The Race of the Provinces: Are Alberta and Saskatchewan Overtaking Ontario in Renewables?

by | Aug 29, 2021 | Blog

Onshore wind farm on the Canadian Prairies.

Summary

  • Alberta and Saskatchewan are responsible for most of Canada’s greenhouse gas emissions, which makes their anticipated lead in Canadian renewable energy production all the more surprising.
  • The two provinces, Alberta and Saskatchewa, are prime locations for solar arrays and wind farms due to the Prairies receiving a lot of sun and wind. The provinces are also major emitters, so they need to offset to reach national net-zero emission targets.
  • Much of the growth of the renewable energy industry was driven by Ontario phasing out coal-fired power plants over the last decade. However, this growth is now tapering off. Although the rest of the country is projected to slow down its growth in renewable energy capacity, the capacity in the Canadian Prairies will likely continue to grow over the next couple of years.
  • Alberta introduced a Technology Innovation and Emissions Reduction (TIER) regulation which enforces a maximum carbon emissions cap, or benchmark, for industrial facilities. A facility that reduces its emissions beyond its benchmark can collect credits from the government, which can then be sold to other facilities. It is this trading system that has made renewable energy investment in Alberta more attractive.
  • Corporate procurement has also been a significant driving force in promoting renewable energy projects in Alberta and Saskatchewa. Offtake deals – where a buyer agrees to purchase future goods or services – have proven very popular.

Introduction

Ontario has been the forerunner in renewable energy growth in Canada for the past decade. It has predominantly achieved this by phasing out the use of coal. However, Alberta and Saskatchewan are set to take the lead as they substantially increase their green energy production. The prospect of Alberta and Saskatchewan becoming renewable energy leaders may be a bit of a surprise to some, as these provinces are best known for their oil and gas industry. However, with Canada aiming to reach net-zero emissions by 2050, areas with heavy fossil fuel production need to implement large-scale renewable energy projects. Alberta alone is responsible for over 50% of Canada’s greenhouse gas emissions, followed closely by Saskatchewan. This article explores how Alberta and Saskatchewan are creating a greener future and doing their part to support the national net-zero emissions target. We’ll discuss if and how Ontario will be passing the renewable baton to Alberta and Saskatchewan.

How Are Alberta and Saskatchewan Overtaking Ontario?

Solar power is set to skyrocket in Alberta, while Saskatchewan will more than triple its wind power capacity.

When most people think of Alberta and Saskatchewan, oil and gas production is one of the first thoughts that come to mind. However, the reality is that the Prairies are perfect for both solar and wind energy given the abundant sunshine and wind, making them excellent for renewable energy growth. With coal-fired power generation in decline in Alberta and Saskatchewan, several new renewable energy projects are in the pipeline. The Canada Energy Regulator has issued a short-term forecast which reports that both provinces are expected to see considerable renewable energy growth. Solar power is set to skyrocket in Alberta, while Saskatchewan will more than triple its wind power capacity. Although Saskatchewan is prioritizing wind energy projects, it has the best solar resources in the country. This is because solar panels work better when in cooler conditions – so while Saskatchewan’s winters may have shorter days, they have exceptional solar power generation potential. Alberta, Canada’s largest oil-producing province, is projected to experience the fastest growth in renewable energy capacity between 2018 and 2023. New wind and solar projects will help replace coal-fired electricity, a massive contributor to fossil fuel emissions. As a result, by 2023, 26% of Alberta’s electricity capacity will come from renewable energy sources, up from 16% in 2017. The neighbouring Prairie province of Saskatchewan is set to see renewable energy capacity increase from 25% to 33% over the same period. Both provinces are already in the process of phasing out coal-fired electricity generation by rolling out projects to replace it with solar power, wind power and natural gas. In fact, between 2017 and 2023, Alberta should add almost 2,000 megawatts of renewable power capacity, while Saskatchewan will add 587 megawatts during the same time.

How Are Investors Getting Involved in Renewable Energy Growth?

Investor processes promote additional advancement in renewable energy resources while facilitating businesses to take climate action.

Infographic of people investing in green opportunities.

Corporate procurement – businesses and institutions agreeing to purchase renewable energy directly from renewable developers  – has been a considerable force behind renewable energy development in Alberta and Saskatchewan. Much of the corporate procurements are conducted through offtake deals where a buyer agrees to purchase future goods or services.

A contract for difference (CFD) ensures a set price for renewable energy produced by the developer while offering buyers protection against future energy price ambiguity. This means corporate investors can secure affordable renewable energy for years to come and for various purposes, including meeting voluntary sustainability commitments (such as net-zero targets) to emissions reduction pledges (like industrial carbon pricing).

