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

CERI Breakfast Overview Allan Fogwill, President & CEO October 23, 2018

Transitioning To A Cleaner Electricity Grid In Western Canada

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: In-kind:

Ivey Foundation

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
• r 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)

Jurisdiction GHG emission reduction target by 2030 GHG emission reduction target by 2050

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

GHG Targets

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?

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

Scenarios

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)

Province Period Scenario 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 BC 2050 11.6 9.8 9.6 11.6 11.7 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

Scenario Type Scenario Present Value of Total Power System Investment and Operating Cost (CAD$ million) Value of Coordination (CAD$ million) Gross Value Net Value* Carbon pricing CCMP-NC 57,166 1,691 211 CCMP-WC 55,475 Carbon cap DGGHG-NC 78,127 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

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