The Morning Brief – 10.15.20

By Bruce Carson


The Need for all Energy Molecules: Renewable and Non-Renewable

Alberta’s move to diversify its energy mix

Could the Canada Infrastructure Bank actively help promote this diversification in Alberta?

The impact of the International Energy Agency’s (IEA) October World Energy Outlook

It was just a week ago when the Morning Brief looked at the oil and gas sector in the context of the Speech from the Throne (SFT) and the inevitable tension the omission of this sector from the SFT caused in Alberta.

The Brief went from there to discuss the federal government’s effort to use the Canada Infrastructure Bank as the means by which it moves to fulfil two SFT promises necessary to meet its 2030 target for emission reduction and set out a path to net zero emissions by 2050. While the SFT called for these matters to be embedded in legislation; that has yet to occur.

The $10 billion allotted to the bank for this endeavour is to be divided as follows: $2 billion for large scale building retrofits to increase energy efficiency; $1.5 billion for agricultural irrigation projects to help increase production; $1.5 billion to accelerate the adoption of zero emission buses and charging infrastructure; $500 million for development and early construction; $2.5 billion to support renewable energy generation and storage; and $2 billion to connect 750,000 homes and small businesses to the internet.

At about the same time that the bank funding allocation was being announced, the Alberta government was embarking on its own journey to diversify Alberta’s economy, its energy mix while decreasing emissions.

It started with an announcement last week concerning hydrogen and plastics. The Alberta economy would diversify by employing plastic recycling and a new natural gas strategy, focussing on hydrogen. The plan is to establish Alberta as a ‘Centre of Excellence’ for plastics diversion and recycling by 2030. There is also a plan to export hydrogen and hydrogen derived products across the world by 2040. Alberta also wants to see 2 or 3 major LNG projects develop for export to Asia and Europe. There are plans for Alberta to become one of the world’s largest petrochemical producers.

Alberta’s view is that the demand for hydrogen will increase in a carbon constrained world because it is a clean burning fuel. It would be used for transportation, heating homes and electricity generation.

In order to develop a significant amount of hydrogen, carbon capture and storage must be in place by 2030. Blue hydrogen produced from natural gas relies on carbon capture technology to store carbon.

Chris Varcoe writing in the Calgary Herald quotes Nancy Southern of ATCO as saying that the challenge is to crack the carbon capture nut at a commercial level and “we are very, very close.”

Peter Tertzakian is also quoted saying that the potential for hydrogen is huge in Alberta, but capital investment required for it to grow is also huge. He said “the next step is really to understand the impediments to getting it done and then overcoming them one by one.”

In addition to hydrogen, LNG, petrochemicals and recycling Alberta will be introducing regulations this fall to govern the development of geothermal energy. Alberta’s Energy Minister Sonya Savage stated “we see a huge future for geothermal” as it will get people back to work and contribute to lowering emissions.

Add to this mix, Alberta’s commitment to work with the provinces of Saskatchewan, New Brunswick and Ontario on the development of small modular nuclear reactors and it could be said that Alberta is moving to diversify its economy, its energy mix and at the same time lower emissions.

These announcements from Alberta dealing with its energy and economic future ran smack into the announcement last Friday by the Canada Infrastructure Bank of $407 million in loan support for a massive rebuild of the irrigation system in Southern Alberta.

Alberta will contribute $244.5 million and the irrigation districts will contribute a total of $163 million. These investments are designed to create jobs, modernize equipment and boost agricultural production.

Veteran Calgary Herald columnist Don Braid writing about this announcement made it clear that the federal government would be glad to help Alberta with everything but oil and gas. Braid does provide some useful quotes from bank board chair Michael Sabia delivered during the announcement.

On hydrogen development in Alberta Sabia said “we are very interested in that and very much expect to be a participant in that. The government (Alberta) has raised some very interesting opportunities for a whole set of hydrogen based industries and making Alberta a leader in carbon capture.”

He went on to say “we’re interested in green technology and to the extent we can invest in this, along with the private sector in Alberta and in partnership with the Government of Alberta , that will help build a resilient and diversified economy for Alberta in the future, then we are very interested in having these conversations. Alberta is a very, very important part of Canada. We want to be part of it. “

Premier Kenney’s response was “that answer made my day.”

Braid concluded that Kenney “will take what he can get for the province today and hope he’s dealing with Prime Minister O’Toole tomorrow.”

If Alberta continues down the path of energy diversification, and the federal government is looking for ways to get to net zero emissions by 2050, then it only makes sense that the two jurisdictions work together towards, what seems to be, common goals.

Adding impetus to this would be the IEA’s October issue of its World Energy Outlook where the head of the IEA Fatih Birol is quoted as saying “the era of global oil demand growth will come to an end in the next decade.”

The IEA set out two scenarios for post COVID-19 consumption; global oil consumption will return to pre-crisis levels in 2023, provided COVID-19 is brought under control in 2021 and the other scenario contemplates slower recovery from the pandemic and there’s lasting economic damage. In the latter scenario consumption recovers only in the latter part of the 2020s.

The IEA sees global oil demand reaching a plateau around 2030.

If the IEA is right, it only makes sense for Alberta to keep working to reduce emissions from fossil fuels while at the same time develop emission free energy sources in conjunction with the federal government, funded through the infrastructure bank.

The idea of a détente between Kenney and Trudeau on energy may sound far-fetched but this may be one of those times when interests, once divergent, merge for mutual benefit.

As Yedlin and Tertzakian have written previously “we need all energy molecules-renewable and non-renewable.”

To Come

October 16
  • Monthly survey of manufacturing for August to be released
October 19
  • Bank of Canada’s Business Outlook Survey released
  • Wholesale trade numbers for August to be released
October 21
  • CPI numbers for September to be released
  • Retail trade numbers for August to be released
October 22
  • Last presidential debate

The Morning Brief will return on Wednesday, October 21, and publish issues for the remainder of the week, so as to include commentary on the presidential debate.

– BC