Fraser Forum

Pembina’s renewable revolution requires a rethink

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Recently, Binnu Jeyakumar, director of the Pembina Institute’s electricity program, published an article in the Edmonton Journal, essentially claiming that the renewable power revolution in Alberta is nigh, and exhorting everyone to get on the bandwagon.

Jeyakumar’s declaration of victory may be premature, however, or based on incorrect assumptions.

For example, she states that the cost of renewable and natural gas generation has declined so much that “Coal power can no longer compete with renewables and natural gas,” resulting in early coal-power plant retirements, particularly in North America. This is not true. At the time of writing, natural gas cost US$2.83 per million British Thermal units (BTU) according to the U.S Energy Information Administration (EIA) while coal cost US$1.6 per million BTU.

Meanwhile, a report from the U.S.-based Institute for Energy Research used data from the EIA and the U.S. Department of Energy to evaluate the true cost of wind power generation (including the cost of necessary coal or natural gas backup power) as being US$43.8 per million BTU if the backup is natural gas compared to US$55.7 per million BTU if using coal power as backup. This doesn’t include added costs of government subsidies to wind power generation, which are substantial.

Jeyakumar then proclaims that the health savings from preventing coal power emissions far exceed the costs of retiring coal plants. She does not specify which health savings she’s talking about, but as CO2 is not a human toxin, I’m assuming she means conventional air pollution. But for health savings to be substantial, emission reductions would also have to be substantial. Do coal phase-outs significantly reduce conventional air pollution?

Fraser institute researcher Elmira Aliakbari and senior fellow Ross McKitrick assessed the pollution reductions stemming from Ontario’s expensive phase-out of coal power generation. What they found was that there were indeed reductions in some pollutants such as PM2.5 (though they were generally found to be not statistically significant) while other pollution reductions were small. Emissions of ozone-forming pollutants were reduced by the coal phase-out, but much of this was offset by increased emissions due to the substitution of natural gas as a fuel source.

In an earlier study, McKitrick found that the emission reductions could have been achieved at lower cost (10 times lower) by simply installing then state-of-the-art pollution control systems on existing coal power plants. Jeyakumar fails to mention that the same improvements could be made to coal-power generation in Alberta, while achieving the same emission reductions.

If in fact, wind and solar power are “cheaper” than conventional generation, then there would be no need for subsidies, government power-generation mandates, government choice of power generation technology, or other energy market interventions. If renewables (with all backup/transmission) costs are truly lower than coal, nuclear or natural gas generation, renewables will naturally replace conventional power generation by the simple power of economics—and not requiring the kind of government interventions that have buoyed the growth of wind and solar power in recent years.

This is (and has) happened with natural gas displacing coal in the United States as a low cost fuel source, but there’s little evidence that the same replacement will happen with renewables such as wind and solar power.


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