Greener generation

A shift away from coal-fired power could create an opening for wind power in Alberta

Wind-generated electricity could become a large part of Alberta's power mix in the future. But don't look for a boom in wind farm construction in the next two or three years-especially when natural gas prices are still low and are expected to stay that way for a while.

When it comes to adding new power generation, wind is the second-cheapest option after cogeneration natural gas-fired power, says Paula McGarrigle, a principal at Solas Energy Consulting Inc. This, however, is rarely enough on its own to get a new wind farm launched in Alberta.

That said, between about 400 and 800 megawatts (MW) of new wind-power generation should be built in the province in 2013. Having long-term power purchase agreements in place is key to adding generating capability.

With some 4,000 MW of coal-fired power-
generation capacity in the province on track to be retired over the next eight to 12 years, and overall capacity expected to increase by 50 per cent between now and 2022, there could be an opening for wind power. Just how big that might be remains to be seen. At present, besides low natural gas prices, Alberta has some hurdles that could impede wind-power growth, which provincial governments in British Columbia and Ontario have removed. The good news for its proponents here, however, is that Alberta, as a potential wind-power resource region, is in the top quartile globally.

In 1993, Alberta became the first province in Canada to start a wind farm; however, now the province lags behind Ontario and Quebec in wind generation. As of December 2012, Alberta had total capacity of 1,116 MW of wind-sourced electricity, according to the Canadian Wind Energy Association.

In much of the last six or seven years, wind-power has accounted for 30-40 per cent of additional grid capacity in Europe and the United States. China is also on a steep growth curve in the wind-power department: wind-power capacity grew there from 1,260 MW in 2005 to 62,000 MW by 2011, according to the U.S. Department of Energy. Capacity is expected to hit 100,000 MW by 2015.

In Alberta, on the other hand, growth in additional wind-power capacity has been minuscule for much of the past decade. Still, the last three years have finally seen an upswing in new wind power, with capacity added in 2010 and 2011, and construction of a 150 MW wind farm near Halkirk, Alta., in 2012-currently the province's largest.

Changing landscape

One or way or another, if the province's power requirements are to be met, a lot of new electricity needs to come on stream over the next decade or so.

No one is sure what the mix will be by then, but McGarrigle believes it could be quite different from today's-perhaps with much less coal-fired power. And so does the Alberta Electric System Operator (AESO), a not-for-profit corporation that runs the province's electric power grid and helps manage its wholesale electricity market.

At the end of 2011, total generation capacity in the province was 13,659 MW. Approximately 46 per cent of this total was coal-fired, 39 per cent gas-fired, six per cent hydro and six per cent wind, according to AESO.

AESO expects electricity demand in Alberta to reach about 19,600 MW by 2022. New federal rules affecting coal-fired power, expected to be in force by 2015, could see as much as 4,500 MW of power generation retired by 2032.

"The future generation mix in Alberta is expected to shift from a predominantly coal-based fleet to a natural gas-based fleet with the majority of generation additions to come from combined cycle, cogeneration and wind facilities," says AESO's 2012 Long-term Outlook, published last year.

The environmental reasons for shifting from coal-based power are compelling. Alberta, along with Saskatchewan at about 70 tonnes per year, has among the highest per capita CO2 emissions in the world. Only two U.S. states-North Dakota and Wyoming-have higher emission rates per capita.

"Alberta contributes about one-third of Canada's greenhouse gases," McGarrigle says. "About one-half of that third comes from Alberta's coal-fired power generation."

Future growth

About 20 wind-power projects totalling roughly 3,000 MW of increased capacity are in various stages of development right now, according to AESO. Some of these projects are set to be built this year or next, while others are little more than a gleam in an entrepreneur's eye.

NaturEner Energy Canada Inc. has a 200-MW wind-farm project near Medicine Hat, Alta., in the works. "We expect to start construction on Wild Rose 1 by the end of 2013. I've never been as confident about a construction schedule as I am today," says Greg Copeland, vice-president of wind-energy development at NaturEner.

A 115-MW wind farm near Provost, Alta., is now in the approval process as well. "If this time frame holds, with a decision in June granting a go-ahead, construction should start in the third quarter," says Kelly Matheson-King, vice-president of regulatory and communications at BluEarth Renewables Inc.

A power purchase agreement with a commodity-purchasing consortium that represents a group of school boards is a key factor in making the project financially feasible.

"Our advantage is that we can provide price certainty into the distant future. Our operational costs are relatively low," Matheson-King says. "Although our capital costs are substantial [about $250 million], they're predictable. Our prices are very competitive over the long term, otherwise the school boards wouldn't be interested."

Another substantial wind-power project should see a construction start later this year or in 2014. Greengate Power Corporation's 300-MW Blackspring Ridge 1 project is being developed on 46,000 acres of land in the Vulcan-Carmangay area. It is being financially backstopped by an agreement with Pacific Gas and Electric Company.

As Matheson-King and others point out, over the long term, wind power is insulated from the vagaries-and risks-of constantly shifting commodity prices. In Alberta's deregulated electricity market, with electricity generation largely gas- and coal-fired, a steep rise or drop in the price of, say, natural gas, can play havoc with power bills, profit margins and budgets.

So what's the holdup?

Some would think that, given the strength of the resource, wind-power development in Alberta would be a slam dunk. However, Allan Ingelson, director of the energy management program at the Haskayne School of Business at the University of Calgary, points out one of the holdups: "There's a lost opportunity for wind development in Alberta because of the lack of a wind-leasing framework on Crown lands." And while companies in Canada and the United States have been interested for years in the tremendous wind-power potential of Crown lands in southeastern Alberta, no private sector wind project in the province has ever proceeded on Crown land.

The hesitation of McGarrigle and others regarding the sector's prospects becomes understandable, given the holes in the provincial government's policy framework for wind and the fact that other provinces, like Ontario, British Columbia and the Maritimes, are showering the sector with incentives-something we have yet to see in Alberta.

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