Natural gas is the solution, clean and simple

Contributed to Edmonton Journal
Tim McMillan
President and CEO
Canadian Association of Petroleum Producers
October 14, 2015

Using more natural gas to generate electricity in Alberta is an effective way for the Government of Alberta to balance its desire to reduce greenhouse gas emissions while diversifying and increasing the economic value from its natural resources.

More natural gas power would also enable renewable energy, provide stable and reliable power from a low-cost fuel, and ensure significantly more royalty revenue for public services.

“We need a climate change plan that is ambitious, effective and achievable,” Alberta Environment Minister Shannon Phillips said in the Climate Leadership discussion paper. Natural gas can help meet this ambition.

Natural gas is the cleanest-burning fossil fuel. Used in power generation, natural gas emits about half the carbon dioxide compared to Alberta’s baseload power fuel, coal. It also emits far less sulphur dioxide and nitrogen oxides, and could virtually eliminate emissions of smog-causing pollutants.

This is why CAPP’s submission to Alberta’s climate change advisory panel encourages the panel to consider greater use of natural gas as the province moves to improve the environmental performance of Alberta’s electricity sector to meet its climate ambitions.

Some groups, such as the Pembina Institute, disagree with this position. Rather than using more natural gas to generate power in Alberta, these groups argue the province should switch directly to renewables.

In my view, this is not a realistic solution.

Let’s look at the numbers in the Climate Leadership discussion paper.

It points out that renewable energy sources, including wind and solar, account for 18 per cent of installed electric generation capacity. This refers to the maximum amount of electricity that can be generated by these sources. Wind and solar, however, are intermittent and unable to provide a steady, reliable and affordable supply of continuous electricity.

Albertans need to know that when they flick the switch, the lights will come on and it won’t cost a fortune. Natural gas does that.

As the discussion paper says: “sometimes the wind doesn’t blow and the sun doesn’t shine.” That is why intermittent energy sources only accounted for nine per cent of total electricity generated in Alberta last year – just half of installed capacity.

To ensure wind and solar power can contribute to a steady, reliable electricity supply, they need to be backed up by generation from reliable supply sources. Again, natural gas fits that bill.

We have lots more natural gas in Alberta than we consume, and the province’s extensive natural gas pipeline network can enable power plants to be located near where the power is needed. In other words, natural gas can complement power generation from wind and solar, act as a backup to ensure baseload capacity and thus encourage growth in renewable power generation.

Another major factor the discussion paper said Albertans should keep in mind is the cost impact to electricity consumers that could result from reducing the province’s reliance on coal-fired generation and increasing renewable power generation.

Natural gas is abundant not only in Alberta but across North America, which has resulted in low prices. While these are challenging for natural gas producers, this improved affordability could benefit energy consumers in our province, which is another reason Alberta should use more natural gas in its electricity mix.

Data provided by the Alberta Electric System Operator shows that electricity generated by a coal-fired power plant with associated carbon capture and storage technology would be nearly three times as expensive as electricity from a combined-cycle natural gas plant: $237 per megawatt hour versus $82 per megawatt hour. That’s a significant potential cost saving for consumers.

Fuel switching would create about 1.5 billion cubic feet per day of new natural gas demand in Alberta. Under the current royalty regime this translates into roughly $140 million per year in new royalties for the province, because natural gas pays much higher royalties than coal, based on price and production.

That’s $140 million annually in new revenue for the Government of Alberta.

These are the reasons why we encourage Alberta to prioritize natural gas as a key electrical generation baseload fuel and as a central plank in efforts to reduce emissions in the electricity sector.

The benefits of doing so are clear, and it’s an opportunity to improve the province’s climate performance, generating additional revenues in a relatively short time, and potentially protecting Albertans from large increases in their electricity bills.