Low gas prices could doom new coal power

In 2000, Alberta generators responded to high electricity commodity prices and the perceived shortage in electricity capacity by getting new power generation projects underway. There are currently more than 4,600 megawatts of new capacity announced to be on-line by the end of 2005 in Alberta, much of which will be co-generation projects associated with break-neck oil sands expansion programs in the Fort McMurray area. Other major stations are planned in southern Alberta, including Calpine Energy's 250 megawatt Calgary Energy Centre, AES Corp.'s 525 megawatt gas-fired station east of Calgary, and other stations in the 100 megawatt range planned by TransCanada and the PanCanadian Petroleum Ltd. for Medicine Hat and Balzac. Wind turbine projects are also scheduled for the Pincher Creek region. With concerns that the North American demand for electricity will soften as the economies of Canada and the United States weaken, it has been suggested that Fording Coal Ltd.'s two-stage 1000 megawatt mine-mouth coal-fired power generating station at Brooks, Alberta scheduled to be on line by 2005 would be more economic and efficient as twin 500 megawatt units as opposed to a single 400 megawatt unit. There is no certainty yet that the plant will be built, given the current market conditions. TransCanada PipeLines Ltd. also completed construction of an 80 megawatt co-generation facility at Agrium Inc.'s Carseland nitrogen fertilizer plant. This facility will generate about 60 megawatts of electricity and thermal energy for the plant and will deliver 20 megawatts into the Alberta Power Pool when it is fully commissioned. It was emphasized that the way in which power demand develops over the next 3 to 5 years will determine which projects will actually come to fruition. Demand growth may be hampered if gas prices remain soft and there may not be room for all that capacity. It is possible that only half of the planned projects will actually get built. Average pool prices in Alberta were significantly lower in 2001 than in 2000, reflecting the fall in natural gas prices. If the EPCOR and TransAlta expansions west of Edmonton go forward, much work will have to be completed on the Edmonton-Calgary transmission corridor, particularly if overbuilt capacity will be exported to the United States