Alberta’s electricity-generation sector is facing a bill of up to $1 billion to cut polluting power plant emissions over the next 25 years, under a plan agreed to by industry, government and environmental groups.
Power producers say they like the framework plan despite its costs because it provides a stable regulatory system for managing emissions in Alberta’s deregulated energy market.
The plan also will establish, for the first time, provincewide emission standards for power plants rather than standards set on a plant-by-plant basis, says Mike Kelly, director of environment, health and safety for TransAlta Corp.
“It provides a steady reduction in emissions over time. And it gives us a stable, predictable and understandable regulatory system,” he said.
The plan also retains the structure of Alberta’s deregulated market for electricity, Kelly noted. “It provides short- and long-term regulatory certainty, and that’s absolutely critical for new investment and new capital, which is, after all, what keeps the lights on over time in the province.”
The Clean Air Strategic Alliance (CASA) electricity project team presented its framework to reduce air pollution from power plants to Alberta Environment Minister Lorne Taylor in Calgary last week.
The plan, which still requires provincial cabinet approval, establishes significant emission-reduction targets for four power plant pollutants – sulphur dioxide, nitrogen oxides, particulate matter and mercury.
Taylor said he intends to take the plan, without changes, to cabinet early next year. “I expect it will be well received by my cabinet colleagues,” he said.
Alberta Energy Minister Murray Smith has already privately endorsed the plan, CASA team members told Business Edge.
Taylor asked the multi-stakeholder group to develop a long-term plan for managing power plant emissions following a public outcry in 2001, after the government arbitrarily changed emission limits to accommodate new coal-fired power plants, including Epcor’s Genesee 3 and TransAlta’s Keephills expansion.
CASA, which includes representatives from government, industry, municipal, public health, environmental and community groups, has achieved notable success before with its consensus-based approach to controversial environmental problems.
Through a previous agreement reached by the alliance, oil- and gas-field flaring has been cut by 62 per cent across Alberta from levels in 1996.
Kelly said a couple of dozen participants from the electricity sector, including Edmonton-based Epcor, all ended up supporting the new plan.
“We did that because . . . it makes sound environmental sense, but it also makes really good economic sense.” Tom Marr-Laing, executive director of the Pembina Institute and a co-chair of the CASA electricity project team, said environmentalists also endorse the plan.
“This framework will result in emission reductions over time, without substantial increases in electricity prices,” Marr-Laing said.
Kelly, industry’s co-chair on the CASA team, said economic models predict the plan’s costs to the electricity sector will be $700 million to $1 billion over 25 years.
About 30 per cent of the industry’s costs may be passed on to power consumers, according to the economic models. This amounts to an increase of about $7.50 a year per customer by 2010, excluding other factors such as fluctuating market prices for power, Kelly said.
Under the plan, acid rain-forming sulphur dioxide emissions from Alberta’s electricity generators would be reduced by 46 per cent or 52,000 tonnes by 2025. Smog-causing nitrogen oxides would be cut 32 by per cent or 29,000 tonnes in the same period.
Particulate matter – microscopic particles that are hazardous to the lungs and heart – would be reduced 51 per cent or 3,500 tonnes within the same timeframe.
Mercury emissions would be cut in half, or by 400 kilograms, by the end of 2009.
Coal-fired power plants account for about 80 per cent of the airborne mercury emissions in the province. Mercury is a toxic heavy metal that accumulates in the environment and builds up in the food chain.
CASA’s plan is the first in North America to set reduction targets for mercury emissions from power plants.
The plan also contains a provision to identify “hotspots” in Alberta, such as the Wabamun Lake area about 50 kilometres west of Edmonton, where the concentration of power plants is such that emission cuts beyond those set out in the plan can be negotiated to protect area residents.
CASA’s framework also endorses and lays out a path to achieve, as a minimum, the provincial government’s 3.5-per-cent planned increase in new clean, renewable and alternative energy sources by 2008.
Under the framework, less efficient, older, dirtier power plants in Alberta will either have to be upgraded or phased out within a certain timeframe, Marr-Laing said.
The CASA team had hoped to also recommend targets for the electricity sector to reduce greenhouse gases blamed for global warming. Negotiations on this issue will continue, and the team expects to reach agreement early next year on specific targets to reduce greenhouse gases in the sector by 2010.
The unresolved issues are how much of a reduction in emissions will be required, and how to allocate these cuts across the sector, Kelly said.
Another factor is the ongoing uncertainty over whether the international Kyoto accord to reduce greenhouse gases will go ahead.
The way Kyoto is structured, Russia must ratify the accord for it to come into force as a treaty.
However, different senior Russian officials gave contradictory views last week, saying both that Russia wouldn’t ratify and that it would – but only if it’s in the country’s economic interest.
Environment Minister Taylor said that with or without Kyoto, “we’re going to reduce emissions and we’re going to reduce them our way” with a plan that also supports the province’s energy-based economy.
Alberta legislation to reduce greenhouse gases passed three weeks ago, but has yet to be put into force.
Power producers and several major oil and gas companies in Alberta also say they’ll continue to reduce emissions through improved energy efficiency and new technology, no matter what happens with Kyoto.
Prime Minister-in-waiting Paul Martin said last week that Canada doesn’t yet have a satisfactory plan to achieve its Kyoto target of cutting greenhouse gases by 240 million tonnes by 2008-12.
Taylor, like Premier Ralph Klein, said he’s hoping Martin will take “a more realistic approach” than Kyoto. But Martin remains committed to honouring Canada’s obligations under the accord, according to his spokespeople.