For most of its history, Ice Energy has been treated as a clever, if unorthodox, start-up on the fringes of the North American electricity industry. During his former life as a lawyer in Calgary, current CEO Mike Hopkins was first drawn to the California-based company because of how simple and ingenious its product sounded: oven-sized batteries that offset air-conditioning demand during peak daytime hours by making, and then melting, blocks of ice.
Illustration by Min Gyo Chung
The trouble was, companies like Ice Energy haven’t exactly been in step with how the industry traditionally functions. North America’s electrical grid was designed to meet peak demand without energy storage. “It worked around the problem by overbuilding transmission and oversizing distribution,” says Hopkins. The 13-year-old Ice Energy and its ilk, meanwhile, are geared towards renewable sources of energy, like wind and solar, which are naturally intermittent. As a result, Hopkins, MBA ’84, says his business, “like every other energy-storage company, was operating in a market that really was a market for research and development.” Utilities were interested enough to do a pilot project, maybe, but that was about it.
How things have changed these past few years—and not just for ice peddlers. Here in Canada, and particularly in Alberta, the electricity industry has been uprooted by national carbon taxes and mechanisms reimagining the way electricity is bought and sold, the implications of which are not yet fully known. As we leap into a future built around renewables, the electrical grid, as we know it, must not be just reimagined but physically rebuilt. Existing utilities must innovate to survive. And citizens, in order to realize the green future they’ve demanded, must prepare to pay up.
But what will they be paying for? Ice batteries are just one potential solution angling for a share of this rapidly evolving market. Plans are underway to transform the coal-focused (and aptly named) region of Carbon County, Wyoming, into the continent’s largest wind farm; Elon Musk and Tesla are trying to reinvent roofing with glass shingles and solar cells underneath. Here in Canada, a recent wave of federal and provincial policies is poised to push us into similarly new territory. Simply put, it’s no longer a question of if Canada will adopt green electricity, but when, and to what extent.
The writing has been on the wall for decades, even if it has been largely erased or ignored. Consider the country’s role on the international stage: Canada pulled out of the Kyoto Protocol in 2011, more than a decade after first signing on. The country isn’t on pace to meet the emissions reductions specified in 2009’s Copenhagen Accord either. “We have a long history of setting targets we don’t meet,” says Carmen Velasquez, Executive Director of Energy Programs at the Alberta School of Business.
Last year, Justin Trudeau’s Liberal government signed Canada up for yet another international climate accord. In fact, the country’s targets in the Paris Agreement—a 30 per cent reduction in greenhouse gas emissions from 2005 levels by 2030—were set by the Harper administration (the same one that withdrew from Kyoto and dragged its heels on Copenhagen). But Trudeau has already taken further steps. Namely, the announcement this past October that, unless provinces implement their own carbon-pricing structures, Canada will be implementing a nationwide carbon tax for the first time: $10 per tonne starting in 2018, incrementally rising to $50 by 2022. The tax, which targets energy generated from fossil fuels like coal, will help bring Canada in line with a growing global desire to cut climate change off at the pass.
The carbon tax could also create a more level playing field for renewables, which are zero emitting and could thus become more affordable by comparison. But in fact, when it comes to emissions, we’re already further along than many Canadians might think. “If you look at the rest of the country, it’s already quite clean,” Velasquez says. Approximately 80 per cent of the country’s electricity already comes from non-emitting sources like hydroelectric, nuclear, wind and solar. The real challenge is increasing that number to 90 per cent nationwide by 2030, as planned. And to do that, substantial changes are needed—especially in Alberta, where emission levels are higher than any other province, reaching 273.8 megatonnes in 2014, more than four times the output of B.C., with roughly the same population. And it’s still climbing.
Trudeau wasn’t the only climate-conscious politician to come to power in 2015. When Rachel Notley and the NDP swept the Alberta election in the spring of that year, many wondered how her party’s progressive politics would mesh with the province’s more free-market tendencies—including its electricity industry, which has been deregulated since 1996. The province’s Climate Leadership Plan, which pledged to cap oil-sands emissions and develop more renewable energy sources, was an important first step. But it wasn’t until last November that Notley’s government announced a suite of its own concrete reforms to the provincial electrical system, each with significant ramifications.
Some of those plans, such as banning door-to-door utility sales and putting an upper limit of 6.8 cents per kilowatt hour on electricity rates for families and small businesses, were designed to protect consumers. Others were intended to facilitate and speed up the transition away from coal, from which Alberta still generates the majority of its electricity. By 2030, the NDP government pledged that 30 per cent of the province’s total electricity will instead come from renewables.
One of the biggest challenges to Alberta’s electricity industry is shifting away from a wholly deregulated “energy-only” system and adding what’s called a capacity market. This will allow power plants to bid on contracts to produce electricity in the future—a system that again opens the door to renewables, which were hard-pressed to compete under the former set-up. With a less volatile system in place, energy spikes during inclement weather, and thus their blackout counterparts will become less frequent. Consumers will face less price volatility, while for generators, “a capacity market means their year is no longer made or lost in a matter of hours,” wrote former TransAlta head trader Blake Shaffer in the Calgary Herald.
In all, the province, through its Renewable Electricity Program, could add an additional 5,000 megawatts of renewable energy capacity by the time coal (and its 6,267 megawatts) is phased out in 2030. This means that nearly a third of Alberta’s entire current electrical capacity is slated to be replaced in little over a decade.
Ice Energy CEO Mike Hopkins. Photography by Kelly Sweda.
