Hicks on Biz: Predicting the best-and-worst-case scenarios of the Alberta NDP's energy policy BY GRAHAM HICKS FIRST POSTED Edmonton Sun, THURSDAY, SEPTEMBER 29, 2016
Too late to turn back.
The Alberta ND government has irrevocably committed the province to a profound change in electricity generation, from coal, natural gas and some wind to no coal, more natural gas, and massive new renewable energy projects – more wind farms, big solar farms, on-site solar and run-of-river hydro. The government’s self-declared goal is to have 30% of Alberta’s power generation coming from renewables by 2030.
This fundamental shift is as expected from a government with a radically different mind-set than the old. The “Alberta Advantage” will no longer be measured in economic terms but in ecological ones.
Under past Conservative governments, Alberta was the lowest-cost province in which to do business. The New Democrats want Alberta to be the cleanest province in which to do business.
So let’s polish up the ol’ crystal ball, and predict best-and-worst-case scenarios of this determined effort that will hit home in January when the carbon levy (tax) pushes up the cost of every gigajoule of natural gas and every litre of gasoline and diesel. This revenue, the government tells us, will support, encourage and subsidize all things conserving and sustaining
The best case scenario: Costs come down through mass production and technological breakthroughs. Wind and solar farms become cost-effective with little or no government subsidy. Electricity prices stay constant. Supply keeps up with demand.
On-site solar panel installations (i.e. on your roof) dramatically grow, encouraged by government subsidy. Combined with subsidy-encouraged conservation measures, less electricity is needed from big natural-gas burning power plants, further reducing Alberta’s carbon footprint.
Admiring Alberta’s impressive conservation/carbon reduction efforts, the rest of Canada allows the building of pipelines east and west to carry our oil and natural gas (produced under the strictest environmental regulations) to new markets.
Meanwhile, manufacturers of wind turbines and solar panels set up plants in Alberta, sweetened with government incentives. The NDs persuade these manufacturers to set up factories in Fort McMurray or in mining towns like Grande Cache to offset job losses in the oil sands and coal mine closures.
At the same time, the world price of oil and gas steadily creeps up. Oil stays at $70 or more a barrel. The oil sands are back in business, skilled labour is in demand, consumer spending picks up, wind turbines are turning, solar panels are doing their thing and everybody is happy, happy, happy.
Especially the NDs, who, having been re-elected in 2019, have actually created carbon-free electricity generation while oil and gas revives our economic fortunes and delivers desperately needed royalties to the public purse.
Worst-case scenario, or, as the saying goes, when you’re up to your arse in alligators, you forget you came to drain the swamp.
Everything goes wrong for the New Democrats and Alberta. Renewable energy proves to be far more costly than projected. Despite big-time government subsidies out of the carbon levy pot, the price of electricity to both industrial and residential users triples from what it is at present.
The government makes a number of bad decisions while distributing $3 billion from the carbon levy to support the transition to a carbon-diminished economy. Subsidized renewable-energy companies go bankrupt. Subsidized new technologies don’t pan out.
The interface between on-site solar power and the Alberta power grid is a money-loser all around. Despite sophisticated computer forecasting, drops in wind still create brown-outs or black-outs on hot summer days.
Renewal energy manufacturers do not set up in Alberta. Meanwhile businesses in general are fleeing Alberta, their profits eroded by electricity costs, government-mandated wage increases, higher corporate taxation, higher personal taxation on employees and stifling regulation. “Suncor moves out of Alberta” the headlines might read.
The downward spiral gains momentum. Skilled Albertans, double-whammied with rising taxes (i.e. the carbon levy) and fewer job prospects, start leaving the province. (This is already happening.)
Without new pipelines, ongoing low oil prices and fear of further government intervention, oil sands bitumen production drops. Energy investors avoid Alberta. Better returns can be made elsewhere.
Interest rates rise – as interest rates do from time to time. The ND government’s heavy borrowing (to maintain public services at pre-recession levels) comes back to bite its backside. Debt servicing on the $40 to $60 billion borrowed since 2015 jumps from $800 million a year to $2 billion to $4 billion a year.
Ever so reluctantly, the province cuts back spending which deeply impacts Edmonton, given one-in-four jobs here – civil servants, teachers, nurses, police, firefighters — are government-funded.
By 2030, Alberta has lots of windmills but is a have-not province, scraping by with hand-outs from Ottawa.
Both scenarios are extreme. The reality will likely fall somewhere in between.
But for those of us who believe that schools, hospitals and welfare are best funded from a vibrant private sector, that minimal government, free markets and lower taxation are key to societal wealth creation, that renewable energy should compete without taxpayer subsidies, the outlook on the near-term future of Alberta ranges from worrisome to terrifying.