NDP’s green energy deals are making the province money

By COLLIN GALLANT on April 9, 2021.

cgallant@medicinehatnews.com@CollinGallant

Green energy supply contracts signed by the Alberta New Democrat government are operating in the black, according to a new paper from the University of Calgary’s School of Public Policy.

The Renewable Energy Program awarded three rounds of power supply contracts at set prices to wind power developers beginning in 2017.

Three projects in the first round have been in operation for about 18 months – including the Whitla Wind Farm near Bow Island – and researchers estimate those put power on the grid below the floating market price.

The discount could be $2 million per year in the province’s favour, say researchers Blake Shaffer and Sara Hastings-Simon of the U of C, and a net to the government as much as $28 million because they don’t collect carbon credit offsets as per the contract.

“Many feared it would result in yet another costly subsidy for renewable power,” the authors write. “It may come as a surprise then that the government is actually making money on them.”

They warn the figures are based on estimates, but suggest the Alberta Electrical System Operator posts actual results. Even so, the contract price of 3.9-cents per kilowatt hour – about one-10th what a similar program in Ontario locked in – likely to the advantage of the Alberta government.

The REP process became a political football in the 2019 election, with the NDP arguing it spurred investment to diversify the economy, while the United Conservatives said they would review the contracts. Eventually, the UCP honoured existing contracts, but cancelled future rounds once they gained majority government.

This month, Associate Minister of Natural Gas and Electricity Dale Nally told the News he stood by that decision. He says the industry is now at a point where it doesn’t require pricing supports, and subsequent decisions to maintain an energy-only pricing market are boosting investment.

“Our government welcomes market-driven renewables – like wind, solar and hydro – that can compete with other forms of power production,” said Nally in a statement. “Paired with Alberta’s environmental policies and the falling costs of wind and solar technology, (it) has helped lead to significant growth in market-based renewable energy.”

The ministry states that $2 billion worth of utility-scale renewable generation projects have been announced since the program ended in 2019, which were “funded by private investors, not government subsidies.”

NDP energy critic Kathleen Ganley says however, the U of C study shows her former government’s program provides good value for utility customers, and reiterates there was no subsidy to the REP projects.

“It shows how good the contracts are; it helps us meet our climate goals, it’s created jobs in rural Alberta,” she said.

“The UCP has really oscillated back and forth saying that renewable power doesn’t work, or needs subsidies, but this program shows they’re performing very well.”

The contracts outline a supply price, also called a strike price, over a 20-year period as well as a pool to balance out payments.

If market prices fall below the strike price, producers are paid the difference from the pool. But if prices are higher, companies make deposits.

The Ministry would not comment on the U of C study, citing confidentiality.

Capital Power also declined, but previous financial statements state Whitla 1 is performing well financially. Last year the company announced it would build two separate expansions to the field. Those will not be party to the contract but will sell power to the grid on a merchant basis and with private supply contracts.

To date, only three of four REP round one projects are operating, including two in southwest Alberta. The Sharp Hills Wind farm near Oyen is set to begin construction next fall.

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