The Decibel - Alberta vs. Texas: how two oil giants are taking on clean energy

Episode Date: November 13, 2024

Alberta and Texas have a lot in common. Both have independent western cultures, great country music, and each lead their countries in oil production.And over the past decade, they’ve both been the unlikely hosts to the multibillion-dollar renewable energy boom – with swaths of the Texas and Alberta energy grids going green. But while Texas becomes a leader, Alberta is changing course.Jeffrey Jones, a Calgary-based reporter with The Globe’s Report on Business, took road trips through both vistas to learn how and why these oil-producing regions became hubs for clean energy, and what’s behind Texas’s green surge and Alberta’s slowdown.Questions? Comments? Ideas? E-mail us at [e-mail]

When we think of Alberta or Texas, most of us probably think about oil. Both regions have historically been massive energy producers. But in recent years, there's been a shift from black to green. Alberta and Texas have both seen a rush of investment into wind, solar and other clean energy projects. And the boom has poured millions into local communities. But despite this success, Alberta has started to change course. and explore Texas was just to see why Alberta had put on the brakes when Texas had decided to go full bore on renewables, given the fact that the two jurisdictions seem so similar in so many ways. Jeffrey Jones is a reporter with the Globe's Report on Business, and he's based in Calgary.

He's here to walk us through how these oil-producing regions became hubs for renewable energy, why Texas has continued to embrace this change, and why Alberta hasn't. I'm Maina Karaman-Wilms, and this is The Decibel from The Globe and Mail. Jeff, thank you so much for joining me today. Great to be here. You have taken trips through both Alberta and Texas. You've been looking at the shift towards renewable energy in these places. I want to start with your trip to Alberta, Jeff, in October 2022. What did you see and what was the renewable energy industry like at that time?

It was undergoing an incredible boom. I took a journey down Highway 3, which is also known as the Crow's Nest Highway. It runs basically from Medicine Hat past Lethbridge and then into the Rockies. And what I saw there was just active development of wind farms and solar farms and other types of renewable energy as well. Battery storage was just starting to become a real next big investment target for the industry. You really begin to see the scale of wind development in Alberta as you get closer and closer to the Rockies in southwestern Alberta. So, you know, some people like them. Some people see them as a way to push Alberta further down the road for the energy transition. And some people don't like them at all.

They see them as a blot on the landscape. And they were driven by an Alberta market that welcomed the ability of large corporations with names like Microsoft and Amazon to come in and support these projects by buying long-term power contracts. Jeff, could you just give us a sense of the growth of this industry in Alberta? How much do renewables actually power the grid? How big of an impact do they have? Well, growth was already exceeding just about everybody's expectations. Five years ago, wind power was making up 9% of Alberta generation capacity and solar didn't even register. By October 2022, wind and solar made up 22% of generation capacity altogether. I think this is kind of maybe surprising for some people, Jeff, to hear that Alberta, we often associate Alberta with oil production, right, is actually big in renewable energy. Just take us back. How did the province become such a hotspot here? Well, first of all, let me just say that the wind power has been in Alberta for a very long time, since the 1990s. It's only in the last probably decade or so that the real exponential growth began to happen.

And that was when the previous government under NDP Premier Rachel Notley set a goal to reduce and eliminate coal-fired power in Alberta by the end of this decade. By now, they've beat that deadline by many years. So they had to make up the difference with something. The Alberta power grid now relies predominantly on natural gas fired power. But renewables like wind and solar energy have quickly become the least expensive way to generate power among all the different sources. So that is really where the growth came from. And as a matter of fact, that growth exceeded all expectations up until last year. When you say it's the least expensive power, how did it get there? How is it costing so much less

to produce energy with renewables? It is inexpensive for a number of reasons. One is that the technology has improved. And so all the components that go into developing solar panels or wind turbines has improved to the point where you need fewer units to produce the same amount of power. You don't have a fuel source that's required that you have to pay for. And it can be built quickly and with a lot less manpower. So capital costs and actual production costs are much lower than the fossil fuel sources. Now, of course, the trade-off there is that the power is variable. It's no surprise that when the sun goes down, solar power doesn't work. So this is one of the reasons why the development of battery storage has been anticipated with such excitement.

