Unless there really is unicorns, we are going to pay more for power one way or the other.
http://calgaryherald.com/business/en...-bucks-or-more
Varcoe: Alberta's power plan adds up to several billion bucks, or more
Question: How much is the province’s power plan going to cost Albertans?
Answer: A shocking amount.
Sorry I can’t give you a precise answer, because no one inside the Alberta legislature can provide an overall price tag yet, despite a month-long flurry of announcements surrounding the electricity market.
But it will begin with a B, as in billion — several billion dollars, or more.
“The whole plan, there are all kinds of added costs coming to Alberta,” says electricity consultant Gary Reynolds, former head of the province’s Balancing Pool.
“The monster has a lot of different tentacles.”
Just for fun, let’s start to tally the bucks that will flow out faster than electrons during a summer heat wave.
On Tuesday, as Justin Trudeau and Rachel Notley were meeting in Ottawa over pipeline approvals, the province brought forward legislation to backstop losses inside Alberta’s Balancing Pool.
The provincial agency has been burning through cash — about $70 million a month — this year, mainly because of the NDP government’s decision to hike its carbon levy on heavy greenhouse gas emitters.
That change inadvertently triggered an opt-out clause, letting utilities hand their unprofitable power purchase arrangements back to the Balancing Pool, which manages these PPAs.
To stem this problem, the Notley government has decided to provide a loan to the independent agency, which will pass its losses along to consumers through a monthly electricity bill charge.
No one in government will estimate the total forecast costs, saying that’s still being determined.
But here are a few hints.
On April Fool’s Day, the Balancing Pool’s board decided to liquidate its $700 million in investment holdings “in anticipation of the cash requirements associated with the PPA terminations.”
The agency will be out of money by the end of December, the province says. The $700 million will be gone.
Next year, the Balancing Pool will institute a 67-cent monthly charge for the average residential consumer to pay for the agency’s losses.
Well, 67 cents a month is nothing, right? Less than the price of a cup of coffee.
Wrong. Add up those costs for every household in Alberta for every month between 2017 and 2030.
And don’t forget, industrial or commercial businesses are responsible for about 80 per cent of Alberta’s power consumption. Their bills will go up much, much more.
The government says the annual charge to consumers will total $65 million next year, and is expected to continue on each year until 2030 around the same level.
By my math, that’s another $910 million paid by consumers over 14 years, on top of absorbing this year’s operating losses, most — but not all — of which are tied to the PPAs being tossed back.
The final bill for this mess will depend on several variables, such as future electricity prices and the ongoing settlement talks with Enmax over its outstanding PPAs.
“If forced to say what is the single number … of the Balancing Pool’s losses at the end of the day, after all the settlements, somewhere in the neighbourhood of $1 billion,” says University of Calgary economist Trevor Tombe.
Other analysts have higher numbers, but let’s move on to the government’s plan to subsidize renewable energy.
The NDP wants solar, wind, hydro and biomass to generate up to 30 per cent of Alberta’s electricity by 2030 as it reduces greenhouse gas emissions.
Again, the province won’t release its cost estimates, in part because Alberta hasn’t yet embarked on a competitive auction process for the renewable projects and doesn’t want to telegraph what it’s willing to pay.
But subsidies will be required.
Independent power consultant EDC Associates Ltd. conducted a study this fall that pegged the price tag between $4 billion to $8 billion by 2030. Payments after that period, until the year 2049, range between $5 billion and $15 billion.
“We haven’t changed our minds,” on the size of the subsidies, says EDC president Duane Reid-Carlson.
Then, there’s the bill unveiled by the province last week to retire all of the coal-fired power generation and compensate owners of plants that were supposed to operate past 2030: $1.36 billion.
Finally, we come to the province’s decision last week to cap electricity prices for consumers over a four-year period, starting next June.
If prices go above 6.8 cents per kilowatt hour, consumers on the regulated rate option will be sheltered from market volatility; the province must make up the difference, either through subsidies, hedges or some other mechanisms.
Based on its forecast of prices moving higher, EDC estimates the costs to the province will range between $250 million and $1 billion by 2021.
So where will all this money come from?
It will flow from a combination of consumer charges, the province’s levy on industrial greenhouse gas emitters and the carbon levy.
“It’s going to mean increased costs to us, either on our electric bill or through taxation,” warns Wildrose MLA Don MacIntyre.
So why do it?
Well, the Balancing Pool must pass along all losses or profits to consumers.
Compensation had to be paid to owners of coal-fired power plants or it would have crippled investor confidence.
Subsidies will be needed if the province wants to promote large amounts of renewable energy to replace coal, while the rate cap will shelter Albertans from potential price spikes.
The government insists these changes are necessary to lower emissions, green the grid and improve health outcomes for Albertans by stopping the burning of coal.
Energy Minister Marg McCuaig-Boyd insists the NDP inherited a volatile electricity system and the government is “making overdue changes” to protect consumers and draw future investment.
But when you add it all up, it’s still a whack of money — closing in on $7 billion on the low end, just from my estimate talking to experts, but likely much more.
“I don’t have any trouble with going to a lower carbon footprint … but let’s do it as cost-effectively and efficiently as we can,” says EDC’s Reid-Carlson.
“The biggest worry is you start to jam stuff in without thinking too much about it and that’s when unintended consequences happen. And unintended consequences always have a large cost to them.”
When you turn on the lights this evening, try not think about these unintended consequences in the years ahead.
It might keep you up all night — and that would use a lot more power.
Chris Varcoe is a Calgary Herald columnist.
World wide coal plants
. But seems like it makes some feel good about themselves.
. Want a change in political direction, work hard for the party you support and get out the vote.
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