TranAlta suggests ‘dial-down’ of Alberta coal plants to meet CO2 reduction goals

TransAlta Corp. (TSX: TA) (NYSE: TAC), a major producer of coal-fired power in western Canada, reported in an Oct. 30 earnings statement that Canadian regulators have been ratcheting down on greenhouse gas emissions standards.

On June 29, the Alberta provincial government in Canada announced an increase to its provincial Specified Gas Emitters Regulation (SGER). On Jan 1, 2016, there will be an increase in the greenhouse gas (GHG) reduction obligation for large emitters from 12% to 15% of emissions, with the compliance price of the technology fund rising from C$15 per tonne to C$20 per tonne. On Jan. 1, 2017, there will be a further increase to a 20% reduction requirement and a $30 per tonne compliance price.

At the same time, the Alberta government announced an intention to develop a broader climate change program which could result in greater emissions reductions over time. That program is to be developed by the fall of 2015 through consultations with Albertans and advice from an independent expert panel. “It is not clear at this time if this broader climate change program will supplant the SGER framework or be incremental to it,” TransAlta reporrted. “The GHG offsets created by our Alberta wind facilities are expected to increase in value through 2017, as GHG emitters can use them as compliance instruments in place of contributing to the technology fund.”

On Oct. 1, TransAlta submitted a proposal to the Alberta Climate Change Advisory Panel that would see a “Dial Down” of coal-based electricity generation while the province “Dials Up” renewables-based generation. The proposal would impose a hard cap on GHG emissions from coal-fired generation. Coal plants would operate at reduced capacity starting in 2016 while maintaining baseload generation levels during the transition. At the same time, the proposal would facilitate accelerated investment in renewables generation, including hydro, wind, and solar generation.

TransAlta noted that it is already Canada’s largest wind power generator and has Alberta’s largest hydro operations. TransAlta said it is committed to working with all stakeholders, including environmental groups, communities and labor unions, to develop a solution that would enable the province to achieve its GHG reduction targets, protect consumers from high power prices, accelerate renewables generation, protect jobs, and support economic growth.

Also, on April 13, the Ontario provincial government, which has already eliminated coal-fired power in the province, announced that Ontario will be implementing a GHG cap-and-trade system in an effort to reduce emissions and fight climate change. The cap and trade system will impose a hard ceiling on the GHG emissions allowed in each sector of the economy. The details of the cap and trade system (such as specifics on a potential cap, covered sectors, or anticipated launch date) have not been determined but are to be developed through stakeholder consultations. TransAlta noted that power sales contracts at its gas-fired facilities in Ontario generally include provisions protecting it from adverse changes in laws.

On Aug. 3, U.S. President Barack Obama announced the CO2-reducing Clean Power Plan. The plan was published in final form on Oct. 23, triggering a series of lawsuits against it. The plan sets GHG emission standards for new fossil-fuel based power plants and emission limits for individual states. States will have the option of interpreting their limits in mass-based (tons) or rate-based (pounds per megawatt hour) terms. The plan is intended to achieve an overall reduction in GHG emissions of 32% from 2005 levels by 2030. It will be implemented in two stages: 2022 to 2029, and 2030 and beyond.

“The plan is not expected to have any impact on U.S. Coal, as we are exempted from such regulations based on the 2011 agreement between Washington state and TransAlta,” TransAlta noted. The U.S. Coal segment is the 1,340-MW Centralia plant in Washington state. The 2011 deal with the state calls for one of the Centralia coal units to be shut in 2020, and the other coal unit to be shut in 2025. 

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.