Maxim Power says it’s positioned well to comply with new Alberta CO2 mandates

Maxim Power Corp. said Nov. 23 that it is moving forward on compliance with the government of Alberta’s Climate Leadership Plan, which among other things calls for the phasing out pf coal-fired electricity generation by 2030 and encourages more renewable energy.

MAXIM anticipates that it will be permitted to run its coal-fired Milner Unit 1 (M1) at full capacity to Dec. 31, 2019, and at stand-by capacity thereafter until Dec. 31, 2029, consistent with the current federal regulations. The government proposes that starting in 2018, coal-fired generators will pay C$30 per tonne of CO2 on emissions above what Alberta’s cleanest natural gas-fired plant would emit to generate the same amount of electricity or an estimated C$18 per MWh for Alberta’s coal-fired generation fleet. MAXIM anticipates that any resulting production cost increases will either be recovered in the market or, in the case of M1, incent a higher use of natural gas versus coal.

By 2030, the Canadian province targets to have renewable sources such as wind and solar account for up to 30% of Alberta’s total operating generating capacity and has indicated that it will auction renewable credits to provide market signals for the development of renewables.

MAXIM believes it is well positioned for this shift, having permits in hand to own and operate 946 MW of natural gas-fired generation projects in Alberta.

  • The Milner Expansion Projects (M2 and M3) would increase the installed generation capacity at the existing M1 site by 606 MW to 756 MW. M3 adds 86 MW through the integration of natural gas-fired generation operating in combined cycle mode at this site, and provides for an orderly transition from coal to natural gas. M2 is permitted as a 520-MW combined cycle natural gas-fired facility.
  • The Deerland Peaking Station (D1), MAXIM’s project to develop a natural gas-fired peaking facility, represents a further 190 MW and is fully permitted.
  • MAXIM also has a wind development project, Buffalo Atlee (B1), that has the potential for development of over 200 MW of capacity.

The provincial plan appears to consider the need for system reliability, electricity price stability, and not stranding market participants’ capital, MAXIM said. In particular, a special negotiation mechanism is being created to address industry concerns about stranded capital. MAXIM said it will continue to be an active participant in these negotiations to advocate the rights and requirements of its stakeholders.

Based in Calgary, Alberta, MAXIM is an independent power producer, which acquires or develops, owns and operates innovative and environmentally responsible power and power related projects. MAXIM currently owns and operates 39 power plants in Alberta, the United States and France, having 778 MW of electric generating capacity. MAXIM trades on the TSX under the symbol “MXG”.

Alberta says this plan will maintain electric system reliability

Alberta’s Climate Leadership Plan, announced Nov. 22, accelerates the transition from coal to renewable electricity sources, puts a price on carbon pollution, and sets emissions limits for the oil sands industry, a backbone of the provincial economy. Other measures include broad programs to improve energy efficiency, support green technological innovations, reduce methane, and provides supports to ensure that families and small businesses are protected.

“Responding to climate change is about doing what’s right for future generations of Albertans – protecting our jobs, health and the environment. It will help us access new markets for our energy products, and diversify our economy with renewable energy and energy efficiency technology. Alberta is showing leadership on one of the world’s biggest problems, and doing our part,” said Rachel Notley, Alberta’s Premier.

“The announcement is a significant step forward for Alberta. We appreciate the strong leadership demonstrated by Premier Notley and her government. The framework announced will allow ongoing innovation and technology investment in the oil and natural gas sector. In this way, we will do our part to address climate change while protecting jobs and industry competitiveness in Alberta,” said Murray Edwards, Chair, Canadian Natural Resources Ltd.

Alberta said it will phase out all pollution created by burning coal and transition to more renewable energy and natural gas generation by 2030. Three principles will shape the coal phase-out: maintaining reliability; providing reasonable stability in prices to consumers and business; and, ensuring that capital is not unnecessarily stranded. Two-thirds of coal-generated electricity will be replaced by renewables – primarily wind power – while natural gas generation will continue to provide firm baseload reliability. Renewable energy sources will comprise up to 30% of Alberta’s electricity production by 2030.

Alberta will phase in carbon pricing in two steps:

  • C$20/tonne economy-wide in January 2017
  • C$30/tonne economy-wide in January 2018

An overall oil sands emission limit of 100 megatonnes will be set, with provisions for new upgrading and co-generation.

In collaboration with industry, environmental organizations, and affected First Nations, Alberta will implement a methane reduction strategy to reduce emissions by 45% from 2014 levels by 2025.

Said a Nov. 20 report to Notley on which the carbon plan is based: “Alberta generates much of its electricity from coal. In fact, Alberta currently has the highest rate of coal-fired electricity of any province. Though a cheap source of power, coal-fired electricity contributes not only to greenhouse gas emissions, but also affects air quality and directly impacts the health of Albertans.”