Do we know actually how much energy renewables are producing for the province right now? Well, it varies a lot depending on the weather conditions. And this is one of the problems that I believe the Alberta government has seized upon as saying that renewables are not just variable in power, they're unreliable, according to them. So in the depths of winter in January, you'll have times when there is zero renewable power being generated in the province because it's cold, the wind's not blowing, and the days are very short. Last year, we had a couple of near blackout situations in the province. It wasn't necessarily because of renewables. It was because there were some gas fired power plants that had tripped offline. But renewables weren't there to sort of jump in and take up the

slack just because it was nighttime and it was very, very cold. Okay. I want to ask you one more thing before we move on to Texas. You mentioned that there's big companies actually buying up some of the energy here. You mentioned Microsoft, I believe, as one. How is this exactly working here? How is this energy being sold? Well, there's two ways. One is if you build, let's say, a solar plant or a solar farm somewhere in Alberta, you have two ways to make it work. One is you can sell it on a merchant agreements to those large companies, and most of them are very well-known names over a long period of time, so 15 years, 20 years, to guarantee a price, and that will allow you to get the financing required to build those projects. So that's

kind of the two ways that are generally used to boost capacity for producing renewables. Okay, I've asked you a lot about Alberta, Jeff, but let's talk about Texas now, because I know that you also took a trip there. What is driving the surge in renewable energy in Texas? You know, it's a lot of the same things. Texas has this fast growing economy. There's a lot of population growth, industries moving in quickly, and a lot of those are very power hungry. So data centers, gigafactories, AI, all of that stuff uses tons of electricity. And so that state requires ever growing capacity to produce power. And as we talked about in Alberta, renewables have been the way to get it onto the system quickly and cheaply. As a matter of fact, it may be one of the least expensive places in North America to actually produce electricity because of this.

And do we have a sense, Jeff, of just how quickly renewables have grown in Texas? Yeah, it's been pretty stunning, actually. So since 2011, wind power capacity has quadrupled and now makes up 29% of total available generation, which is a lot. are some places where you look around as you're driving, and in every direction, sticking up from crags and hills and flatlands are wind turbines. It looks almost otherworldly. And solar is even more dramatic. More than $28 billion invested since 2011. So that has increased now from 70 megawatts to 26,000 megawatts. So that's an incredible amount of growth. And in the next 20 months, that could jump by another 56%. Wow.

Okay. So quite significant, actually, the rate that that is growing at. I also want to ask you, Jeff, we just did an episode on the Inflation Reduction Act in the states and the impact it's having. Is this having a big impact in Texas? It's huge. Texas is one of the red states that is leading in terms of receiving Inflation Reduction Act money.

And this has been kind of the counterintuitive aspect of the IRA. I mean, you know, when you think of it, it's a Democrat that came up with this massive legislation, President Joe Biden. And it's really been Republican states that have made the most of this. And a lot of it has gone to Texas. I have to ask, is going green any part of this motivation here? Like, is that part of why people, I guess, want to participate in these projects in Texas and maybe Alberta too? Well, in terms of Texas, I didn't speak to many locals, if any at all, that said, we're interested in increasing Texas's ability to decarbonize its power grid. Nobody said they were a climate activist. And just about everybody said that what they really appreciated was the financial benefits that it brought to their local communities, whether it was new buildings, infrastructure. under Governor Greg Abbott has a program where renewable energy developers can contribute

directly to local projects and infrastructure and services for a period of 10 years rather than pay their share in taxes. So what that has done is it's slashed the tax bills of residents who live in these counties that host renewable projects. So you have people in these counties that are actually very supportive of these renewable projects, not for the environmental benefits, but actually the financial benefits that they're seeing. They're not so much interested in going green, but they're very interested in earning green.

