Accelerated coal phase-out could cost Alberta $8 billion, new study concludes

Phasing out coal-fired electricity in the province could cost from $4 billion to $8 billion by 2030, according to a new study commissioned by 15 industry participants, including the Alberta Electric System Operator.

The study, conducted by EDC Associates Ltd. of Calgary, looked at more than 60 different ways the government could implement its plan to phase out coal, said Allen Crowley, vice-president of EDC and one of the study's authors.

Crowley said the $4 billion estimate, paid by government, the industry and consumers, would cover "just the amount paid to wind developers to build" renewable power facilities, he said.

"Then there's other costs on top of that," Crowley said.

That would include transmission costs, according to Crowley, who said depending on how much power is generated those costs could bring the total up to $8 billion, or perhaps higher.

Those higher costs could eventually filter down to consumers, the report concluded.

"Some combinations of the implementation details could have severe unintended consequences to Alberta consumers and new and existing generators," the report said.

Speed of phase-out key, study says

The study assessed four key areas, including greenhouse gas emissions, costs, reliability and investor considerations.

The report said costs are driven by the speed at which coal is removed from the system and the co-ordination of bringing renewable energy into the market.

"You really have to make sure you match how fast you put in renewables with how fast you take out the other generation," Crowley said.

"If you put them in too fast, it's like putting in too many hotels in a city. Nobody will make any money. And then you can't attract, when you actually do need the next hotel, you may not get as many investors ready to do that."

One of the bright spots, according to the report, is that Alberta's climate leadership plan, including taking coal-fired electricity out of operation, "will reduce the long-term emissions into the Alberta environment."

"We didn't find the holy grail," said Duane Reid-Carlson, president of EDC, an independent energy consulting company.

He said the perfect solution, with low cost, low emissions and a good investment climate, doesn't exist.

"We did find some combinations that are workable between government and industry that could probably produce a reasonable result, at some cost."

Ontario example cited

Reid-Carlson pointed to Ontario as a recent example of how costs can rise.

"They recently announced cancellation of 1,000 megawatts of renewable wind contracts to save $3 billion. So there's an example close to home that if you don't do it right, costs are high."

The study and its cost analysis did not include the amount of compensation now being worked out between the Alberta government and companies currently operating coal-fired electricity plants.

The provincial government is now reviewing advice from an expert hired to negotiate compensation arrangements with coal companies. The Alberta government has said details of the compensation plan will be released before the end of the year.

Reid-Carlson said it's  a complicated process, and government needs to work closely with industry.

"It's going to take a lot of collaboration to be mindful of the pits and perils of poor implementation, which would drive the cost up."