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Using Bitumen to Fuel Green Energy

Alberta already invests some carbon taxes in low emissions tech. But sky's the limit say industry insiders. Fifth in a series.

By Geoff Dembicki, 22 Jun 2012, TheTyee.ca

Wind farm near Pincher Creek

Road to a diversified economy: Wind farm near Pincher Creek, Alberta. Photo: Shutterstock.

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Spring gusts sent a lone plastic bag spiraling into the crisp April air over downtown Calgary. Smokers sheltered out of the wind in recesses and doorways of office towers looming high above them.

Inside one of those towers are the offices of Greengate Power. To Alberta's leading producer of wind-powered electricity, the gusts blowing beyond the window represent money. A magazine displayed in the company's seventh-floor lobby had a cowboy on its cover, standing beneath two bone-white wind turbines.

"The challenge we have in Alberta," company founder and CEO Dan Balaban told me when we met in his sparsely furnished office down the hall, "is our need to diversify the economy beyond oil and gas."

One answer to that need, the green power executive thinks, is blowing across Alberta's prairies -- some of the strongest and most reliable, if under-utilized, wind resources in the entire world. Balaban hopes Greengate can ride those gusts into becoming the country's biggest independent producer of clean electricity.

But if there's an ill wind for Alberta's oil sands in the rise of clean energy, Balaban doesn't see it. Instead, he believes, the bitumen sector will find it difficult to expand without a lush green-energy sector alongside it.

"We're starting to see a backlash against Alberta's fossil fuel industry in some pretty meaningful ways," he said. "Demonstrating we have a vibrant renewable sector will help give us the social license we need."

Balaban's not the only Albertan, or the only executive, who sees the fates of clean energy and fossil fuels in Canada as closely tied. Alberta's government shares that view: for the past three years it’s invested revenue from the province's carbon-levy on large greenhouse gas emitters into a fund which supports low emissions technology.

Results so far have been modest -- leading critics to see a convenient way for major polluters to claim climate progress when little is actually being made.

But as the scale of the climate challenge becomes clear, there are those who believe that radically experimental advances in technology are humanity's best shot at cooling the atmosphere.   



Promise

From the right vantage point in downtown Calgary, you can see past the city's western edge to where the prairie meets snow-capped Rocky Mountains. This abrupt change in elevation creates one of the most accessibly windy regions in the country, if not the world.

A nascent wind-power industry has grown slowly over the past two decades to capture the resource. Wind turbines now supply about five per cent of Alberta's electricity needs, including the energy to run Calgary’s entire light rail system.

That figure is set to grow, especially with the construction of Greengate's 300 megawatt Blackspring Ridge project. When it's done, it will be the largest wind farm in Canada.

Observers such as the Pembina Institute see huge potential as well for Alberta's hydro, biomass, geothermal, solar and cogeneration, among other low carbon energy sources.

Perhaps one day. But for now Alberta gets three-quarters of its electricity from the dirtiest fossil fuel of all, coal. Coal-fired power stations are the province's largest source of carbon emissions: 52.6 megatons in 2010 (although likely soon to be overtaken by oil sands emissions, which were 49 megatons that same year).

Standing street level in downtown Calgary, it's easy to lose sight of Greengate's seventh floor offices amidst the soaring towers that surround them, many branded by oil and gas company logos.  So too is Alberta's fledgling clean energy industry dwarfed by its fossil fuel counterpart.

Yet a provincial initiative now entering its third year of activity claims to be slowly turning that imbalance into a boon for global warming solutions. The Climate Change and Emissions Management Corporation (CCEMC) was created in 2007, after Alberta introduced North America's first market price on industrial greenhouse gas emissions.

It was a selective price, complexly applied. Each year, the province's largest emitters, collectively responsible for half of Alberta's carbon footprint, were expected to meet a climate reductions target set by the government.

This target wasn't based on slashing their overall emissions, but on a 12 per cent cut to the emissions intensity of their operations -- the carbon released, say, to produce one barrel of oil. (How that target actually applies to each emitter is based on a complex time frame that varies by operation.)

Failing to meet their target by year's end meant these emitters had to pay a penalty on whatever emissions exceeded it. At $15 per tonne of CO2, that penalty was considered by some to be little more than a limp-wristed slap.

Nevertheless, it now raises about $74 million each year for the province. That revenue goes directly to the arms-length CCEMC, whose mandate is to invest it in promising low-emissions technology.

"The vision I think overall, is not to abandon traditional forms of energy development," CCEMC executive director Kirk Andries told The Tyee Solutions Society. "But rather, as we draw down on those resources, be thinking about building up renewable forms of energy."

There's an elegant symmetry to the idea at odds with a few hard economic facts. Since its inception in 2010, the CCEMC has approved 32 low emissions projects worth $167 million in all. Last year alone, total oil sands investment was about $15 billion.  

Still, the Crown corporation claims that each dollar it invests is leveraged three to four times, bringing CCEMC's real impact closer to $830 million. It also argues that many technologies it funds wouldn't have been feasible without its support.   

