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    From the Editor: Locking horns with the feds [Gas in Transition]


Canada has proposed ambitious regulations aimed at producing a net-zero power grid in the country by 2035. Some provinces – led by Alberta – are pushing back hard. [Gas in Transition, Volume 3, Issue 8]

by: Dale Lunan

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Natural Gas & LNG News, Americas, Insights, Premium, Editorial, Gas In Transition Articles, Vol 3, Issue 8, Canada

From the Editor: Locking horns with the feds [Gas in Transition]

There’s a growing understanding around the world that achieving carbon neutrality by 2050 will be tough, requiring trillions of dollars of investment and commitments from even emerging economies to pursue policies that might deprive the Global South of energy security or affordability for decades to come.

In the wake of Russia’s invasion of Ukraine and subsequent energy security concerns in the West trumping environmental concerns, the path to net-zero has gotten bumpier, and a number of developed countries are stepping back to consider their respective energy futures.

In Germany, for example, a goal to cut greenhouse gas (GHG) emissions 65% by 2030 is unlikely to be met, which also puts in jeopardy its plan to reach net-zero by 2045.

The country’s buildings and transport sector are fingered as the main culprits in failing to reach the targets. The buildings sector will be 35mn tonnes of CO2 short of its target by 2030, transport an estimated 117mn-191mn tonnes shy.

With shortfalls like that, Germany’s Federal Environment Agency (UBA) calculated only 82% of the 2045 target would be met under current policies, while implementing planned policy changes would still leave the country 14% short of the net-zero target.

Constitutional challenges

In Canada, achieving net-zero by 2050 will require draconian measures against the oil and gas industry, including the possibility of a cap on production, which has brought threats from key provinces that insist such measures would be unconstitutional.

To speed the process to carbon neutrality, Canada has decided that the best way to achieve a net-zero energy system by 2050 is to force power grids across the country – also provincial responsibilities under the Canadian constitution – to achieve carbon neutrality by 2035.

Reaching a carbon-neutral electricity system, Ottawa says, would deliver 342mn tonnes of cumulative greenhouse gas emission reductions between 2024 and 2050, and it’s prepared to offer up about C$30bn of incentives to achieve its goals, although reports are circulating that Ottawa would withhold those incentives from provinces that don’t get on board with its plan.

Ottawa says a net zero electricity system is achievable, largely because more than 80% of the country’s electricity comes from emission-free sources: hydro in Quebec, Newfoundland and Labrador, Manitoba, Yukon and BC; nuclear in Ontario and New Brunswick, along with limited wind, biomass, coal and oil. The rest of the country? Well, that’s what the government’s Clean

Electricity Regulations (CER) are designed to take care of.

“The draft regulations set a clear signal for transitioning toward a clean grid, while including flexibilities to avoid stranding large capital assets, and to enable electricity systems to continue to provide reliable, affordable power,” according to a government backgrounder released earlier this month. “One such flexibility allows for an ongoing, though limited, role for some fossil-fuel generation past 2035, to ensure it is used where it has the greatest value for maintaining affordability and reliability.”

In the Canadian lexicon, “fossil-fuel generation” largely means natural gas, which provides 60% of the generating capacity in Alberta and 37% of the power in Saskatchewan, second to coal’s 39% contribution to the energy mix.

It is these two provinces that will bear the brunt of the impact of the CER, and not surprisingly, both are pushing back against the proposed new rules, which they say impinge on the constitutionally-protected rights of provinces to control the development of their own energy systems.

“The draft federal 2035 net-zero power grid regulations are unconstitutional, irresponsible and do not align with Alberta’s emissions reduction and energy development plan that works towards a carbon-neutral power grid by 2050,” Alberta premier Danielle Smith said.

Saskatchewan premier Scott Moe said Ottawa’s new net zero power rules are unaffordable, unrealistic and unconstitutional.

“They will drive electricity rates through the roof and leave Saskatchewan with an unreliable power supply. Our government will not let the federal government do that to Saskatchewan people.”

The oil and gas industry is equally disturbed by the proposed new rules. Lisa Baiton, CEO of the Canadian Association of Petroleum Producers, which represents about 80% of Canada’s oil and gas production, said the new rules would have “significant implications” for the energy and electricity sectors.

“CAPP is concerned that the proposal, as currently drafted, will limit the ability to use natural gas as a back-up to renewable energy post-2035,” she said in a statement.

Cap on emissions intensity

Fossil fuel power plants generating more than 25 MW, the proposed regulations say, would have to meet a carbon intensity cap of 30 tonnes of CO2/GWh of electricity produced. Assuming a 95% capture rate, a newer gas plant emitting 375-400 tonnes of CO2/GWh could meet the threshold; an older plant emitting 500 tonnes or more would have little chance.

“For baseload power generation, a combined cycle natural gas turbine with CCS should be able to achieve the CER requirements, although operational issues such as maintenance and unplanned outages are always a factor that can affect overall CO2 capture rates,” says James Millar, CEO of the International CCS Knowledge Centre.

For Saskatchewan, the proposed new regulations, Crown utility SaskPower says, would require the effective rebuilding of the province’s power system – developed over more than a century – in less than 15 years.

And in Alberta, Smith said, the regulations would make investments in new natural gas generation virtually impossible, “endanger the reliability of Alberta’s power grid and cause massive increases in Albertans’ power bills.”

Alberta’s own plan is to achieve a carbon-neutral power system by 2050 through the addition of an appropriate amount of high-efficiency natural gas base load, abated using CCS technology, and strategic deployment of small modular reactors, hydrogen generation and a sustainable amount of wind, solar and other renewables to drive down electricity costs, Smith said.

“Alberta will chart its own path to ensuring we have additional reliable and affordable electricity brought onto our power grid that is available 24 hours a day, 365 days a year.”