Alberta
Alberta’s emergency grid alert underscores vital role diverse energy mix plays in Canada
From the Canadian Energy Centre
By Cody Ciona
After a major cold spell affected the capacity of Alberta’s power grid to provide electricity, experts weigh in on the need for multiple sources of energy
The crucial need for Canada to have a flexible and diverse energy grid was given a practical demonstration this past weekend as frigid winter temperatures in Alberta prompted a grid emergency.
With temperatures in some places dropping to almost –50C with the wind chill, provincial officials issued an emergency alert asking Albertans to immediately reduce electricity usage, with the grid approaching maximum capacity during peak hours.
With wind and solar assets unable to contribute power and the unexpected shutdown of two natural gas plants, Albertans faced the possibility of rolling blackouts in dangerously cold conditions.
A day after the emergency, the Alberta Electric System Operator (AESO) thanked Albertans who responded quickly to reduce the demand load.
“This is an example of why we need to ensure that we have sufficient dispatchable, dependable generation available to us as a province to meet what is always our most challenging time, which is those cold, dark winter nights,” Michael Law, CEO of AESO, told the Calgary Herald.
The prospect of failure in the worst possible circumstances prompted energy analysts to highlight the critical need for a diverse and flexible energy grid.
“You could have had 50,000 megawatts, all the solar farms and wind farms in the world located in Alberta, and it still wouldn’t have come anywhere close to closing that gap,” University of Alberta economics professor Andrew Leach told CBC News.
Wind and solar can be major contributors to the grid when conditions allow, but when the sun goes down and the wind stops, base load power sources like natural gas reliably protect the system.
Leach said system operators need to plan for supply to manage adverse weather conditions to ensure the reliability of the grid.
“Whether it’s natural gas, nuclear, import capacity, battery storage, etc., geothermal, there’s nobody that’s arguing against that.”
With policymakers pushing for more electrification, University of Alberta industrial engineering professor Tim Weis said Alberta isn’t alone in the need for resilient and stable power supply.
“I think we need to wrestle with that and realize that we are moving into a world where there’s going to be more electrical demands on the system,” he told Global News.
“We are moving into a new world. We’re not the only ones facing some of these challenges. I think we’re a little bit behind responding in terms of dispatchable demand and allowing consumers the opportunity to automatically respond to some of these things.”
As the federal government aims to decarbonize Canada’s electricity generation by 2035 with sweeping regulations, flexibility for some jurisdictions is a key factor that needs to be addressed, said University of Calgary associate professor of economics Blake Shaffer.
“I do think that this shows us that no amount of renewables would push us to have solved that winter peak on Saturday,” he told CTV Calgary.
“And that means flexibility to have a gas fleet, for example, that is capable of being there for a few hours for a few days, maybe a few weeks a year. And we need the technical and economic setup to make that worth their while to be there,” Shaffer said.
“We saw this cold weather coming, everybody was preparing for it. The wind forecast was out a week ago we saw there was going to be no wind. Thankfully, the gas thermal fleet performed amazingly well.”
Natural gas generation was able to backstop the reduction in renewable power, said ARC Energy Research Institute executive director Jackie Forrest.
“The system delivered during the deep freeze this past weekend… so reliably that no one even noticed… I have long argued that gaseous fuels are needed in the mix for energy transition and the need to become cleaner; this is why,” said Forrest on X, formerly known as Twitter.
According to Forrest’s colleague, energy economist Peter Tertzakian, Alberta’s oil sands industry also plays a big role in power generation in the province with the prominence of natural gas-powered cogeneration facilities.
“The power that’s generated in this province during this cold spell, about 40 per cent of it comes from cogeneration. The bulk of which comes from the oil sands and all their big generators which have surplus electricity that they feed into the grid,” said Tertzakian on ARC Energy Institute’s latest podcast.
“I think it’s important to understand that any policies that affect oil sands also affect the electricity grid.”
From the Fraser Institute
By Spencer Gudewill and Tegan Hill
Last November, Premier Danielle Smith announced that her government will give up to $1.8 billion in subsidies to Dow Chemicals, which plans to expand a petrochemical project northeast of Edmonton. In other words, $1.8 billion in corporate welfare.
And this is just one example of corporate welfare paid for by Albertans.
According to a recent study published by the Fraser Institute, from 2007 to 2021, the latest year of available data, the Alberta government spent $31.0 billion (inflation-adjusted) on subsidies (a.k.a. corporate welfare) to select firms and businesses, purportedly to help Albertans. And this number excludes other forms of government handouts such as loan guarantees, direct investment and regulatory or tax privileges for particular firms and industries. So the total cost of corporate welfare in Alberta is likely much higher.
Why should Albertans care?
First off, there’s little evidence that corporate welfare generates widespread economic growth or jobs. In fact, evidence suggests the contrary—that subsidies result in a net loss to the economy by shifting resources to less productive sectors or locations (what economists call the “substitution effect”) and/or by keeping businesses alive that are otherwise economically unviable (i.e. “zombie companies”). This misallocation of resources leads to a less efficient, less productive and less prosperous Alberta.
And there are other costs to corporate welfare.
For example, between 2007 and 2019 (the latest year of pre-COVID data), every year on average the Alberta government spent 35 cents (out of every dollar of business income tax revenue it collected) on corporate welfare. Given that workers bear the burden of more than half of any business income tax indirectly through lower wages, if the government reduced business income taxes rather than spend money on corporate welfare, workers could benefit.
Moreover, Premier Smith failed in last month’s provincial budget to provide promised personal income tax relief and create a lower tax bracket for incomes below $60,000 to provide $760 in annual savings for Albertans (on average). But in 2019, after adjusting for inflation, the Alberta government spent $2.4 billion on corporate welfare—equivalent to $1,034 per tax filer. Clearly, instead of subsidizing select businesses, the Smith government could have kept its promise to lower personal income taxes.
Finally, there’s the Heritage Fund, which the Alberta government created almost 50 years ago to save a share of the province’s resource wealth for the future.
In her 2024 budget, Premier Smith earmarked $2.0 billion for the Heritage Fund this fiscal year—almost the exact amount spent on corporate welfare each year (on average) between 2007 and 2019. Put another way, the Alberta government could save twice as much in the Heritage Fund in 2024/25 if it ended corporate welfare, which would help Premier Smith keep her promise to build up the Heritage Fund to between $250 billion and $400 billion by 2050.
By eliminating corporate welfare, the Smith government can create fiscal room to reduce personal and business income taxes, or save more in the Heritage Fund. Any of these options will benefit Albertans far more than wasteful billion-dollar subsidies to favoured firms.
Authors:
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