Renewable energy part of earning social licence for Alberta oil sands?

Renewable energy – primarily wind – already cost-competitive without subsidies in Alberta, says BluEarth CEO

Calgary entrepreneur Kent Brown has been named Clean Energy Canada’s “Innovator of the Year” for 2015. Not bad for a guy who manages renewable energy assets whose value is expected to reach $650 million next year.

Kent Brown, CEO of BluEarth Renewables of Calgary.

And who expects Calgary – Houston of the North – to be home to one of Canada’s largest renewable energy companies?

But Canadians often forget – or, more likely, just don’t know – that Calgary is about more than just oil and gas. A number of major energy companies – including TransCanada and Enbridge – already have significant renewable energy portfolios.

And Brown’s company, BluEarth Renewables Inc., is financed by Arc Financial, a Calgary-based private equity firm known for its investments in oil and gas exploration and production. The other major investor is the Ontario Teacher’s Pension Plan, no slouch in the Canadian financial industry, either.

That kind of financial clout makes BluEarth a player in Canada’s emerging but fast-growing renewable energy sector.

Perhaps surprisingly, Brown doesn’t disparage fossil fuels. He understands energy is in transition – renewables are challenging coal and petroleum, but the new technology is young and many decades from displacing hydrocarbons as the powerhouse of the global economy. As pressure ramps up on Canada – and especially on Alberta, home of the oil sands – he thinks renewables are one way to bring down the oil and gas industry’s carbon intensity.

“If you look at Alberta is in terms of greenhouse gas emissions, obviously the oil sands and conventional oil and gas are large emitters. But coal-fired electricity generation is an equally large emitter,” Brown said. ” [Ramping up renewables more quickly] helps show the world that we are committed to meaningful greenhouse gas emissions. Which, I think, in turn will help with getting our social license to operate on the oil and gas side.”

Brown says renewables (mostly wind power) already makes up eight per cent of Alberta electricity generation. If that number could be boosted to 20 per cent or more, coal could be phased out and more renewable energy could be used by the oil sands, bringing down the carbon intensity of its crude oil.

To make that happen, renewables must be price competitive.

Renewables are much lower cost than most people believe, says Brown. Wind prices are comparable to the low end of new natural gas or coal-fired generation, about $70 per MWH (existing coal-fired generation that has already been paid for is $30 to $50 per MWH, but Brown says those plants are likely to be phased out by the federal government in the near future).

Saskatchewan’s latest competitive call for power actually produced bids from wind power generation under $60 per MWH.

The usual knock against wind is that it needs subsidies and is too intermittent to rely on. Both those myths need to be laid to rest, says Brown.

Wind generation technology enjoyed a major leap forward over the past five years. Turbines are now more efficient, reliable, and quieter.

“Towers are higher, so you’re getting up to more wind. And the diameter of the blades are longer, so the windswept diameter is bigger,” said Brown.

“Five or six years ago I would’ve said, ‘Technology’s pretty good now. We’re going to see incremental gains.’ And then there was a landmark change. I think we’re going to see incremental change from now on, but it may be more than that.”

The biggest impediment to adopting more renewable energy is long-term Power Purchase Agreements, says Brown. PPAs allow renewable generators like BluEarth to obtain long-term debt financing at rates which keep the cost of capital at acceptable levels. The de-regulated market in Alberta works against utilities entering into 20-year agreements .

“Power Purchase Agreements generally don’t exist in the market place today. They’re very difficult to come by,” he said. “Other provinces are regulated and have competitive procurement processes to buy power.”

Brown hastens to add that he isn’t advocating Alberta return to a regulated system.

“I think generally most people are happy with the market the way it is. So, you want to be careful about messing with that too much,” he said.

But there is still plenty of room for good, well thought out public policy.

“One of the ideas out there is a retailer-based emission intensity standard,” he said. “At the retail level, the government mandates an emissions intensity. Retailers can buy whatever electricity they need for their customers, but it has to have a certain emission intensity, just like the large emitters program [The Specified Gas Emitters Program] in Alberta.”

Alberta is a great place to build wind turbines (lots of wind) and solar farms (lots of sunlight), and Brown thinks the province should move quickly to take exploit its competitive advantage. Especially since doing so could bolster the oil sands case on the international stage, making renewables a win-win for the Canadian energy industry as a whole.

It’s that kind of thinking that earned Brown his Innovator of the Year award. Now, if he can just get the Alberta government, oil sands producers, provincial electricity retailers, and customers on board, we’d nominate him for Innovator of the Century.


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