Kevin Libin: Alberta’s now copying Ontario’s disastrous electricity policies. What could go wrong?
Not every province gets the chance to live through the kind of white-knuckle excitement in its electricity sector that Ontario has enjoyed over the last decade: soaring power bills, fleeing industries and endless boondoggles in provincial contracts for solar and wind energy. The dramatic climax arrived last week as David Livingston, the one-time chief of staff to Dalton McGuinty, the premier who imposed on Ontario the entire electricity fiasco, was sentenced to prison over a scheme to destroy evidence of the Liberal government’s political mischief in the power market.
But get ready, Alberta, because all the thrills and spills that inevitably follow when politicians start meddling in a boring but perfectly well-functioning electricity market in the name of pointless political symbolism are coming your way, next.
A report released Thursday by the University of Calgary’s School of Public Policy gives a sneak peek of how the Alberta script could play out. It begins once again with a “progressive” government convinced that its legacy lies in climate activism, out to redesign an electricity grid from something meant to provide affordable, reliable power into a showpiece of uncompetitive solar and wind power. And like Ontario, the Alberta NDP is determined to turn its provincial electricity grid into not just a green project that ignores economics, but an affirmative-action diversity project that sets aside certain renewable deals for producers owned by First Nations.
Alberta Premier Rachel Notley’s plan, like McGuinty’s, is to phase out all of Alberta’s cheap, abundant but terribly uncool coal-fired power (by 2030, in Alberta’s case) and force onto the grid instead large amounts of unreliable, expensive solar and wind power. Albertans have been so preoccupied fighting through a barrage of energy woes since Notley’s NDP was elected — the oil-price crash, government-imposed carbon taxes and emission caps, blocked and cancelled pipelines and the Trudeau government’s wholesale politicization of energy regulation — that they probably haven’t realized yet how vast an overhaul Notley was talking about when she began revealing this plan in 2015. But the report’s author, Brian Livingston, an engineer and lawyer with deep experience in the energy business in Alberta, runs through the shocking numbers: As of last year, Alberta’s grid had a capacity of roughly 17,000 megawatts, but the envisioned grid of 2032 will require nearly 13,000 megawatts that do not currently exist. Think of it as rebuilding 75 per cent of Alberta’s current grid in less than 15 years. Hey, what could go wrong?
Alberta Electricity System Operator is planning for so much wind power that the province will blow past Ontario, a province three times its size.
And if Ontarians thought their government was obsessed with green power, Livingston notes that the Alberta Electricity System Operator is planning for so much wind power that the province will blow past Ontario, a province three times its size, with 5,000 megawatts of wind compared to Ontario’s 4,213 megawatts, and nearly twice as much solar power, 700 megawatts, compared to Ontario’s 380 megawatts.
Learning from McGuinty’s mistake, the Alberta NDP is smart enough to ensure the extra cost of all this uneconomic power won’t show up printed in black and white on consumers’ power bills, likely hoping that spares them the political fallout that now threatens the Ontario Liberals. Rather than ratepayers shouldering the pain, it will be taxpayers — largely the same people — who pay most for any additional costs through added deficits and debts, at least for the next few years. That’s because Notley has ordered a temporary cap on household electricity rates of 6.8 cents per kilowatt hour (which is still significantly higher than the current rate). When wholesale rates rise higher than that, the government will use carbon-tax revenues to pay the difference. But businesses pay full freight from the get go.
Hiding from the real costs of using energy is a curious move for a government that gives away energy-efficient lightbulbs and other products designed to conserve while imposing carbon taxes to try suppressing energy use. It’s also a costly move. Estimates from the C. D. Howe Institute estimate it will cost Alberta taxpayers up to $50 million this year alone; a recent report from electricity consultants at EDC Associates estimates that by 2021, the extra costs moved off electric bills and onto tax bills will total $700 million. That’s when the price cap expires and costs could start showing up on power bills, instead.
Of course, Ontario has proven that it’s easy to underestimate how expensive these political experiments can get, but the Alberta redesign is already getting pricey. First, Notley accidentally stuck Alberta consumers with nearly $2 billion in extra surcharges when she rewrote carbon policies without realizing that gave producers the right to cancel unprofitable contracts. Her plan also requires the government to create a new “capacity” payment system for electricity producers, who will able to charge substantial sums even if they don’t produce a single watt. Livingston shows that many producers can earn almost as much just for offering capacity to the grid as they do for producing. Meanwhile, since solar power is perennially and embarrassingly uncompetitive economically, even with expensive wind power, the government plans to let solar providers sell electricity at premium rates to government facilities, with taxpayers covering that cost, too, just as they’ll cover the cost of overpriced wind power, which doesn’t approach the affordability of fossil fuels.
In his report, Livingston drily notes that the way Albertans think of the future of their electricity system could probably be summed up as: “Whatever we do here in Alberta, please let us not do it like they did it in Ontario.” Since Albertans pay around five cents a kilowatt hour — compared to the up to 18 cents Ontarians experienced — they have reason to fear. It won’t be exactly the way they did things in Ontario, but that doesn’t mean it still can’t go very wrong. Wherever progressive politics infests an electrical grid, people always pay for it in the end.