closing, I predict if advanced nuclear technologies can achieve a cost of production in the range of $.01 to $0.02 per kWh ($10 to $20 per MWh), the energy transition will occur spontaneously and lower income Canadians will be lifted into the middle class.
As we watched numerous European countries in 2022 reactivate their shuttered coal power plants. it's become apparent when push comes to shove, energy security and inflation trump emissions obligations..Ironically, Canada’s rejection of coal power over the past 15 years came about after the Europeans began (naively) to replace their base-load coal and nuclear plants with back-up natural gas power, wind and solar. Now, as Europe does everything in its power to save its citizens from the effects of these failed policies, I find myself asking has Alberta likewise given up energy security for emissions reduction by paying $1.5 billion to decommission its coal power fleet?' The answer is 'yes.' Here's what happened..First, it is crucial to highlight Rachel Notley’s NDP knew its mandated 30% wind and solar requirement for the power industry would end the longstanding power purchase agreements (PPAs) established under Ralph Klein’s administration. These PPAs were great for retail consumers, but had extremely narrow margins for producers. (Spark spread, ie the difference between the pool price and the price for natural gas.). Price and Alberta Internal Load .The Alberta Electric System Operator (AESO) data shown here comparing 2022 (pink) to 2016 (orange) illustrates just how much our power market has changed since Rachel’s wind and solar mandate was enacted. AESO shows that the Alberta Internal Load (AIL) increased by approximately 10% over the six-year time span. It also shows that natural gas, pool price and spark spread increased in both magnitude and volatility from 2016 to 2022..The increase in the spark spread, commonly used to show the profit margins for a thermal power plant running on natural gas, shows the price hike in natural gas is not the sole reason for these changes..My article from October 10 highlights the natural gas and pool price volatility in 2022 is partly attributed to TC Energy’s expansion work on its NOVA Gas Transmission system from Grande Prairie to Calgary. Between July and early September, this caused prolonged natural gas supply disruptions. This not only limited base load power production throughout Alberta, but reduced the ability of natural gas-fed plants to compensate for wind and solar intermittencies..Prior to Rachel’s 30% mandate, the backbone of our power market was thermal coal, where each plant had a coal mine within a short hauling distance. As Alberta has never had a significant thermal coal export industry, the primary cost for the coal power plant was the cost of the yellow iron used in their mining operations. Thus, geopolitics or international supply and demand for coal had minimal influence on the price of thermal coal here in Alberta. This was our energy security. .However over the past seven years, American liquefied natural gas (LNG) export capacity has exploded. .Global demand for LNG exports is so tight in 2022 that bidding wars for export capacity have become the norm. In fact, long term LNG supply contracts are sold out to 2026..With this rising demand for LNG and as Kitimat’s LNG export facility nears its commissioning date later in 2023, our new natural gas-fired power plants are faced with the prospects of further increase in fuel costs. The Kitimat facility alone will increase demand for western Canadian natural gas by approximately 10%..And just before Christmas, the Federal Energy Regulator granted a 40-year export license approval for a new $10 billion LNG floating terminal to be owned by the Nisga’a Nation at a site to be located 2 km south of the Alaska border. Likewise, Cedar LNG, also located in Kitimat is waiting for approval later this month on their LNG export facility..With talk of a federal cap on Canadian oil and gas CO2 emissions, western producers may struggle with expanding regional supply. This is a recipe for mass energy inflation..Those advocating for increased LNG export from western Canada ignore the possibility that these exports will not displace global coal consumption as long as coal is cheaper than LNG. They likewise seem to ignore that Canadian LNG exports would put upward pressure on electricity rates in western Canada..The solution to this loss of an affordable secure fuel is not embracing wind, solar and lithium battery technologies that largely benefit the Chinese Communist Party-controlled NetZero market in China. The virtual cartel that China maintains on this market is as much a future threat to Canadian energy security as Europe’s dependence on Russian natural gas..Where we go from here must first start by acknowledging social progress depends on people having affordable energy, on demand. This is especially true for lower-income demographics, for whom the return on investment for society at large is the greatest. Having grown up with limited access to power, I can attest to this simple fact..Next, it's critical we recognize all forms of energy production have negative side effects. What matters is the cost versus benefit. We don’t decommission highways or airports because of accidents and road-kill because the benefits to society far outweigh the cost..If I could reset the clock, Rachel Notley would have done everything in her power to preserve our coal power fleet. Instead of paying $1.5 billion to decommission fully functional facilities, she should have assisted in the cost of implementing carbon capture and storage (CCS) at these facilities..This was the Harper Era regulatory requirement put in place before Notley came to power: Implement CCS by 2030 or decommission..The technological feasibility of CCS in Alberta is exemplified by the TC Energy and Pembina Pipeline Carbon Grid Project, as well as the Capital Power CCS upgrade to its Genesee natural gas power plant. These projects will allow Alberta’s heavy industry to sequester vast quantities of CO2 in deep geological aquifers and to co-produce carbon nanotubes for use in advanced manufacturing industries..Additional evidence of the potential for CCS in Alberta is the oil sands industry’s $16.5 billion investment in the Pathways Alliance Project, which will capture and sequester millions of tonnes of CO2 per year in a geological formation in the Cold Lake region..Last, but most definitely not least, Notley could have kick-started the advanced nuclear renaissance that we are now witnessing in Canada, thanks in large part to Conservative leadership. Early in 2022, a memorandum of understanding for the development of small modular reactor (SMR) advanced nuclear technologies was signed by Ontario, Alberta, Saskatchewan and New Brunswick..More on Canadian advanced nuclear technology development in the new year. In closing, I predict if advanced nuclear technologies can achieve a cost of production in the range of $.01 to $0.02 per kWh ($10 to $20 per MWh), the energy transition will occur spontaneously and lower income Canadians will be lifted into the middle class.
