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Alberta coal “economic note” based on shaky information

Health savings of provincial climate plan ignored while some costs are double counted

3 Mar 2016

CALGARY — Ben Thibault, electricity program director at the Pembina Institute, made the following statements today in response to the economic note on Alberta’s coal phase out plan released by the Montreal Economic Institute (MEI).

“The information the economic note relies on to conclude Albertans will pay a ‘steep bill’ to phase out coal is shaky. It generally cites the province's Climate Leadership Report (CLR), but the CLR does not support the assertion.

“The CLR, in fact, reads: ‘We expect negligible changes to electricity prices compared to business as usual for the next several years, with larger potential increases on the order of 20% by 2030 predicted under worst case scenario assumptions as coal is phased out. The impact on prices depends mostly on how the market responds with new, gas generation. Given that our carbon pricing program reduces the cost of electricity supplied through new gas generation relative to the status quo, the likelihood of significant wholesale electricity price increases in the longer term is limited.’

“To build the pile of costs the note says will be foisted onto consumers, the authors point to industry’s estimates of what is needed in compensation to shut down coal plants. Our analysis indicates coal plants can be phased out in a progressive, stepwise manner with little to no compensation necessary. To take industry’s word on the amount of money it says it needs is skewed to say the least. Moreover, the billions demanded fail to account for the hundreds of millions per year in health costs coal plants currently foist on the rest of us.

“Assuming the province uses carbon price revenues to accomplish some of its climate objectives — coal power phase-out, renewable energy deployment — then the note is double counting the costs by pointing both to carbon price impacts and the costs of other measures. In any case, the nature of the new carbon price and how it is applied to gas generation — which will be setting the price the vast majority of the time in coming decades, regardless of government policies — is expected to reduce consumer electricity prices relative to business as usual.

“The note says power companies will take on additional debt because they will be ‘required to build green energy projects sooner than expected.’ But a simple reading of the CLR makes clear that the climate strategy wouldn’t require any power company to build green energy. We have already seen investment companies, representing trillions of dollars of investment capital, scratching at the door to invest in Alberta, attracted to the province’s transition to cleaner energy under a credible climate plan.

“The MEI note’s focus on Ontario’s experience is strange. There are dozens of jurisdictions just in North America that have undertaken measures more in line with the CLR recommendations — and they have shown that it can be done successfully and cost-effectively. In fact, the note cites an OECD study that points to policies like those outlined in the CLR as among the most efficient ways to reduce emissions."

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Contact

kirkh [at] pembina [dot] org (Kirk Heuser)
Communications Lead, Pembina Institute 
587-585-4522

Background

Posted March 3, 2016 by AEN

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