Reducing emissions through offsets and licensing
Offsetting emissions in Alberta
Our Alberta plants are subject to the Specified Gas Emitters Regulation (SGER) under the Climate Change and Emissions Management Act (Alberta). SGER requires companies that emit more than 100,000 metric tonnes of carbon dioxide equivalent (metric tCO2e) to reduce the emission intensity of a facility by 2% per year to a maximum of 12%, compared to the calculated baseline intensity for the specific facility. These companies may choose to purchase carbon offsets equal to their reduction requirements as one of four compliance mechanisms. Alternative compliance strategies would be to purchase Emission Performance Credits from other companies, implement performance improvements, or pay $15/tonne into the Climate Change and Emissions Management Corporation’s Technology Fund, widely referred to as the “Tech Fund”. As the risk-free compliance option, the price of a Tech Fund contribution sets a cap on the market price for SGER reductions. In 2013, Capital Power paid into the Tech Fund to meet compliance.
The baseline emission intensity for Genesee 1 and Genesee 2 is the average emissions intensity from 2003-2005. However, for new facilities, such as our Clover Bar Energy Centre, the baseline emission intensity is based on the facility’s third full year of commercial operation. In 2013, under SGER, Genesee 1 and Genesee 2 were subjected to a CO2e intensity reduction target of 12%, and Genesee 3 had a CO2e intensity reduction target of 10%. 2013 was the second year that our Clover Bar Energy Centre was subjected to SGER GHG reduction targets of 4%.
In addition to SGER, we are also required to reduce our share of Genesee 3’s GHG emissions by approximately 53%, which is to the level of a natural-gas combined-cycle plant. Offsets have been retired every year since commissioning in 2005 and will continue to be retired to meet future obligations. In 2013, Capital Power retired 641,466 tonnes of GHG offsets in Alberta, which were created primarily from coal mine methane projects.
Capital Power also retired 8,280 Canadian renewable energy credits against our power consumption for the Edmonton and Calgary offices for 2013, and we retired 663 Canadian-based offsets against our gas consumption for the Edmonton and Calgary offices for 2013, resulting in a total of 2,679 metric tonnes of CO2e being offset. We plan to continue the practice of offsetting our carbon footprint for our office space in Edmonton and Calgary in subsequent years.
Leading Emission Offset Practices
- In 2013, Capital Power invested $2.6 million in emission offsets. Since 2007, Capital Power has registered nearly 10 million tonnes of carbon offsets for the Alberta market.
We have been acquiring offsets for almost a decade and have entered into more than 35 offset purchase agreements.
We have expertise in the origination, purchase, and sale of verified emission offsets. We also developed two of the Alberta Offset System Quantification Protocols.
Capital Power has been active in the Alberta SGER emissions offset market since 2007 and has used offsets for 100% compliance for 2008-2012. Capital Power continues to be active in the Alberta offset market and anticipates continuing to use offsets to meet future compliance obligations. Emission offsets are audited and verified by independent third parties.
We continue to invest in emission offset markets and have become an active buyer of Climate Reserve Tonnes (CRT) offsets. We are also an active member of the International Emissions Trading Association.
We have purchased offsets from a variety of Alberta and CRT projects in 2013. Some of these project types include composting, ozone-depleting substances, forestry, agricultural methane, no-tillage agriculture, and landfill gas.
Future emission reductions from coal unit retirements
- Canadian regulations will close 14% of Alberta’s coal-fired generation by 2019, rising to 28% in 2027 and 59% by 2029, which will significantly reduce future greenhouse gas emissions.
Capital Power has long supported Canadian targets and regulations to mandate emission reductions from coal-fired power generation, including national and provincial regulations that would significantly reduce GHG and air emissions from coal-fired electricity plants, to help Canada achieve its Copenhagen commitment to lower GHGs.
The Canadian federal regulation mandates the closure of coal-fired generation facilities in Canada once they have reached a defined end of life and prohibits new coal-fired generation after 2015, unless units are either retrofitted or constructed to achieve carbon capture and storage. In the near to medium term, it is anticipated that units will be retired and replaced with alternative forms of generation, including natural-gas-fired generation.
The Canadian regulation mandating orderly coal unit retirements provides certainty for generators, accelerates carbon reduction, avoids stranded investment, and facilitates planning of cleaner replacement generation.
In Alberta, for example, the regulation signals the timing and volumes of replacement baseload generation that will be required and provides certainty about greenhouse gas reduction. By capacity, the regulation will close 14% of Alberta’s coal fleet by 2019, rising to 28% in 2027 and 59% by 2029.
Replacement generation for all the pre-2025 coal unit retirements is already in development, and includes the proposed Genesee Generating Station Units 4 and 5 - a baseload gas-fired facility.
- See Report Scope for an explanation of which facilities and offsets are included in these totals. For example, no emissions or offsets are included with respect to Capital Power’s 50% ownership interest in Keephills 3 because Capital Power does not hold the operating permit; however, 100% of emissions and offsets are included from Genesee 3, where Capital Power is the operator, despite Capital Power owning only 50% of Genesee 3. This approach also aligns with Canadian federal reporting requirements, where operators report 100% of facility emissions rather than emissions based on their proportional ownership interest.