In January 2002, Hon. Lorne Taylor, Alberta ’s Minister of Environment, asked CASA to develop an approach for managing air emissions from the electricity sector. This report and package of recommendations is CASA’s response to that request. It is recommended that the new framework be fully implemented by January 1, 2006.
The proposed framework will lead to significant reductions over time in five priority air emissions: mercury, sulphur dioxide, nitrogen oxides, primary particulate matter and greenhouse gases.
The proposed framework will lead to significant reductions over time in four priority air emissions: mercury, sulphur dioxide, nitrogen oxides and primary particulate matter. The main outcomes in terms of improved performance and emissions reductions are:
STANDARDS FOR NEW UNITS
- New units will be governed by new emission standards for SO2 and NOx, effective January 1, 2006.
- New coal-fired units will be required to add mercury controls and to reduce or offset their greenhouse gas emissions to natural gas combined cycle levels.
- Effective January 1, 2006, all standards for new units will be based on Best Available Technology Economically Achievable (BATEA).
REQUIREMENTS FOR EXISTING UNITS
- There will be significant reductions in mercury by the end of 2009.
- Mercury control technologies may provide significant co-benefits, including reductions in primary particulate matter to levels consistent with BATEA.
- There is a new requirement for units to reduce emissions to the latest BATEA performance standard at the end of their design life.
- CASA is recommending a defined multi-stakeholder process to evaluate the performance of the framework at five-year intervals.
- The review will be a publicly credible, transparent and participatory process that will involve stakeholders from all sectors including the public.
- If core assumptions are proven wrong, the framework will be revised.
RENEWABLE AND ALTERNATIVE ENERGY
- A target for the development of new renewable and alternative energy will apply to all electricity generation by 2008, subject to certain issues being resolved.
- Strategies, such as a “green certificate” program and emissions trading, are proposed to implement the target.
- A multi-stakeholder team is recommended to assess the need for a target beyond 2008.
ENERGY EFFICIENCY AND CONSERVATION
- The framework includes strategies to reduce demand and encourage more efficient use of electrical energy.
- Stakeholders will undertake further work to refine strategies in this area.
CONTINUOUS IMPROVEMENT AND HOT SPOTS
- Recommendations include special provisions to address potentially emerging “hotspots.”
- Continuous improvement will occur through regular review and updating of technology performance standards.
- Industry will be setting continuous improvement goals at five-year intervals.
MONITORING AND TRANSPARENCY
- A key component of the framework is a comprehensive monitoring system to track compliance with emissions standards and reductions targets.
- There is greater emphasis on transparency with information available to the public.
- The framework recommends opportunities for public involvement in the management system.
EXPECTED EMISSIONS REDUCTIONS
|Substance||Annual Reductions||Reduction from 2003||Target Year|
|Primary particulate matter (PM)||3,500 tonnes||51%||2025|
|Sulphur dioxide (SO2)||52,000 tonnes||46%||2025|
|Nitrogen oxides (NOx)||29,000 tonnes||32%||2025|
The team is of the general opinion that emissions reductions will likely be more than projected due to improved technologies and practices.
WHOLESALE PRICE AND COST IMPLICATIONS
Comprehensive economic modeling was conducted to assess the impact of the team’s recommendations on wholesale electricity prices. The major factor affecting future wholesale prices is the forecast price of natural gas. The proposed emissions management approach is projected to have minimal additional impact on the wholesale electricity price. The forecast average impact of direct emissions control costs over the modeling period ranges from $0.73/MWh to $1.15/MWh. The costs to individual units for emissions management were inputs provided by the team to the modeller. Based on these cost inputs, the total emissions control costs from 2003-2025 for existing coal units could be in the range of $2.7-billion to $3.8-billion. When this amount is discounted back into 2004 dollars, the total emissions control costs are between $0.7-billion and $1.0-billion. This represents a cost range to a typical unit of $1.80/MWh to $2.70/MWh across the 2003-2025 period. It was also forecast that most new renewables arising from the renewable target would be wind energy. It was also forecast that wind would play a role in lowering electricity prices in the period prior to 2010, which may result in the need for incentives over and above the current federal incentive to encourage incremental wind generation. The overall average wholesale electricity price impact of wind energy for the forecast period is in the range of $0.82-$1.69/MWh.
When assessing the cost of the framework, it is crucial to balance this assessment with the knowledge that the status quo is not one of zero cost. In other words, there are economic costs as the electricity generation sector complies with current and emerging regulations and meets existing emission limits. In addition, the federal government has indicated that reductions in greenhouse gas emissions from current, or “business as usual,” levels will be required as Canada moves to meet its commitment under the Kyoto Protocol.
Key benefits of the proposed framework are many, and include:
- Significant reductions in four priority substances with anticipated co-benefits for a second list of substances.
- Emission reduction requirements that will put Alberta among the leaders in air quality management in North America , and help to guide the development of national standards for mercury and greenhouse gases.
- A sustainable emissions management system in terms of achieving environmental improvement within time frames that are economically achievable.
- Increased long term regulatory certainty for all parties.
- Ongoing multi-stakeholder input to the management of emissions from the electricity sector.
- A blend of management tools, including an emission trading system, that will provide industry with a wider range of choices, thus enabling it to minimize cost while meeting emission reduction targets
- Control strategies that that can be applied to bring about emissions reductions in more than one substance.
The framework represents a creative mix of management strategies that will increase long-term regulatory certainty for all parties, provide flexibility in reducing emissions and encourage continuous improvement of the overall management system.
In conclusion, the Electricity Project Team is of the view that the framework is a significant contribution to achieving CASA’s goals for air quality, namely, protect the environment, optimize economic performance and efficiency, and seek continuous improvement.
- Report of the Greenhouse Gas Allocation Subgroup
- Report of the Energy Efficiency and Conservation Working Group
- Report of the Prioritization Subgrou
- Final Report of the Public Consultation Subgrou
- Interim/consultant reports
- Electricity Price, Energy Production and Emissions Impact: Evaluating proposed GHG Emission Reduction Frameworks for the Alberta Electricity Industry (1,000 KB), Energy Demand Consulting Associates Ltd. (EDC Associates Ltd.), June 2004.
- Electricity Price, Energy Production and Emissions Impact: Evaluating proposed management options for reducing air emissions of 5 priority substances from electricity generation facilities in Alberta (880 KB), Energy Demand Consulting Associates Ltd. (EDC Associates Ltd.), November 2003.
- A Review of Legal Rights and Obligations Related to Transparency, Public Participation, and Accountability for Compliance in Current and Proposed Regimes for the Management of Air Emissions from the Alberta Electricity Sector, September, 2003. A report prepared for Environment Canada by Linda F. Duncan and Keri Barringer.
- Power Purchase Arrangements, Wholesale Market Organization and Air Emission Management Options (200 KB), Joseph Doucet Economic Consulting Inc., November 2002.
- Monitoring, Reporting and Compliance Assurance Background Report, September 2003. (31 KB) A report prepared by Alberta Environment.