Alberta Unbound

Some people think Albertans should wear black Stetsons given that the province emits 30% of Canada’s carbon dioxide, and 25% of its nitrogen oxides, while containing barely 10% of the country’s population.

Nevertheless, as Alberta restructures its electrical generation and retail services, more firms are donning green hats. Wind and small hydro generation aren’t about to overtake coal — the fuel source for 56% of Alberta’s electrical generation capacity — but greener power is opening opportunities for Albertans, consulting engineers included. Part of the reason for this greening of the province is the deregulation of the power generation industry.

The 1995 Electric Utilities Act established a market — the Power Pool of Alberta — for selling and buying electricity, and the Electric Utilities Amendment Act opened the way for customer choice in buying electricity. Choice was given to larger commercial users in 1999, and this January to farm and residential customers, who have the option of staying on a regulated rate for another five years. Smaller commercial and industrial users retain the option for three years.

Alberta has pioneered electrical deregulation in Canada. The promised benefits are a reliable supply, competition and eventual downward pressure on prices as new players are added, and environmentally friendly options and innovations.

The restructuring entailed:

ending responsibility for generation and retail services by a handful of vertically-integrated, investor-owned and municipal utilities;

creating the independent Power Pool as a market to buy and sell electricity through contracts, direct purchases and spot sales;

appointing an independent Transmission Administrator to ensure fair transmission rates and system access (critical to entry by new players);

encouraging wholesalers to market power competitively (as with telephones) to commercial and retail customers who receive electricity through existing distribution networks;

auctions of large blocks of power to wholesalers under power purchase arrangements of up to 20 years.

Rising prices

While Alberta has not suffered anything like the chaos recently experienced in northern California, the transition to a competitive market has been anything but smooth. Recently, spot prices have reached $700 or more per megawatt hour (MWh). With an election pending, Ralph Klein’s government faced pressure to act. It did so by forcing a rollback on surcharges applied by distributors. It also capped the regulated selling price at $80 MWh (8 cents per kWh) and later raised it to $110. The government eased up somewhat when it became apparent that its policies were generating confusion and discouraging new generation. Premier Klein then tried to lower the political heat through various energy rebates.

Amid references to the National Energy Policy and stories of Albertans freezing in the dark, the government insisted that deregulation wasn’t the villain. Instead, they pointed to other factors, such as Alberta’s 4.1 % economic growth (for creating more power demand and pushing up prices), and high electricity prices throughout the western U.S., a market in which Alberta competes.

Faced with financial risk and regulatory uncertainty, power producers are playing “After You Alphonse.” Critics say uncertainty has discouraged anyone from building the added new capacity. It’s estimated that demand is growing at about 3% per annum, and a 300 MW plant needs to be added every year to match it. While several major power generators are planning new plants, they can’t be built overnight. Alberta once possessed the luxury of excess generation, but now its 10,000 MW of installed capacity doesn’t leave much leeway.

Cogeneration

In this difficult situation, one effect of deregulation that has occurred more quickly than people might have expected is the growth in renewable energy. The sharp increase in what Albertans pay for electricity has meant that technologies such as solar and wind power can compete more favourably with electricity produced by burning fossil fuels.

If, as proponents of deregulation maintain, freeing the market eventually will bring prices down, then some of green power’s recent cost competitiveness may fade. However, because deregulation permits even small power producers and not just big utilities to sell into the province-wide grid, it creates a new avenue for the sale of power from wind, solar, small hydro, and cogeneration. Add to this the fact that power retailers see a marketing advantage in offering consumers non-polluting power, it appears that green energy has a future in Alberta.

Cogeneration, for example, (plus imports from neighbouring provinces) is helping to fill the void in supply. It is rare now for a major Alberta plant with heat and steam requirements not to incorporate combined cycle (gas and steam) cogeneration. Last fall, Canada’s largest merchant cogeneration unit (416MW) was completed at the Nova Chemicals plant at Joffre near Red Deer. Black and Veatch, and Spantec Constructors (part of UMA) handled engineering and construction. Owned jointly by Atco, Epcor and Nova, the $380 million Joffre facility sells about 70% of its output off-site through contract or spot sales.

The Poplar Creek Power Station, part of Suncor’s oil sand expansion at Fort McMurray, provides another example. Fluor Canada engineered, procured equipment and material, and constructed several parts of this cogeneration plant for TransAlta Energy. Just being completed, the plant consists of two 115 MW gas-turbine generators, each exhausting into a heat recovery steam generator; a 60 MW condensing steam-turbine generator; a 75 MW condensing steam-turbine generator; plus auxiliary systems supplying air, gas, steam and water to Suncor’s utilities.

Wind, water and sun

Even with high prices, green power can’t be expected to meet all of Alberta’s requirements soon — despite efforts by the likes of Vision Quest Windelectric. The Calgary firm last year commissioned 14 new wind turbines (for a total of 20) with a combined 13.5 MW capacity. Since 1997, its wind farms using the latest (Vestas V47-660) Danish technology have an imposing presence, as giant blades mounted on 50-metre towers near Pincher Creek draw energy from southwest Alberta’s legendary prevailing winds.

Most wind-power engineering expertise still resides abroad. However, Calgary-based Wiebe Forest Engineering’s Jeff Bannard, P.Eng. has worked on several wind projects. He predicts: “We have a good possibility of installing more wind farms because of lack of power in the province.”