TransAlta says new policy has positive aspects, but needs further review

TransAlta Corp. (TSX: TA) (NYSE: TAC), the operator of several coal-fired power plants in Alberta, said Nov. 22 that it is carefully reviewing the climate change policy to assess how it will impact TransAlta’s business and strategy moving forward.

“What’s critically important is that the Premier has committed to an orderly transition that ensures system reliability and price stability for our customers, given that it is now certain that coal-fired generation will be phased out by 2030, and that the province’s policies will not unnecessarily strand capital,” said TransAlta President and CEO Dawn Farrell. “This is a positive, timely and important step forward. We are looking forward to working with the government-appointed negotiator to achieve these objectives over the next few months to ensure a fair outcome for our stakeholders.”

System reliability and investment certainty are critical to keeping Alberta’s energy prices affordable for consumers, globally competitive for businesses, and attracting the billions of dollars in new growth capital needed to build new renewables capacity, TransAlta noted.

“This is an important announcement for the company and our shareholders. In the past six months we’ve seen a significant devaluation of our stock price due to the uncertainty of the future value of our coal assets in Alberta. The province’s 15-year transition, and the commitment to appoint a negotiator, confirms that Alberta does not intend to strand capital,” said TransAlta Chief Financial Officer Donald Tremblay.

As part of TransAlta’s Clean Power strategy, the company is currently analyzing a number of growth opportunities in renewables, including hydro, solar, wind and gas.

TransAlta is a power generation and wholesale marketing company focused on creating long-term shareholder value. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia.

Capital Power supports provincial plan

Capital Power (TSX: CPX) President and CEO Brian Vaasjo said Nov. 23 about the new policy: “Over the past several months, Capital Power was fully engaged with the climate change policy review being conducted by the Government of Alberta. Capital Power is committed to helping Alberta and Canada implement meaningful action on climate change by accelerating the phase-out of coal and through growth in renewables.”

Vaasjo said that Capital Power’s proposals to government during the consultation process included an accelerated closure of Alberta’s coal-fired power plants, with reasonable compensation to investors, and a transitional renewable approach tied to coal plant retirements that would otherwise maintain Alberta’s competitive electricity market. While the government’s retirement schedule for coal generation is substantially more aggressive than that proposed by Capital Power, he said that Capital Power is encouraged that the Climate Leadership Plan incorporates policy approaches that are consistent with his company’s recommendations.

The government has signalled that an independent facilitator and the system operator will work with owners of coal-fired power generation to develop a transition plan, Vaasjo said.

“Over the past decade, Capital Power has been the largest investor in Alberta power generation,” Vaasjo added. “We support government policies that treat investors fairly, and maintain an attractive climate for investment in new power generation. We are cautiously optimistic that with the effective implementation of the new policy framework, Alberta can continue to be an attractive market for investors in power generation.”

Capital Power is well positioned to compete to supply both new merchant natural gas generation, and new renewables, he said. Near-term opportunities include the Genesee 4 project, a fully-permitted combined cycle natural gas-fired facility proposed to be developed through a joint venture with ENMAX. Capital Power has also applied to connect a proposed 150-MW wind farm to the grid, near its existing Halkirk Wind facility.

Capital Power owns more than 3,200 MW of power generation capacity at 17 facilities across North America. In its core market of Alberta, Capital Power owns 2,366 MW of power generation capacity through ownership interests in nine facilities. On a capacity basis, 58% of the company’s Alberta power generation is from coal-fired units, 36% from natural gas-fired units, and 6% from wind power.

Capital Power owns an additional 371 MW of Alberta coal-fired power capacity through a power purchase arrangement that entitles the company to a portion of the output from Units 5 and 6 of the Sundance power plant until 2020.

Capital Power noted that all but two of Alberta’s coal-fired facilities use subcritical generation technology. Capital Power owns 50% of Genesee 3 and Keephills 3, which use supercritical combustion technology that delivers greater fuel efficiency and lower emissions. Opened in 2005 and 2011, they are among the cleanest coal-fired units in North America. Under federal regulations, the units would have operated until 2055 and 2061.

Greenhouse gas (GHG) emissions at Genesee 3 and Keephills 3 are up to 20% lower than at other Alberta coal units, and the remaining GHG emissions are offset to the level of natural gas combined cycle unit. In addition, Genesee 3 and Keephills 3 are equipped with pollution control technologies that reduce air emissions such as NOx and SO2 by 50%-70% compared to older facilities, and capture more than 99.8% of particulate emissions.

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.