This represents significant opportunity for the electricity industry. It also comes with a hefty price. The Alberta NDP estimates the province will need $25 billion in new infrastructure to shift towards natural gas and renewables by 2030. “And that’s just on the electricity generation side,” says Trevor Smereka, BCom ’89, executive vice-president of the independent energy-management firm 8760. Meanwhile, Alberta’s carbon tax, which will supersede the national one proposed by the Trudeau government, isn’t directly applied to consumer energy rates, so not only will it show up in direct costs, like gasoline and natural gas heating, but indirect costs like food imports. “What does that do to the overall economy?” he asks.
To help offset some of these new costs, the NDP will offer rebates for low- and middle-income Albertans, as well as reduced tax rates for small businesses. But Smereka believes that many of his clients at 8760, including mid-sized and large corporations, school districts and seniors’ housing, will be on the hook for the full amount. The province, he says, is also home to electricity-intensive industries like forestry, agriculture, manufacturing and petro-chemicals—some of which could decide to leave Alberta in search of provinces whose carbon plans are more business-friendly. “So Alberta has to be careful,” he says. “The lights are on, but will anybody be home?”
Smereka thinks a more robust conversation remains to be had among Albertans about the true costs involved in the NDP’s plan to move towards renewables. He isn’t alone. As the CEO of EPCOR, electricity distributor for the City of Edmonton and other municipalities, Stuart Lee, BCom ’86, also has the changing utility landscape on his mind. He hopes Alberta learns from Ontario’s recent expansion into renewables, which, he believes, didn’t give the public a clear understanding of the true costs involved at the outset. “You ended up with unintended consequences,” he says, “and you’ve seen electricity prices effectively double over the past 10 years.” As Alberta attempts to green its own electrical grid, Lee argues the public must be properly informed and prepared for the future costs, which could jump more than 60 per cent from their current historic lows, according to estimates by energy investment firm FirstEnergy Capital.
For his part, Smereka doubts the math will ever work, even with proper precautions. “I cannot think of any scenario whatsoever, despite what the politicians and the environmentalists say, that renewable energy is cheaper,” he says. “Overall electricity costs are going to be higher going forward, pretty much forever.”
Ice Energy’s commercial ice battery air conditioning system, Ice Bear, which charges by making ice during off-peak hours when rates are low. When temperatures go up, Ice Bear’s smart-grid controller allows monitoring of energy use. Photo supplied by ICE Energy.
There is an additional X factor, however. The technology around renewables is improving at a rapid clip, becoming smaller, cheaper, more efficient, and its impact may change things in ways we can’t foresee. The same rules of exponential advancements that apply to smartphone technology could also apply to renewables. “A lot of people believe that renewables are a product of public policy,” says Hopkins. “That’s not accurate. Renewables are driven by technology.”
For instance, one shot against green energy sources is they are, by nature, intermittent. You can’t create solar power if the sun isn’t shining, or wind power if the turbines aren’t moving. But that’s only a problem if you require generated energy immediately—and if companies like Ice Energy can solve the storage question, then the future looks different indeed. “There is no other delivery system in the world, for any commodity, that lacks storage,” says Hopkins. “You don’t have to deliver milk in real time, from cows to you. You have a cost-effective, reliable way of storing it so you can produce it at a constant rate, store what you don’t need, and then make sure the consumer gets what they want, when they want it.” Electricity, in this sense, is unique, and thus ripe for disruption. “You can’t have significant renewable energy without energy storage.”
The turning point for Ice Energy came in 2013, when the State of California, buoyed by the success of its own renewables, mandated utility providers start procuring significant amounts of energy storage. That announcement was good news to Hopkins, but made legacy utilities a little more nervous. Here in Alberta, EPCOR sees a large part of its future tied to the City of Edmonton’s environmental strategic plan, which also includes emissions targets and support for renewables. EPCOR’s energy supplier, Capital Power, on the other hand, has responded to the Notley government’s plans with guarded optimism, recognizing the billion-dollar opportunities for future investment in wind farms, while also acknowledging that without government compensation, they stand to lose around $100 million per year for the next twelve years.
It’s too early to know exactly what the cost for revamping an entire electrical grid will be. But even if costs are as high as analysts like Smereka predict, Canadians are getting what they asked for when they elected governments who campaigned on building a stronger environmental profile. They might even decide that taking decisive action against climate change is worth the price, given the state of the world’s icecaps and sea levels, and more frequent extreme weather.
One thing is for sure: electricity is poised to become a political issue in Alberta like never before. “You’ve got a major policy shift coming here,” Lee says. “You’ve got an opposition that clearly has different views on it. In the next election, electricity is going to be one of the major policy discussions. And if you ended up seeing a change in government, you could see another change in direction around electricity policy, which creates more uncertainty.”
In a fully regulated industry like those in Canada’s other provinces, drastic changes in policy and even the ruling party have a limited effect. But in Alberta, Lee says, it could be a different story. “When you’re dealing with a competitive market design, and you have major policy shifts every four, eight, twelve years—and you’re making 50-year investments—that’s problematic.”
But that doesn’t mean it’s not worth the effort. While analyzing the push to green the grid and lower emissions to sustainable levels, Velasquez borrows a famous hockey maxim: You miss 100 per cent of the shots you don’t take. “So let’s at least try,” she argues. “Even if we don’t get there, we’ll at least change the direction.”
Michael Hingston is a novelist and Edmonton-based contributor to Wired, the Guardian and The Washington Post.