Enmax preparing for future of Alberta renewable energy

Cost of renewables will drop, fossil fuel costs likely to rise, power grid becomes smarter – Enmax

I still refer to this column three years later. Long before Rachel Notley and the NDP assumed power in Alberta (May, 2015), Calgary utility Enmax was already planning to integrate renewables into its power generation mix. Enmax echoes every other North American utility I’ve talked to since. As always, the issue is not if we will transition to clean energy technologies, but when. Enjoy.

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Whither renewable energy in Alberta? The answer to that question, according to Calgary-based Enmax, is really about the provincial power grid becoming much “smarter” and more complex as it integrates new sources of power supply over the next 10 to 20 years.

John Rilett is Enmax’s director of distributed generation. He chatted with Beacon News recently about the future of renewable energy and how Enmax will adapt its business model and its power grid to emerging energy technologies.

Rilett says the best analogy is telecommunications and the changes in phone and cell service over the past two decades. In the 1980s, everyone had a landline. Today, some still have landlines, but the majority have cell phones that are mini-computers, they work on wifi and cell networks, they offer a variety of communication choices (calls, text, chat), and all for an affordable price.

“If you draw that same kind of parallel there’s lots of opportunity around electricity and the energy structure to innovate and come up with similar types of systems that are flexible, that are two-way, that allow consumers choice,” he said. 

“And give them more control over what they do, while at the same time maintaining safe, reliable energy for everybody.”

Changes in electricity generation and distribution are being driven by rapid improvement in renewables, the increasing tendency to price the cost of externalities (pollution, carbon, etc.) into coal-fired power generation, and the development of associated technologies that enable the the “smart grid” future foreseen by Rilett.

Speaking of the declining price of renewable energy, I asked Rilett about the costs of producing electricity in Alberta. The figures with an asterisk are from the U.S. Energy Information Administration’s Annual Energy Outlook 2014, which Enmax says is the best info they have at the moment. The other figures were provided by Rilett. Readers should also note that the Energy Outlook numbers can vary significantly by region.

1. Existing Alberta coal-fired plants: As low was $40 to $50 per MWh.
2. New coal-fired plants:$70 to $90 per MWh (required by regulation to achieve the same greenhouse gas particulate emissions as gas-fired plants, which significantly increases generation costs).
3. New gas-fired plants: $70 to $90 per MWh depending on fuel price.
4. Wind turbines: $80 per MWh*
5. Solar micro-generation: $160 per MWh
6. Solar PV: $130 per MWh*
7. Solar thermal: $243 per MWh*

As of today, solar and wind are not very competitive with existing coal-fired power. But that will likely change in the not too distant future, says Rilett.

Why?

One, renewables technology will improve. Rilett agrees that it is still early days for renewable energy and costs for solar, wind, small hydro, and associated technologies like battery storage will continue to drop. Renewables are particularly attractive because they have no fuel costs that might drive up power prices in an uncertain future. Renewables are the very beginning of the technology adoption bell curve, says Rilett, but it won’t be long before they move up the curve and become more mainstream as costs drop and more utilities install capacity.

Two, the regulatory environment is almost certain to change, favouring less-carbon intense forms of energy and penalizing coal. Momentum seems to be gathering for some form of national carbon tax. And the recent Alberta Speech from the Throne promises help for renewable energies.

Three, demand will continue to grow, but forecasting by how much is difficult. For instance, what happens if electric cars like the Tesla quickly become more mainstream? Utilities like Enmax are excited at the prospect of a large crop of existing customers suddenly using a lot more power, but worried about how they’re going to meet the demand. Depending on how quickly demand grows, utilities may find themselves both increasing renewable energy production and maintaining coal-fired plants longer than they anticipated.

I asked Rilett about Enmax’s strategy for the next 10 to 20 years. The utility executive says the company is continually assessing demand growth and supply options going forward, but the electricity landscape is much more complex than it used to be.

“Generating facilities tend to be around for a really long period of time. It’s not a five-year cycle, it’s a 35-40 year cycle, or longer. If you make infrastructure investments in wires and distribution and things like that, they’re there for a really, really long time before you go back and change them significantly,” he said.

“So, we’re doing our best to plan for what we think might happen.Which is very difficult right now given the we’re kind of on the precipice of what could be a major change over the next 10 years, 20 years in our electricity system. And yet that’s a shorter period of time than what the assets typically last for.”

My takeaway from Rilett’s interview is that renewable energy is somewhere between the unbridled optimism of its proponents, who foresee a very quick end to fossil fuels, and opponents, who think renewables are decades and decades away from being ready for prime-time.

Utilities like Enmax are already planning how they will incorporate renewables into their generation capacity. In the short-term, that capacity will look like a matrix: Coal and gas dominant, but growing production from wind, solar, and small hydro, perhaps also biomass and co-generation. Over time the matrix will change as the cost of renewable energy drops, the cost of coal and gas rise, demand increases and the power grid grows ever smarter.

We can’t see the future of renewable energy in Alberta clearly from here yet, but according to Enmax the general trends are clear and it’s a fair bet to conclude that renewables are going to contribute in a big way much sooner rather than later