Update on the Alberta Coal Phase Out

As January 1, 2017 approaches and Alberta prepares to enact some major changes to the electricity market here is an update on the Coal Phase Out.

The Alberta Government is attempting a made-in-Alberta transition to a stable, reliable and cleaner electricity system, the government plans to phase out all coal pollution by 2030. This will be achieved through the following actions:

• having 30% of Alberta’s electricity come from renewable sources by 2030
• allowing coal units to convert to natural gas where it is economically viable
• creating a market for private investment in technologies such as natural gas, cogeneration or other technologies

A hiccup that came along with the move towards a coal free electricity grid was when 4 companies applied to terminate their Power Purchase Arrangements. Which was followed by a lawsuit launched by the government to counter those terminations.  A settlement has been reached Capital Power and tentative agreements have been reached with TransCanada and AltaGas.

There is also the effect on the owners of the coal-fired electricity generation assets that will be affected by the mandated phase out.  The government has elected to provide transition payments to the companies which were originally slated to operate their coal-fired units beyond 2030.

These payments, calculated using a methodology provided by energy expert Terry Boston, represent the approximate economic disruption to their capital investments. They also provide investor confidence and encourage them to participate in Alberta’s transition from coal to lower emitting sources of electricity, such as natural gas and renewables.

The transition payments will be coming from Emissions Reduction Alberta (formerly the Climate Change and Emissions Management Corporation – CCEMC) and will be paid from revenues generated by Alberta’s price on industrial carbon emissions.  This is a funding source that was in place prior to the NDP taking power and will have no effect on consumer electricity bills.

In regards to the communities and local economies that will be impacted by the retirements of coal-fired power plants, the government has created the Advisory Panel on Coal Communities.  This panel, with experts in employment and labour law, human capital and economics will engage with the affected communities to try and enact a positive economic and social transition in this large market shift.

As coal-fired electricity generation currently makes up half of the grid capacity in Alberta and the government has a goal of 30% renewable capacity by 2030, natural gas generation, both new and coal to gas conversions , will still make up the other 70% of grid capacity.  As of the fall of 2016 there is already a memorandum of understanding between the Alberta Government and TransAlta regarding the transition from coal to gas.

With drastic market changes like this there is bound to be impact on consumers.  The coal phase out and the carbon tax will most likely have upward pressures on retail rates for consumers.  How drastic those upward price pressures will be is yet to be seen and will depend on the other coming changes to Alberta’s electricity market.

Consumers can protect themselves from any price increases by choosing a Fixed Rate Plan from Park Power that will guarantee them a low (pre-carbon tax) rate for 2 or 4 years.