Alberta’s electricity market is undergoing extensive changes in order to implement certain elements of the province’s Climate Leadership Plan, announced on November 22, 2015.1 The main components of that plan are:

  • an accelerated phase-out of coal-fired power generation by 2030;
  • an economy-wide carbon dioxide tax;
  • an absolute cap on oil sands emissions; and
  • a methane gas emissions reduction plan.2

The province has repeatedly referred to the plan as a selling point for the approval of oil pipelines to tidewater.3

Approximately 39 per cent of Alberta’s installed electricity generation capacity is from coal and achieving the phase-out of all coal-fired power generation by 2030 is an ambitious goal. The target has nevertheless been legislated in the Renewable Electricity Act,4 which was tabled in November 2016.

In their article on “Alberta’s Evolving Electricity Market – An Update on Recent Changes and Developments”, Kimberly Howard and Gordon Nettleton review the restructuring of the market, from a fully deregulated regime to a hybrid system that incorporates capacity payment mechanisms.

Electricity market reform is also being initiated in Ontario by the Independent Electricity System Operator (IESO), the first significant overhaul of that market since it was first implemented 15 years ago. The scope of the planned market reform is reviewed by Johannes Pfeifenberger et al. in their article “Reforming Ontario’s Wholesale Electricity Market: The Costs and Benefits.” The article is based on work undertaken by the Brattle Group for the IESO. The analysis concluded that the reform initiative “can mitigate or eliminate numerous existing inefficiencies associated with the current market design and provide substantial net benefits to the province.”

In their article titled “Do Manufacturing Firms Relocate in Response to Rising Electric Rates?”, Ahmad Faruqui and Sanem Sergici conclude that industrial relocation clearly is not just driven by the price of electricity and that many factors go into the relocation decision, including other costs of doing business such as labor costs and taxes, access to raw materials and access to markets. The conclusions are based on variations in industrial rates across the U.S. but the authors “expect similar conclusions would flow from a review of Canadian data.” ERQ hopes that this piece will prompt the generation of data and some analysis on this side of the border.

Oil and gas exploration offshore from British Columbia has had a somewhat checkered history, including moratoriums on drilling and on tanker traffic off the northern coast. The status of these moratoriums has sometimes been unclear. As this issue of ERQ goes to press, however, the federal government has introduced legislation to formalize the moratorium on tanker traffic. The history of the moratorium and the proposed legislation are reviewed by David Bursey and Charlotte Teal in their article “Proposed Oil Tanker Moratorium Act – a brief look at the history of the moratorium”. The authors conclude that restricting options for export will add cost and complication to the developing Canada’s oil resources for export. The long-standing debate will continue as the legislation proceeds through Parliament.

Mechanisms for pricing carbon dioxide emissions are of course all directed at reducing those emissions. However, the effectiveness of such mechanisms requires further empirical study, which in turn suggests transparency in their application would be useful. In a recent decision, the Ontario Energy Board declined to require the inclusion of cap and trade charges as a separate line item in customer bills, notwithstanding that prospective usefulness, and notwithstanding widespread support for such transparency. Moin Yahya concludes in “‘Cap and Trade’ and Price Transparency: a Comment on the OEB’s Decision in EB-2015-0363” that the Board missed a valuable opportunity to contribute to the science surrounding customer behavior with respect to emissions.

Finally in this issue of ERQ, one of your editors, Rowland Harrison, reviews DYSFUNCTION: Canada after Keystone XL, by Dennis McConaghy, a retired senior executive of TransCanada Corp. The review suggests that Dysfunction is an important contribution to the current debate about the review process for pipelines and should be read widely by politicians, policy-makers, regulators, industry and concerned citizens.

  1. Government of Alberta, Climate Leadership Plan (Edmonton: 22 November 2015), online: <http://www.alberta.ca/climate-leadership-plan.cfm>.
  2. Ernest & Young LLP, “Alberta climate change leadership plan announcement” (Calgary: 2015), online: <http://www.ey.com/Publication/vwLUAssets/Alberta-climate-change-leadership-plan-announcement/$FILE/Alberta-climate-change-leadership-plan-announcement.pdf>.
  3. See, for example, Rick McConnell, “Alberta’s climate-change plan selling point for pipelines, Rachel Notley says” CBC News (19 July 2016), online: <http://www.cbc.ca/news/canada/edmonton/alberta-s-climate-change-plan-selling-point-for-pipelines-rachel-notley-says-1.3686055>.
  4. Bill 27, Renewable Electricity Act, 2nd Sess, 29th Leg, Alberta, 2016.

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