Tran­sAlta fast-tracks green tran­si­tion, eyes $50M in car­bon cred­its

Power pro­ducer on the look­out for more pipe­line projects to meet its gas needs

Calgary Herald - - CITY - REID SOUTH­WICK rsouth­[email protected]­

Tran­sAlta Corp. will fast-track its tran­si­tion to cleaner power — with fore­casts of hand­some gov­ern­ment re­wards for its re­new­ables port­fo­lio — and plans to moth­ball some coal plants in the near term, which is ex­pected to boost low elec­tric­ity prices.

The Cal­gary-based power pro­ducer signed a let­ter of in­tent with Tide­wa­ter Mid­stream and In­fra­struc­ture Ltd., which has agreed to build a $150-mil­lion nat­u­ral gas pipe­line from its pro­cess­ing fa­cil­ity in cen­tral Al­berta to Tran­sAlta power plants.

The 120-kilo­me­tre pipe­line — with ini­tial ca­pac­ity of 130 mil­lion cu­bic feet of gas per day and the po­ten­tial for ex­pan­sion — will sup­ply some of the fuel Tran­sAlta will need to pro­duce power at its Sun­dance and Keep­hills fa­cil­i­ties af­ter it con­verts the coal-fired plants to nat­u­ral gas gen­er­a­tion.

The com­pany is hunt­ing for more pipe­line projects to meet its needs for gas.

Af­ter se­cur­ing the pipe­line deal and re­ceiv­ing clar­ity on fed­eral rules, Tran­sAlta plans to con­vert six of its coal-fired gen­er­at­ing units to nat­u­ral gas by 2022, a year ear­lier than planned.

The $300-mil­lion project is ex­pected to cut emis­sions from these fa­cil­i­ties by half and ex­tend their use­ful life un­til the mid-2030s.

“The less-com­plex op­er­a­tions are also ex­pected to lead to sig­nif­i­cant op­er­at­ing and car­bon tax cost re­duc­tions,” an­a­lysts at CIBC World Mar­kets said in a note to clients Thurs­day.

In the mean­time, Tran­sAlta plans to tem­po­rar­ily shut sev­eral un­eco­nomic coal-fired gen­er­a­tors amid a weak power mar­ket un­til de­mand grows or the elec­tric­ity mar­ket is over­hauled af­ter phas­ing out coal.

The move is ex­pected to cut the com­pany’s op­er­at­ing ex­penses by up to $235 mil­lion and lift Al­berta power prices, said an­a­lysts at BMO Cap­i­tal Mar­kets.

Tran­sAlta is one of the largest coal-fired power pro­duc­ers in Al­berta, but it’s also a ma­jor sup­plier of elec­tric­ity from re­new­able sources, hav­ing owned 90 per cent of the prov­ince’s hy­dro ca­pac­ity.

The com­pany ex­pects to reap $30 mil­lion to $50 mil­lion in an­nual cred­its from Al­berta’s re­vamped car­bon tax on large in­dus­trial op­er­a­tions.

The sys­tem re­wards top per­form­ers with cred­its and pe­nal­izes high emit­ters with a tax in the hopes that they will im­prove.

Plants that aren’t al­ready big emit­ters can opt into the pro­gram. This means Tran­sAlta can add its suite of hy­dro, wind and so­lar gen­er­a­tors into the car­bon sys­tem and re­ceive cred­its be­cause they don’t pro­duce any emis­sions.

Tran­sAlta al­ready ex­pects a wind­fall based on its ex­ist­ing re­new­able port­fo­lio.

The com­pany has also pro­posed a $2.5-bil­lion pumped hy­dro project at its ex­ist­ing Brazeau dam in Dray­ton Val­ley. If the project se­cures a long-term con­tract to sup­ply power, it could be op­er­a­tional as early as 2025.

“Pumped hy­dro rep­re­sents 95 per cent of global en­ergy stor­age and has sig­nif­i­cant ben­e­fits within Al­berta as it tran­si­tions to a re­new­able power-based mar­ket,” GMP FirstEn­ergy an­a­lyst Ian Gil­lies said in a note.


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