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Could hydroelectric power from B.C.’s Site C dam delivered via an east-west transmission grid save Alberta’s oilsands?

From a cost perspective, it makes sense to use natural gas to generate electricity for the oilsands
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B.C. Premier Christy Clark recently suggested her province could help Alberta reduce its greenhouse gas emissions by delivering hydro-generated electricity to Alberta.

Many Albertans might be surprised that British Columbia’s premier wants to help, but a rising price on carbon emissions could make such a bold venture viable.

B.C. proposes a connection between its planned $8.3 billion Site C dam on the Peace River in the province’s northeast to Alberta’s oilsands developments. Hydroelectricity could significantly reduce greenhouse gas (GHG) emissions compared with the coal-fired electricity used now in the oilsands process.

The idea of an east-west transmission grid connecting B.C. or Manitoba hydro power to Alberta and Saskatchewan is not new. Yet the idea has never had serious economic analysis in public hands. That changed on February 5 when the Canadian Energy Research Institute (CERI) published a paper analyzing the cost of delivering hydroelectricity to the oilsands.

The CERI paper looked at B.C.’s Site C, reinforcing an existing link between B.C. and Alberta, Manitoba’s Conawapa hydro facility on the Nelson River north of Lake Winnipeg and hydroelectricity from Alberta’s Slave River.

CERI calculates that the existing link between B.C. and Alberta is the most affordable of all options examined. While the Slave River option is the most affordable of the new projects, it would also have the biggest environmental impact: it would have to go through Wood Buffalo National Park and the Peace-Athabasca Delta. In the end, CERI thinks the Conawapa option is the most attractive.

Although Site C is closer, B.C.’s electricity demand growth makes it less certain as a long-term source of power for the oilsands.

A quick look at CERI’s results suggests hydro power is – at least on purely financial grounds – not worth the effort. Over the past 10 years, Albertans paid between $48 and $90 per megawatt hour (MW-h) for their coal-fired electricity. The estimated delivered cost of hydroelectric power from B.C. or Manitoba is between $81 and $162 per MW-h – 80% higher. Add in the headaches associated with building linear infrastructure in Canada, and natural gas looks far more attractive.

A natural gas cogeneration process (capturing the heat for use elsewhere) would cost an estimated $57 per MW-h. From a cost perspective, it makes sense to use natural gas to generate electricity for the oilsands.

This issue, however, is not simply a matter of costs. CERI estimates that the use of hydro power could reduce the GHG emissions of oilsands operations by 13% to 16%. This is significant, raising the potential of a major brand advantage. A quick “well-to-wheels” calculation suggests that it could make oilsands cleaner than competing crude oils. Wouldn’t that be a refreshing message for Alberta to deliver to the world?

CERI’s study suggests that current carbon pricing alone is not sufficient to fund the switch.

For every tonne of carbon dioxide not emitted, cost estimates range from $75 to $332. With a carbon price of $30 per tonne, the cheapest estimate for hydro is more than twice as much – it just doesn’t make sense.

The political climate, however, has shifted between the time CERI started its study and its publication. Alberta has announced intentions to replace coal-fired electrical plants with renewable generation, and Saskatchewan is increasing renewables, too.

By 2030, 30% of Alberta’s emissions are to come from renewables. Saskatchewan is aiming to produce half of its power from renewable sources by 2030.

If hydro replaces coal, CERI estimates that the costs of avoided emissions are far more reasonable. The costs range from minus-$3 per carbon tonne (i.e., cheaper) to $98 per carbon tonne – this makes hydro economical with a carbon price of $30 per tonne. The numbers may be better yet for expansions of existing hydro facilities in Alberta, like TransAlta’s Peace River facility. The key question that needs more analysis is how hydro compares in GHG reduction efficiency and power cost with a blended natural gas/renewable approach.

Hydro’s big advantage over solar and wind is it provides a consistent and flexible source of electricity.

This is particularly important in a province like Alberta, where a strong industrial base means that there isn’t a lot of downtime.

It is likely time for a closer look at options to bring hydro power onto Alberta’s electricity grid.

This could well mean accepting help from B.C. or Manitoba. •

Trevor McLeod is director of the Centre for Natural Resources Policy at the Canada West Foundation.