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Alberta to pay coal power producers C$1.1bn to transition away from coal generation by 2030

25th November 2016

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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VANCOUVER (miningweekly.com) – As part of the province’s ‘Climate Leadership Plan’, the Alberta government has agreed to pay three coal power producers operating in the province more than C$1-billion over the next 14 years to compensate them for prematurely shuttering their coal-fired power plants by 2030.

The agreements will see TransAlta Corporation, Capital Power and ATCO, which own six coal-fired electricity units originally slated to operate beyond 2030, end coal-fired emissions on or before December 31, 2030. They will be provided with transition payments for investments that have been reduced in value through the government's transition away from coal-fired generation.

“The settlement is reasonable because it repays shareholders for the stranding of capital due to the 2030 truncation of coal emissions, while also recognising the potential for extending the economic lives of certain facilities through conversion to natural gas,” said electricity generator Capital Power president and CEO Brian Vaasjo.

Capital Power will receive yearly cash payments from the province of C$52.4-million for 14 years, starting July 31, 2017, for a total of C$734-million.

Another generator, TransAlta, has agreed to stop coal-fired emissions from the Keephills 3, Genesee 3 and Sheerness coal-fired plants on or before December 31, 2030, in return for cash payments of C$37.4-million a year over the 14-year period.

The Alberta government argued that the agreements were a cost-effective way of reducing greenhouse-gas emissions, with the total payments representing less than C$10/t of emissions eliminated. This represents about one-tenth of the government subsidy typically required to retrofit coal units with carbon capture and storage (CCS).

COAL IN DECLINE
These agreements came on the back of the Canadian federal government's accelerated plans, announced earlier this week, to transition the economy to renewable-energy sources, saying it would aim to phase out coal-fired plants by 2030.

“The government’s decision to provide transition payments to these companies demonstrates our commitment to building a low-priced, reliable, investment-friendly electricity system for Albertans. The government is committed to working with existing Alberta businesses as we transition away from coal; we are making good on that commitment today,” provincial Energy Minister Margaret McCuaig-Boyd announced Thursday.

Energy expert Terry Boston has recommended the provincial government’s approach, which will be accompanied by further action in support of coal communities, government said in a statement.

“I believe that these transition payments to support Alberta’s commendable transition to a low-carbon economy will go a long way in securing a positive investment climate in Alberta,” stated Boston, a former executive VP for power of the Tennessee Valley Authority.

Government reiterated that the payments will be fully funded by Alberta’s price on industrial carbon emissions – not by consumer electricity rates.

According to the Coal Association of Canada, 55% of electricity generation in Alberta comes from coal generation, contributing to a strong economic advantage owing to the abundance of locally sourced coal.

ENVIRONMENTALIST RESPONSE
Environmentalist nongovernmental organisations such as Pembina Institute and Clean Energy Canada hailed the announcements this week as a victory against fossil fuel.

“We are pleased to see the government of Alberta moving forward with the phase-out of coal power pollution in the province. Looking at the full balance sheet of costs to the government and society shows that the coal phase-out will benefit Albertans,” stated Pembina director of clean economy Sara Hastings-Simon.

“Coming on the heels of a federal commitment for an accelerated coal phase-out, this only reiterates that Alberta is moving in the right direction by using funds from the levy on large emitters to implement this phase-out. There is a near-term role for natural gas in Alberta’s grid, but the facilitator identifies the risk of overbuilding natural gas.

“The clear market signals provided by the end date for converted facilities, along with the capacity market mechanism, can avoid overinvestment in natural gas infrastructure that leads to stranded assets,” stated Hastings-Simon.

Clean Energy Canada stressed that the payments were more cost-effective than retrofitting plants with CCS equipment.

“Previous governments in Alberta and Ottawa offered to provide a subsidy of C$779-million toward the $1.4-billion price tag for TransAlta’s proposed coal-fired carbon capture and storage project, but even with taxpayers shouldering more than half the cost, there wasn’t a viable business case and the project was shelved,” said policy director Dan Woynillowicz.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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