+ RMA Rural Municipalities
of Alberta

Resolution 5-16F

Continued Operation of Coal-fired Power Generation Plants

Date:
November 16, 2016
Expiry Date:
December 1, 2019
Active Status:
Active
Sponsors:
MD of Greenview,
Parkland County
District:
3 - Pembina River,
4 - Northern
Year:
2016
Convention:
Fall
Category:
Environment
Status:
Intent Not Met
Vote Results:
Carried
Preamble:

WHEREAS in November 2015, the Government of Alberta announced the Climate Leadership Plan and the goal for zero emissions from coal-fired electricity generation by 2030; and

WHEREAS the phasing out of all coal fired power generating plants included in Alberta’s climate change strategy will have a significant impact on all municipalities, particularly rural communities adjacent to the power plants; and

WHEREAS coal mines and the power generating plants employ a significant number of people and support many local businesses – the loss of those facilities will be detrimental to the sustainability of the rural communities; and

WHEREAS coal has traditionally been Alberta’s low-cost source of electricity; and

WHEREAS alternate methods of utilizing coal to produce electricity with reduced emissions are being used in other provinces and countries at this time; and

WHEREAS Alberta will need an injection of at least $16 billion invested in new electrical generation as the province phases out coal power in the coming years; and

WHEREAS Alberta businesses and the quality of life for its citizens afforded by the production of low cost coal-fired electricity generation will be adversely impacted through higher electricity costs;

WHEREAS the Government of Alberta has not offered the option to the coal and power generation industries to research methods for reducing the emissions caused by these coal fired plants, and

WHEREAS over the next 20 years, global demand for thermal coal is expected to double; and

WHEREAS coal is a valuable and abundant natural resource in Alberta and the Government of Alberta should be supportive of exploring alternate uses or methods of refining this resource and supporting the implementation of enhanced technologies in the use of coal-fired power generation;

Operative Clause:

THEREFORE, BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties requests the Government of Alberta to allow the continued operation of coal fired power generation plants while encouraging the coal industry and the electricity producers to explore alternate methods of utilizing coal for power generation and alternate uses for coal.

Member Background:

Coal is used as the source of power generation for up to 55% of Alberta’s power needs. There is an abundant supply of low sulphur coal in Alberta and the technology exists to burn it with fewer emissions. Even with wind and solar developments, there must be an “on-demand” supply that will replace it when renewable sources of electricity do not produce. Wind produces 30% of the time while solar is limited to 15% of the time. Alberta’s coal contains more than twice the energy of all of the province’s other non-renewable energy resources, including conventional oil and pentanes, natural gas, natural gas liquids, and bitumen and synthetic crude.   While natural gas is promoted as a replacement, it is subject to wild price fluctuations. This would tie the province to one source for both heating and electrical needs, which during a price spike would severely impact everyone, but most drastically, the poor and economically vulnerable who can least afford it.

Under existing federal regulations, coal fired power plants are required to meet performance standards to lower greenhouse gas emissions or retire when they reach 50 years of operations.  Thermal coal is predominantly used for electricity generation, and Alberta produced 23.3 million tonnes of coal for coal-fired electricity power plants in 2014.    In Alberta, 12 coal fired generating units are expected to retire before 2030.

Coal has proven to be the most economical method of producing electricity in areas that do not have access to hydro power. Strict standards are set for facilities to become as efficient as natural gas generation.  By 2030, two-thirds of Alberta’s coal generating capacity will be replaced by renewable energy, with one-third replaced by natural gas.   The loss of the commodity and the introduction of a carbon levy on natural gas will cause a significant spike in the cost of electricity to the end user.  Countries which had previously decided to phase out coal fired generation are not opening up new sites as the cost of utilizing renewable energy is too expensive and the reliability of which does not meet the standards set by coal.

For the municipalities throughout Alberta with ties to the coal-fired generating plants and coal mines, the loss of the generating companies will have a significant effect on their communities. It will impact the viability of many smaller communities who rely on the corporate tax revenues, the financial infusion and community  support through sponsorships, grants and donations to non-profit organizations and the direct and indirect employment created by the power generators and mine operators.

There will be limited local employment opportunities available for displaced workers, forcing them to move out of the region.  The loss of these families will affect enrolment in schools, the volunteer base, and the business base.

Starting in 2018, coal-fired generators will pay $30 per tonne of CO2 on emissions based on an industry-wide performance standard.   These new climate change rules will make companies unwilling to invest in Alberta power generation.  Both TransCanada and AltaGas cited the change in Alberta’s laws – such as the new policy that all carbon emissions be taxed at $30 per tonne – as the reason for the cancellation of their power purchasing agreements from coal-fired power generating plants earlier this year.

