Friday July 25, 2014



Black Gold Turning Green

Oil and gas industry driving the renewable energy sector
AltaGas Photo

AltaGas is commonly known for processing, storing and transmitting natural gas, but it is also involved in the renewable energy sector. The company got its start in that industry with the Bear Mountain Wind Park near Dawson Creek, British Columbia, choosing to move that direction to offset carbon emissions from their coal-fired power generation station in Alberta.

Renewable isn't a dirty word never to be spoken in the hallways of companies that toil in the oil and gas industry of western Canada. Actually, as the Canadian energy landscape changes to include technologies such as wind, solar and geothermal on an increasingly large scale, companies ranging from oils sands giant Suncor Energy to pipeline outfit Enbridge are diversifying their portfolios with green energy projects popping up across the country.

Suncor and Enbridge even grew up together as modern wind power pioneers after they decided to join forces on building the SunBridge Wind Power Project in Saskatchewan in 2001.

"After about four or five years of trying to find a project that would fit for us, our first project basically came along in 2001," said Don Thompson, vice president of Enbridge's Green Energy department.

That was the 11-megawatt wind farm in Saskatchewan.

"They basically were looking for a partner and we were looking for a project," Thompson said of the partnership with Suncor.

"And, of course, Suncor is a very large shipper on the Enbridge system. So, it was a really good fit."

Additionally, Enbridge felt a responsibility to contribute to the electricity grid in Saskatchewan as one of the largest consumers of power in the province.

"That was a start," Thompson added.

It is now twelve years later and Enbridge has just launched the first phase of their thirteenth wind project, the Lac Alfred Wind Project in Quebec, bringing their total wind power generation up to 1,250 megawatts.

Suncor has been busy, too.

The oil company now has three additional wind projects in Alberta and another two wind projects in Ontario.

"We believe that wind power – a clean, safe and renewable energy source - is an important part of Canada's future energy mix," said Nicole Fisher, Suncor spokesperson.

"Suncor is committed to developing and supplying energy options that meet the needs of both today and tomorrow," she added. "As a Canadian pioneer in wind energy, we currently operate six power developments with other projects in the planning stages."

"For all of our operating projects, we are the investor," said Thompson, noting that Enbridge has not always been the proponent of those projects.

"We essentially bought the late-stage or near-ready-to-construct projects," he explained. "We have typically not gone … into the development side. And when I say development, that's the guy who basically goes out, takes the wind measurements or negotiates the land access or works with the [utility] to get the access to the transmission.

"We basically buy it after those pieces have already been developed. And then we basically take it to the next step, which is the construction and then eventually the operations."

Thompson said that Enbridge has grown increasingly comfortable with their role in the wind energy sector.

"Our ability to actually invest in those development projects earlier is much greater," he said. "And our appetite, frankly, for those early stage projects is getting much larger."

Enbridge believes that they are encouraging those visionary individuals who develop renewable energy technologies and projects through their investments in that area.

"For them, this is about recycling their investment," said Thompson.

"They're quite an interesting group," he added. "They don't all just take it and put it in the bank and go home. They plough it back into new development."

However, building a wind farm isn't just about power supply and demand issues, tackling the financial hurdles or ensuring that the project is profitable for companies like Enbridge.

They must also consider safety and environmental impacts.

"We bring a tremendous amount of expertise," said Thompson.

"The construction of utility-scale projects is not at all easy, all the way through permitting, as well as making sure that we have labour organized, subcontractors organized, materials organized," he continued.

"That's what I think we bring to the equation."

Thompson cites the Lac Alfred wind farm in Quebec as an example of Enbridge's ability to manage the logistics of such a project.

"It's a 300 megawatts project," he explained. "There's 150 turbines. The road servicing this is 180 kilometres of road. There are very few companies that can actually execute that project well. And, frankly, that's what we really pride ourselves on. And then the long-term operation of projects."

The responsibilities that come with operating a wind farm aren't only about satisfying minimum code requirements, but ensuring that there are no incidents that cause harm to people or the environment.

"These are all high voltage systems," said Thompson.

Another Canadian company with roots in the oil and gas industry that is also gaining experience and expertise in the renewable energy sector is AltaGas.

"Our business really does have three legs to it," said vice president of finance and CFO Debbie Stein.

"We have the power side," she continued. "We have the gas processing. And then we have the utilities."

Stein explained that AltaGas began its life in the natural gas business when founder David Cornhill put his $37,000 to work building a network of small processing plants.

"We've been in the power business since 2001," she said.

