Canada's western province of Alberta has long been synonymous with oil and gas. At its heart are the nation's oil sands, the most carbon-intensive oil developments in the world.

Yet while Alberta's oil producers are stalling growth plans and slashing spending amid low oil prices and market uncertainty due to Covid-19, market-watchers are optimistic that the province's energy sources above ground, rather than beneath the surface, will expand in the coming years.

A new Rystad Energy analysis of more than 500 wind and solar photovoltaic projects that are either under development or currently operating anticipates Alberta will become Canada's largest producer of wind power by 2025. It is also expected to be the largest solar producer, says Felix Tan, senior analyst, renewable energy at the consultancy.

Alberta's expected move to overtake Ontario – the province with the most wind-power capacity in Canada today – and Quebec, which ranks second, is achievable because of its vast wind resource, government support for private electricity projects and a deregulated market that encourages investment, a spokesperson for the western province tells Upstream.

"The quality of our resources, coupled with our openly competitive electricity market, is why the private sector is bringing forward more wind and solar projects than any other form of generation," the spokesperson says, noting that Alberta is also home to Canada's first utility-scale wind farm, the 75-megawatt McBride Lake.

Alberta's buildout

Overall, wind-power capacity in Canada is expected to grow by about 42% from 14 gigawatts this year to 20 gigawatts by 2025.

Alberta is expected to dominate that growth, taking about 70% of the nation's future wind-power capacity.

"Looking at each of the individual projects, we've concluded that within the next five years, if you add all of these up, you do have a lot of capacity buildout," says Tan. "And that does mean they overtake Ontario as the province with the most installed wind and solar photovoltaic capacity."

The wind resource in Alberta is among the strongest in the country, according to Evan Wilson, senior director of Western Canada at the Canadian Renewable Energy Association (CanREA).

As the oil and gas industry tries to curb its own emissions, it also has a role to play in Alberta's wind-power development. Calgary-based Suncor Energy has led the charge by developing its own wind facilities, and other players provide a strong market as electricity consumers and buyers of carbon credits and offsets.

"We are seeing oil and gas companies diversifying their portfolios to include renewables across the globe, and Canada is no exception," says Paul Van Der Weg, Siemens Gamesa's managing director, Canada. "The renewables industry has a track record of generating solid returns, and oil and gas companies are seeing renewables as a safe place to deploy capital."

Siemens Gamesa has supplied equipment for a number of wind projects in the province.

Deregulated market

Alberta, with its vast oil sands operations and industrial complexes, provides a ready market for electricity. The province also plans to phase out coal by 2030, opening up space in the market for new electricity providers.

Alberta is unique in Canada in that its electricity sector is deregulated, generally making it easier for corporate buyers to hash out a power purchase agreement (PPA) directly with a provider, Tan says.

"So if I own a solar plant and am looking for offtakers, I can sort of look for corporate offtakers quite easily," he tells Upstream. "Compare this with other provinces; it is not as straightforward."

Siemens Gamesa sees unique opportunities in the province's growing virtual PPA space, where the power is generated elsewhere but counts towards the buyer’s own decarbonisation goals.

"We think that will help drive growth," says Van Der Weg.

A growing renewables industry also offers something that the heaviest emitters in the province crave: carbon credits to lower the levy paid to the government for carbon emissions.

Through the provincial government's technology innovation and emissions reduction (TIER) system implemented earlier this year, industrial emitters that fail to meet carbon dioxide emissions targets may choose to pay a $30-per-tonne carbon tax to the provincial government, which plans to invest the money to develop emissions-reduction technologies.

But large emitters may also choose to buy credits from another facility or carbon offsets.

The potential growth in the market for carbon credits bundled with the market for electricity may be especially attractive to renewables developers, according to CanREA's Wilson.

"If you have revenue coming from the energy-only market, and you have revenue coming from the sale of your green attributes or the sale of your credits, there is a pretty compelling case to make for renewable investments here in Alberta," Wilson says.

The province has a target to reduce methane emissions from upstream oil and gas operations by 45% relative to 2014 levels by 2025.

Covid-19 impact

Earlier this year, Suncor temporarily suspended its large Forty Mile wind project in Alberta as it slashed spending in response to low commodity prices and the Covid-19 pandemic.

But for Siemens Gamesa, which has a contract to supply 45 of its SG 4.5-145 model of wind turbines for the Suncor project, the future remains bright in the region. The company, which already has 2.9 gigawatts of installed capacity in Canada, also has a contract with Liberty Power to supply 35 of its SG 5.0-145 turbines for Algonquin Power's Blue Hill project in Saskatchewan and another to supply 43 of its SG 4.5-145 turbines for Transalta's Windrise project in Alberta.

Meanwhile, the US-based group controlled by billionaire Warren Buffett has been looking for offtakers for long-term power purchase agreements (PPAs) for what it says could be Canada's largest wind farm. The Alberta project is expected to have a generation capacity of 398.5 megawatts.

So while Covid-19 definitely has affected global supply chains and construction timelines, it has not necessarily discouraged wind-project developers or asset owners, Tan says.

"Looking at the next five years we do see, at least in Alberta, a lot of permits being awarded (for project development)," he says.