That really puts quite a fine point on it. Yeah. All right, Jeff, let me ask you about how politics, I guess, plays into this. Because I think, you know, we know that both Alberta and Texas are generally politically conservative, stereotypically, not always the biggest supporters of environmental movements. But I wonder, has there been backlash in either place with this renewable shift? Well, a little bit. And you're right. I mean, you hit upon an important point here. And this is that it's often believed, and quite rightly, that Texas and Alberta are fellow travelers when it comes to politics, natural resource development. I mean, both lead their respective countries in oil production, and independent Western culture, country music, all of that. But where they do diverge and where they have diverged now is when it comes to renewable energy. Texas has not put any roadblocks in front of wind and solar developers. Alberta, on the other hand, has

intervened in what was a free and active market and decided to impose a moratorium on new projects and then several limitations on the industry that had not existed before. We'll be right back. So, Jeff, you've talked about how renewable energy was really taking off a couple of years ago in Alberta, but recently has stalled because of a seven-month moratorium on new projects that the government has put in place. This was announced back in August of last year, and then new regulations were announced this past February. So, Jeff, what has the provincial government changed? There's been a number of new restrictions placed on the industry. Danielle Smith, the premier of Alberta, has said that she's going to take a quote-unquote agriculture first

approach to how land is used. So what that means is they will generally not allow projects, especially solar projects, to be on the most fertile agricultural lands. Not that that was happening anyway, really. I mean, you know, if the renewables developers strike their deals with landowners and those landowners decide how they want to do their land. But that's one thing. Another one was there hadn't been security mandated as part of those deals. So that means that there has to be money set aside for the

eventual reclamation of these lands, which is a stipulation that's not, by the way, given to the oil and gas industry. Another thing they came up with was, and I think this is more directed at wind developers, is a phrase called pristine viewscapes and a 35-kilometer buffer zone that essentially disallows wind farms from being built in an area where there is a quote-unquote pristine viewscape. So this means that you generally won't be allowed to put new wind projects in places such as in front of the Rocky Mountains where the view could be obscured. Jeff, could you just give us a sense of just how much money these projects represent? Like, is this a big loss? Well, there were a lot of projects that were in the queue to be developed.

Some have already been pulled out of the queue. Some of them are sitting there, have received approvals, but there's been no money put in them because the developers don't know what the rules are. But certainly those projects represent billions and billions of dollars. I mean, if you take a look at some of the larger solar projects that have been constructed in Alberta over the last few years. I mean, you're looking at upwards of half a billion dollars for a very, very large one. What exactly did Premier Daniel Smith say about why she wanted to halt the development of renewable energy projects? Well, a lot of her political base are rural, and a lot of them are very pro-oil and gas. So they are not

in favor, generally, of renewable energy. That's one thing. Another thing that she said was that they are intent on protecting the reliability of the province's power grid. So remember, we talked about the variability of power. They're concerned that if there's too much renewable power on the electrical network, that at times of great demand, you may not have the ability to draw on it if the sun isn't shining and the wind isn't blowing. So the industry is now rethinking its proposals to build projects, its capital spending plans in light of all of this. The province is rewriting its rules for its power market. So everybody's kind of sitting on their hands waiting to see what comes up and whether

Alberta will resume being a reliable place to invest. Well, I mean, you just touched on this a little bit, but can you elaborate a little further, Jeff, about the numbers that said 33 projects that had been planned before the government imposed freeze have been canceled. They were the ones in the development queue. And another 20 in which companies had hoped would be grandfathered under the previous rules have also been withdrawn. In 2024, the industry's tax bill was $54 million, which is a lot. There's no indication on whether that's going to be down next year. But two years ago, it was about half that amount. So local communities that had been planning to use this tax revenue to build projects, I know that there was one that was going to build a new water treatment plant in southern Alberta. They're no longer able to do that. So they're going to have

to come up with other plans because they can't rely on some of the tax revenue that they assumed would be coming in their door. So I guess I'm trying to understand this, Jeff, because it sounded like Alberta and Texas were both kind of working in similar ways to embrace renewable energy. And now Alberta's really curbed that success while Texas has kind of continued to embrace renewable. And these are both, as we said, politically conservative places. So what's the difference here? Why is this renewable energy boom succeeding in Texas but really being rolled back in Alberta? Well, you know, there's one key aspect of how governments collect revenue from various energy sources that I think explains at least some of it.

