3 Strikes Against New Electricity Policies Means its Game Over for Alberta
“Good intentions never change anything. They only become a deeper and deeper rut.” - Joyce Meyer
So here we are in the year of our lord…. and; we are in a very deep rut. Our provincial government in its infinite wisdom has declared that we will immediately move away from fossil fuel generated electricity to renewable energy. First on the hit list is coal. This is an admirable goal and I applaud the move!
No one with a smidgen of common sense can legitimately argue that we aren’t in one fashion or another despoiling our environment. To turn a blind eye to the larger impact of man-made climate change arising from the use of fossil fuels is to ignore all the obvious signs around us.
But; the blinding speed of these changes will inevitably create an unintended series of issues for each and every Alberta resident. Good intentions are now dragging us down into that rut.
By now; everyone has heard of the very significant financial impact to provincial coffers from cancelled power purchase agreements. In a nutshell, the provincial government has been forced to compensate Alberta power generators because of arbitrary changes made to the industry without truly understanding the intricacies of this slice of our economy. We’re not talking about a few hundred dollars here folks. The tally is $1.36 billion. That works out to about $328 for every man, woman and child in Alberta.
Math may not be my strong suit, but that is going to hurt! It hurts because at the end of the day I am not getting anything in return for my money. I’m not even getting an acknowledgment or thank you from our provincial government for my largesse. I pay my money and it disappears into the coffers of some very wealthy corporations.
Here is the wind-up.
It’s a curve – ball on the outside corner - Strike 1.
Renewable Energy. What a great idea. Wind blows, the sun shines and everyone is charged up for another day. What could be better. No smog, no pollution. Everything is coming up roses.
Just one small issue to overcome. Well, there are a couple of issues. Well; actually, there are a ton of issues with this concept, but let’s just stick to two of them.
As you may already be aware, Germany has been one of the leading lights (forgive the pun) when it comes to using renewable energy. About 32% of all their electricity is generated by the sun and wind. Truth is that there have been instances where, for a brief period of time, up to 100% of all their electricity has come from renewables. It only happened for a short while, but it did happen.
There is just one small, itty-bitty problem with this story. You have probably noticed that occasionally the wind doesn’t blow and the sun doesn’t shine. And; sometimes they both don’t happen at the same time. Imagine that!
Reports out of Germany have demonstrated that the country must have a 100% redundant fossil fuel supplied power generating system in place just in case renewables are not operating for a period of time. This means that the cost of building the renewable generating capacity in Germany is compounded by the need to have a fully operating system just waiting to fire up in the event it is needed. That means engineers and maintenance people that run the plant are at their posts just waiting for the call to fire up the generators. All the spare parts have to be on hand and equipment has to be kept tip-top in case that plant is called on to generate power.
It’s like owning a Ferrari just in case the battery in your Porsche doesn’t work when you need it most.
The ironic part of the German experiment is that the stated goal was to reduce carbon emissions 40% below 1990 levels by 2020. Certainly a bold target if they could have achieved it, but they have only cut their emissions by 27% since 1990.
So here we are in Alberta building a renewable energy portfolio but have to back it up with a 100% fossil fuel power generating system, “just-in-case”?
It’s a wicked slider on the inside for another strike.
Generating power is an expensive business. To build a new fossil fuel powered generating plant will cost approximately $1,500,000 to $2,000,000/MW of capacity. To put that in perspective, if we had to build enough new fossil fuel powered generating capacity to keep all of Alberta lit up, the cost of building these plants would be somewhere between $20 and $25 billion not including all of the supporting infrastructure. In other words, building just the generators without the infrastructure to support it is the same as you handing over $5,000. Family of 4? Your family now owes $20,000.
It’s not a cheap game and the investors in those new plants will want to make sure that their money will provide a return on their investment! Here is the rub though.
If an investor was planning on building a new generating plant in Alberta right now and they knew the 1,000 MW natural gas fired plant they want to build is going to cost around $2 billion dollars, and that it will only be able to sell the power it produces when the sun doesn’t shine and the wind doesn’t blow, why would they want to invest in a power plant in Alberta?
Don’t worry everyone, the government has a plan!
Here it is! If you promise to build the plant, our government will guarantee that you will be given a subsidy to build it. It’s called a capacity payment.
If the wind is blowing and we don’t need your power, we the government promise to pay you. If the sun is shining and we don’t need your power, we promise to pay you again. Quite handsomely I have to add.
Now let’s analyze who is going to pay a private corporation that 100% owns the plant that our provincial government is subsidizing to locate here.
Frankly; there really isn’t too much to analyze. You dear voter are the lucky one that will be given the glorious opportunity to subsidize a power plant owned by an investor who is in it to make money and that may or may not generate power on any given day of the week. All this and you also get to subsidize renewables like wind and solar farms that are also owned by wealthy investors. In another twist of the knife you are offered the amazing opportunity to even purchase the power being generated by the plants you are subsidizing to be here in the first place.
Just to make the point clear; you my Alberta friend and neighbour will subsidize the fossil fuel fired plants, you will subsidize the solar farm, you will subsidize the wind farm and; AND you will also be permitted to buy the power from the privately-owned generating plants which you are subsidizing.
Ladies and gentlemen; it’s a fast ball right across the plate and Strike 3 is called.