What happens to Alberta when much of the World follows Chile’s lead?

“Solar power is now the cheapest source of electricity in Chile, according to Deutsche Bank AG.

That conclusion is based on the results of an energy auction in October when renewable projects offered the lowest prices and won contracts to supply 1,200 gigawatt-hours of power, Deutsche Bank analyst Vishal Shah said in a report Tuesday.

That may lead to more than 1 gigawatt of new solar capacity installed in Chile this year, Shah said. It will help the country reach a target set in 2014 by Chile’s government of having 45 percent of its installed electric capacity powered by renewable sources.”

  • Solar Energy Is Cheapest Source of Power in Chile, Deutsche Says, by Vanessa Dezem, Bloomberg.com, November 4, 2015 — 2:13 PM MST


If one wants to look at the future of Oil and Natural Gas, and thus the future of Alberta’s economy, I would suggest looking at Chile. That country is interesting because of its weird geography and thus its odd climate. While, it is only about half the size of the Province of Quebec, it has a broad selection of climates. Covering much of the South American Pacific Coast, Chile has deserts in some parts and a Mediterranean-like climate in others. However, Chile also has portions of the country which are cold and have Canadian-like Tundra.


With such disparate climates, one would think that Chile would not have an innovative energy grid. However, one would be wrong. Chile has a competitive electrical energy market where people bid for contracts. In this market, there are no subsidies or market distortions. In that environment, three solar farms just outbid two wind farms and a coal power plant for new electrical energy contracts. Those three solar farms offered to sell power to the grid at about $65 and $68 per MW/hr.


In the same auction, no one could match that price. Wind farms offered to produce power at a costly $79 per MW/hr; while competing coal and thermal plants were even more expense demanding, respectively, $85 and $97 per MW/hr to produce power for Chile’s electrical power grid. Or put differently, the lowest price provider in that auction was the solar farm. Given that Deutsche Bank analyst Vishal Shah reported this event; it would be hard to say that this account was tinted by the eyes of an ideologically-bound environmentalist or a politically ambitious individual.


With that being said, this is not an outlier. In a recent interview with Bloomberg TV, Chilean Energy Minister Máximo noted that the Government of Chile had hoped for more of the same. In a document called “Roadmap to 2050: A Sustainable and Inclusive Strategy”, the Government of Chile noted that by 2050 Chile could produce 29% of its electrical needs from hydroelectric projects, 23% of its needs from wind power and 19% of its needs through solar generation. Accordingly, one can see that the market, without pressure, is pushing towards that outcome. While, Chile is hindered by transmission infrastructure, the Government has already approved 2.1 gigawatts of additional electrical projects and is poised to hit their goals.


These numbers are very similar to Denmark. Denmark has been reducing their use of coal-fired power plants since 2005. Where coal used to be Denmark’s main source of electrical energy, now 41.07% of Denmark’s power is harnessed from the wind. Because the wind doesn’t always blow, Denmark has a number of ways to stabilize the grid. Ten percent of their power comes from nuclear power plants; while, Denmark supplements their electricity grid with hydroelectric imports through interconnections with Germany and Sweden.


In fact, if one wants to search, one can find these types of stories in the Caribbean, Netherlands, the US and China. Governments – in record fashion – are moving away from coal, oil, and natural gas toward more innovative ways of producing electricity. For example, Danish and Dutch engineers have been working on a smart grid which will be able to use cars as batteries to store excess renewable power when it is available and expel it – to the grid – when there are shortages.


In such an environment, where Electric Cars are produced by Tesla, Ford, GM, Nissan, and Toyota, one might ask what the future of Alberta is. From my point of view, the answer is simple: Alberta needs to innovate.


Through the Albertacanada.com website, the Government of Alberta notes that Alberta “boasts the highest per-capita ratio of engineers” in Canada and “one of the highest in North America.” We are equally gifted with entrepreneurs, business executives and self-starters. This means that we can create new industries and grow existing ones.


Think about it. In 1906, in reaction to Bell Canada, Liberal Premier Alexander Rutherford purchased a number of Alberta telecom companies to form AGT, the predecessor to Telus. While, in the 1950s, because the province said they couldn’t afford to electrify rural Alberta, Albertans formed rural electrification associations (REA). REAs continued into this century providing rural Alberta with the necessary infrastructure.


Or think about the history of Syncrude. While, it started with private funds, Syncrude couldn’t find its way to profitability. It required more money and the private market was not going to provide it. However, Premier Lougheed stepped up to the plate. With the assistance of the Government of Canada and the Government of Ontario, Premier Lougheed put Public Money at risk. The Government of Canada bought up 15% of Syncrude; while Alberta bought 10% and Ontario bought 5%. That effort allowed for the technology to be developed which eventually led to the mining, exploitation and profitable extraction of bitumen from the Athabascan Oil Sand Deposit. That public investment led to the growth of what is now Fort McMurray and to Alberta’s rise as an energy power.


The Government of Alberta and the People of Alberta have developed through innovation and risk. Today is no different. As Chile has done, we can move beyond coal. In my previous writing, I have suggested that our electric grid could use a mix of wind, geothermal, natural gas and solar power while using Tesla PowerWall technology (or another generic brand) as a back-up. Given the number of engineers in this city, it is not difficult to see new companies developing if they had the right capital. Not long ago, I also suggested that this capital could be found if Alberta created a new venture capital institution. Similar to ATB, this new venture capital institution would be able to pair some government money, with money from private investors and depositors. Such a “mercantile bank” would be able to fund start-ups and allow Alberta to naturally diversify itself. All of this is possible, if we are willing to take a plunge.


I know I am willing. For such a start would be in the best interest of the most people. It would not reduce the rights of any minority. In fact, it would enhance the economic strength and professional diversity of Alberta. Given that this would provide the best good for the greatest number, without harming any individuals, who would stand in front of the strength of Alberta?

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