Alberta election fact check: Will it cost $87B to decarbonize the grid?

High voltage transmission power lines near Brooks, AB., on Sept. 11, 2020. THE CANADIAN PRESS IMAGES/Larry MacDougal

The United Conservative Party says the support from Alberta NDP Leader Rachel Notley to move the province’s electricity generation to net-zero carbon emissions by 2035 will cost Albertans in increased electricity prices, investment costs and opportunity costs.

But the authors of one of the studies the UCP used is saying the $87-billion figure being used is “not a fair representation” of the costs of the federal policy.

What’s the claim?

On Wednesday in Calgary, Brian Jean (Fort McMurray-Lac La Biche) made a “shocking revelation” that the NDP’s support of decarbonizing Alberta’s electricity grid will cost “at least $87 billion.”

“AESO, Alberta’s independent electricity systems operator, published a report last year that (said) meeting the pure power generation… will cost $52 billion,” he said.

“(Navius Research) found that the opportunity cost to Alberta’s economy will be a further $35 billion between now and 2035.

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“If we are retrofitting power plants, we aren’t building other things in our economy, and Alberta will lose $35 billion in GDP because of that.”

Quoting the AESO report, Jean and fellow UCP candidate Rebecca Schulz (Calgary-Shaw) said following the federal commitment to decarbonize the grid “will raise electricity rates by at least 40 per cent more than they might otherwise be.”

Schulz said the UCP’s “reasonable measures and aspiring to a net zero energy sector by 2050” were going to be less costly, but declined to provide any figures.

Let’s take a closer look at all these numbers.

Will it cost that much?

Jean and Schulz may have been misusing and misrepresenting the findings of at least one report they quoted from, according to the report’s authors.

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Wednesday evening, Navius took to social media to “set the record straight” on the work they did looking at the macroeconomic impacts of the federal Clean Electricity Regulations, work which was based on the Alberta Electric System Operator (AESO) estimate for investment required to decarbonize the grid.

Navius’ modelling showed the net cumulative impact to GDP in 2015 dollars would be $35 billion over 20 years, from 2020 to 2040.

Their model could lead to “a reduction in Alberta’s GDP growth rate, which declines by 0.03 per cent between 2020 and 2040.

“This means that GDP is $1.9 billion lower in 2030 (0.5 per cent), $3.2 billion lower in 2035 (0.7 per cent), and $2.7 billion lower in 2040 (0.5 per cent),” the report reads.

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The Vancouver-based climate and energy policy analysts said their report accounted for the investment estimates from the AESO report, not on top the AESO estimates.

“This GDP impact relies on estimates of the investment required to achieve net zero electricity in Alberta provided by the AESO. If the realized cost of renewable electricity in Alberta is lower than the AESO’s figures, the realized economic impact would also change,” Navius said in a statement to Global News.

“Because of this, the $87 billion figure being communicated publicly by adding the $35 billion (real 2015$) GDP impact and $52 billion (nominal) investment together is not a fair representation of the costs of the policy.”

The AESO report gave a range of estimated costs for capital investments needed for net-zero electricity generation: $44 to $52 billion from 2022 to 2041.

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Sara Hastings-Simon, an assistant professor at the University of Calgary, said there were flaws in the model used by AESO.

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“The assumptions around the costs of some of the key technologies — wind and solar, for example — are really much higher than what we’re seeing today across North America,” she said. “And that’s costs today. We know that costs for wind and solar are continuing to fall.”

AESO did recognize that the operating costs for generation could be $11 to $19 billion, or 20 to 41 per cent, costs that it appears Schulz assumed would be passed along to consumers.

“Normalized across system load, costs may be $50/MWh or 40 per cent higher by 2035,” AESO wrote.

A 40-per cent increase in prices, as the UCP claim, would be equivalent to a three-per cent increase per year over 12 years.

But Hastings-Simons said Alberta’s competitive electricity market doesn’t mean increases in costs would result in a direct pass-through to customers.

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“We don’t have a regulated system like much of the rest of Canada where you would expect those costs to go directly on to the users of electricity. Instead, generators of electricity basically make bids in an auction-like system in order to produce electricity,” Hastings-Simon said.

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Citing work by her U of C colleague Blake Shaffer, Hastings-Simon noted recent rises in electricity costs are not the result in rising input costs, but in a change in the bidding behaviour due to a legal concentration of market power.

“Also in many cases, building out those renewables will actually weaken the market power that some of the players within the market have because you’re bringing in new generator types. And so that can actually go in the other direction again and lead to a lower cost through that kind of bidding behavior.”

Where did the Clean Energy Regulations come from?

During the 2021 federal election, the Liberal Party of Canada campaigned on the promise to make electricity generation in Canada net zero by 2035.

At COP26, Prime Minister Justin Trudeau announced an accelerated phase-out of coal-fired electricity plants as part of Canada’s work to reduce pollution and meet its Paris Climate Agreement commitments.

In March 2022, the federal government began consultations on the Clean Energy Regulations.

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On April 19, Notley tweeted “Alberta’s NDP will work with industry to achieve a net-zero electricity grid by 2035 and a net-zero economy by 2050.”

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Wednesday afternoon, Notley said she’s heard from industry that they feel confident in meeting the 2035 goal.

“The study that (the UCP) are basing their numbers on fails to take into account the opportunities that come from technological innovation, opportunities that industry themselves are saying that they can use and that they are excited to use,” Notley told reporters.

Thursday morning, UCP Leader Danielle Smith stood by her candidates’ characterization.

“We don’t need to issue a correction,” Smith said.

Instead, the UCP campaign’s Twitter account issued a clarification on Wednesday evening, at Navius’ request.

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Both the AESO report and the Navius report limited its scope only to the investments needed to get to net zero by 2035 and the resultant impacts on GDP.

Neither reports appeared to address the costs of not decarbonizing Alberta’s grid.

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