February 4, 2020 - Canada is likely to add 7.7 GW of wind capacity and retire 5 GW of coal-fired capacity by 2028, mainly in the western provinces of Alberta and Saskatchewan, according to consultancy firm Wood Mackenzie.

Industry observers think the analysis "makes sense" but could change with provincial elections or "hiccups" in nuclear refurbishments in eastern provinces.

"We are very enthusiastic about opportunities for wind energy development in Canada, and in Alberta and Saskatchewan in particular," said Evan Wilson, Canadian Wind Energy Association regional director for Prairies. Wilson added:

"In Alberta, the combination of the energy-only market, TIER regulation and falling wind energy prices are expected to open many opportunities for development."

TIER is the Technology Innovation and Emissions Reduction program, which requires large industrial emitters to reduce greenhouse gas emissions to a benchmark level, pay into a technology fund or buy offsets or credits. This replaces the Alberta Electric System Operator's Renewable Electricity Program, which resulted in contracts for 1,500 MW of wind generation.

"A number of recent announcements have reflected opportunities for both corporate offtake agreements, and the use of wind energy to reduce compliance obligations under TIER," Wilson said Monday, adding:

"In Saskatchewan, we expect that wind energy will continue to be a cornerstone of Saskatchewan's regulated requirement to reduce emissions by 40%. We are eager to see the results of the current procurement process, which will award a contract to 300 MW of wind capacity."

However, Dan Shreve, Wood Mackenzie's head of global wind energy research, during a webinar last week about the North American wind market, described wind generation growth in Canada as "diminished."

"The biggest issue is the low cost of hydro," Shreve had said.

Mark Winfield, who co-chairs the York University Sustainable Energy Initiative in Ontario, said Wood Mackenzie's conclusion regarding the concentration of wind in the west "generally makes sense," but added in an email:

"A change in government in Ontario could change the landscape significantly, particularly if the nuclear refurbishments go badly or another hiccup involving Pickering nuclear puts an earlier (but already delayed) retirement into the forefront –- although existing gas or Quebec hydro might be the next options in line in those situations."

Coal-to-Gas Switching

Of the 5 GW of coal likely to retire by 2028, Alberta has about 4.2 GW, according to the Wood Mackenzie presentation.

But "a good deal of [that] is converting to natural gas," Shreve said. Another 500 MW of coal capacity is slated for retirement in Saskatchewan, according to Shreve's presentation.

The coal retirements present an opportunity for wind generation, "but it's being hamstrung by transmission constraints," Shreve said.

Morris Greenberg, S&P Global Platts Analytics managing director of North American Power, said Wood Mackenzie's projections of about 2 GW of wind to be built in Alberta through 2023 are "consistent" with Alberta's Renewable Energy Program procurement contracts "plus a few merchant wind farms."

"The steady increases beyond 2022-23 concern me in that the cumulative capacity becomes relatively high compared with average load," Greenberg said in an email.

Wood Mackenzie's written presentation shows about 5 GW of wind being built by 2028, compared with the Alberta Electric System Operator's average daily peakload of 10.3 GW and the year's highest peak of 11.5 GW.

"If there's not much diversity in wind conditions across the province, given the relatively small size of the system, it could be difficult to operate with that much wind, and the average price that wind receives could be low leading to unattractive returns," Greenberg said.

Canada's eastern provinces could export excess wind power in addition to their excess hydropower to the northeastern US, but that might be "hard to see," Winfield said, "given the softness of the US market" and Quebec's excess hydropower already available.

Tougher renewable portfolio standards in northeastern US states "might create some opportunities," Winfield added.