Market News

 March 14, 2007
Will Alberta's Energy Strategy be Sustainable?

 Calgary, Canada (GLOBE-Net) -- Alberta has become the first province to introduce legislation to reduce greenhouse gas emissions intensity from large industry, and the government promises more is coming as part of a provincial sustainable energy strategy. The province recently received $160 million in ecoTrust funding from the federal government, and announced the formation of a task force on carbon capture and storage. These initial steps could lay the groundwork for a sustainable energy future for Alberta, but the province's fossil fuel resources will make managing its greenhouse gas emissions a major challenge.

The recently introduced Climate Change and Emissions Management Amendment Act, and the accompanying pecified Gas Emitters Regulation will require companies that emit more than 100,000 tonnes of greenhouse gases a year to reduce emissions intensity by 12 percent starting July 1, 2007. The Bill has passed the first reading, and could come into force sometime within the next few months.

The baseline against which reductions will be measured is to be the average of reported emissions for each facility over the three years since reporting requirements were introduced. If the Bill passes, companies reporting their 2007 emissions at the end of this year will be required to meet the intensity target for the last six months of the year.

The legislation will have broad coverage, applying to around 100 facilities that account for approximately 70 per cent of Alberta's industrial emissions. The unit for measuring intensity will vary for each facility, and could be based on output, such as cubic feet of natural gas, barrels of oil, tonnes of coal, megawatts of electricity, or inputs of materials and energy. Firms that don't meet the requirement will have two options for compliance:

  • Contributing $15 for each tonne of emissions over the 12 percent target towards an Alberta-based fund which will used to invest in technology or infrastructure to reduce greenhouse gas emissions, such as carbon capture and storage; or

  • Investing in a project to offset their excess emissions elsewhere in Alberta, subject to verification by a third party.

Federal funding for carbon capture and clean energy

Alberta also received a boost from the federal government this week, with a $155.9 contribution from Ottawa under the Canada ecoTrust program, which directs federal funds to help provinces reduce greenhouse gas emissions and air pollutants.

Some projects identified for the funds include:

  • a Clean Coal Front End Engineering Design (FEED) project as the first step towards creating a coal-fired electricity generation facility capable of near-zero emissions;

  • a waste-to-energy project in Edmonton to convert municipal waste into electricity; and

  • a Hydrocarbon Upgrading Demonstration Program, to explore commercial opportunities to upgrade Alberta energy resources into other consumer products, while minimizing environmental impacts.

Carbon capture and storage has been identified as a major priority, and some ecoTrust funds will go towards technical and practical development of the technology, supporting work done by the newly established Canada-Alberta ecoEnergy Carbon Capture and Storage Task Force.

The Task Force will build on the CO2 Capture & Storage Technology Roadmap (PDF) released last year by Natural Resources Canada. The report looks at near-term implementation and long-term aspects of carbon dioxide storage, with a strong focus on the oil and gas sector, particularly in Alberta.

"Large point sources" such as oil and gas facilities or coal plants offer the greatest potential for isolating carbon and piping it to a location where it can be stored underground in geological formations, says the Roadmap. Carbon dioxide can also be injected into oil wells and coal bed methane deposits to enhance resource recovery.

The Task Force will identify opportunities in this area and seek to address challenges for developing a large-scale carbon dioxide capture and storage system, identifying methods for public and private sector collaboration. The Task Force will be chaired by Steve Snyder, President and CEO of TransAlta, with members from industry, academia, and government.

Alberta Premier Ed Stelmach has endorsed a plan for a $1.5 billion carbon dioxide pipeline that would transport the gas from large industrial sources to where it can be stored in geological formations or injected into depleted oil wells to improve production.

Alberta remains a fossil fuel province

It is clear that Alberta's natural resources are heavily tilted towards fossil fuels -- oil, gas, and coal. But use of these resources does not mean that Alberta's energy mix and economic growth have to be an environmental negative.

