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Heating up

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The Alberta Environment Minister, Shannon Phillips, has recently set out her government’s new climate change strategy. She has revealed a new advisory panel on climate change that would consider regulations that could speed up the decommissioning of coal-fired power plants in Alberta.

Under current regulations, coal power will represent 12% of the province’s supply mix by 2030 compared with 40% today, TransAlta President and CEO, Dawn Farrell, said in a statement earlier in the month.

CEO of Capital Power, Brian Vassjo, has said there are steps the government can take in the near-term that will lead coal power producers to reduce their absolute emissions – one of the goals of the new government’s climate change strategy.

One option analysts have pointed to is increasing the royalty rates coal miners are charged to extract the hydrocarbon in Alberta, which would make powering coal plants more expensive relative to cleaner-burning natural gas.

Another option that Phillips has put forward is speeding up the process of retiring existing coal-fired power plants.

Yet, Vassjo, is concerned this could lead to early closure of his company’s coal-fired power plant. In an interview following the announcement of the new climate change strategy, he said: “The fact of the matter is that no matter how this story ends, it’s not good for us as a coal plant owner.”

The regulations lead Capital Power to transition away from coal, Vassjo said, towards looking to invest in renewable and natural gas power. He commented: “We do recognise that it is on the table and that is one of the reasons why we are fully participating in this process to ensure that all consequences and unintended consequences are understood.”

RBC Capital Markets Analyst, Robert Kwan, is reported to have said in a research note earlier this month that share prices of power producers could be negatively affected if Alberta’s new government considered imposing a 40-year lifespan on the province’s coal plants in its climate change strategy. He said reducing the lifespan would cut 2600 MW of coal-fired electricity by 2020. This would be replaced by extra renewable energy capacities, such as wind, in turn potentially creating demand of 1 billion ft3 per day for natural gas as an electricity source.

Edited from Source:Financial Post by Harleigh Hobbs

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