Alberta’s NDP government is close to completing three more pieces of its climate and energy strategy, reaching two peaceful settlements with legacy electricity providers in the province and announcing a shift in its power market designed to restore stability for both consumers and generators.
The biggest-ticket item will see the province pay nearly C$1.4 billion to three power companies to phase out all legacy coal-fired generating plants in the province by 2030, years before their design lives are over. “We have chosen to incentivize new investment in clean energy and improve Albertans’ health by eliminating dangerous air pollution,” Environment Minister Shannon Phillips told reporters.
“The government’s climate change plan aims to shut down all coal-fired plants in Alberta by 2030, but six newer facilities were previously allowed to operate until as late as 2061, leading their owners to call for compensation,” the Calgary Herald reports. Under the agreement, “the province will pay TransAlta Corp., ATCO Ltd., and Capital Power Corp. a total of $97 million annually over 14 years, beginning in 2017—for a total cost of almost $1.36 billion.” The payments will be funded by revenues from a carbon tax on large industrial emitters, not consumers, Phillips said.
Brian Vaasjo, CEO of Capital Power, which stands to receive the lion’s share—$734 million—of the package, called the settlement “reasonable.” The deal “compensates companies for shuttered coal plants, while recognizing some could be converted to produce natural gas,” the Herald adds.
Alberta’s opposition Progressive Conservative energy critic Rick Fraser denounced the plan—which calls for the companies to support communities around coal plants scheduled for retirement until 2030—as “disgraceful,” calling the timetable to phase out coal “ideological.”
The province is expected to need $20 to $30 billion in new electricity generation infrastructure to replace the coal plants being decommissioned.
Meanwhile, Alberta said it is close to settling ongoing contract disagreements with several utilities over its increase in the carbon tax it levies on large carbon emitters. The dispute saw four companies—Enmax, Capital Power, TransCanada Corp. and AltaGas Ltd.—renounce their power supply agreements with the province, and the province threaten to legislate to change the contract terms retroactively.
Those settlements come on top of an announcement last week that Alberta intends to restructure its electricity supply market beginning in 2021, abandoning the volatile “energy-only” marketplace installed by a Progressive Conservative government 20 years ago in favour of what is known as a “capacity market”.
The shift adopts a recommendation made by the province’s grid operator, the Alberta Electric System Operator. The widely-used capacity system pays providers separately for their infrastructure investments and the energy they produce. The energy-only marketplace left providers—and ordinary consumers—at the mercy of market swings, with billions in capital investment at stake.
Dawn Farrell, president and CEO of major provider TransAlta, welcomed the change. “The fact that we now have this capacity market really enables us to convert some of our coal plants to gas, keep our workers working, keep our communities strong, and be able to provide capacity to the system as we go through the decades,” she said. “So it’s good news from that perspective.”
Until the new system kicks in between 2021 and 2024, “consumer prices will be capped at 6.8 cents per kilowatt-hour to protect them from volatility,” CBC News reports. That rate is higher than Albertans have paid recently. “However,” CBC adds, “once the new system is in place, consumers are not expected to see higher prices.”