In Alberta, landowners do so. And the royalties from that production go to the government, fill the government coffers. It's actually a huge part of Alberta's annual revenue. So if you've got a system that supports natural gas with natural gas power plants, and the government is collecting royalties from natural gas production, you can see where there is a pull towards supporting fossil fuels. And they wouldn't get the same royalties from a wind turbine or solar panels then? They do not. Wind and solar developers strike their deals directly with the landowners. So they'll pay local taxes, all of that type of stuff, but there's no royalty that goes to the government

in wind and solar production. If you compare that to Texas, it's different. The state government doesn't collect royalties from most oil and gas production in Texas. So all of the deals that are done are between the developers and the landowners, and that goes for oil and gas, and it goes for renewables as well. And once again, there's payments that are made and taxes and that to state and federal governments, but it's not the same sort of royalty system that would seem to support fossil fuels. So that explains at least some reason why the government in Texas is agnostic when it comes to how power is generated, at least to a degree. Yeah, this is a really important point, because from what you've laid out,

the provincial government in Alberta has an interest actually to continue with oil and gas development, but doesn't have that has an interest actually to continue with oil and gas development, but doesn't have that same royalty incentive when it comes to wind and solar. So that would be significant. Yes. Yeah. Just our last few minutes here, Jeff. Of course, we all know now that the US has an incoming Trump administration. So I guess I wonder for places like Texas that, as we talked about earlier, really benefited from that Biden era Inflation Reduction Act. Are there any chances that things could be changed when it comes to Trump's policies?

I guess I'm kind of wondering if there could be a kind of a U-turn in Texas there. Well, as you know, Trump has said some pretty unusual things when it comes to especially wind turbines. Unfounded comments on whether they cause cancer from their noise or whether they are bird killing machines. He's no fan of that. You know, the thing makes it so. And of course, it's like a graveyard for birds. But Texas has really benefited from the expansion of wind and solar energy. There's a lot of economic growth that's expected there. So it's really difficult to imagine the federal government under the Trump administration deciding to put roadblocks in a state that is one of its biggest supporters. Though one of the big worries when it comes to the new administration has to do with Donald Trump's love of tariffs. And a lot of the inputs

in whether it's solar farms or whether it's wind projects, all of that, rely on imported goods. So, you know, there is a big concern in the Texas renewable energy industry that trade friction could actually harm the economics of development there. Okay. I guess we'll have to wait and see how that happens. Just before I let you go, Jeff, let me just bring it back to Alberta here, because as we talked through, leader in renewable energy, and that seems to have stalled. What happens now in the province when it comes to energy production? The provincial regulator is now rewriting the rules about the market, how power goes on to the system, the expectations for

different types of generation to feed the grid. So the industry itself is holding its fire when it comes to capital expenditures. And actually, some are talking about looking to Ontario or other jurisdictions that may well be more welcoming to their projects. So it's really a wait and see situation for renewables and whether Alberta can resume the type of growth that it was experiencing in the decade or so before 2023. Jeff, really appreciate this. Thank you so much for being here. My pleasure. That's it for today. I'm Mainika Raman-Wellms. Our producers are Madeline White, Michal Stein, and Allie Graham.

David Crosby edits the show. Adrian Chung is our senior producer. And Matt Frainer is our managing editor. Thanks so much for listening, and I'll talk to you tomorrow.