Between 2010 and 2015, the Alberta Government received over $91 million in royalties from coal companies to financially support government programs and services which enrich the lives of all Albertans.  Rural municipalities struggle to survive and the decision to shut down all coal fired plants without attempting to look at ways to ensure that these plants are viable, both economically and environmentally, is very short sighted.  The ultimate cost may be more than our province and citizens can afford.

There is an opportunity for Alberta to become a leader in the development of the clean burning of coal, which would allow us to meet the province’s emissions goals while not negatively impacting the ability of small rural communities to remain sustainable.  Alberta could be a global leader in research and development and generating new employment opportunities, as we export a technology that will significantly reduce greenhouse  gas emissions world-wide. New coal mining projects can further diversify the economy, pay billions of dollars in taxes and royalties to government and create thousands of high paying, long term jobs.

Prior to phasing out all coal fired generating plants, all options should be considered and a full analysis undertaken regarding the costs for new generating facilities and required transmission infrastructure, compensation to generating companies for stranded assets and financial impacts to businesses and residents.  The final cost may be more than the province and citizens can afford.

REFERENCES

Alberta Energy

Coal Association of Canada

Coal Industry fighting Alberta Plans to phase out power plants, Edmonton Journal online, March 31, 2016

HR Milner – Maxim Power Corporation

Phase-out of coal fired emissions in Alberta, Alberta Government, March 2016

TransCanada becomes latest to terminate Alberta coal-power deals, citing higher costs, CBC online, March 7, 2016

RMA Background:

RMA has no active resolutions directly related to this issue.

Government Response:

Environment and Parks (Climate Change Office): The Government of Alberta (GOA) is committed to phasing out emissions from coal-fired generators by 2030 to protect the environment and the health of Albertans. Coal-fired generators that can be engineered to release zero emissions through carbon capture and storage will be able to continue after 2030. The federal government also requires all coal units in Canada to install carbon capture and storage beyond 2030.

Alberta worked with the federal government to enable coal units to convert to natural gas where it is economic to do so and operate for an additional 15 years. This would not have been allowed under previously proposed federal natural gas regulations. By compensating the companies for their investments in units that would have run beyond 2030, companies will be able to continue to reinvest in Alberta and have the option to transition existing coal plants to natural gas. This will allow these companies to keep investing in our communities and in our workers.

By legislating a 30 per cent renewable energy target by 2030, investors from around the world will have the certainty to bring long-term investments in new energy infrastructure projects in our communities. We expect this 30 per cent target to bring in over $10 billion in private capital and create at least 7200 jobs.

Rural communities will stand to benefit from the renewable energy build. The Canadian Wind Energy Association estimates that 5000 MW of wind will bring $1.4 billion in new property tax revenue to communities in rural Alberta. By way of example, TransAlta’s Summerview wind project in the Municipal District of Pincher Creek produces 136.2 MW of electricity, provides the municipality with $1.2 million in tax revenue, and injects $5.8 million annually into the local economy.

The GOA appointed an Advisory Panel on Coal Communities to engage with stakeholders affected by the closing of coal-fired generation plants and associated mining operations. This includes those in and around Parkland and Leduc counties, the Village of Forestburg and the Town of Hanna. The panel is expected to report back to government early in 2017 with recommendations and options for supporting community transition. More information can be found online at www.alberta.ca/coal-communities.aspx.

The GOA committed to assist coal communities in the transition to a cleaner economy.

Energy: On November 24, 2016, the Government of Alberta (GOA) announced that it reached agreements with Capital Power, TransAlta, and ATCO Power to end coal-fired emissions on or before December 31, 2030. In late November, the federal government also proposed regulations which will require all coal-fired generation units to meet a stringent emissions standard by 2030; it is unlikely that any coal-fired generation unit could meet this standard without installing carbon capture and storage (CCS) technology.

The coal transition payments provided under the agreements with companies provide Alberta with inexpensive emissions reductions. Cumulatively, Alberta will avoid net 175 megatonnes of greenhouse gas (GHG) emissions, assuming replacement with natural gas-fired units, and avoid 95 cumulative years of continued air pollution. The coal transition payments are estimated to cost less than $10 a tonne of GHG emissions eliminated, approximately one-tenth the cost to retrofit the units with CCS technology. The payments will be fully funded by Alberta’s price on industrial carbon emissions, not by consumer electricity rates.

Again, the transition payments are far more cost-effective for reducing GHG emissions than the public subsidies necessary to deploy so-called clean coal technologies, as has been seen in other jurisdictions, as well as in Alberta. In fact, Alberta committed considerable public resources to the development of CCS for two different proposed coal facilities, but both projects were cancelled. One, Project Pioneer, to apply CCS to Keephills 3 coal-fired power generation unit, was selected to receive $436 million in funding from the GOA. Along with an additional $343 million from the federal government, this $779 million in public funding for one coal-fired unit would have covered over half of the estimated capital cost of the project at that time. Nevertheless, the project was cancelled in 2012 as uneconomic.