Along with the above initiatives, the province says it will develop a comprehensive energy strategy, to "ensure the sustainable development of the province's resources in an environmentally responsible manner".

The plan will make use of technological innovations that allow for reductions in emissions from fossil fuels, including efficient combustion of coal, pollutant-reducing gas scrubbers, and carbon capture. It will also focus on renewables, with wind power and biofuels receiving the greatest attention.

A new Oil Sands Sustainable Development Secretariat will be created to monitor the industry's expected growth, replacing a previous institution that has been overwhelmed by the rapid pace of development.

With the expected growth in the oil sands, Alberta's greenhouse gas emissions will continue to rise, and the province will undoubtedly retain its position as the largest GHG-emitting region in Canada. By regulating emissions intensity, Alberta will slow the pace of emissions growth and encourage investment in efficient, clean technologies. But even though an intensity-based approach may be suitable in the short-term, a longer term plan will need to include a hard cap system or other mechanism in order to prevent enormous increases in greenhouse gas emissions. While a hard cap for Alberta seems very unlikely now, the federal government may well enact such a system in the future.

The province will need to address its heavy use of coal, which supplies 74 percent of its electricity, both by making its use more efficient and by displacing it with renewable energy.

'Clean coal' may prove to be a reality in the future, but it has yet to be demonstrated on a commercial scale. The $1.6 billion, 450 MW Keephills 3 plant to be built near Edmonton will emit one-quarter less CO2 per unit of power than the obsolete Wabamun plant, but will still be a major emitter. With forecasts from the Alberta Electric System Operator (AESO) that the province will require 3,800 MW of new generation by 2016, 'clean coal' technology must be improved and applied in the very near future to have an impact on infrastructure investments that will last several decades.

The province has also excellent resources for wind energy, and must diversify its energy supply mix or face rising greenhouse gas emissions and deteriorating air quality. Apart from the related health and climate risks, a rising GHG profile without adequate development of clean energy sources puts Alberta's economy at risk from future federal emissions caps. Another area in which Alberta must make up some ground is energy efficiency. A 2006 report from the Canadian Energy Efficiency Alliance (CEEA) gave Alberta a failing grade for its a lack of building codes or regulatory pressure to promote energy efficiency. Given that the province will continue to use fossil fuels extensively in the foreseeable future, improving energy efficiency is vital.

So while Alberta is promising a sustainable energy plan, nothing concrete has been seen yet. The province could have a sustainable energy future if the government delivers a workable strategy that includes: targets for renewable energy; tough energy efficiency measures; a long term strategy for reducing greenhouse gas emissions; and energy management programs that result in the more efficient use of fossil fuels. There is equal risk however, that continued heavy and inefficient use of fossil fuels will place Alberta's environment, its economy, and its citizens at higher levels of risk.

Finding an appropriate strategy

As the GLOBE Foundation's Endless Energy model predicts, the transition towards a sustainable energy economy will be different in each jurisdiction, as natural resources, economic circumstances, and societal dynamics dictate which solutions are both attractive and achievable.

While hydroelectric capacity and a variety of other energy options make it possible for British Columbia to become energy self-sufficient by 2025 from renewable sources alone, such a plan may not be feasible for Alberta.

In all likelihood, Alberta's path towards a sustainable energy future will include continued use of fossil fuels with the development of technologies to reduce associated emissions, such as carbon capture and storage, along with renewable energy and increased efficiency.

Whether the province's sustainable energy plan can deliver all that the Alberta government promises remains to be seen.

"Sustainable energy policy is not 'one size fits all'," notes Dr. John Wiebe, President and CEO of the GLOBE Foundation. "Alberta's fossil fuel resources will continue to be important for the province, and it is possible that emerging technologies will allow for careful expansion in these industries. However, this should not preclude immediate measures to improve energy efficiency, to develop renewable energy sources, and to reduce greenhouse gas emissions."