Power Cost Hikes
Oil companies face sharp and prolonged increases in power transmission fees, which also hit oil sands green cogeneration power export projects.
While Alberta’s oil companies scanned Paris announcements for carbon clobber, a less-publicized event happened back home that’s hitting them with up to a 30 per cent power bill hike by 2024: the province’s grid upgrade.
Two high voltage DC Calgary-to-Edmonton transmission lines are starting up, costing $3.5 billion – part of a total $13 billion program – and industrial users pick up more than half the tab. The Alberta Electric System Operator (AESO), which plans the transmission network, forecasts transmission costs will soar an eight percent per year average for the next 10 years. For big industrial users transmission fees typically account for 35 per cent of their bills.
Alberta is the fastest-growing jurisdiction for power demand in North America, installing more than 9,000 megawatts (MW) electricity generating capacity since 1998, which is set to double – and someone has to pay for it.
Two more lines will connect central Alberta to Fort McMurray – costing $3 billion. For every $1 billion invested in transmission, large industrial consumers will pay about $1.20 per MW-hour extra for their electricity.
An advantage of the new lines, planned under the previous government, is allowing southern Alberta’s solar and wind farms to transmit power to the north. In January, the current government is expected to unveil a program to encourage renewable energy. If it includes power storage incentives to overcome renewables intermittency problem, the resulting transmission fee hike plus storage combo may get industrial users off the grid.
Some oil sands operators are already ahead of the green curve. To boost efficiency they invest in cogeneration – combined heat and power (CHP) plants that simultaneously produce steam and electricity.
Imperial Oil’s Kearl mining operation’s cogeneration plant slashes 500,000 tons of CO2 it would have produced from purchased power. Not only do these plants create power self-sufficiency but they sell excess electricity to the grid. Imperial Oil will export an average of 150MW of cogeneration power when it starts up a plant by 1Q 2016 in its Cold Lake, Nabiye SAGD project. MEG Energy also sells surplus cogeneration power. More projects will roll in as transmission tariffs bite. Fort Hills Energy – Suncor Energy, Total, and Teck Resources – aims to bring its oil sands mining project’s 170MW plant on stream in 2017.
Cogeneration should boost profits and buy social license. bout 10 percent of the total energy used at Syncrude is produced from waste heat. But ironically, Alberta’s power market will punish oil sands producers for being too green – tariffs also whack those that export to the grid.
Oil firms are waiting for details from both Alberta’s government on its own climate-change framework and Canada’s international commitments from the Paris agreement, to determine the impact on their bottom lines. But the shocks of upgrading the province’s power infrastructure are already being felt.
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