A discussion on clean coal, solar, wind and why Alberta doesn't need renewable energy targets
AlbertaVenture.com | December 15 | Executive Speak

Photo credit: Bluefish

Capital Power has come a long way in the last two years. The Edmonton-based electricity provider was created by Epcor Utilities – from it, really – in 2009 as part of its restructuring plan, one that saw Epcor move out of the power generation business and into “water and wires.” Epcor still controls a significant chunk of Capital Power’s common shares: 49 per cent, down from 72 per cent at the time of its creation. But if Capital Power’s recent transactions are any indication, it is starting to find its own identity. Yes, it’s still in the business of generating coal-fired electricity – it turned over the reins of Keephills III, Alberta’s newest coal-fired plant, to joint-venture partner TransAlta in September – but it has also invested in some key renewable energy assets of late. In this interview with Alberta Venture, CEO Brian Vaasjo shares his thoughts on the company’s ongoing evolution.

AV: Capital Power recently sold its 29 per cent stake in Capital Power Income LP to Atlantic Power Corp. for just over $320 million. What was the rationale behind that decision?
BV: We believed that it was in the best interest of all unit holders. The business plan for Capital Power is to build power plants in selected areas in North America, and each of those represents fairly significant investments. Capital Power Income LP has a bunch of very good assets with long-term contracted cash flows, but they don’t fit us strategically. A number of them are in the wrong geography, a number of them don’t have the technology that we plan on employing going forward and, on average, they’re fairly small.

AV: In other words, it was more a question of fit than function.
BV: Our entire investment in Capital Power Income LP is about $320 million – that’s the cost of a reasonably sized wind farm. For us to properly manage those assets, which we’ve been doing, takes a considerable amount of time, energy and focus. From the executive standpoint alone, it probably takes 25 per cent of our time on average to manage that partnership, and when it’s less than 10 per cent of our investment base, it just doesn’t make any sense in the long term.

AV: Earlier this year you decided to buy out your partner in the Halkirk I wind project. Is wind an area that Capital Power will move into more aggressively in the future?
BV: It isn’t that there’s a particular model that we’re pursuing. It’s about finding good, solid opportunities that meet our geographic and technological criteria and also provide us with an appropriate return. As it happens, the Halkirk project fit with us geographically and was a good, strong project with good fundamentals.

AV: Why invest in wind?
BV: There are a couple of reasons. Generally speaking, they’re contracted, long-term cash flows, in a technological and geographical area that we’re familiar with. Secondly, when you look across North America, what are the kinds of opportunities
that exist? They’re generally in the renewable space. One, for example, that we’re exploring fairly vigorously is solar power in the U.S. southwest.

AV: Albertans tend to associate Capital Power with its coal-fired power plants, but your activity on the wind side – in addition to the Halkirk project, you’ve invested in two major wind projects in Ontario and one in British Columbia – seems to suggest that you’re becoming a major player in the green energy economy. Is that by design?
BV: We are 49 per cent natural gas, 36 per cent coal and 14 per cent wind, and then there’s a one per cent sliver that’s a combination of biomass and tire dry fuel. That’s by megawatts, not by earnings or financial contributions, but it gives you an idea as to what our portfolio is shaping up to be. Over time, we do expect the natural gas side and the renewables side to grow fairly significantly for the next decade.

AV: How big of a slice could solar power occupy in, say, 10 years?
BV: Solar power, particularly in the U.S. southwest, is huge. It will outstrip wind in terms of the development in that area over the next five or six years. California, Arizona and Nevada all have renewable energy targets that are in the 20 to 30 per cent range.

AV: Would you like to see the Alberta government implement similar targets for renewable energy?
BV: They actually don’t need to. If you look at the renewables side in Alberta, we’ve got on the order of 10,000 MW of generation, and we have 700 MW of wind already, with another 500 MW that’s being talked about. We’re building another 150 MW; our initial partner in Halkirk is building 300 MW, so there doesn’t seem to be any great need to set a standard.

AV: Can clean coal be achieved at a reasonable cost to industry?
BV: Absolutely. We in Alberta are among the most advanced, if not the most advanced, when it comes to actually doing things. There are a number of reasons why clean coal makes a whole lot of sense. Start with the big picture, the accessible coal reserves in Alberta. If you summed the BTU value of natural gas, oil and oil sands, it would be half what the accessible coal is. Another measure is that we have enough accessible coal to last us for 800 years. From time to time, you see the Alberta government being extremely sensitive around exploiting coal, and that’s why: it’s such a huge resource. That’s why both the federal and provincial governments are so supportive of moving forward on the technology front.
I would be surprised if, within a decade, there wasn’t another coal plant being built in Alberta that met natural gas emissions standards. In fact, I’d be surprised if we weren’t building one.

AV: Can Alberta be a world leader in clean coal technology?
BV: It absolutely can. From time to time there’s criticism of the Alberta government’s $2-billion carbon capture and storage program, but that is what’s going to enable Alberta to stay ahead. We’re getting research interest from the United States, China and all parts of the world who look at what’s being achieved here and the commitments that the government is making, not only financially but in terms of federal and provincial regulations, as well. It’s all there. All the pieces are there for us to be a world leader in carbon capture and storage and clean coal technology.

Originally ran December 15, 2011 in the digital edition of Alberta Venture Magazine. Retrieved online December 15, 2011 from http://albertaventure.com/2011/12/capital-power-ceo-brian-vaasjo-leads-alberta%e2%80%99s-newest-utility-towards-a-greener-future/