Blowing in the Wind

There’s no shortage of wind in southern Alberta. So why has our government capped wind power production?

By Shannon Phillips

People who live in southwestern Alberta learn to park their cars facing west. In a 60-kilometre-per-hour gust, opening the door becomes a substitute for a visit to the fitness centre— but a workout is better than having a car door flung clean off its hinges. From the Crowsnest Pass along highway 3 to Medicine hat, wind is not idle small talk. It is a serious part of daily life, from wardrobe choices to building materials.

But Alberta has yet to get serious about wind power. In a province that pays the bills by pumping Co2 into the atmosphere, renewable energy is a hot topic. By an accident of electricity deregulation, our province now leads Canada in wind power production. But our leadership is not going to last. Last year, the province capped wind power production at 10 per cent of the power supply.

Alberta is the only province in Canada with a cap. While we will reach 510 megawatts of installed wind capacity by the end of 2007 (5 per cent of our power supply), Manitoba, Ontario and Quebec have set targets of 15 per cent by 2015. Ontario and Quebec will surpass Alberta in installed wind capacity this year (1,280 MW and 1,405 MW respectively), with construction projects already planned as far ahead as 2011.

The wind cap made the government few friends. Allan Kettles is a wind power entrepreneur. his grandfather was one of the original homesteaders in Pincher Creek, and his 9-MW wind farm is on the original quarter section of family land. When I visit, Kettles is putting the finishing touches on 30 new turbines—a $50-million project. he first became interested in wind power when his son did a science fair project on renewable energy.

As a “little guy” in an increasingly consolidated industry, Kettles is free to speak his mind, without reverting to corporate buzzphrases and marketing bluster. It’s a freedom he appears to relish.

“You can just imagine the hue and cry if they tried to put a cap on the oil sands or gas wells,” he says over coffee at a hotel café in Pincher Creek. “They don’t take [wind] seriously. They could be doing all sorts of things… heck, even Stephen Harper and George Bush are starting to get it with wind power… but not Alberta. Why don’t we have production tax credits or production incentives? We could be leaders just like we have been in the oil and gas sector.”

What will it take for that to happen?

Albertans owe our first iconic foothills wind farm— Cowley Ridge, west of Pincher Creek—to a 1980s incentive program called the Small Power Research & Development Act, which gave small producers a guaranteed price over a set time period. With a guaranteed rate of return, it was easier to finance experimental technologies.

The Klein government cancelled the program in 1995. Wind stayed on the fringes of power production, a hippie wallflower compared to grungy coal. A regulated electricity system meant the provincial government awarded contracts to generators. until 2001, coal always won.

Deregulation—which is more accurately described as re- structuring of the electricity industry—broke coal’s choke- hold. Anyone could bid into the power pool. Corporate Calgary saw an opportunity for green branding and diversification: Suncor, Enbridge, Enmax, Canadian hydro, TransCanada and TransAlta all have interests in Alberta wind resources. In seven short years, Alberta’s wind industry went from Birkenstocks to Big Money. TransAlta Wind has even copyrighted the term “Green Energy.”

TransAlta Wind executive Jason Edworthy was one of the entrepreneurs on the ground floor of wind power’s extra- ordinary growth. Edworthy co-founded Vision Quest Electric with two small turbines in 1997. Gobbled up by TransAlta in 2002, Vision Quest has gone on to develop 145 MW of wind power in Alberta, with an additional 1,000 MW in potential developments across the country.

Delivering a speech to Lethbridge’s Southern Alberta Council on Public Affairs, Edworthy exudes the confidence of a man who’s been given corporate Alberta’s stamp of approval while losing none of his little-guy ethic or honesty. “The market responded to our product in Alberta,” he says. “In other provinces, they have to use policies and plans to do what we’ve done here.” Premier’s Stelmach’s new government has had “a change of attitude” toward renewables, Edworthy says. But, he notes, there is plenty more our province could be doing, such as uS-style production tax credits. “We should be rewarding people for producing wind power, no question.”

Over the past decade, wind power has become a reliable and mainstream source of power, says Tim Weis, a wind power expert at the Pembina Institute. “It’s now hard to dismiss it as a bunch of hippies running around trying to make a marginal technology work,” he claims. Sixty thousand MW of wind power is generated globally every year. Denmark, Spain and Germany derive more than 20 per cent of their power from wind. India and China are investing heavily in the technology. In mid-2006, Canada joined the 1,000-MW club, putting it among the top 19 producers in the world.

The cap was imposed early in 2006 by the Alberta Electricity Systems operator (AESO), putting about $4-billion worth of developments on ice. Robert Hornung, president of the Canadian Wind Energy Association, says the cap “sent a negative signal to the marketplace at a time when very big players were investing in wind power.”