One example it points to is a $2.65 million investment in Coastal Hydropower Corp.'s Carseland project, a plan to generate low-impact hydropower from the Bow River with "fish-friendly" underwater turbines.

"CCEMC funding is essential to the Carseland project," Coastal founder and president Neil Anderson says in the technology fund's annual report.

Or there's the $10 million the CCEMC has pledged to Biorefinex Canada Inc. That will help fund a demonstration facility outside Lacombe, Alberta, which turns organic animal waste (think carcasses and cattle feces) into renewable electricity and high-grade fertilizer.  

Small technology start-ups like those aren't the only companies benefiting from CCEMC support. Some of Alberta's major greenhouse gas emitters have also applied for, and received, funding.

Suncor, for instance, which made $1.46 billion in net income in the first quarter of 2012, is using a $3.3 million CCEMC investment to research new ways of making oil sands operations more energy (and hence, carbon) efficient. Encana, Cenovus, ConocoPhillips and Nova Chemicals have also received financial backing.

Andries was unapologetic about directing public money to some of Canada's most profitable, and most polluting, companies.

"We're here to pick the best projects possible," he said. "From my perspective, it doesn't matter what size of company it is. What matters is, how many tonnes of GHG are you going to reduce?"

Waiting for results

That's a question critics have asked more broadly of the CCEMC itself. The corporation claimed in its most recent annual report that projects it has supported to date will reduce Alberta's carbon footprint by 8 megatons by 2020, or about one sixth of the province's medium-term reduction target.

Pembina Institute calculations suggest that's optimistic. The non-partisan research body thinks CCEMC's venture will cut Alberta's emissions just one megaton by 2020, a fraction of the corporation’s estimate.

That perspective may be too short. Some CCEMC investments, Pembina acknowledged recently, "hold the promise of paving the way for greater emission reductions in the longer term.” Ultimately, it judged, "it is too soon to tell how effective" the technology fund will really be.

That hasn't stopped some oil sands producers from arguing that paying Alberta's $15 carbon levy, and thereby investing in the fund, is equivalent to reducing greenhouse gas emissions at their own operations.

"This strategy," Nexen claimed in documents it filed to the 2010 Carbon Disclosure Project, "is fiscally prudent and meets environmental objectives. A tonne of carbon [reduced] from any eligible/verifiable source has the same net environmental effect."

Which is technically true. But it's not the reality -- not yet. Paying the government's $15-a-tonee carbon levy is an investment in low-carbon technology, but it won't result in actual carbon reductions for years to come, or possibly ever.

Overall, Pembina has concluded that CCEMC's technology fund is, "inherently a mechanism that defers emission reductions until later."

Depending on your perspective that's either a cynical way for government and industry to claim progress while deferring harder choices; or, it's a tantalizing wager on new technologies, that while untested and therefore risky, could pay off hugely in the future.

The snowball effect

That gamble has its proponents. Many climate thought leaders have expressed doubt that for all that binding targets, public exhortations, industrial regulations or even carbon pricing can accomplish, it won't be enough to solve our global warming crisis. The missing factor, those analysts say, is transformative technology, an overhaul of energy systems on par with the microchip revolution.  

The best way to accomplish such a techno-revolution, McGill University economist Christopher Green and co-author Isabel Galiana argued in a 2009 paper for California's Breakthrough Institute (the group which has led much of this thinking), is robust support at the centre of any climate strategy for research and development of new technologies.

They see a modest carbon tax, rising slowly over time, playing an important ancillary role as a reliable source of income to fund risky new low-carbon projects: almost exactly (minus the rising carbon tax) Alberta's plan.    

Green acknowledged that Alberta’s approach, "might not do a lot on the emissions front" right now. "But when it starts paying off," he told The Tyee Solutions Society, "it could be like a snowball coming down a hill with wet snow, and having a tremendous effect in transforming the world's energy picture."

Leaned back in his office chair, Balaban, the Greengate Power CEO, is focused on a less dramatic transformation: proving to Canada's oil and gas capital that clean energy can deliver high economic performance alongside its environmental benefits.

He listed several ways Alberta could accelerate the business case for renewables: implement a clean energy standard, favour natural gas over coal, raise the province's carbon price. Yet even Balaban seems reticent about imagining a near future without hydrocarbons at all.

"I believe it's in all of Canada's interest that we have a healthy fossil fuel sector in Alberta," he said. "Increasingly this is a driver of the national economy."

Maybe Balaban is just a realist. Or perhaps this is how you build consensus for clean energy in a province that emits more than a third of Canada's greenhouse gases, by presenting your low-carbon sector as less of a rival to fossil hydrocarbons and more as an ally, whose vitality is in their best interest.

"To continue developing our fossil fuel-based resources we need to demonstrate that we're environmentally responsible," Balaban said of Alberta. Then comes the pitch: "We have the opportunity to exploit some of best renewable energy resources in the world."

The one, he believes, can clearly help the other.

On Monday, the "Greening the Oil Sands" series picks up with a look at whether "clean, green oil" is an oxymoron. Find the entire series to date here.  [Tyee]

Read more: Energy, Environment

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