Canada Is Replacing Coal With Natural Gas — And That’s A Huge Problem

On Friday, the federal government released its long-awaited draft regulations for the phase-out of coal-fired power in Canada. It was a huge move — the first step to fulfilling a central piece of the government’s pledge to “transition to a low-carbon economy” via the Pan-Canadian Framework.

But another draft regulation was also released on Friday, albeit with a lot less fanfare: performance standards for natural gas electricity generation. Basically, it proposes establishing maximum carbon intensities for different kinds of gas plants. Importantly, it won’t apply to facilities that already exist, converted from burning coal or those operating as “peaker” plants.

Doesn’t sound awful, right? Except one big catch: the regulation effectively gives the go-ahead for provinces transitioning away from coal — Alberta, Saskatchewan and Nova Scotia — to replace a lot of their lost generation capacity with natural gas. And that seriously undermines the country’s ability to decarbonize its electricity system anytime soon.

“Having a grid that relies on 70 per cent on natural gas by 2030 is definitely not compatible with a strong climate policy,” said Benjamin Israel, analyst at the Pembina Institute, referencing Alberta’s climate plan. “That’s a very huge concern because we’re not going to meet the federal target of 90 per cent carbon-free electricity by 2030.”

The regulation dictates that most  facilities will be allowed to emit a maximum of 420 tonnes of CO2 equivalent per gigawatt-hour. While that will prevent future construction of the dirtiest kinds of plants, it still allows for most modern operations: for example, the recently opened Enmax Shepard Energy Centre in Calgary boasts an emissions intensity of 370 tonnes per gigawatt-hour.

New Natural Gas Plants Can “Lock In” High Emissions for Decades

In 2014, Canada generated 78 per cent of its electricity from non-emitting sources: large hydroelectric dams, nuclear power plants and conventional renewables such as wind and solar. But a recent report by EnviroEconomics and Navius Research concluded that by 2030, Canada will only generate 80 per cent — a mere two per cent increase.

That’s almost entirely because of the doubling of natural gas generation that’s about to take place.

To be sure, there’s also going to be a 250 per cent increase in generation from renewables. But it won’t be enough to replace all the coal-fired power. Exacerbating the situation is the temporary loss of low-carbon electricity from the Darlington Nuclear Generating Station in Ontario, which is undergoing a decade-long refurbishment.

As a result, provinces are turning to gas — which will increase annual emissions by 19 megatonnes, greatly undercutting the savings from the coal phase-out.

There are a number of reasons this doubling down on gas is concerning to experts.

Clearly, Canada wants to cut its emissions by as much as possible in line with its Paris Agreement commitments. Switching from coal-fired power (with an average emissions intensity of over 800 tonnes of CO2 per GWh) to natural gas (as low as 370 tonnes per GWh) is a step in that direction. But wind, solar and nuclear facilities have an average operating emissions intensity of literally zero. It doesn’t take a math nerd to know that 370 is a lot more than zero!

There’s also the potential issue of gas-heavy jurisdictions exposing themselves to fluctuations in commodity prices, resulting in electricity prices spiking if gas supply falls for whatever reason. And on that note, we can’t forget where natural gas comes from in Canada — fracking currently accounts for 66 per cent of domestic production, but will rise to 80 per cent by 2035, carrying all sorts of local environmental impacts and unknowns about methane leakage with it.*

All of that will be “locked in” for 30 or 40 years if new natural gas power plants are built — resulting in a serious risk of creating stranded assets and having to compensate owners.

“As we’ve seen with coal, if you’re looking at stranding those assets that usually involves some form of compensation that ratepayers or taxpayers are footing the bill for,” said Dan Woynillowicz, policy director at Clean Energy Canada. “Are we potentially repeating mistakes of the past in terms of allowing things to proceed that if you play it out over their full operating lifetime are going to be inconsistent with other objectives that have been set and therefore require compensation?”

Modelling Shows Wind Power Can Make Up 35 Per Cent of Canada’s Power Supply

Luckily, there are lots of other options.

Economists Brett Dolter and Nicholas Rivers recently published a study in Energy Policy modelling the lowest-cost pathways to decarbonize Canada’s electricity system. It was a huge endeavour, including hourly solar irradiation data from 200 stations and hourly wind speed data from more than 2,000 locations. While conclusions varied by specific scenario, wind power ends up as the superstar on all counts, making up 30 to 35 per cent of the future decarbonized system (with hydro and nuclear contributing the remainder).

Interestingly, solar power won’t play a role at all assuming the continuation of current installation costs (which is by no means certain). Dolter explained in an interview that a key challenge with solar is “seasonal capacity factors” that sees facilities in Saskatchewan generating at 30 per cent of capacity in the summer but only 12 per cent in the winter — at the exact time when the grid needs the most electricity.

There’s also the complicating factor of “variable” versus “dispatchable” electricity, in which baseload sources like hydro, nuclear or gas need to be deployed in conjunction with solar and wind. Alternatively, innovations in energy storage and demand flexibility can be used to “balance” the system. All of this would be greatly accelerated by a higher carbon price or more rapidly tightened output-based allocation framework.

“You’re missing the opportunity to send that price signal that might also drive some competition from alternative sources of supply that don’t have carbon emissions,” Woynillowicz said.

New Transmission Lines Would Reduce Costs of Transition, Improve Reliability

Central to any decarbonized future will also be new high-voltage direct current (HVDC) transmission lines.

“Because we have so much hydro in Canada, if you can connect hydro jurisdictions and non-hydro jurisdictions and start to use the hydro to balance the wind,” Dolter said. “If you can start to link across jurisdictions, a lot more becomes possible.”

According to their model, this would include new transmission lines between Labrador and Nova Scotia, northern and southern Quebec and the “western interconnect” project through the four western provinces.

“There’s no politics in our model so it’s easy for us to assume that this could be built,” Dolter admitted. “Generally, we’re finding it’s going to cost less if we can act together. Decision makers should see even the political benefit of that, if you can make a decarbonized system for a lower cost.”

* UPDATE Feb. 20, 11:25 a.m.: This article originally stated that fracking accounts for 53 per cent of domestic gas production, but that number has actually increased to 66 per cent.

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