In the news media, the AESO consistently emphasized wind power’s unreliability. Market services director Kevin Willerton told the Edmonton Journal that “you’re never quite sure what you’re going to get” with wind power, which “is three times more expensive than coal, because wind turbines only turn 30 per cent of the time.”

What Willerton didn’t say is that wind variability can be mitigated through forecasting. Techniques already in use throughout Europe integrate wind with the existing power system. With only a few hours’ notice, managers can make up reduced wind generation by turning to other sources. Wind power does take longer to pay for itself than coal-fired plants do, but overall it lowers consumer prices.

Tim Weis says the cap was based on legitimate concerns. Without careful planning, runaway wind power growth could be a problem. But, Weis argues, Alberta used a blunt instrument. Government leadership could have kept the industry growing.

More than 90 per cent of Alberta’s electricity comes from coal. Coal-fired plants run continuously, rather than ramping up or down in peak periods—that’s why coal and natural gas are a good mix, as gas-fired power can be dispatched quickly into the grid if there’s a surge in demand. hydro is another “dispatchable” source, making it more compatible with wind— but Alberta has limited hydro production.

Mixing coal with wind is more difficult. But Weis says it is possible to overcome these challenges. Denmark, for example, relies heavily on nuclear power, which behaves similarly to coal. “Twenty-five per cent of Denmark’s power now comes from wind,” he explains. “They’re aiming for 50 per cent. The difference is [Denmark] took the attitude back in the 1980s that yes, compatibility with nuclear is a problem, but how do we fix it. Alberta’s taken the view that if we have problems, we’ll just back away from wind.”

When the cap was imposed, the wind industry fought back. Throughout 2006, wind investors publicly assailed the province as short-sighted, anti-business, and interfering in the marketplace. In private, they successfully convinced the AESO that grid stability issues could be managed. Proponents met with Conservative leadership candidates, ministers and MLAs. As Conservative politicians began to realize that big dollars were associated with wind power, they changed their tune.

By January 2007, AESO had softened its rhetoric. Warren Frost, AESO’s vice president of systems reliability, now characterized the 900-MW cap as a “time out”—an opportunity to ensure adequate planning for a burgeoning industry. Frost added that Alberta has some of the best wind potential in the country, “but that means it has to be developed at a more orderly pace.” Frost says the AESO is now working with the industry on forecasting, and anticipates the cap will be gone by the end of 2007.

The electricity system has four different functions: generation (producing the power), transmission (delivering it via power lines), distribution (transforming it into a manageable voltage), and retail (selling it to users). In Alberta, generation and retail are deregulated, while transmission and distribution are not. Albertans can purchase power directly from a distributor (Enmax has a monopoly on distribution in Calgary, for example), or can buy power from a retailer, who pays the distributor a fee to purchase power (Direct Energy, for example, purchases power from Enmax in Calgary, then retails it to customers).

Before 2001, Alberta’s electricity industry was a three-company monopoly that carved up the province into three parts. Each company was responsible for all four functions of the electricity system in its region, and was given a contract to deliver power to consumers for set prices over set periods of time. Predictability allowed these companies to pay off the high cost of building power plants, lines and transformers. In deregulated systems, the four pillars of the electricity system are “unbundled” to allow competition—breaking up the monopolies and putting the price at the mercy of the market. The province had faith that the profit motive could do for electricity what governments could or should not. Efficiency, innovation and lower consumer prices were supposed to be the result.

Deregulation was a bonanza for wind power generators, as it gave them access to customers. But when it came to transmission, Klein’s deregulation party bequeathed an unpleasant hangover. When generation was deregulated, generating capacity was at an all-time low. of course, when supply is tight, price goes up. Alberta electricity consumers all learned that basic law of economics in early 2001 as their utility bills went through the roof. Meanwhile, the province attempted to go further by deregulating transmission lines. Instead of a government agency planning how many power lines Alberta would need and when, the government tried to leave the decisions to the market. Consumers had been paying for new transmission lines, but the new scheme forced generators to pay half that cost. Transmission deregulation had already resulted in power line shortages in the united States, but the province pressed on: its ideological fixation on privatization had reached Freudian proportions.

In 2001, wind producers told the government they needed new transmission in southwestern Alberta, where lines were already full. But the “market” did not respond. no investment in new lines came forward. A power line, explains TransAlta’s Jason Edworthy, is like a pipeline: there’s only so much water or oil one can pour into a pipeline, and electricity is no different. Facing transmission bottlenecks, the province reversed course. In 2004, Alberta reregulated power line construction and reassigned 100 per cent of the costs to consumers. The transmission deregulation experiment had ended in failure.

