Sponsor: Lethbridge
Co-Sponsor: Medicine Hat

Issue

Literature has long suggested that Alberta has the natural assets and technical feasibility to support further renewable energy development.1 That being said, Alberta’s renewable energy generation is low compared to the other provinces.2,3 Despite the importance and potential of renewable energy as part of a low carbon future, Alberta generated 11% of its electricity in 2017 from renewable sources,4 which is significantly less than the national rate of 66% renewable generation.5 Alberta’s largest source of renewable energy is wind power, generated from turbines often built together at wind farms on rural land, producing roughly 5% of total electricity in the province. 

Background

Alberta’s electricity market is deregulated, allowing private generators to participate in a competitive power pool. Subject to the approval of the Alberta Utilities Commission (AUC), any generator can connect to the grid, where the transmission network allows buyers to purchase the energy with Power Purchase Agreements.6 Independent Power Producers make competitive offers to sell their energy to the grid and receive a price at the intersection of electricity supply and demand on an hourly basis.7 Smaller energy producers (under 5 MW) can develop projects under the Micro-Generation Regulation, allowing energy generation from renewable or alternative sources to offset the generator’s use, as well as sell back excess power to the grid.8 

As the third largest producer of energy in Canada, Alberta trades electricity with British Columbia, Saskatchewan and Montana.9 In 2017, Alberta was an electricity importer.10 The bulk of Alberta’s energy comes from fossil fuel sources, with roughly 45% of electricity generated coming from coal and another 45% from natural gas in 2018.11 Despite having a number of legacy hydroelectric dams built in the 1900s, renewable electricity generation was quickly outpaced by fossil fuel energy development.

The Government of Alberta established a goal of generating 30% of electric energy from renewable sources by 2030 within the Renewable Electricity Act, passed in 2016.12 To facilitate the development of renewable projects to meet this target, the AESO developed and implemented the Renewable Electricity Program (REP). This program provides an Indexed Renewable Energy Credit, where the government pays or is paid the difference between the pool price for wholesale electricity sale and a bid price that represents the lowest acceptable cost for the renewable project.13 This program was designed to attract the most bidders by allocating the market price risk and opportunity to the Government of Alberta, providing revenue certainty for the renewable project owner14. In the first three rounds of the REP, 12 projects were selected to receive this funding, totaling 1,359.3 MW of renewable capacity to be operational by 2021. The program was able to procure the lowest renewable electricity prices in Canada.15 

In anticipation of introducing more renewable energy, the AESO recommended a transition from an energy-only market structure to a capacity market structure.16 Under a capacity market, generators would be compensated for both producing energy and for providing capacity to produce energy.17 This transition was recommended to ensure the system was reliable, provided stable revenue, drove innovation and cost discipline, and was adaptable to policy decisions.18 The AESO determined that this transition would be required to accommodate the greater number of renewable generators being introduced by providing greater price stability and to incentivize investors to develop more renewable and natural gas projects because of the revenue sustainability.19 However, critics of the program cited concerns about oversupply and higher prices. 

However, following the 2019 election, the current government, passed a bill terminating both the next round of REP and the Alberta Carbon Tax.20 These policy changes are one reason the AESO has forecast that Alberta will not reach 30% renewable capacity by 2030.21 There are several shovel-ready projects in Alberta. AESO reports that 49 solar and wind generation projects from international and provincial players already received regulatory approval for construction. These projects have a combined generation capacity of 3,805 megawatts, including 300 MW wind project developed by EDP Renewables and several 200 MW wind projects developed by ENMAX, BluEarth Renewables and Suncor. Combined, these projects could create over $8 billion of investment in Alberta and more than 10,400 jobs by 2024. 

In the wake of COVID-19, it only makes sense to hedge our public bets by diversifying into the small-scale renewable energy market, particularly in Alberta where there is significant economic activity to be unlocked by enabling renewables at a faster pace. Leveraging stimulus spending to reduce barriers for renewable energy will help Alberta tap into the potential of its vast renewable energy resources, which will mean more jobs, more investment coming to the province and affordable electricity.

Recommendations

The Alberta Chambers of Commerce recommends the Government of Alberta:

1. Set clear targets and make commensurate investments in energy storage projects to ensure Alberta can leverage its opportunities in renewable energy; 
2. Develop outreach programs to attract students to relevant academic programs – with the aim of producing a diverse, highly skilled work force of post-secondary graduates and/or tradespersons; 
3. Continue to invest in pilot projects across Alberta and neighboring provinces, to further level the playing field for renewables on the provincial grid; and 
4. Engage in a united action with other levels of government, electricity employers, and academic institutions to support education and training or retraining to optimize the labour potential of current workers.

Resources

1. https://www.cangea.ca/uploads/3/0/9/7/30973335/2288_deep_dive_analysis_of_best_geothermal_reservoirs_fo r_commercial_development_in_alberta_-_final_report_20170404.pdf 
2. http://publications.gc.ca/collections/collection_2017/eccc/En4-294-2016-eng.pdf 
3. https://open.alberta.ca/dataset/2bf1b608-8e3b-4bc9-854e-23d19bbecbdc/resource/a238daa7-1513-4ac0-841ed512d73a9c16/download/energy.pdf 
4. National Energy Board (2019). Provincial and Territorial Energy Profiles – Alberta. 
5. https://www.cer-rec.gc.ca/en/data-analysis/canada-energy-future/2020/canada-energy-futures-2020.pdf 
6. https://www.pembina.org/reports/plugging-in-2018.pdf 
7. Ibid. 
8. https://www.alberta.ca/micro-generation.aspx 
9. https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/provincial-territorial-energy-profiles/provincialterritorial-energy-profiles-alberta.html 
10. https://www.alberta.ca/micro-generation.aspx 
11. National Energy Board (2019). Provincial and Territorial Energy Profiles – Alberta.
12. https://www.qp.alberta.ca/documents/Acts/r16p5.pdf 
13. https://www.aeso.ca/market/renewable-electricity-program/about-the-program/ 
14. https://www.aeso.ca/assets/Uploads/AESO-RenewableElectricityProgramRecommendations-Report.pdf 
15. https://www.aeso.ca/assets/Uploads/2019-Transmission-Capability-Assessment-Final-18Apr2019.pdf 
16. AESO (2016). Alberta’s Wholesale Electricity Market Transition Recommendation. 
17. Ibid. 
18. Ibid. 
19. Ibid. 
20. https://globalnews.ca/news/5334599/alberta-carbon-tax-ucp-bill-kenney/ 
21. https://calgaryherald.com/business/local-business/renewable-electricity-target-downgraded-by-albertaselectric-system-operator 

Date Approved: May 2018
Date Renewed: May 2021