Transitioning To A Cleaner Electricity Grid In Western Canada CERI - PowerPoint PPT Presentation

Transitioning To A Cleaner Electricity Grid In Western Canada CERI Breakfast Overview Allan Fogwill, President & CEO October 23, 2018

Canadian Energy Research Institute Overview Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, registered charitable organization specializing in the analysis of energy economics and related environmental policy issues in the energy production, transportation, and consumption sectors. Our mission is to provide relevant, independent, and objective economic research of energy and environmental issues to benefit business, government, academia and the public. CERI publications include: •Market specific studies •Geopolitical analyses •Commodity reports (crude oil, electricity and natural gas) In addition, CERI hosts an annual Petrochemical Conference and supports Argus Energy Week.

Core Funders: Donors: Ivey Foundation In-kind:

Presentation Outline  Electricity Markets in Western Canada  Methodology and Assumptions  Analysis and Observations  Conclusions

Western Canada Electricity Market • Government and Private Sector Ownership • Integrated and disaggregated companies (generation, transmission and distribution) • Hydro and coal dominating generation • Limited existing interties • Different polices on renewable power and climate objectives (tax or no tax?) • Alberta and Saskatchewan challenged to reduce emissions • BC law requires domestic power • Manitoba Hydro – significant debt challenges and limited export market

Electricity Generation (GWh)

Electricity Sector GHG Emissions Source: ECCC, 2018

Pan-Canadian Framework • Federal carbon pricing backstop if provinces do not implement a carbon pricing scheme • Carbon pricing based on a levy and an output based allocation (made in Alberta) • Emissions reduction targets are not assigned to sectors only to the economy as a whole (30% by 2030; 80% by 2050)

GHG Targets Jurisdiction GHG emission reduction target by 2030 GHG emission reduction target by 2050 Canada 30% below 2005 levels (approximately 523 Mt of No target for total GHG emissions; CO2e) 80% below 2005 levels for GHG emissions from federal operations Newfoundland 35-45% below 1990 levels 75-85% below 2001 levels and Labrador Prince Edward 35-45% below 1990 levels 75-80% below 2001 levels Island Nova Scotia 35-45% below 1990 levels 75-80% below 2001 levels (also 80% below 2009 levels) New Brunswick 35% below 1990 levels (≤10.7 Mt of CO2e) 80% below 2001 levels (≤5.0 Mt of CO2e) Québec 37.5% below 1990 levels 80-95% below 1990 levels Ontario 37% below 1990 levels 80% below 1990 levels Manitoba Under consultation Under consultation Saskatchewan No target for total GHG emissions; 40% below Unclear 2005 from electricity Alberta Sector targets – 100 MT cap for Oilsands, No target; Under the 2008 Climate methane Change Strategy, 14% below 2005 British Columbia No 2030 target; 2020 target is 33% below 2007 80% below 2007 levels levels Nunavut Not established Not established Northwest 1,150 kt CO2e (reduction by 290 kt CO2e from Not established Territories 2015 levels) Yukon No target for total GHG emissions; 20% emissions Not established intensity reduction for on-grid diesel by 2020 & carbon neutral gov’t operations .

Study Objectives • What are the total costs of electric system operations and system-level average costs of electricity including generation investments, operations, systems support services, transmission costs, and distribution costs? • What are the GHG emission levels (both total emissions and emissions per unit of electricity generated)? • What is the value of a higher level of inter-provincial coordination regarding electricity trade and aligned climate change policy?

Scenarios Scenario Scenario Carbon GHG Reduction Renewable Interprovincial Name Description Pricing Target Energy Transmission (reference year Targets = 2005) Reference Reference case None None None Current levels CCMP -NC Current carbon OBA system None Provincial Current levels management plan with a carbon Targets levy CCMP-WC Current carbon OBA system None Provincial Doubling of management plan with a carbon Targets current intertie with higher levy capacity coordination among provinces DGHG-NC Deep GHG reduction None 30% by 2030, Provincial Current levels 80% by 2050 Targets DGHG-WC Deep GHG reduction None 30% by 2030, Provincial Doubling of with higher 80% by 2050. Targets current intertie coordination among Shared capacity. provinces emissions target

Power Planning Model • System planning and hourly dispatch simulation • Assumes availability of bulk transmission • Constraints • Minimum availability of co-gen to meet host heat requirements • Biomass minimum capacity factors • Hydropower limited by water availability • Minimum reserve capacity • Capital costs and learning rates • Emissions caps • Outputs • Available generation capacity by technology by province by time period • Electricity production by technology by province • Investment costs by technology by province • Hourly operating costs by province

Demand Forecast

Hourly Demand

Electricity Generation by Scenario

GHG Emissions

Residential Cost of Electricity (C/KWh) Scenario Province Period Reference CCMP-NC CCMP-WC DGHG-NC DGHG-WC AB 2020 11.2 11.8 11.8 11.2 11.2 AB 2050 12.8 14.0 14.0 16.3 16.3 BC 2020 14.1 11.6 11.5 14.1 14.6 11.7 BC 2050 11.6 9.8 9.6 11.6 MB 2020 11.5 9.9 9.6 11.6 11.3 MB 2050 10.8 9.0 8.8 11.3 10.5 SK 2020 9.8 10.8 10.9 9.8 9.9 SK 2050 12.5 12.9 12.8 15.1 15.1

Impact of Interprovincial Coordination Present Value of Total Value of Coordination Power System (CAD$ million) Investment and Operating Cost Scenario Type Scenario (CAD$ million) Gross Value Net Value* CCMP-NC 57,166 Carbon pricing 1,691 211 CCMP-WC 55,475 DGGHG-NC 78,127 Carbon cap 1,812 332 DGHG-WC 76,315 • BC-AB intertie (1,000 MW increase; add a new 500 kV line, ~350km): CAD$750 million • AB-SK intertie (150 MW increase; add a new 230 kV line, ~ 225km): CAD$380 million • MB-SK intertie (300 MW increase; add a new 230kV line, ~200km): CAD$340 million

Observations • Enhanced interconnections have value in western Canada. Largest benefit comes from AB/BC interconnection and SK/MB interconnection. AB/SK interconnection has minimal value • Wind generation in winter has baseload type characteristics • Wind generation increases cyclic operations for natural gas units which will decrease the efficiency of those units • Penetration of variable generation is limited without policy support • Natural gas generation has enhanced value in hydro dominated systems due to the need to manage water availability • Low cost of natural gas makes it challenging for other technologies to compete on an economic basis • Carbon pricing, as it is currently implemented/proposed, is not as effective as regulations in reducing emissions from power generation • Residential electricity cost increases due to deep decarbonization is modest

Thank You for Your Time WWW. CERI .CA CANADIAN ENERGY RESEARCH INSTITUTE @CERI_CANADA UPCOMING STUDIES: Natural Gas Liquids Market and Pricing Urban Energy Systems and Transportation Methane Emissions and Controls for the Natural Gas System