Alberta government responds to federal electricity regulations

“These regulations are irresponsible and reckless, setting unrealistic targets and even banking on technologies that don’t exist,” says Danielle Smith, Premier of Alberta. “They will result in Albertans shouldering an unbearable cost for an electricity system that will no longer deliver the safety, reliability and affordability upon which our lives depend. We will not permit these dangerous and unconstitutional regulations to be imposed upon our province.”

“The standards and enforcement that Ottawa is proposing would put the safe, reliable and openly competitive market of Alberta’s electricity system at risk, all for targets that aren’t feasible or realistic,” adds Rebecca Schulz, Minister of Environment and Protected Areas. “We cannot allow the reliability of our electricity to be compromised and risk public safety during the coldest months of the year when people need the power most. We urge Ottawa to abandon these regulations and work with us on a realistic path that aligns with our own emissions-reduction goals.”

According to the provincial government, some of the key problems outlined in Alberta’s technical submission include:

Flawed modelling creates unrealistic targets

The modelling tools used by the federal government lack the capability to properly assess Alberta’s energy-only market, including the province’s large share of cogeneration. The federal tools also use incomplete proxies to evaluate system reliability, leading them to drastically underestimate the negative impacts.

The federal modelling also relies heavily on technologies that are currently not ready to be deployed, assuming they will soon be easily or quickly available. As a result, the federal modelling offers an unreliable and inaccurate picture of the costs, impacts on reliability and outcomes of these regulations. With better modelling, the federal targets would be unachievable.

Unachievable standards

The regulations propose unachievable emission standards, with limited flexibility and using a rigid approach that will not work. The standard is also based on unproven design specifications that will be very challenging for operators to meet, even under optimal conditions, and potentially impossible given the operational variability that occurs in electricity grids on a daily basis.

Notably, Ottawa’s standard is significantly higher than those proposed in the United States in May. Standards need to be based on actual performance.

Creating a retirement cliff

The proposed regulations set an end of prescribed life of 20 years, despite the typical operating life of natural gas units being closer to 45 years. This will create stranded assets and massive retirement “cliffs,” as large numbers of natural gas facilities go offline.

Approximately 55 per cent of Alberta’s existing and approved natural gas generation installed capacity would be subject to the federal emissions standard by 2035. The unnecessary retirement of best-in-class natural gas units would have massive negative impacts on Alberta’s electricity system.

A one-size-fits-all approach won’t work

It is clear that the federal government drafted these regulations based largely on the electricity systems of Canada’s three largest provinces, which primarily rely upon hydroelectricity and nuclear energy.

Regional differences must be recognized, including flexibilities for those jurisdictions most negatively affected by the regulations. When Ottawa exempted home heating oil from the carbon tax, they recognized the need for this flexibility. Alberta and all provinces deserve the same consideration.

Flawed understanding of natural gas

Alberta currently relies on natural gas for more than 70 per cent of its generation. Alberta’s grid reliability is maintained through natural gas generation to backup and balance intermittent sources of power such as wind and solar. Considering the seasonality of renewable resources, Alberta anticipates the need for efficient high-capacity abated natural gas units for decades to come.

The regulations are so rigid and strict that they will effectively make it economically unviable for companies to build and operate natural gas facilities, including abating emissions through carbon capture, utilization and storage (CCUS).

Inflexible and punitive compliance options

The draft regulations are unnecessarily punitive with inflexible compliance options. As written, generators must not emit or they could face criminal penalties under the Canadian Environmental Protection Act, which includes a threat of incarceration. The regulations also increase red tape, increase costs, and offer very little flexibility for industry.

Limiting new technologies

The proposed federal electricity regulations will limit the adoption of important new technologies like hydrogen and CCUS by setting unproven and unrealistic performance standards for facilities. This imposes high costs, introduces investor risk, and creates challenges such as older facilities not being able to upgrade or retrofit new technologies. The result will be added costs and grid reliability risks.

Risks to reliability and safety

Alberta requires reliable electricity power in periods when intermittent sources are not generating. In December 2022, the 5,000 megawatts of installed renewable capacity generated as little as 187 megawatts of energy at one point during a period of cold weather with little wind or solar generation. Natural gas was needed to keep the province from experiencing blackouts.

The proposed allowable peaking provisions – needed to ensure that power is available at any time, under any weather conditions – will result in Alberta not having enough power available when needed most. This is dangerous and irresponsible. The proposed low annual-run-hour limit and emissions restrictions do not enable natural gas assets to respond when needed to increasing demands and the variability of intermittent generation.

A ridiculous approach to emergencies

The proposed treatment of emergencies is unacceptable. It is untenable for the federal government to require post-emergency sign-off by a federal minister. Alberta’s provincial system operator knows best when we have an emergency, not politicians in Ottawa. Provinces must have flexibility to call on generators during emergencies to protect the safety and security of families and businesses, without the threat of punitive action on system operators or generators.

Inadequate financial support for those hit hardest

The federal government released the draft regulations without providing the financial supports needed to enable this transition. Any claims otherwise are false. Federal modelling indicates the regulations will cost $58 billion – since 60 per cent of the net costs will fall on Alberta, the province should receive 60 per cent of the necessary federal funding. Also, the $58-billion figure is likely incorrect as it’s based on flawed modelling and does not adequately consider the distribution and transmission and other costs that will be required. Other third-party assessments further estimated the costs reaching into the trillions.

Next steps

Alberta continues to call on the federal government to respect jurisdictional authority and the enshrined rights and responsibilities of the provinces. The Supreme Court of Canada’s decision on the Impact Assessment Act confirmed the unconstitutionality of the federal government’s ongoing efforts to interfere with electricity and natural resource sectors of all provinces.

The Alberta-Ottawa working group continues to discuss how to bring Ottawa’s efforts to achieve carbon neutrality in the economy in line with Alberta’s Emissions Reduction and Energy Development Plan. If this alignment is not achieved, Alberta will chart its own path to protect its citizens and economy by ensuring the province has additional reliable, affordable and sustainable electricity brought onto the power grid.

Alberta officials will continue to share technical information and analysis on these regulations with the federal government as required to achieve a more practical and realistic approach.

Alberta government quick facts

Alberta has reduced electricity emissions by 53 per cent since 2005.
According to Canada’s Constitution, legislating and regulating the development of electricity explicitly falls within the jurisdiction of the province (92A (1) (c)).
The Alberta Electric System Operator found that Alberta would face disproportionate risk and costs, compared with other provinces, as a result of the federal electricity regulations.
The Public Policy Forum previously indicated that the cost of the federal electricity approach could be more than $1 trillion and as high as $1.7 trillion.

by rdnewsNOW Staff