Power generation used to be a pretty staid thing. Assemble a dragline with a life expectancy over 40 years, dig a hole, put up a power plant near the hole, and feed said power plant with coal. Smoke goes up, power comes out.
By the time the dragline is ready to be put out to pasture, the power plant might be, too, so you either rebuild the power plant, or perhaps build a new one, and build a new dragline. If not, you shut down the operation.
New federal regulations implemented under the Stephen Harper Conservatives in 2015 required coal-fired generation units, once they hit 50 years old, be retrofitted (with carbon capture) so that their emissions are the same or lower than combined-cycle natural gas power generation. Failing that, they must be shut down.
SaskPower decided to be the first – in the world – to implement a commercial-scale, post-combustion carbon capture system to do just that. The Boundary Dam Unit 3 Integrated Carbon Capture and Storage project cost $1.5 billion for the rebuild and carbon capture plant. It’s taken a few years to work the bugs out, but it works.
Along came the Trudeau Liberal government, throwing a monkey wrench in the works. Now, a ratcheting carbon tax is going to mean paying $50 per tonne of CO2 by 2022.
That, combined with the Alberta Rachel Notley NDP’s government carbon tax and quest against coal, led to some very interesting developments in recent weeks. That’s also where Alberta power generation companies parted paths with SaskPower.
I don’t know how much, if any, interest ATCO and TransAlta might have expressed in the Estevan carbon capture project. I don’t recall seeing any of their representatives on any of the half-dozen or so tours I’ve taken of the plant over the years. Conceivably, they would have done so, in a private manner, and without journalists around. Their discussions with SaskPower would have been private, too.
But whatever the case, I didn’t see anyone from those companies at the Carbon Capture Summit held on May 11 at Southeast College in Estevan.
That’s probably because TransAlta and ATCO have decided to do an end-run around the whole idea of carbon capture. In recent days, they’ve both announced their intentions to convert their coal-fired power plants to natural gas power plants. Instead of spending billions of dollars on carbon capture facilities to bring emissions down to the level of natural gas facilities, they’re just going to go straight to natural gas. ATCO is aiming for full conversion by 2020, while TransAlta is targeting 2022.
For the past decade, natural gas prices have floated unimaginably low, especially compared to where they were a little over a decade ago.
With that in mind, the power utilities are seeking to take advantage of low prices and the glut of Alberta gas. Compared to implementing a new technology like carbon capture, natural gas turbines are cheap, easy and quick. SaskPower is building just such power plant at Swift Current.
All this is good news for natural gas producers, as the increased demand will provide a local market and a bit of a boost in prices for their product. But it also spells the demise of the coal industry, for any coal mine and miner that is not already exporting their product. If your product is for local consumption, you’re done, and in very short order.
These developments are going to play heavily on SaskPower’s next moves. While the current government, along with the leadership of SaskPower, are firmly committed to continuing coal mining and coal-fired power generation, a change in government could profoundly alter things. An NDP government could, conceivably, pull a page from the ATCO playbook and change our much, or even all, of our coal fleet to natural gas in the space of one term. By rebuilding existing plants, you can use existing grid infrastructure and cooling facilities. In one fell swoop, Saskatchewan could be out of coal.
What would be the coal miners’ loss could be the oil and gas sector’s gain. Instead of shipping our gas elsewhere, the new gas plants in southeast Saskatchewan could sell their product to SaskPower.
SaskPower officials, like those who spoke at the Carbon Capture Summit, continually point out the price volatility of natural gas as a prime reason for sticking with coal. But with volatility in greenhouse gas regulation now a reality, other utilities have calculated that’s a risk they’re willing to take.
SaskPower now appears to be putting off a decision on its next moves in carbon capture. It’s not hard to see why. There are billions on the line, and right now, the best move might be to punt.
Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net.
