End of REP Won’t Stop Renewable Energy in Alberta

Cleantech Investing

The province’s Renewable Energy Program has been scrapped, but companies in the space will continue to find opportunities.

Despite challenges, renewable energy firms will continue to find opportunities in Alberta, says Evan Wilson, the Canadian Wind Energy Association’s (CanWEA) regional director for the prairies.

Wilson’s comments come after the election of Jason Kenney as premier of the province. Kenney and his United Conservative Party (UCP) plan to scrap Alberta’s Renewable Energy Program (REP).

Kenney will assume office on April 30, after winning the provincial election on April 16. He pitched the removal of the REP during his campaign.

Renewable energy to face challenges without REP

Wilson said there will be continued demand for electricity that is currently provided by coal to be replaced with alternate forms of electricity, like wind energy generators.

“Because wind facilities can be quickly deployed, because we know that there is a very low cost for generation of wind,” Wilson said. “We expect that there will be continued opportunities for the development of wind energy in the province of Alberta.”

Under the REP, renewable energy producers were invited to submit bids for providing electricity. Producers with the lowest bids were offered long-term contracts for the supply of electricity. Alberta hosted three rounds for the procurement of electricity under this program, which paved the way for “record low” pricing of renewable energy in Canada.

Wilson noted that Alberta is currently transitioning to an energy and capacity market system from an open energy market system that aids renewable energy providers. He said that these companies will be able to secure new projects provided they are able to access revenue streams or sign long-term contracts with industrial facilities in the province.

“The low cost of wind makes it a good hedge against volatile electricity prices overall,” he said. “If carbon credits can be purchased from wind facilities, it also does a lot to reduce the cost of compliance with large emitters program.”

Crucially, Wilson said that renewable energy companies will have to develop different business plans without the REP program. They will also face increased project development risks.

“The canceling of the REP means that there will no longer be a competitive auction where contracts will be awarded by the Alberta Electric System Operator (AESO),” he said. “It did result in significantly de-risking projects because you know the pricing, [and] you know the size of the market for 20 years.”

Wilson said that CanWEA is keeping an eye on whether the lack of the REP will affect Canada’s climate change targets for 2030.

The REP’s wind energy legacy

Alberta is home to 12 percent of the total wind capacity in Canada with 1,483 megawatts (MW). While REP was designed to invite projects across all sources of renewable energy, including from renewable fuels, it was wind energy projects that emerged as winners in all three rounds.

AESO procured 595 MW of capacity under the first round of the REP with the four winning projects awarded to the Canadian arm of EDP Renewables (ELI:EDP), Capital Power (TSX:CPX) and Enel (OTC Pink:ESOCF, BIT:ENEL), through its subsidiary Enel Green Power North America.

In the second round, 363 MW were procured by AESO with the winning bids belonging to EDF Renewables Canada, Capstone Infrastructure (TSX:CSE.PR.A) and Potentia Renewables, a subsidiary of Power Corporation of Canada (TSX:POW).

In round three of the procurement, 400 MW were awarded by AESO to three projects belonging to Potentia Renewables and TransAlta (TSX:TA).

At the recently concluded 2019 CanWEA Spring Forum, Innovative Research Group’s highlighted that the majority of people in Alberta support wind projects.

In a poll conducted by the firm, the majority of the respondents revealed that they support the building of wind energy projects near their communities. In total, 27 percent said they strongly support the building of such projects and 30 percent somewhat support such projects.

Comparatively, 56 percent of Canadians support such projects, with the people of British Columbia and the Atlantic provinces giving 70 percent approval to these projects.

The firm also highlighted that the UCP voter base supports low-cost options for future power generation in the province, as well as the elimination of subsidies to wind and solar power generation.

(Image courtesy: CanWEA)

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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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