The Kyoto “cloud” looming over Alberta has a silver lining of opportunity for enterprising businesses, say stakeholders in the climate-change issue.
Reducing greenhouse gases under the Kyoto Protocol – the international climate change treaty ratified by the federal government in December – is expected to add to operating costs for most businesses, at least initially.
But the effort to reduce emissions blamed for global warming will also spur more efficient energy use, development of cleaner fossil fuel technologies, and expansion of “green” products and power in Alberta, say some stakeholders.
New opportunities, they say, will depend on the federal and provincial governments co-operating on a well-designed, well-funded Kyoto implementation plan. It must create a market price for the carbon now emitted by conventional energy production, and provide incentives to keep this carbon out of the air by developing new, cleaner energy sources.
“Some very serious funding needs to be put in place to do the kind of (energy) integration we’re talking about,” says Eddy Isaacs, managing director of the Alberta Energy Research Institute (AERI).
Neil Shelly, director of environment at the Alberta Forest Products Association, says incentives, carbon credits and even tax relief “are all essential” to these projects.
Last month’s federal budget committed $2 billion over five years to reducing greenhouse gas emissions. However, the budget was conspicuously lacking specific funding allocations for renewable energy projects, or in tax incentives to encourage public transit use, the purchase of fuel-efficient vehicles or energy-efficient retrofits of homes and businesses.
The environmental community argues that the costs of complying with Kyoto will be manageable, as long as government policies support clean-energy initiatives that help in reaching Canada’s Kyoto target.
Under Kyoto, the country is obligated to cut emissions to six per cent below 1990 levels – a predicted actual reduction of about 240 million tonnes of greenhouse gases by 2012.
“If we’re making investments now that make us less carbon-intensive, we’ll be better prepared going forward,” says Robert Hornung, policy director at the Pembina Institute for Appropriate Development.
AERI has outlined in a draft document the provincial government’s long-range strategic research plan that “will be a cornerstone of Alberta’s approach to addressing climate change and reducing emissions.”
AERI’s plan emphasizes development of new technologies that build on Alberta’s abundant oil, gas and coal reserves.
Recommended approaches include generating power with yet-to-be-developed “clean coal,” tapping coalbed methane gas, enhancing oil recovery using carbon dioxide (while storing the greenhouse gas underground), and improving the quality of synthetic crude production from oilsands plants.
And what of environmentally friendly alternatives to fossil fuel, such as solar and wind power and small-scale run-of-river hydroelectric power generation?
Many of these alternative energy technologies are already being developed and deployed elsewhere in the world, Isaacs says. Alberta’s strategy is to capitalize instead on the province’s unique natural wealth in oil, gas and coal deposits.
Proven technologies such as gasification, for converting coal to synthetic gas, could enable Alberta to become the world’s first fully-integrated energy economy, Isaacs says, adding: “We have to have an Alberta niche in all of this.”
Hornung criticizes the province’s strategy as a “throw your eggs all in one basket” approach. “The Alberta government is betting on finding ways to allow fossil fuels to continue as they always have, and not looking at alternatives,” he says.
But David Lewin, senior vice-president of environment and sustainable development at EPCOR Inc., points out that Alberta has about 1,100 years’ worth of coal reserves at current extraction rates.
Given the substantial capital investments made in existing coal-fired plants, he adds, “a priority is trying to find better ways of continuing to use fossil fuel, particularly coal.”
EPCOR is a founding member of the Canadian Clean Power Coalition of coal and coal-fired electricity producers.
Lewin says the coalition estimates it will cost nearly $1 billion to develop and construct by 2010 a coal-fired power plant that produces as few emissions as a similar-sized natural gas-fired generator.
Hornung argues that while the Alberta government and the fossil fuel sectors are investing heavily to develop new technologies that might not work or be economic, the “tremendous opportunity” for wind energy in Alberta is not being fully exploited because of a lack of provincial incentives.
But the horizon of opportunity for renewable energy development is expanding, even in fossil fuel-focused Alberta.
Alberta Infrastructure has issued a request for proposals to purchase at least 25 per cent of the electricity it uses in government-owned facilities from clean green power sources, beginning in 2005.
In the private sector, TransAlta Corp. last fall paid $37 million for Vision Quest Windelectric Inc., a Calgary-based wind power firm. TransAlta says it intends to invest at least $1 billion over the next 10 years to develop wind energy.