Vision Quest executive director Jason Edworthy adds: “The basis of what we do is possible because of deregulation.” Besides letting his firm and others link to the grid, restructuring encourages alliances. TransAlta, a major private sector power producer (and until recently distributor) has acquired minority ownership in Vision Quest. TransAlta’s director of sustainable development, Paul Vickers, P.Eng., says the acquisition lets TransAlta respond to a small, but significant, green market. Furthermore, it provides greenhouse gas emission reduction credits to trade or to offset TransAlta’s emissions.

Vision Quest has a sales arrangement with Enmax, the Calgary-owned distributor. Its Greenmax program has about 2,000 subscribers. Customers have the option of paying a monthly premium (up to $15) for green power. Vision Quest’s power meets EcoLogo standards although, of course, it’s not practical to segregate specific green power travelling along distribution lines.

Epcor Energy Services, which, following recent acquisitions beyond Edmonton, serves more than half of Alberta customers, has 3,000 takers for a similar Eco-Pack program. Epcor vice-president David Morrow, P.Eng. hopes that 25% of their generation eventually will come from renewables. Epcor accessed wind generation in September with a 10-year contract to buy power from a 750 kW wind turbine owned by the Peigan Indian Utilities. Epcor’s principal green source, however, remains run-of-the-river hydro power from Canadian Hydro Devel
opers.

Hydro dams are not new to Alberta, but Calgary-based Canadian Hydro is a leader in low-impact-hydro generation not reliant upon dams. Formed in 1990, the publicly traded company owns 11 plants (including the Cowley Ridge wind farm and four hydro plants in Alberta). Its latest hydro addition, a 2.75 MW, $12.5-million joint venture with Epcor, opened at Magrath in September and uses water from an existing irrigation canal. It is also developing a 40-80 MW hydro project at Dunvegan on the Pearce River.

Guido Bachmann, P.Eng., president of Canadian Hydro’s subsidiary Canadian Gas & Electric (involved with biomass generation), formerly chaired the Independent Power Producers’ Society of Alberta. He is convinced: “We would not be doing all this in Alberta if the province were not going down this (deregulation) path. The ability of independent power producers to connect to the grid is dependent on deregulation.”

Howell-Mayhew Engineering, an Edmonton firm specializing in solar energy systems, has shown how even small solar electric systems can sell power to the grid. Solar electric (photovoltaic or PV) modules on the firm’s energy-efficient house/office complex generate about $225-worth of electricity annually (at 2000 prices). The 2.3 kW, 36-module PV system supplies some 2 MWh of the office’s consumption directly, with an additional 1 MWh exported and sold to the Power Pool at its hourly prices. The demonstration project was supported by Natural Resources Canada and Epcor, which then installed a much larger solar array on its Edmonton headquarters. Gordon Howell, P.Eng., says that utility electricity price increases, coupled with PV system price and performance breakthroughs, are rapidly making the economics of small distributed solar electric systems comparable to those of conventional utility electricity.

Small solutions

Mariah Energy, which placed a 30 kW Capstone micro-turbine in Calgary’s Walker Court, a new 12-unit live/work “green” condominium, sees its Heat PlusPower system as the first in a series of small gas-fuelled cogeneration units which it would link in a grid to form a distributed micro-utility. Mariah’s turbines use a lean pre-mix combustion system to achieve low emission levels. When fuelled with natural gas, NOx and total hydrocarbon emission levels are less than 9 ppm, and CO2 emissions below 40 ppm.

At some oil and gas wells, micro-turbines use flare gas to generate electricity for on-site use and sale to the Alberta Power Pool. Calgary’s High Time Industries faces increased demand for well site micro-turbines (up to 3.5 MW). The company’s principal engineer, Doug Hunchuk, P.Eng., explains why the oil and gas producers install them: “It’s not so much to produce power but because they are required [by regulators] to do something with the flare gas.”

Like micro-turbines, biomass generation isn’t strictly speaking “green” but it offers environmental benefits, says Chuck Brenton, P.Eng., UMA’s regional manager, industrial, in Edmonton. UMA were consultants in the addition of a 10.5 MW biomass generator (one of several in Alberta) using wood waste at Weyerhaeuser Canada’s Drayton Valley operations. Besides eliminating once-familiar tepee burners, it keeps some of Alberta’s 1.5-million-tonnes-a-year of wood waste off landfills. “A few years ago, it was difficult to make (biomass) projects fly without incentives. Now with increased power costs, they are attracting more attention,” observes Brenton.

Of the 2,000 MW in new capacity expected by late 2002, half the power will be sold through the Alberta Power Pool. Wayne St. Amour, the Pool’s vice-president of customer and corporate services, remains confident operating reserves will see Alberta through. However, he concedes “circumstances will remain tight until new supply is in the system.”

The growing demand for more power supply coupled with the deregulated market will almost certainly create opportunities for consulting firms. The opportunities lie not only in the area of design, but also in helping power purchasers navigate through the deregulation maze. As for the latter kind of work, according to Edmonton consultant Roger Bellows, P.Eng. of Carlin Energy: “It’s very commercially-oriented and not traditional engineering, but most of it is done by engineers.”

Even uncertainty is generating business as Albertans contemplate whether a springtime of greener opportunities will follow a winter of discontent. CCE

Nordahl Flakstad is a freelance writer based in Edmonton.

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