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Renewables moratorium forcing investors to be wary of the shifting sands of the energy landscape in Alberta

Bill-WhitelawAlberta’s recent moratorium on renewables offers plenty of threads to tug.

Let’s pull on the hypocrisy thread first. It’s one of the biggest in this bewildering tapestry we call energy politics. And hypocrisy that is now seemingly normalized is why many Canadians despise politics and politicians.

We live in fascinatingly complex times when it comes to the funny world of values and energy. It’s a world that is more polarized by ill-informed ideology at both poles than it is by solid science and constructive appreciation of the facts at the centre.

But one essential reality is this: it’s increasingly a world in which molecules and megawatts are caught up in an awkward waltz as hydrocarbons meet the pressures of decarbonizing electricity grids in jurisdictions like Alberta.

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As a result, the world is waking up to the reality that all forms of energy come with various price tags. All systems and sources are negatively consequential in one way or another, and, too often, those consequences become the focal point for negative ideological debate.

In Canada, this is compounded by the unenviable reality that most energy-entitled Canucks do not possess much in the way of energy smarts. We’re part of a socio-political system that takes energy, its security and stability of supply, as a birthright. So, by way of that entitlement, we think we know a lot when, in fact, we know very little, given the stakes. This ignorance gives politicians on both the left and right freedom to free-form rhetoric from perspectives rooted in ideological frames that don’t lend themselves to effective collaboration and consensus building.

But here’s another known: as energy systems (and solutions to some of the problems each system presents) evolve, one factor seems consistent: the need for investors to see some form of policy and regulatory certainty from various government actors. Investors will park their capital where it will do the most (predictable) good. They detest governments that squabble among themselves and seek places of equilibrium. Such equilibriums of certainty can only come from positions grounded in common sense and firmly in the middle, not at the fringes.

So back to hypocrisy: the Alberta government has long challenged the federal government to provide investor clarity and certainty for the legacy oil and gas sector on a broad range of issues, including tax incentives for a nascent carbon capture, utilization and storage (CCUS) sector and its commitment to helping decarbonize a healthy oil and gas sector.

But the real issue here is about electricity grids and who gets to control what counts for a decarbonizing grid, including time frames between 2035 and 2050, and what forms of energy (natural gas included) will contribute to how the grid moves steadily toward emissions reduction.

Here’s a tweet from Alberta Premier Danielle Smith back in June:

“I was disappointed to read comments federal Environment and Climate Change Minister Steven Guilbeault made to a reporter about his intention to see the federal government impose a net-zero electricity mandate on all provinces for 2035 and that he continued to reference Ottawa’s planned de facto oil and gas production cut. Not only are the contemplated federal targets unconstitutional, they create investor uncertainty and are extremely harmful to the Alberta and Canadian economies.”

The core debate here is not the range of arguments Alberta Minister of Affordability and Utilities Nathan Neudorf, who announced the surprise ban, insists are central to the moratorium. Alberta’s concerns about the growing renewables sector are fair enough. As energy systems go, the renewables sector is relatively new and has several dimensions that require analysis and exploration – notwithstanding rapid growth in recent years.

But pulling the carpet out from the sector’s footing through a moratorium is not the way to go. It caught the stakeholders off-guard, and because there is such a thing as the law of unintended consequences, we’re already seeing alarm from investors and project proponents who are legitimately puzzled by a decision that came out of the blue, with little or no apparent consultation.

Indeed, had the Alberta government announced an innovative consultation process designed to work with a sector already well in motion, such a move would have cemented investor confidence and potentially attracted even more dollars to the province.

Hence the hypocrisy: the United Conservative Party has created the very type of policy and regulatory uncertainty they claim to eschew and abhor. Executives from companies as diverse as Labatt, Amazon and Microsoft – all of which have turned to Alberta renewables – must be hastily convening board meetings. But this is about politics, however petty and sophomoric.

From the premier’s same tweet:

“Instead of seeking ways to sow investor uncertainty and reduce support for Canadian energy globally, the federal government should focus on partnering with Alberta and investing in our national energy sector to achieve carbon neutrality by 2050 while simultaneously increasing energy production, jobs and economic growth for Canadians.”

In hindsight, energy sector watchers should have seen the moratorium coming from a mile away.

It is clearly less about working with the renewables sector than sticking the sector inside a political gauntlet tossed Ottawa’s way in terms of who gets to say and do what about the grid.

But it is hard to negotiate from a position of strength when you have devolved as a jurisdiction to the same hypocritical low-road status of which you consistently accuse your federal “partner” of travelling.

Here’s a rationale and reasoned view from the trenches. It was written by Trevor Lewington, CEO of Lethbridge’s economic development authority. Lethbridge, as a municipality and as the regional node of southwestern Alberta, stands to suffer immensely from the renewables moratorium. It will be a case study in unintended consequences.

 “Alberta is a leader in traditional energy. We have the natural resources and talent the world needs. Oil production in Alberta reached an all-time high in the first five months of the year at +6.5 percent compared to the pre-pandemic peak. Natural gas production year-to-date has also expanded +1.2 percent compared to last year. The International Energy Agency is forecasting an increase in global demand for both oil and natural gas through 2028.

Alberta is a leader in renewable energy. International investment is attracted by the opportunity to decarbonize operations through wind, solar and geothermal markets in our province. Renewable power generation, including hydro, provided 17 percent of Alberta’s net-to-grid generation, up from 10 percent in 2018.

All forms of energy create potential benefits from capital investment, labour income, property taxes and other contributions.

All forms of energy generation have potential negative impacts on land use, wildlife and communities. All energy projects should have strenuous obligations for remediation at the end of the project life as well as performance bonds like financial commitments to ensure performance. Alberta’s legacy of abandoned oil and gas wells is a lesson that should be forefront of our minds.

Alberta’s power system is undergoing the biggest transformation in its 100-plus-year history. Coal-fired electricity generation, a key source of power in the province for more than a century, is on track to be eliminated as a fuel source for electricity by the end of 2023.

Regulatory changes are required to ensure competition, provide reliable and diverse sources of generation as well as build transmission and distribution infrastructure ready for technologies like grid scale battery storage.

Politicians from all ends of the spectrum should be preparing Alberta for the continuing transformation of the global energy sector. We need to build on our existing strengths. That means both traditional AND renewable energy. Why not have total world domination in BOTH?

We need to ensure proper protection of agricultural lands and (respect) municipal land use planning by all actors in the energy sector. Quasi-judicial bodies like the AUC should not be able to overrule municipal decisions without considerable process and justification.

We also need to respect market mechanisms and give landowners the ability to maximize what the free market will provide. Investment in any sector requires a consistent and predictable regulatory environment. Continuous improvement is a good thing. We all reserve the right to get smarter. Sudden changes without consultation are not good for anyone.”

If I were an investor, I would be heartened to read such perspectives. I would be happy to park my money in a jurisdiction that thinks with such clarity.

Perhaps Lewington should run for premier. His is a refreshing perspective that grounds energy discourse and dialogue in the right way – all common sense and no polarizing ideology. He gets that the stakes are that high.

These are critically important times in our national energy debate. Canadians should be engaged and enthusiastic about participating in decisions critical to their future. They should be joining politicians on the pathways toward that future.

But ideologically driven hypocrisy is no way to lead a conversation so critical to our future – one in which there are no dollars to pay for the investment foundation on which that future is built.

Bill Whitelaw is the Managing Director of Strategy & Sustainability with Geologic Systems.

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