Three reasons to celebrate Alberta’s first procurement of renewablesCheapest contract for renewables in all of Canada

Blog - Dec. 14, 2017 - By Binnu Jeyakumar

Alberta’s first competitive procurement of renewable energy is historic — it shows that renewables are the most economic source of electricity. Renewables will cost less for Alberta than building natural gas plants, and these are the cheapest contracts for renewables in all of Canada. Here are three reasons to celebrate.

Cheap electricity today and for the future

The Alberta Electricity System Operator has set up a Renewable Electricity Program to encourage the development of 5,000 MW of utility-scale renewables by 2030. This first round of the program was a competitive process where renewable developers bid for 20-year contracts. Four projects, totalling 595 MW, won with a weighted average price of $37/MWh (equivalent to 3.7 ¢/kWh). This is lower than the cost of gas-fired electricity, even at today’s very low natural gas prices. And of course it is cheaper than coal with CCS (estimated at 14 ¢/kWh for Boundary Dam in Saskatchewan) (Figure 1).

Alberta wind contract price cheaper than gas and coal*

*Figure includes life cycle costs for gas and the empirical cost for Boundary Dam

As well, because renewables have negligible operating costs and no fuel costs, they protect our electricity bills from any possible swings in cost due to the price of natural gas. Gas prices are currently at an all-time low ($2/GJ) (Figure 2) , but they have changed dramatically over the last decade, with a high of about $9/GJ, and are projected to increase in the future.

Figure 2. Projections for natural gas prices in Alberta. 

Local economic benefits

Wind projects also motivate investment and local benefits. This REP round has attracted funding from Alberta energy company Capital Power, and large international companies ENEL and ENP. These projects will bring more local jobs, activity for local businesses, municipal tax revenues, and lease payments for landowners. Recent studies estimate that the REP, over the length of 4500 MW of procurement in the next 13 years, could generate $4–14 million in lease payments and $8–26 million in property taxes. Wind development can also result in infrastructure investments such as upgraded roads and broadband connections. To maintain the job creation and stimuli for local businesses, it is critical that the pace of renewables growth is maintained.

Sustainable resilient grid

Our perspectives to your inbox.
Today, only about nine per cent of Alberta’s electricity comes from renewable resources, with most of the rest from coal and gas. Increasing the amount of renewables increases the flexibility of the grid and its overall reliability, as other jurisdictions have shown. Renewables diversify the generation mix; their variability can be predicted and they can provide valuable ancillary services critical to grid stability, such as frequency response and voltage control.

How was it done?

The success of this round of procurement can be attributed to Alberta’s great renewable resources (among the best in the country), the falling prices of renewables, the effectiveness of the REP design, and the policy certainty to investors. This is why Alberta’s contract price of 3.7 ¢/kWh is much lower than any of the contracts announced to date in Canada (Figure 3).

Range of contract prices for the most recent wind energy projects in Canada (older contracts were much more expensive)

This first round of procurement will bring our total wind capacity to just over 2,000 MW — less than a tenth of the wind capacity in Texas — but it sets us on the right trajectory. Future rounds are critical to maintaining the momentum and ensuring a sustained growth of renewables and their accompanying benefits.


Binnu Jeyakumar

Binnu is the director of the Pembina Institute's electricity program. She is based in Calgary.


Subscribe

Our perspectives to your inbox.