Connect with us
[the_ad id="89560"]

Alberta

Federal electricity regulations threaten Albertans with high costs and power outages

Published

11 minute read

Alberta responds to dangerous federal electricity regulations

Alberta has submitted detailed analysis showing why proposed federal regulations will threaten the province’s electricity grid.

Alberta is rapidly reducing emissions and targeting a carbon-neutral grid by 2050. Electricity emissions have declined by 53 per cent since 2005 and the province will have phased-out all coal generation by early 2024.

However, in August, the federal government released its draft Clean Electricity Regulations, which propose rigid rules to try and achieve net-zero electricity by 2035.

Based on expert analysis and industry consultations, Alberta’s government has submitted a detailed response outlining the technical problems with these regulations. The province’s analysis found that these regulations are unrealistic, ineffective and could compromise grid reliability to an unacceptable degree, resulting in the very real risk that Albertans will not have access to an essential service, like power, when they need it.

“These regulations are irresponsible and reckless, setting unrealistic targets and even banking on technologies that don’t exist. They will result in Albertans shouldering an unbearable cost for an electricity system that will no longer deliver the safety, reliability and affordability upon which our lives depend. We will not permit these dangerous and unconstitutional regulations to be imposed upon our province.”

Danielle Smith, Premier

“The standards and enforcement that Ottawa is proposing would put the safe, reliable and openly competitive market of Alberta’s electricity system at risk, all for targets that aren’t feasible or realistic. We cannot allow the reliability of our electricity to be compromised and risk public safety during the coldest months of the year, when people need the power most. We urge Ottawa to abandon these regulations and work with us on a realistic path that aligns with our own emissions-reduction goals.”

Rebecca Schulz, Minister of Environment and Protected Areas

Some of the key problems outlined in Alberta’s technical submission include:

Flawed modelling creates unrealistic targets

The modelling tools used by the federal government lack the capability to properly assess Alberta’s energy-only market, including the province’s large share of cogeneration. The federal tools also use incomplete proxies to evaluate system reliability, leading them to drastically underestimate the negative impacts.

The federal modelling also relies heavily on technologies that are currently not ready to be deployed, assuming that they will soon be easily or quickly available. As a result, the federal modelling offers an unreliable and inaccurate picture of the costs, impacts on reliability and outcomes of these regulations. With better modelling, the federal targets would be unachievable.

Unachievable standards

The regulations propose unachievable emission standards, with limited flexibility and using a rigid approach that will not work. The standard is also based on unproven design specifications that will be very challenging for operators to meet, even under optimal conditions, and potentially impossible given the operational variability that occurs in electricity grids on a daily basis.

Notably, Ottawa’s standard is significantly higher than those proposed in the United States in May. Standards need to be based on actual performance.

Creating a retirement cliff

The proposed regulations set an end of prescribed life of 20 years, despite the typical operating life of natural gas units being closer to 45 years. This will create stranded assets and massive retirement “cliffs,” as large numbers of natural gas facilities go off-line.

Approximately 55 per cent of Alberta’s existing and approved natural gas generation installed capacity would be subject to the federal emissions standard by 2035. The unnecessary retirement of best-in-class natural gas units would have massive negative impacts on Alberta’s electricity system.

A one-size-fits-all approach won’t work

It is clear that the federal government drafted these regulations based largely on the electricity systems of Canada’s three largest provinces, which primarily rely upon hydroelectricity and nuclear energy.

Regional differences must be recognized, including flexibilities for those jurisdictions most negatively affected by the regulations. When Ottawa exempted home heating oil from the carbon tax, they recognized the need for this flexibility. Alberta and all provinces deserve the same consideration.

Flawed understanding of natural gas

Alberta currently relies on natural gas for more than 70 per cent of its generation. Alberta’s grid reliability is maintained through natural gas generation to backup and balance intermittent sources of power such as wind and solar. Considering the seasonality of renewable resources, Alberta anticipates the need for efficient high-capacity abated natural gas units for decades to come.

The regulations are so rigid and strict that they will effectively make it economically unviable for companies to build and operate natural gas facilities, including abating emissions through carbon capture, utilization and storage (CCUS).

Inflexible and punitive compliance options

The draft regulations are unnecessarily punitive with inflexible compliance options. As written, generators must not emit or they could face criminal penalties under the Canadian Environmental Protection Act, which includes a threat of incarceration. The regulations also increase red tape, increase costs, and offer very little flexibility for industry.

