Yesterday the Federal Environment Minister, Catherine McKenna, announced Ottawa is aiming to 'virtually eliminate' the use of coal across Canada by 2030. What might this mean for Saskatchewan.
In short: 96 percent of the 1,500 megawatts (MW) of Saskatchewan's existing coal-fired generating assets, will be fully depreciated by the time it has to be shuttered in accordance with the new regulations. As a result the amount of investment which will have to be written off ($200-million) is relatively minor in comparison to the initial $4.5-billion value of those coal assets.
Although the build rate of new capacity - required to offset these coal closures - sounds challenging; the amounts required are minimal in comparison to build rates for gas capacity in Saskatchewan since 2012 and for wind in other parts of North America. Given the cost of new low-carbon assets (primarily wind) there is no evidence this new capacity will have any appreciable impact on electricity prices.
This new federal policy represents a massive economic opportunity for Saskatchewan - not least because of our world class wind resource. Nonetheless that opportunity is not being strategically developed. Instead, the real shame of it is Premier Wall appears more interested in playing political games rather than considering the significant economic and employment opportunities. The longer he continues with this tactic; the greater the proportion of those advantages that will be lost to companies from other parts of Canada, the U.S. and Europe.
That's the short version. The longer follows..
The Big Picture - Canada's GHG emission targets. To provide context it's useful to consider how greenhouse gas (GHG) emissions, from burning coal, fit into national plans to reduce carbon emissions in accordance with the Paris Agreement. Those commitments are covered in this blog from October last year. In summary: they envisage a reduction to 524 million tonnes (30 percent below 2005 levels of 747 million tonnes) by 2030. In 2014 - the last year for which data is available - Canada's emissions were 732 million tonnes i.e. a reduction of 208 million tonnes is required by 2030.
Canadian emissions from burning coal. Only four provinces still burn coal in order to make electricity - Alberta, Saskatchewan, Nova Scotia and New Brunswick.
Total annual GHG emissions, from the four provinces, are 66.5 million tonnes. This is just under one third (32 percent to be exact) of the total emission reductions which Canada needs to achieve by 2030. In other words they are significant and it is easy to see why the Feds have picked coal as a relatively easy initial win in reaching these targets.
Premier Wall "denounced" the plan - no surprise there - and for good measure added that his government will "review the economic impacts".
We do hope this review will include the true cost of Carbon Capture at Boundary Dam although, realistically, the chance of that happening is close to zero.
Premier Wall's knee-jerk negativity, towards any Federal proposals to reduce carbon emissions, is disappointing not least because it means Saskatchewan is missing out on productive negotiations - something which is clearly happening with other provinces.
Alberta, which arguably has the toughest challenge to meet these new targets, has already announced a process which will see coal phased out by 2030. The federal government has also already agreed to negotiate a deal with Nova Scotia which will allow the province to burn some coal after 2030 in high-demand winter months. Also of note is that Nova Scotia has reached an agreement with Ottawa on carbon pricing after Premier Stephen McNeil initially balked at the federal carbon tax plan announced by Mr. Trudeau last month.
So much for the other provinces - what of Saskatchewan?
Saskatchewan coal. Saskatchewan has three coal-fired power stations (Boundary Dam, Poplar River and Shand) which together supplied 46 percent of Saskatchewan's total electricity in 2015. Details as follows;
Question #1: is it possible to shift almost half of Saskatchewan's generation away from coal in only 15 years? In short - yes.
We are talking about only 1,500 megawatts (MW) of generation. In this context, it is of note that Iowa announced a 1,000-turbine, 2,000 MW wind project in April of this year - Wind XI. It was approved in August and will be completed in 2019. Also noteworthy is that, since 2013, SaskPower has announced, and expects to have complete by end 2019, four separate coal and gas projects with a total capital cost of $3.5-billion and a combined installed capacity of 974 MW: they are North Battleford gas plant, Boundary Dam Carbon Capture (coal), Queen Elizabeth power station (gas) and Swift Current (gas).
So yes - it is absolutely possible to build 1,500 MW of new wind and gas generation capacity long before 2030.
Question #2: Is it technically possible to run Saskatchewan's electricity system without coal? Even though, as noted in the previous paragraph, SaskPower is obviously very fond of building more gas and coal; we have lots of other options. Principle amongst them is one of the best wind resources in North America and the best solar resource in Canada. Couple this with Canada's world-class hydro-electric resource, and - as noted in this July study by GE Consulting - there is no reason why wind energy alone should not supply at least 35 percent of Saskatchewan's total electricity needs. Add the 33 percent from natural gas, the existing 14 percent from hydro and that brings us to 82 percent. Add 10 percent from solar (not so far fetched as California already generates more than 10 percent with solar) and we are almost there. And that is without even considering significant new imports of hydro electric power from Manitoba - an option suggested in the aforementioned GE study and something to which SaskPower has yet to give serious consideration.
Question #3: What will it cost? Wind energy today, given our world-class resource, is cost competitive with new natural gas, it is significantly cheaper than nuclear and less than half the price of coal with carbon capture. It is, in short, financially attractive and, unlike the $1.5-billion carbon capture scheme at Boundary Dam, requires no price premium for electricity consumers. Solar is slightly more expensive but its costs are falling fast. The fundamental attractiveness of wind and solar is evidenced by the fact that, in the US, wind added the most new generation capacity in 2015 followed by gas and solar. Globally: 2015 saw two times more capital invested in new wind and solar generation than in new coal and gas generation.
Also of note, from the table above, is that 96 percent of all in-province coal capacity will have reached the end of its 50 year life by the time these new federal regulations require it to be decommissioned in 2030. The only exception is the 276 MW Shand facility which will still have a quarter of its life 'unused' by 2030. In other words: out of the $4.5-billion initial value of the current 1,500 MW of coal generation assets, approximately $200-million or 4 percent, will have to be written off. That is certainly regrettable but it is also a relatively small amount in the grand scheme of things.
The reality is yesterday's federal coal phase-out plan can be readily achieved and at zero marginal cost. More than that: the transition to wind energy, given our world class wind resource, represents a $4-billion+ investment opportunity which could create new industries for Saskatchewan and many thousands of jobs. Back in January we proposed, through SaskRenewables, a seven point strategic plan which would see this once-in-a-generation, billion-dollar opportunity, developed in a fashion which would maximise the economic and employment opportunities for Saskatchewan. Since then neither SaskPower nor Premier Wall's Government, has engaged with us over the further development, or implementation, of that plan.
The great shame in all of this is Premier Wall appears more interested in using this file as a political football to justify his continued preference for ongoing subsidies to the coal and oil industries and particularly for Carbon Capture/CCS.
The Saskatchewan roll-out of non-hydro renewables therefore proceeds without any (apparent) strategy and, by definition, in a sub-optimal fashion. It is rapidly becoming a process in which much of the potential economic benefit is being lost to companies from other parts of Canada, North America and the World.
Given the parlous state of the oil industry, one might have hoped for better.