Alberta Renewable Energy in 2021

Alberta is the fastest growing Province in Canada from the perspective of renewable power development. The once was, (and still is… it’s touchy subject), oil and gas behemoth, has an abundant future of renewable energy to look forward to.

Alberta is primed to be a North American leader in production of sustainable electricity through wind and solar development. This is a result of the strength of Alberta’s wind and solar resources, vast land resources, and its novel deregulated electricity market. Thanks to technological improvements, the cost of energy from solar and wind projects has achieved a state where government subsidies are not required to incentivize developers; however, carbon tax reinvestments under the market-based Technology Innovation and Emissions Reduction (TIER) regime has certainly increased the development competitive landscape.

Three reasons why Alberta renewables will see tremendous growth in 2021–2023:

1) Sustainable Procurements

There is significant growth from public and private organizations seeking “green energy and credits” in an effort to achieve corporate sustainability goals. There’s no denying the environmental, social and governance (ESG) flywheel has benefited renewable industries. The demand for Power Purchase Agreements (PPA) in Alberta is at all time highs, benefiting all involved. Offtakers secure hedged energy contracts while endorsing their commitment to environmental practices which increases their image in the eyes of ESG investors.

The PPA market has continued to be active throughout 2020, despite reduced power consumption and depressed power price futures in the near term (more on this later). The securement of these energy contracts allow developers to accurately predict future cashflows enabling greater financing options and higher impact capital. TC Energy, RBC, TELUS, Amazon, Direct Energy are a few of the private corporations active in recent months; while the City of Edmonton, Alberta Infrastructure and Province of Alberta all have active or recent procurement calls.

Voltarix Group has solar generation ready for offtakes should your business be seeking ways to achieve sustainability goals.

2) Public subsidies are a means for acceleration, not a requirement

While government procurements have contributed to the growth of renewable generation in Alberta, there’s been evidence renewable projects can stand on their own. The 2017 Alberta Renewable Electricity Program (REP) awarded PPAs for 12 wind projects, representing 1,359MW of generation capacity for the province. Alberta’s renewable energy sector is not dependent on such programs for continued growth. Rather, demand is expected to continue as a result of renewable energy generation costs becoming increasingly competitive with other sources of electrical generation on the provincial grid and different types of investors looking to add renewable energy assets to their portfolios to achieve their ESG objectives.

Just last year we saw a successful demonstration of this through Copenhagen Infrastructure Partners investment in Greengate Powers Travers Solar project. The 400MW project achieve Alberta Utility Commission approvals and will be Canada’s largest solar project and one of Alberta’s largest producers of environmental attributes under the TIER regime. The project is noteworthy as the financiers are prepared to develop the solar plant based solely on merchant revenues from uncontracted and unsubsidized attributes.

I would be remiss to discuss Alberta energy subsidies and address the misconception, a give credit to the work Emissions Reduction Alberta (ERA) is doing in reallocation of TIER capital. The subsidies deployed by ERA in renewable energy promote acceleration of novel technologies not yet proven or ready to be deployed at scale. Subsidies of this nature are still very much needed for Alberta to continue being a global leader in energy performance.

3) Alberta’s most polarized discussion — Carbon

The Canadian Federal government recently announced that the carbon tax will increase from its current $30 per tonne of greenhouse gas (GHG) emissions to $170 per tonne in 2030. This is an increase of 566% over 10 years.

The Federal carbon tax is managed under the Greenhouse Gas Pollution Pricing Act (GGPPA). The GGPPA has two main parts:

• a federal fuel charge paid by fuel producers, distributors, and certain prescribed users on 21 types of fuel and combustible waste, and
• an output-based pricing system requiring large emitters exceeding 50,000 tonnes of GHG or more per year to reduce emissions, pay a carbon tax, or retire carbon credits purchased from renewable generators.

Renewable developers predictable creation of environmental attributes can be easily forecasted and relied upon by investors and financiers. While these credits are often closely tied to PPA’s, there’s strong rationale that renewable electricity generators may accelerate payback periods and earn a reasonable profit from carbon alone, during times of suppressed power prices.

While the constitutionality of the GGPPA is currently before the Supreme Court of Canada, and many Albertans stomp at the idea of a cost of carbon, it must be abundantly clear — the question is not IF there will be a carbon tax, its how much will it be, and how much will it increase in the future.

Signoff

As always, I welcome and encourage you to reach out if you have corrections, questions or simply want to chat further.