A new 240-kilovolt power line from Lethbridge to Pincher Creek—“for wind power expansion,” according to EUB and AESO documents—was approved in early 2004. But industrial consumers, who use 50 per cent of the province’s electricity, were not convinced they should pay for a power line in an area where oil and gas interests are minimal, nor expand infrastructure for an industry that does not count among its members.

In 2004, the Industrial Power Consumers & Co-Generators of Alberta, representing oil, gas, petrochemical and manufacturing companies, filed 20 separate documents asking for information on the new line; each document contained between five and 20 specific requests. The documents questioned wind power’s “volatility,” efficiency and generating capacity. The group’s objections delayed the project until 2006, when they finally withdrew their opposition. The $80-million power line is now scheduled for 2009. But new wind developments are on hold, as there is no space left on the existing line.

Transmission is also scarce in southeastern Alberta, where wind developers have found that the wind is persistent enough to warrant large-scale commercial wind farms. The 1960s- era infrastructure in southern Alberta was not built for the number of consumers it now serves, let alone the new crop of wind producers waiting to plug in. Robert Hornung says the Canadian Wind Energy Association is worried about lack of planning for wind expansion. “We have a concern [that the AESO is] only looking at 900 MW as the maximum amount of wind in the province,” says Hornung. “You really want to build transmission that looks beyond the 900-MW threshold.”

Wind is a significant source of revenue for rural municipalities. Pincher Creek makes about $1-million per year from wind farms, while turbine construction and maintenance accounts for about 30 permanent jobs. The Conference Board of Canada estimates new wind developments around Medicine hat will create 1,700 direct new jobs and pump $300-million into the local economy—if transmission issues are resolved and the cap is lifted.

In Quebec, wind power production targets have a manufacturing requirement: a percentage of the new turbines must be made in the province, which has prompted European manufacturing companies to set up operations there. Robert Hornung predicts that “within ten years, wind farms from all over north America will be buying turbines manufactured in Quebec.” Even so, there are no firm plans to bring turbine manufacturing to southern Alberta.

The town of Fort Macleod boasts 160 turbines on its door- step, but most wind revenues go to the county because the turbines are outside town limits. I asked town officials whether Fort Macleod has ever asked the province for assistance in attracting manufacturing companies to the area as Quebec has done. “The maintenance crews come and stay in our hotels, and that gives a boost to the town,” says economic development director Gordon MacIvor. “But no, we’ve never thought we could do manufacturing here. These turbines are part of a world-class industry. We’re just a host community.”

Rural Alberta could be reaping better returns from wind power. Wind can be a decentralized industry, with profits flowing to municipalities, First nations, individual landowners and co-operatives. Commercial wind developers have deep enough pockets to seek out the best sites and sink millions into wind farms. But community power policies allow landowners or municipalities to invest in their own turbines and sell the electricity to the grid, keeping the ownership and revenues in the community. Small community power operations don’t generate large amounts of power, but they still produce enough to return profits to the community if the right policies are in place. In Europe, and now Ontario, small generators are guaranteed a slightly higher price than their commercial competitors. This helps them secure financing for their turbines and turn a profit. Thanks to these “standard offer” contracts, one-third of Germany’s 4,000 MW of wind production is owned by co-operatives. In Denmark, 175,000 people own 80 per cent of the wind energy produced.

Ontario Community Power Coalition director Deb Don- caster says her province is experimenting with the European- style contracts. “American studies show that for every dollar spent on energy, 75 cents leaves the community… An Iowa study compared co-operative wind projects to large out-of- state wind developers. It found the community earned ten times more from co-operative power.”

Alberta has no plans for standard-offer contracts. Jason Chance, a Ministry of Energy spokesman, says Alberta is still a per-capita leader in wind production, and the province is looking at new “micro-generation” policies such as net metering for individual households. Strategies for community power or attracting manufacturing investment, says Chance, would amount to interference in the marketplace.

At the hotel Café in Pincher Creek, I ask wind farmer Allan Kettles about where things might be headed. he answers that “the new guy” (Ed Stelmach) seems to understand that rural Alberta needs better economic development strategies— “but we’ll see if he does anything about it. We’re not asking for subsidies like the oil and gas industry gets. We’d just like some positive, predictable signals that Alberta is a fine place to do business if you’re in the renewable industry. But the cap and the transmission delays do the opposite. That tells people that we aren’t ready to grow the industry. And we have no intention of getting ready.” Alberta’s wind power leadership was a happy, if accidental, consequence of electricity deregulation. other provinces are now overtaking us, using wind to spur manufacturing jobs and rural development. Alberta could harness the wind for a more sustainable rural economy—the question is whether we will watch yet another resource boom pass without a vision or a plan.

Shannon Phillips is an independent journalist based in Lethbridge. Since 2003, she has written for Edmonton’s Vue Weekly.

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