ENMAX Corporation and Vision Quest Windelectric have announced plans to build, by late 2003, Canada’s biggest wind farm, a $100-million, 75-megawatt facility near Fort Macleod.
Suncor Energy – in its first wind-power venture in southern Alberta – is pursuing a proposed 30-megawatt facility on private land, says company spokesperson Jenniffer Berger-Gee.
Experts say the “early-bird” opportunities to reduce greenhouse gases under Kyoto will be in conserving energy and using it more efficiently.
CETAC-West, a non-profit corporation based in Calgary, has launched a project with a $5-million budget to improve energy efficiency and reduce greenhouse gas emissions in Western Canada’s upstream petroleum industry.
“It makes good business sense to do this,” says Joe Lukacs, president and CEO of CETAC-West. “The driving force is higher (production) capacity, lower operating costs, lower energy costs.”
The Alberta government, like the Canadian government and other nations, is designing an emissions-trading program that would enable participants to buy and sell credits for reducing greenhouse gas emissions.
Such programs will create the needed market price for carbon, thereby increasing opportunities for energy- efficiency projects and new technologies, says Allan Amey, president and CEO of Climate Change Central. The provincially funded, public-private sector partnership is co- ordinating Alberta’s efforts to reduce greenhouse gases.
Amey says that establishing a price for carbon should encourage more energy retrofits of commercial buildings, as well as development of community-based power generation and district heating systems.
Mariah Energy Corp. of Calgary, for example, is pioneering the use of highly efficient gas-fuelled micro-turbines in a combined heat-and-power system. The company’s system is already being used in a residential office complex, an institutional swimming pool and a commercial greenhouse.
AERI’s Isaacs expects that Kyoto will trigger the first large-scale projects in Alberta in carbon sequestration. This involves capturing carbon dioxide emissions at industrial plants, and pumping the gas underground into deep rock formations for permanent storage. The technology is currently not economic, and would cost at least $75 per tonne of CO2 for all but a fraction of the potential industrial sources of carbon dioxide, according to a study by the Canadian Energy Research Institute.
Isaacs says that to reduce costs, the first major sequestration or CO2 storage projects will include enhanced oil recovery, or injecting the gas underground to push more oil to the surface.
EnCana Corp., in a $1.1-billion project launched in the fall of 2000, is reporting promising results with this approach in its aging Weyburn oilfield in southern Saskatchewan. The 25-year project uses otherwise waste CO2, pipelined 325 kilometres across the border from a coal gasification plant in North Dakota.
Alberta’s forest industry also has identified several opportunities under Kyoto, says Neil Shelly of the Alberta Forest Products Association. They range from tapping biomass energy to converting marginal agriculture lands to woodlots that act as carbon “sinks” in absorbing greenhouse gases.
Biomass energy has a huge potential in the province, Shelly says. The technology involves burning wood waste or residues – such as bark, sawdust, shavings and trim blocks – to generate heat and power. Canadian Gas & Electric Company Ltd., a subsidiary of renewable energy developer Canadian Hydro Developers Inc., has partnered with Canadian Forest Products Limited on a $40-million, 25-megawatt biomass plant near Grande Prairie. In addition to generating power, the plant could produce heat for use in the city’s public buildings.
By displacing fossil fuels such as coal, the biomass project is expected to produce at least 200,000 tonnes of emission-reduction credits per year. These credits, sold for $10 per tonne in an emerging international emissions-trading market, would be worth $2 million annually toward the return on investment.
Another biomass opportunity in the forest sector is the production of wood pellets as an industrial-grade fuel that could be used to heat large institutions such as hospitals, universities and prisons.
Vanderwell Contractors Ltd., which runs a wood pellet-processing plant in Slave Lake, recently shipped 5,000 tonnes of its wood pellets to Denmark. “We think it’s kind of ironic that we’re producing a good ‘green’ fuel here in the form of biomass pellets, and we’re shipping it all the way over to Denmark because there’s no market here,” Shelly says.
Amey, at Climate Change Central, says he expects many Alberta companies will find new domestic and export markets for technologies that will emerge and expand under Kyoto.
If companies that now expect to take an economic hit under Kyoto can reduce their energy costs and find markets for new products and technologies, they will come to view the accord “as an opportunity rather than a cost,” Amey says.
