CALGARY — David Pickup, director of the Pembina Institute’s electricity program, made the following statement in response to the final investment decision of a large gas power project in Alberta’s Industrial Heartland:
“Adding a new power plant of this size – generating enough electricity to power a city two-thirds the size of Calgary – will massively increase demand for gas in the province. This, combined with Prime Minister Carney’s announcement today that Canada intends to “triple” LNG exports over the next decade, will expose Albertans to much more intense market competition for the gas they rely on heavily to heat their homes and power their grid. This likely means household electricity costs for Albertans will keep rising in the years ahead.
“It does not need to be this way. In other places, data centre operators are showing that the large electricity demand these projects represent can be met with a much higher share of solar, wind and battery storage – all far lower-cost options. Today could have been an opportunity for Alberta to leverage private sector partners to massively expand renewables in the province. As it stands, Alberta’s Bring Your Own Generation rules around data centres have a fundamental flaw – they essentially exclude all options for generation other than gas-fired power.
“While a project like Greenlight could not have been run solely on renewable energy, it would certainly have benefited from a mix of energy sources to help offset the environmental impacts and costs associated with gas. This is both a missed opportunity for data centre proponents to demonstrate their existing commitments to clean power, and yet another indicator of how Alberta structurally locks in demand for gas above all else.
“This outcome is even stranger considering how costs associated with building new gas power plants are only increasing. The price of turbines needed to fuel projects like Greenlight have more than doubled since 2021. Companies are having to wait upwards of four years to get their hands on turbines to be able to start building. Meanwhile, the costs of solar, wind and batteries is falling, and they can be deployed in months, not years.
“This result came about due to Alberta’s concerted efforts to tie up renewables projects in red tape, while weakening the climate policies in place to deal with emissions from gas generation - particularly industrial carbon pricing and the Clean Electricity Regulations.
“This announcement comes on the same day that Prime Minister Carney said Canada intends to “triple” LNG production over the next decade. We know from examples around the world that when countries begin to export more gas abroad, they see prices spike for consumers at home. Provinces in Canada that are not overly reliant on gas for power generation will be shielded from this reality – but Alberta, and Albertans, will be very exposed.
“Alberta urgently needs to return to a true free electricity market – where renewables are not suppressed, and demand for gas is not artificially enhanced. Until this happens, Albertans will continue to pay the price in their energy bills.”
Quick facts
- The 932 megawatt (MW) combined cycle natural gas power plant is expected to cost $4 billion in capital costs alone. This is 2.6-times more expensive than the 900 MW Cascade power plant built only two years ago.
- Natural gas turbine costs — and therefore natural gas power plant costs — have been increasing in other parts of the world as well, driven primarily by a supply chain crunch caused by the recent AI data centre boom.
- At the same time, contract prices for wind and solar have been falling across Canada, decreasing by half over the past decade.
- Even when they bring their own power, data centres powered by natural gas generators can increase costs for ratepayers by driving up fuel prices.
- A data centre this size would use as much electricity as a city 2/3 the size of Calgary. The natural gas power plant would emit 3 megatonnes of CO2, which is equivalent to 10% of Alberta’s total electricity sector emissions.
- This development is unsurprising, given the Alberta Electric System Operators proposed “Bring your own Generation” process for data centres is limiting its intake to gas-fired power plants only.
- Meanwhile, data centre proponents in Texas and Minnesota are considering hybrid supply options, pairing data centres with wind, solar and energy storage, with natural gas and grid connections providing backup.
- In Australia, prior to 2015, the wholesale price of natural gas was under AU$4 a gigajoule. Within a few years of the country opening LNG terminals and starting up its export sector, wholesale prices tripled to AU$12 a gigajoule. These spiked even further during the 2022 global energy crisis following Russia’s invasion of Ukraine – when prices got as high as AU$50 a gigajoule. This demonstrates the overlapping risks of Canada increasing LNG exports, Alberta adding new huge sources of natural gas demand competition such as has been announced today, while doing nothing to reduce Albertans’ reliance on expensive, increasingly volatile natural gas fired power prices.
[30]
Contact
Senior Director of Communications, Pembina Institute
604-356-8829
