EDMONTON – Alberta power generators have no right to billions of dollars in compensation if the province shuts down coal-fired plants as part of its climate change strategy, says a study from a clean energy think-tank.
The Pembina Institute says deals the companies agreed to long ago give them plenty of time to recoup their investments without big payouts from taxpayers.
Nor should Albertans cover costs for coal-fired plants built after it was clear that climate change would affect government policy, says the institute’s report.
“Now that we’d like to move away from your type of electricity, we don’t need to pay you off — you’ve been paid off for that capital,” summarized co-author Ben Thibault.
Don Wharton, TransAlta’s vice-president of policy and sustainability, said recouping capital doesn’t account for the money generators are forced to spend to keep their coal plants operating safely.
Shutting those plants too soon would weaken the very companies Alberta will depend on to finance the transition to cleaner power, he said.
Retirement of coal-fired power is expected to be a major part of the Alberta government’s climate change policy, which is expected before the end of the month.
Companies, using terms such as “expropriation,” have argued that taxpayers should compensate them for that. Some have warned that requiring them to close coal-fired plants before the companies want could put the government on the hook for as much as $4.6 billion.
Not so, said Thibault.
Sixteen of Alberta’s 18 coal-fired plants have power purchase agreements with the government that run out in 2020.
Nine of those agreements expire at about the same time the plants are deemed in their agreements to have earned back their original investment. The rest would take a decade or so longer.
Taxpayers have no obligation to compensate companies for facilities that have already earned back their capital, said Thibault.
“The public doesn’t owe you anything given that we’ve accomplished our terms of the contract.”
Plants that still have some value left in 2020 can earn back the rest of their capital on the open market, he suggested.
The two plants without such agreements were built after it was clear that climate change was going to affect the regulatory environment. Their owners should have accounted for that risk, the report says.
Equating the worth of those plants to their book value is too simple, said Wharton.
“TransAlta spends tremendous amounts of capital every year to maintain those plants. They’re ignoring tens if not hundreds of millions in investment.
“We’re required to do exactly that — we can’t let them die and be zero value at some book date.”
Wharton emphasized TransAlta is not looking for a cheque.
The company, together with Atco and Maxim, proposes it be exempted from future carbon taxes if it reduces its coal-fired generation to conform with the government’s current reduction targets for major emitters.
“That, in our estimation, is adequate compensation for the lost production that we would incur by dialling back.”
Wharton said retiring coal plants too quickly could slow the growth of renewable energy in Alberta. Forced to rapidly add generating capacity, companies would probably build natural gas facilities — substituting one fossil fuel for another.
“We need to be cognizant of how we treat coal in order to get renewables.”
Independent energy economist David Gray said Pembina is right to suggest taxpayers have no obligation to compensate power generators.
“There’s no legislative requirement or anything else for the government to pay compensation,” said Gray.
“They have those power plants fully paid off at the end of a power purchase agreement and they were looking forward to years of gravy.”