Recent decisions by the Notley government in Alberta may have rendered a large portion of Alberta’s electricity supply uneconomic to produce, a recent article by two lawyers at Osler suggests.
The issue arose when, on March 7, TransCanada Corporation announced its plan to exit three Power Purchase Arrangements (PPAs) as a result of changing emissions laws in Alberta, which TransCanada claims have rendered the PPAs unprofitable. Earlier this year, ENMAX Energy Corporation had also decided to exit the Battle River PPA, also claiming unprofitability. Collectively the four account for about 15% of the provinces installed capacity.
As the authors go to on to explain, the decision will leave the Balancing Pool – a statutory entity created during deregulation in 1999 – in charge of the PPAs associated with the four coal-fired plants (Sundance A, Sundance B, Sheerness and Battle River). They point out that the Balancing Pool may itself then decide to terminate the PPA, whereupon control of the generating unit reverts to the owner, who may decide to stop producing power.
The authors suggest that the generating companies’ decisions are related to the provincial decision to increase levies on carbon emissions, as well as requirements for emissions reductions, on industrial emitters, on the way to an accelerated phase-out of coal by 2030.
As the authors go on to say, the result could be that Alberta will “find itself in a situation where much of the coal-fired capacity – which provides a very reliable and stable power source – will be taken offline much sooner than the Government planned. This may have implications for system reliability [as well as consumer costs] if these large-capacity plants cannot be replaced with lower emitting alternatives before they go offline. These factors are all likely to play a role in the ongoing negotiations between the Alberta Government and coal plant owners regarding compensation for the premature closure of the affected plants.”
Following publication of their article, Capital Power Corporation also announced March 24 that it also would terminate its role as buyer of the Sundance C PPA. The company did note that it continues to own more than 1,500 MW of generation capacity in the Alberta market.
Excerpted from "Alberta emission policies shake up power industry," by Martin Ignasiak and Jessica Kennedy, Osler LLP, March 10.