The Alberta NDP has promised to shut down 18 coal power plants by 2030. The problem with this promise it that they will have also started taxing carbon at 20$ per tonne in 2017 and then 30$ per tonne in 2018. That may make every coal power plant in Alberta unprofitable by 2018.
Already several power companies have returned some PPA’s back to the government.
On March 7, 2016, 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. The decision will leave the Balancing Pool – a statutory entity created during deregulation in 1999 – in charge of the PPAs associated with the Sundance A, Sundance B and Sheerness coal plants. The announcement follows ENMAX Energy Corporation’s decision earlier this year to exit the Battle River PPA, also claiming that the plant had become unprofitable as a result of changing emissions laws. The Effective Terms of the Sundance B, Sheerness and Battle River PPAs are set to expire at the end of 2020 and the Sundance A PPA expires at the end of 2017. The collective generation capacity of these plants is 2,407 MW (about 15% of Alberta’s total installed generation capacity).
These decisions follow the Alberta Government’s announcement in June 2015 that it will increase the carbon emission reduction (or offset) requirements for industrial emitters from 12% in 2015 to 20% in 2017, in conjunction with an increase to the carbon emissions levy from $15 per tonne in 2015 to $30 in 2017. The interim increases (15% reduction and $20 levy) took effect at the beginning of this year, at a time when Alberta was (and is) experiencing consistently low electricity prices. The Alberta Government also released an aggressive climate change leadership plan in November 2015, which includes an accelerated phase-out of coal by 2030, with much of the excess capacity to be filled by renewable power (see our prior Osler Update here).
The ENMAX and TransCanada PPA terminations are the first of their kind in Alberta. That fact, along with the significant number of MW affected, demonstrates that the policy and legislative changes imposed by the Notley Government in 2015 are beginning to have tangible impacts on the industry. These termination decisions further suggest that a large portion of Alberta’s electricity supply may no longer be economic to produce. In that case, Alberta could 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 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.