What will it cost to kill coal completely by 2030?
Albertans wondering what their power bills might seem like in the next couple of years should seriously consider the Alberta government’s ambitious greenhouse-gas-reduction agenda. That plan, revealed in November, aims to improve Alberta’s carbon tax (that is already underway) and shut down coal plants early, while subsidizing alternative power generation.
If similar policies elsewhere in Canada are any indication, Albertans can get to become tied to a hefty bill.
Until recently, Alberta avoided tapping consumers or taxpayers to be able to “go green.” Regardless of this, coal-fired electricity generation already dropped from 66 per cent from the electricity grid in 1996, to 38 per cent last year, and was on the right track to decline to just 10 % by 2034.
Meanwhile, wind and gas were set to increase to 11 per cent and 74 per cent of electricity generation, respectively, by 2034, up from nine per cent and 44 per cent respectively in 2015.
All of that greening had been in the power pipeline before the new government committed itself to forcing coal turn off to zero by 2030.
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So here is a question: What will it cost to kill coal completely by 2030?
To answer that, consider first Alberta’s recent power prices. While volatile, from 2002 to 2015, electricity prices within the province rose just 16 per cent, slower than the consumer price index (34 percent) and far slower than prices of government-delivered things like riding on the bus (69 per cent) and water (91 percent).
All of that is about to change, however. The provincial government’s intend to double the tax on carbon emissions – to start with – will cost the typical Alberta household $480 annually by 2018, and twice that quantity by 2030. That’s according to the Climate Leadership Plan commissioned through the Alberta government.
An extra thousand dollars annually will be a burden, although the government intends to subsidize some consumers.
But there is no “free lunch,” as subsidies must also get paid for from someone’s pocket. Besides, governments routinely underestimate increased power costs (for everyone-consumers taxpayers, and businesses) once they hurry to get rid of coal plants.
Ontario is an ideal example. In 2006, its government decided to end all coal-fired electricity generation, about one-quarter from the power generated within the province at the time. This capacity ended up being to get replaced with power sourced from alternative energy such as wind and solar, with the aid of guaranteed price programs (feed-in tariffs). Power prices subsequently grew from five cents per kWh in 2004 (pre-announcement) to nine cents per kWh in 2014, an 80 per cent increase.
Even the province’s “cheaper” post-2009 subsidies will, according the Ontario Auditor General, lead to one more $9.2 billion paid to alternative power producers over Two decades.
Alberta’s government says it’ll avoid feed-in tariffs, but the Climate Leadership report explained the province will subsidize green energy in other ways.
The price of replacing Alberta’s coal-powered electricity generation with more expensive renewable alternatives will thus be also significant. One Standard & Poor’s estimate is that $7 billion in additional debt will be contracted by power companies necessary to build green energy projects earlier than expected.
Then there is the other iceberg Albertans are about to sail headlong into: The province’s new policy of accelerating the shutdown of coal plants means significant costs for consumers, taxpayers, and shareholders. An earlier coal phase-out can create obligations for government to pay companies that own coal-fired facilities to the tune which is between $5 billion and $15 billion, based on EDC Associates Ltd.
The Alberta government’s artificial and forced “hurry up” green plan means killing cheap power. That inevitably means much higher power bills – all this for “zero coal” by 2030 as opposed to 10 per cent coal-generated electricity by 2034.
The government should be upfront about these costs so that Albertans can comprehend the policies they may soon be asked to finance. Or even better: Probably the new government may wish to rethink their rush.
Mark Milke and Youri Chassin are the authors of “Green Energy Subsidies: Is Alberta Jumping on the Bandwagon?” authored by the Montreal Economic Institute
