It would seem to promise an energy marriage made in heaven – matching up Alberta’s world-class wind resources and British Columbia’s bountiful hydroelectric capacity.
As Alberta moves to retire coal-fired power, the province will have to replace it with new sources. The current plan calls for a mix of natural gas and renewable generation to fill the void, with renewables to meet two-thirds of the capacity lost due to coal-plant retirements.
However, several studies suggest Alberta would benefit from greater electricity trade with BC Hydro, which could provide hydroelectric power to its neighbour when needed and offer a market for wind-generated electricity when supply in Alberta exceeds off-peak demand.
Federal ministers have talked about the importance of connecting interprovincial grids to maximize the benefits of investments in green energy. Ottawa is considering financing for regional transmission projects through its new Canada Infrastructure Bank or through federal climate-change programs that earmark more than $2 billion for the two western provinces.
Increased energy trade between Alberta and British Columbia holds great promise but there are major hurdles that must be overcome. They include the tendency of provinces to prefer costlier domestic generation to imports, as well as a mismatch in the two markets. BC Hydro enjoys a near monopoly, while Alberta has a competitive wholesale pricing system.
Still, with all governments looking to reduce greenhouse gas (GHG) emissions in the electricity sector, western Canada would benefit greatly from the expansion of interprovincial transmission capacity, said Nicholas Martin, a policy analyst at Calgary-based Canada West Foundation.
“The most effective way to [decarbonize the electricity system] is to develop a lot of good wind resources in the Prairies and have a lot more interprovincial transmission capacity to send it where it needs to go and back it up with hydro from Manitoba and B.C.,” Martin said in an interview.
Co-operation among provinces on electricity trade has been elusive. And now is a fraught time for energy relations between Canada’s two most westerly provinces.
Earlier this year, Alberta Premier Rachel Notley suspended talks on electricity trade as a result of the B.C. government’s efforts to block expansion of the Trans Mountain pipeline expansion. United Conservative Party opposition leader Jason Kenney has pushed Notley to be even more aggressive in punishing B.C. for its government’s actions that are seen to damage Alberta’s economy by denying export markets for its crude.
Proponents of greater B.C.-Alberta electricity trade argue it is in the interest of electricity consumers and producers in both provinces, given the determination to reduce GHG emissions in the system.
Notley has committed Alberta to closing its coal-fired generating stations by 2030. That represents 6,300 megawatts (MWs) of electricity capacity, or nearly 40 per cent of the province’s total. Under the NDP plan, renewables – mainly wind – would support 30 per cent of the province’s electricity capacity by 2030.
Natural Resources Canada recently completed a study on Regional Electricity Cooperation and Strategic Infrastructure (RECSI), which was done in collaboration with the four western provinces, the Northwest Territories and their main grid operators. It concluded that two B.C.-Alberta interties, or transmission connections, could be added at an annual cost of $122 million, and would reduce GHG emissions by two megatonnes at an average cost of about $63 per tonne.
Canada West Foundation’s Martin said the RECSI study did not include any savings that would accrue from not having to build natural gas plants to cover the variability of wind power. Nor did it calculate the benefit to Alberta wind producers of having access to an export market when their supply exceeded demand in the province.
(The Saskatchewan Party government in that province has committed to rely on renewable power for 50 per cent of its power capacity by 2030, as it closes coal plants that are not equipped with carbon capture technology. The RECSI study argues two proposed interties with hydro-rich Manitoba would save the two provinces $22 million and reduce GHGs at a cost of less than $42 per tonne.)
A University of Ottawa study, published in February, also concluded provinces can achieve emission reductions most efficiently by expanding regional grids. Hydroelectricity is the perfect complement to wind power, because water can be held back when the wind is blowing and released when it dies down.
That work, by Brett Dolter and Nicholas Rivers, found that expanding wind power capacity brings cheap emission reductions. The most cost-effective way to balance the variability of wind would be with existing hydro dams and enhanced electricity trade between the provinces, they concluded.
One Alberta-based analyst has calculated that an additional 1,700 MW intertie between the provinces would provide $194 million per year in savings to Alberta ratepayers and $120 million per year in extra revenue to wind producers in Alberta. The intertie, which would come at a cost of $2.1 billion, would reduce annual GHGs by 2.2 million tonnes. The analyst provided his conclusions to Corporate Knights on the condition he not be named because his company has not authorized the analysis.
Alberta and British Columbia already have 1,200 MW of cross-border transmission, but it is currently restricted to 850 MW due to concerns about the impact on the entire grid if the transmission lines went down in a storm.
The two provinces have discussed how to expand usage of that line and Alberta has put out a call for “demand response proposals” that would reduce peak demand, said Blake Shaffer, a post-doctoral fellow at the University of Calgary who has worked for BC Hydro and TransAlta.
Shaffer said the great value of an interprovincial transmission line is that it carries electricity both ways: supplying power to Alberta at peak times on summer afternoons when the wind is low, but also providing a market to Alberta producers when there is a surplus in the province.
It can be a tough sell in Alberta, however, which would be importing when the market is tight and prices are high and exporting when there is surplus power generation available and prices are low.
“Alberta would have a trade deficit [in electricity] in terms of dollar but that doesn’t mean it’s a bad thing,” Shaffer said.
As well, the fact that BC Hydro dominates the wholesale market in that province, while Alberta has an openly competitive system with many private players, complicates how electricity could be traded. Some market reform would be required to maximize the value of an expanded interprovincial grid, the Canada West Foundation said in a 2016 study.
The critical question is: What is the alternative? Without imports, Alberta would have to run high-price natural gas plants designed specifically for covering peak demand, which would be costlier for consumers than relying on B.C. hydroelectricity, Shaffer said.
The studies on the cost effectiveness of regional transmission assume governments intend to continue driving down emissions in the electricity systems.
However, it is not clear what a new Alberta government would do if Kenney defeats Notley in next spring’s election. He currently has a commanding lead in the polls.
He may follow the lead of Saskatchewan’s conservative government and maintain an ambitious renewable power target. But he has vowed to eliminate the carbon tax, which provides incentives to use renewable power and import hydroelectricity rather than rely on natural gas.
Alberta has vast pools of natural gas, and producers who have struggled for years with rock-bottom prices are eager for new markets.
Given the current political climate, Kenney may be loath to pursue a policy that could be construed to benefit British Columbia at the cost of Alberta gas producers.
Still, Shaffer said the retirement of the coal-fired power plants is providing plenty of opportunity for gas producers.
“My view is a combination of resources is the best option,” he said, “and having a greater amount of interties with BC Hydro doesn’t preclude a significant amount of natural-gas capacity development in Alberta.”