The GOA recognizes that coal and products produced from coal use have non-energy uses and research is underway globally on potential uses. As the government does not know what the future may hold in regards to technology and research development, the government has not precluded any potential future uses of these resources.

It is important to recognize that the existing schedule for retirement of coal units under federal regulations, the province was already slated to see electricity prices increasingly set by natural gas-fired generation. By the early 2030s, given the functioning of Alberta’s electricity market, natural gas was expected to set the market price for electric energy the vast majority of the time, under existing federal policy. Moreover, because of the use of output-based allocations, the new carbon levy on electricity generation that is under development for implementation in 2018 will have lower compliance costs for high-efficiency natural gas generation than the existing Specified Gas Emitters Regulation (SGER).

Related to the cancellation of power purchase arrangements (PPAs), the resolution indicates that the increased cost of carbon caused their return to the Balancing Pool. It is important for your members to understand that the return of the PPAs to the Balancing Pool was virtually guaranteed when sustained low electricity prices rendered the PPAs uneconomic.

The Change in Law provisions of the PPAs were written so broad that any of a number of legislative or regulatory changes – including the original SGER instituted in 2007 or any of a number of occupational health and safety requirements that add costs to the coal plant operations – might have been attempted as the excuse for the PPA returns. The GOA is happy to report that after standing up for consumers to prevent them from shouldering the burden of these PPAs alone, we are now securing positive settlements to the PPA disputes that dramatically reduce the liabilities. We did not create this serious problem. But we have taken the necessary actions to resolve it in the best interest of Albertans.

Related to investment interest in Alberta’s power generation, the GOA has heard very strong interest from investors in our newly announced capacity market design for Alberta’s electricity system. The system we inherited – the energy-only market – was not working for consumers or investors, because of the price volatility and uncertainty in the market. Expert advice assembled by the Alberta Electric System Operator (AESO) made it clear that investors were reluctant to invest in any new generation in energy-only markets. The announced transition to a capacity market is the result of recommendations from the AESO and we have heard resounding approval for new investment in generation to meet our future supply needs.

The GOA appointed the Advisory Panel on Coal Communities to engage with communities which rely on coal-fired electricity generation and coal mining. The panel will provide recommendations on how to address the economic challenges and opportunities, including impacts to workers. Starting in early 2017, the panel will engage municipalities, First Nations, community economic development organizations, small businesses and workers in impacted communities to better understand the challenges and opportunities they are facing so that next steps are responsive to concerns and align with community priorities.

It is important to recall that federal GHG regulations on coal plants have been in place since 2012. They will begin to force coal-fired power unit closures at the end of this decade and through the next. We are working with municipalities, community economic development organizations, small businesses, workers, and First Nations to ensure that workers, communities and affected companies are supported and treated fairly during the transition from coal-fired electricity generation. Although the transition schedule was set four years ago to begin in 2020, this hard but crucial work was ignored and neglected by previous provincial and federal governments.

With our leadership on climate action, the GOA has secured a crucial concession from the federal government that will allow these plants – in these communities – to continue to operate after conversion to gas.

Combined with the transition payments summarized above to enable reinvestment in electricity generation in Alberta, this creates the potential for the coal plant owners to convert and run these facilities beyond their current federal end-of-life dates and even beyond 2030 to as late as 2045, potentially maintaining both employment and municipal tax revenue in the communities.

This would not have been possible under the existing federal regulations on coal-fired power and natural gas-fired electricity generation regulations that the federal government had been proposing.

Development:

The response from the Government of Alberta indicates that the transition away from coal fired power generation will continue forward as outlined in the Alberta Climate Leadership Plan. Though electricity generating companies are exploring the opportunity to convert existing coal fired units to natural gas, the extent to which this occurs is unclear and ultimately up to the electricity generating companies to decide. Even if this does occur, it is unclear how this will impact those communities that currently rely on coal fired electricity generation for employment and the tax base. Although the phase out of these facilities will continue over the next 12 years and impact will not be fully known until after that time. In the interim, the Coal Community Transition Fund has been created to support 12 projects in 17 communities across the province. The total funding is approximately $5 million and will cover projects such as: strategic planning, tourism development, feasibility studies, and work to expand agribusiness, transportation, and high-tech industries. However, the Government of Alberta’s response does not satisfy the intent of the resolution and therefore, it has been assigned a status of Intent Not Met.

Provincial Ministries:
Energy,
Environment and Parks
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