Limiting new technologies

The proposed federal electricity regulations will limit the adoption of important new technologies like hydrogen and CCUS by setting unproven and unrealistic performance standards for facilities. This imposes high costs, introduces investor risk, and creates challenges such as older facilities not being able to upgrade or retrofit new technologies. The result will be added costs and grid reliability risks.

Risks to reliability and safety

Alberta requires reliable electricity power in periods when intermittent sources are not generating. In December 2022, the 5,000 megawatts of installed renewable capacity generated as little as 187 megawatts of energy at one point during a period of cold weather with little wind or solar generation. Natural gas was needed to keep the province from experiencing blackouts.

The proposed allowable peaking provisions – needed to ensure that power is available at any time, under any weather conditions – will result in Alberta not having enough power available when needed most. This is dangerous and irresponsible. The proposed low annual-run-hour limit and emissions restrictions do not enable natural gas assets to respond when needed to increasing demands and the variability of intermittent generation.

A ridiculous approach to emergencies

The proposed treatment of emergencies is unacceptable. It is untenable for the federal government to require post-emergency sign-off by a federal minister. Alberta’s provincial system operator knows best when we have an emergency, not politicians in Ottawa. Provinces must have flexibility to call on generators during emergencies to protect the safety and security of families and businesses, without the threat of punitive action on system operators or generators.

Inadequate financial support for those hit hardest

The federal government released the draft regulations without providing the financial supports needed to enable this transition. Any claims otherwise are false. Federal modelling indicates the regulations will cost $58 billion – since 60 per cent of the net costs will fall on Alberta, the province should receive 60 per cent of the necessary federal funding. Also, the $58-billion figure is likely incorrect as it’s based on flawed modelling and does not adequately consider the distribution and transmission and other costs that will be required. Other third-party assessments further estimated the costs reaching into the trillions.

Next steps

Alberta continues to call on the federal government to respect jurisdictional authority and the enshrined rights and responsibilities of the provinces. The Supreme Court of Canada’s decision on the Impact Assessment Act confirmed the unconstitutionality of the federal government’s ongoing efforts to interfere with electricity and natural resource sectors of all provinces.

The Alberta-Ottawa working group continues to discuss how to bring Ottawa’s efforts to achieve carbon neutrality in the economy in line with Alberta’s Emissions Reduction and Energy Development Plan. If this alignment is not achieved, Alberta will chart its own path to protect its citizens and economy by ensuring the province has additional reliable, affordable and sustainable electricity brought onto the power grid.

Alberta officials will continue to share technical information and analysis on these regulations with the federal government as required to achieve a more practical and realistic approach.

Quick facts

  • Alberta has reduced electricity emissions by 53 per cent since 2005.
  • According to Canada’s Constitution, legislating and regulating the development of electricity explicitly falls within the jurisdiction of the province (92A (1) (c)).
  • The Alberta Electric System Operator found that Alberta would face disproportionate risk and costs, compared with other provinces, as a result of the federal electricity regulations.
  • The Public Policy Forum previously indicated that the cost of the federal electricity approach could be more than $1 trillion and as high as $1.7 trillion.

Alberta

Low oil prices could have big consequences for Alberta’s finances

Published on

From the Fraser Institute

By Tegan Hill

Amid the tariff war, the price of West Texas Intermediate oil—a common benchmark—recently dropped below US$60 per barrel. Given every $1 drop in oil prices is an estimated $750 million hit to provincial revenues, if oil prices remain low for long, there could be big implications for Alberta’s budget.

The Smith government already projects a $5.2 billion budget deficit in 2025/26 with continued deficits over the following two years. This year’s deficit is based on oil prices averaging US$68.00 per barrel. While the budget does include a $4 billion “contingency” for unforeseen events, given the economic and fiscal impact of Trump’s tariffs, it could quickly be eaten up.

Budget deficits come with costs for Albertans, who will already pay a projected $600 each in provincial government debt interest in 2025/26. That’s money that could have gone towards health care and education, or even tax relief.

Unfortunately, this is all part of the resource revenue rollercoaster that’s are all too familiar to Albertans.