Investor processes promote advancement in renewable energy resources while facilitating businesses to take climate action. Corporate renewables soared in popularity following several renewable energy procurements in Alberta between 2017 and 2019. They used the CFD approach, which resulted in wind and solar prices reaching record lows. The earliest projects under these contracts so far have brought in money for the government.

The Technology Innovation and Emissions Reduction Regulation

Generators in Alberta have discovered they can sell power and credits to customers over the long term and at a locked-in price, creating a predictable revenue stream.

The Alberta Technology Innovation and Emissions Reduction (TIER) regulation was established to provide market-based incentives for emissions reduction in the industrial sector and provide opportunities for developers to earn revenues by selling more than just power.

It works by setting a cap on how much carbon each industry facility can emit. If a facility emits too much carbon, it must pay a carbon levy to the government. On the other hand, if a facility reduces its carbon emissions beyond the benchmark, it can collect credits from the government, which can then be sold to other facilities. The facilities which buy the additional credits can give them to the government instead of paying a levy. For example, if the carbon levy is $30/tonne over the limit, but a facility buys carbon credits that bring the levy down to $25/tonne, the facility may opt to give the credits to the government instead.

This trading system provides for industrial facilities that emit low carbon rates with an additional revenue stream. It is especially true for wind and solar facilities, which have no emissions once in operation. So, for every kWh of energy generated, credit is created that can be sold to another industrial facility. Generators in Alberta have discovered they can sell power and credits to customers over the long term and at a locked-in price, creating a predictable revenue stream. This trading system has made renewable energy investment in the province of Alberta even more attractive.

Will Canada Continue To Increase Renewable Energy Production?

The majority of the renewable growth activity has been driven by Ontario phasing out coal-fired power plants over the past decade.

Canada’s Renewable Power report states that the country’s total installed renewable capacity should reach 71% in 2023, equivalent to 106,027 megawatts. This is up from 67% in 2018. Most of Canada’s sustainable energy is generated from an extensive network of hydropower dams in British Columbia, Manitoba and Quebec. Canada generated 426,000 gigawatt-hours of electricity from renewables in 2018, 66.2% of its total power.

However, the rapid growth rate is set to slow down from 2.9% per year between 2010 and 2017 to 1.3% per year between 2018 and 2023. The majority of the renewable growth activity was driven by Ontario phasing out coal-fired power plants over the past decade – growth which is now tapering off. Although the rest of the country is projected to slow down its renewable energy capacity, the capacity in the Canadian Prairies will continue to grow over the next couple of years.

Closing Thoughts

The Prairie Provinces of Alberta and Saskatchewan may no longer be the centre of fossil fuels for much longer. With their renewable energy projects and green incentives, they may lead Canadian renewable energy growth. In addition, investor interest in Alberta and Saskatchewan means Canada may hit its ambitious net-zero greenhouse emissions target by 2050.

Frequently Asked Questions (FAQs)

What is the primary source of energy in Alberta?

Coal is presently Alberta’s primary source of energy. Based on the current rate of consumption, deposits are estimated to last around 300 years. However, renewable energy projects are being rolled out, so they will soon play a more significant part in Alberta’s power production.

 

How much of Saskatchewan’s energy is renewable?

Saskatchewan is on the path to improving its renewable energy rate. According to 2010 Canada’s Renewable Power report, its total installed electricity capacity was 4,256 MW, of which 24.3% was renewable. In 2017 it then increased to a capacity of 4,560 MW with a 25.2% renewable rate. By 2023, it is projected that Saskatchewan’s total capacity will increase to 5,302 MW, with 32.7% of that being renewable.

 

Does Canada use non-renewable energy?

Canada has diverse and reliable renewable and non-renewable energy sources. Their primary non-renewable energy forms include coal, oil and gas. However, the country is working to include solar and wind energy sources. Canada is currently the fifth-largest energy producer in the world and the eighth largest consumer of energy.

 

What are the oil sands in Canada?

The oil sands in Canada are the world’s largest deposit of crude oil. The oil sands, otherwise known as tar sands, are made of sand, water, clay and bitumen (a type of oil). The bitumen can be extracted from the oil sands, making it a secure energy source for the future.

 

Where is the best Canadian province for investing in renewable energy?

Alberta is considered a prime location for wind and solar energy investment. Although Alberta is well known as being the home of Canada’s petroleum industry, it has also become a key province for renewable energy developers in Canada.