That was when the oil and gas industry thought the Western Canadian Sedimentary Basin (WCSB) was all but dead and domestic sources of natural gas were a thing of the past, prior to the discovery of massive shale gas deposits throughout North America and the rise of horizontal drilling and hydraulic fracturing.

"We decided that we needed to diversify away from the WCSB," said Stein.

So, AltaGas ventured into the power business with the acquisition of coal-fired power generation in Alberta.

"We had such a significant carbon footprint," said Stein.

"We like the power business. We understand the power business," she continued, adding that their power business in Alberta had been closely tied to the natural gas business until recently.

"We looked at where the long-term trend was for power generation in North America and … thought that moving into renewables would give us a foot in the door in terms of greening our world, as well as reducing our own carbon footprint because of the [coal-fired generation] that we owned," said Stein.

"Everyone was on the bandwagon around developing wind farms."

Stein recalled that a lot of people were starting to set up meteorological towers to take wind measurements and sell wind projects, while BC Hydro was developing a new power plan and looking for opportunities with Independent Power Producers (IPPs).

"We partnered with a couple of small developers that had put up [meteorological] towers and had done wind studies," said Stein. "We partnered up with a developer that brought us the Bear Mountain project."

AltaGas saw the project as a great opportunity to gain experience and expertise operating a wind farm, one that just happened to be located in the heart of natural gas country near Dawson Creek, British Columbia.

It was the first wind farm in B.C.

"Really did put us on the map in British Columbia," said Stein, adding that it allowed the company to develop good relationships with BC Hydro and the B.C. government.

"Prior to that, we'd had very little business activity in British Columbia."

That was the beginning of their renewable energy business, which continued to grow in 2008 with the acquisition of run-of-river hydroelectric projects under development simply known as the Northwest Projects.

"Those were actually owned by Nova Gold," said Stein. "And Nova Gold got into some trouble. And we bought those projects from them. We took them from being in development phase to where they are now, which is almost ready to deliver power to the B.C. grid.

"Back in 2008, we were talking about renewable energy and we saw that the world would be looking for clean energy. And saw a way to reduce our own carbon footprint. And thought these run of river projects were ideal."

Stein explained that research and development in the renewable energy space isn't the role of companies like AltaGas.

"The role for a company like ours is really putting the pieces together," she said. "Understanding the various elements that impact energy markets overall, be it oil, natural gas, propane, renewable power, coal power, any form of energy. They're all connected. And our ability to understand how these markets work, understand what drives the supply and demand. And be nimble enough to take advantage of opportunities as they arise and weigh in with our expertise in running assets and building assets."

Suncor, Enbridge and AltaGas all understand the role that renewable energy are becoming an increasingly important part of Canada's energy mix, but they also stress that the age of fossil fuels is far from over.

"Investment in renewable power is a key component of Suncor's climate change action plan," said Fisher.

"We are committed to the safe and responsible development of renewable energy generation by investing some of our revenues in bringing along new sources of energy for the future," she added, suggesting that the success of the renewable energy sector can actually be driven by success in the oil and gas industry when revenues are invested in that manner.

Thompson also sees the synergies between fossil fuels and renewable energy.

"I think anyone that has in their minds that we're all going to be powered by wind or solar are apparently willing to not drive their cars when it's not sunny or use their toaster when it's not windy," he said.

"Wind doesn't always blow and water doesn't always flow," added Stein.

"If you want clean, that's all well and good, but if you only want pure wind and solar and water, you're going to give up reliability," she continued. "So, what systems or what technology or what fuel do we use to support the reliability factor? Because I don't think anyone who turns on their light is willing to say, 'Oh, well, the wind isn't blowing today. I'll do without electricity.'"

Thompson believes there has to be a combination of renewable energy and reliable baseload energy.

"We come by this opinion honestly," he said. "Because we're a 24/7 load, which basically means our pipelines have to be able to run 24/7. So, we need a reliable energy mix to be able to do what we do.

"The downside with the renewable energy is it's not 100 per cent available 100 per cent of the time."

The other half of the energy equation appears to be natural gas.

"Where we see a role for natural gas-fired generation is really filling that gap in terms of back-up and backstopping renewable energy," said Stein.

"And we have several examples of that in our portfolio," she added, pointing to 35 megawatts of generating capacity in Alberta as an example.

Interestingly, wind energy is becoming competitive with natural gas in terms of lowest cost power generating options.

"Wind is competitive with natural gas, which, probably, five years ago, would have sounded like heresy," said Thompson.

"We need a stable mix," he continued, "but we also need to realize that the cost of power is a critical input into our competitiveness. So, it's a great happening that we have renewable pricing coming down, being competitive with the natural gas.

"Because I think that is the measure of a sustainable energy industry."





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