Resource revenue (including oil and gas royalties) is inherently volatile. In the last 10 years alone, it has been as high as $25.2 billion in 2022/23 and as low as $2.8 billion in 2015/16. The provincial government typically enjoys budget surpluses—and increases government spending—when oil prices and resource revenue is relatively high, but is thrown into deficits when resource revenues inevitably fall.

Fortunately, the Smith government can mitigate this volatility.

The key is limiting the level of resource revenue included in the budget to a set stable amount. Any resource revenue above that stable amount is automatically saved in a rainy-day fund to be withdrawn to maintain that stable amount in the budget during years of relatively low resource revenue. The logic is simple: save during the good times so you can weather the storm during bad times.

Indeed, if the Smith government had created a rainy-day account in 2023, for example, it could have already built up a sizeable fund to help stabilize the budget when resource revenue declines. While the Smith government has deposited some money in the Heritage Fund in recent years, it has not created a dedicated rainy-day account or introduced a similar mechanism to help stabilize provincial finances.

Limiting the amount of resource revenue in the budget, particularly during times of relatively high resource revenue, also tempers demand for higher spending, which is only fiscally sustainable with permanently high resource revenues. In other words, if the government creates a rainy-day account, spending would become more closely align with stable ongoing levels of revenue.

And it’s not too late. To end the boom-bust cycle and finally help stabilize provincial finances, the Smith government should create a rainy-day account.

Continue Reading

Alberta

Governments in Alberta should spur homebuilding amid population explosion

Published on

From the Fraser Institute

By Tegan Hill and Austin Thompson

In 2024, construction started on 47,827 housing units—the most since 48,336 units in 2007 when population growth was less than half of what it was in 2024.

Alberta has long been viewed as an oasis in Canada’s overheated housing market—a refuge for Canadians priced out of high-cost centres such as Vancouver and Toronto. But the oasis is starting to dry up. House prices and rents in the province have spiked by about one-third since the start of the pandemic. According to a recent Maru poll, more than 70 per cent of Calgarians and Edmontonians doubt they will ever be able to afford a home in their city. Which raises the question: how much longer can this go on?

Alberta’s housing affordability problem reflects a simple reality—not enough homes have been built to accommodate the province’s growing population. The result? More Albertans competing for the same homes and rental units, pushing prices higher.

Population growth has always been volatile in Alberta, but the recent surge, fuelled by record levels of immigration, is unprecedented. Alberta has set new population growth records every year since 2022, culminating in the largest-ever increase of 186,704 new residents in 2024—nearly 70 per cent more than the largest pre-pandemic increase in 2013.

Homebuilding has increased, but not enough to keep pace with the rise in population. In 2024, construction started on 47,827 housing units—the most since 48,336 units in 2007 when population growth was less than half of what it was in 2024.

Moreover, from 1972 to 2019, Alberta added 2.1 new residents (on average) for every housing unit started compared to 3.9 new residents for every housing unit started in 2024. Put differently, today nearly twice as many new residents are potentially competing for each new home compared to historical norms.

While Alberta attracts more Canadians from other provinces than any other province, federal immigration and residency policies drive Alberta’s population growth. So while the provincial government has little control over its population growth, provincial and municipal governments can affect the pace of homebuilding.

For example, recent provincial amendments to the city charters in Calgary and Edmonton have helped standardize building codes, which should minimize cost and complexity for builders who operate across different jurisdictions. Municipal zoning reforms in CalgaryEdmonton and Red Deer have made it easier to build higher-density housing, and Lethbridge and Medicine Hat may soon follow suit. These changes should make it easier and faster to build homes, helping Alberta maintain some of the least restrictive building rules and quickest approval timelines in Canada.

There is, however, room for improvement. Policymakers at both the provincial and municipal level should streamline rules for building, reduce regulatory uncertainty and development costs, and shorten timelines for permit approvals. Calgary, for instance, imposes fees on developers to fund a wide array of public infrastructure—including roads, sewers, libraries, even buses—while Edmonton currently only imposes fees to fund the construction of new firehalls.

It’s difficult to say how long Alberta’s housing affordability woes will endure, but the situation is unlikely to improve unless homebuilding increases, spurred by government policies that facilitate more development.

Tegan Hill

Director, Alberta Policy, Fraser Institute

Austin Thompson

Senior Policy Analyst, Fraser Institute
Continue Reading

Trending

X