Is There a Place for Geothermal Energy in Alberta’s Electricity Future?

The Alberta Electric System Operator’s (AESO’s) Renewable Electricity Program (REP) and Alberta Infrastructure’s 135,000 MWh solar procurement highlight Alberta’s new willingness to encourage and financially support renewable electricity development in the province. Though wind and solar have been the focus of Alberta’s renewable electricity story to date, geothermal proponents have also been promoting the potential of their energy source. Is there a place, given this Province’s geology, talent and infrastructure, for geothermal energy in Alberta’s electricity future?

The Lay of the Land Today

Geothermal electricity generation has not only never been commercially developed in Alberta, it has never been commercially developed anywhere in Canada. In fact, Canada is the only major country on the geologically-active Pacific Rim that is not producing any commercial electricity from its underground thermal resources. This may soon change, however.

In May, SaskPower signed a power purchase agreement with DEEP Earth Energy Production Corp. to determine the feasibility of a five MW project in southeast Saskatchewan. The SaskPower project will involve drawing water from a hot aquifer three kilometres below ground, an aquifer that was discovered by the oil and gas industry. Construction and drilling is to begin on the project this year, with the expectation that it will come online in 2019. The project is expected to produce enough electricity to power 5,000 homes, offsetting 40,000 tonnes of CO2 annually. The company’s hope is to be able to develop hundreds of MWs of generation from small, repeatable five MW power plants.

The SaskPower project has generated optimism within the geothermal community. There have also been some encouraging signs at the federal level. Changes proposed in the 2017 federal budget will allow operators to write off expenses more quickly and complete flow-through share financings, a substantial development for an industry which requires significant upfront capital. Also, Edmonton MP Matt Jeneroux introduced a federal private member’s motion calling for legislative and regulatory changes and increased funding for geothermal technology.

Besides Saskatchewan, geothermal proponents are looking to B.C., Alberta and the Yukon, where the potential for geothermal energy within Canada is thought to be the greatest.

Making a Case for the Future

The case for geothermal energy in Alberta often starts with a discussion of the synergies that exist between the geothermal industry and Alberta’s oil and gas industry. As CanGEA (the national geothermal industry association) has pointed out, encouraging geothermal energy in Alberta would:

  • help to put the oil patch (geologists, reservoir engineers, drillers, etc.) back to work without having to re-train workers.
  • diversify the economy since the accessed geothermal heat can be used for other things besides electricity, like district heating, hot springs, greenhouses, cannabis, pasteurization or drying, before it is reinjected back underground.
  • fit nicely in a distributed generation strategy for Alberta.
  • help the oil and gas industry on the social license front as the geothermal wells would sit side-by-side with producing oil and gas wells; they might even be the same well.
  • build on the extensive Alberta subsurface knowledge that already exists from decades of oil and gas exploration that has seen over 400,000 wells drilled in Alberta.
  • help the Province deal with the huge liability that presently exists from abandoned or suspended oil and gas wells in the Province. Many of these are orphaned wells where the corporate owner no longer exists or is insolvent.

A key component of the business case is that the subsurface knowledge and the abandoned wells make Alberta well suited for geothermal energy.  The subsurface knowledge saves geothermal developers money because they already know where to go to find the best hot underground fluids. The existing wells can be repurposed to do geothermal micro-generation.  To take advantage of existing infrastructure, CanGEA would like to see geothermal producers be able to rent or lease orphaned wells. It argues that government policies allowing as much would give government a revenue source to clean up unsuitable orphans while allowing geothermal production without prohibitive upfront costs or the risks of full liability for the well.

Alberta Takes an Interest

The Alberta government appears to be warming to the geothermal story.  Alberta Economic Trade and Development recently agreed to fund a study of Alberta’s oil and gas wells to identify which wells would be best suited for geothermal energy. The results of the study, completed by CanGEA in collaboration with geothermal companies, were released last month. A study overview can be obtained from CanGEA and an interactive dashboard of the over 60,000 oil and gas wells studied, and their heat content, proximity to interconnection, etc., can be found on Fuzeium’s (one of the study’s collaborators) website.

Unfortunately, the AESO reported last year that while it received some interest in geothermal production, a lack of policies and available information hinders potential development. Further, though geothermal does offer reliable renewable baseload generation potential, its upfront capital costs and unclear regulatory framework make near-term development of the resource challenging. The well study and the work of CanGEA are helping push the geothermal story forward and remedy the concerns. However, geothermal electricity generation will need more direct support from Alberta, as SaskPower has done, if it is to not lose ground to wind and solar in Alberta.

Fortunately, the perfect storm of political, economic, and technological factors appear to be aligning and might help make geothermal electricity generation at a commercial level a reality in Alberta. If the right policies are put in place in the Province to facilitate geothermal electricity development, many believe that Alberta’s geology, talent and infrastructure can be harnessed so that geothermal energy has a place in Alberta’s electricity future.  We will have to stay tuned to see what Alberta is prepared to do on the policy front to make that a reality – more funding for studies and/or a small carve-out for geothermal in a future REP round would certainly be welcomed by the industry.

Myles Fish

Myles Fish is a law student at Dalhousie University who is summering at Borden Ladner Gervais LLP and contributing to the content here on AlbertaPowerMarket.com.

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