by Emma Foehringer Merchant
September 03, 2019

In the solar arms race, Canada is more footnote than headliner. An approval granted last week for a 600-megawatt solar plant in Alberta aims to change that. 

Dan Balaban, CEO of Greengate Power Corporation, the developer building the CAD $500 million (USD $376 million) solar farm, said the company likes to work on “paradigm-busting projects.”

“I think it’s proving that the mega-projects that make economic sense elsewhere in North America and…around the globe can also work right here in Alberta,” said Balaban.

So far, Canada has been home to zero of those mega-projects. The largest solar installations currently operating there top out at 100 megawatts, according to government data. According to the Alberta Electric System Operator, several other large projects are in the works and scheduled to come online in 2020.

That makes Canada an outlier in North America, where gigantic projects have become the norm. The U.S. has already-operating projects such as the 550-megawatt Topaz and the 579-megawatt Solar Star, both in California. Mexico’s Villanueva solar project is over 750 megawatts.

Colin Smith, a senior solar analyst at Wood Mackenzie Power & Renewables, said the size of the Greengate project is becoming “somewhat standard” for developments in U.S. states such as Texas.  

“For Canada, this is a really big announcement,” he said.

WoodMac forecasts that Canada will add between 207 megawatts and 262 megawatts of solar annually over the next five years. The addition of the 600-megawatt Greengate project will significantly boost that number in the year it comes online, but if it were a U.S. state, Canada’s market wouldn’t even rank among the top 10. 

Solar signpost

Binnu Jeyakumar, the director of clean energy at the Pembina Institute, a Canadian think tank focused on the energy transition, said the Greengate project could act as a signpost for a budding solar market in Canada. 

“Part of it is just Canada catching up a little bit,” she said. “Our renewable industry has seen spurts of growth and periods of plateau.”

Policy support from provinces and a federal carbon pricing scheme offered benefits for renewables development in the last several years. But more recent changes, like the cancellation of 758 clean energy contracts in Ontario and a rollback of incentives in Alberta, have brought some uncertainty into the mix.

Much like in the U.S., past renewables incentives favored wind because it outcompeted solar on cost. Wind makes up about 5 percent of Canada’s currently installed renewable resources, compared to the 1 percent that solar accounts for. 

Greengate actually developed Canada’s then-largest wind project, with a capacity of 150 megawatts, in Alberta back in 2011 and 2012. In the province’s most recent competitive auctions, wind also outcompeted solar. Balaban said by next year the province will have about 3 gigawatts of wind and only 100 megawatts of solar. 

But due to cost declines, Balaban said solar is now the renewable resource to watch. The 600-megawatt project is scheduled for completion in 2021.

“Wind, over the last decade, has been more cost-competitive than solar,” said Balaban. “But solar has reached the tipping point where I believe solar is the most cost-competitive renewable in Alberta.” 

Merchant plant

The same economic factors driving global solar growth are having an impact in Canada.

“When you look at the overall dynamics — just like everywhere else in the world — the biggest contributor is the changing economics of solar. We’re also seeing it becoming much more economical and starting to compete with traditional sources of generation,” Jeyakumar said. “That’s the number one shift we’ve seen.” 

An indication of that competitiveness: Greengate will sell the solar power its project produces into the merchant market. That “tells you the level of confidence they have in the market,” said Jeyakumar.   

Alberta is the sole energy-only market in Canada. Balaban expects competitive prices driven by a higher concentration of wind and a move toward renewable generation.

“The underlying dynamic in Alberta is that most of our power today comes from coal. It’s all been mandated to be phased out by 2030, which is driving the need for a whole bunch of new generation to be built in the province. We [also] have a carbon pricing regime on large emitters,” said Balaban.

“Those two things in combination create strong conditions for the build-out of renewables in Alberta and specifically solar, because it tends to realize much higher prices in the market than wind does.”

According to Jeyakumar, large projects like Greengate’s are likely to make the most economic sense in areas like Alberta. She said southern Alberta has the best solar resources in Canada, along with Saskatchewan.

But Alberta’s clean energy industry has faced some recent headwinds. In June, a newly elected government eliminated the province’s 30 percent renewables by 2030 requirement and canceled a provincial-level renewables auction that was supposed to help meet that target. Three previously held auctions had been an important avenue for growth in Alberta, bringing in over 1 gigawatt of renewables.  

At the same time, Jeyakumar said development in Ontario remains a “question mark” after contract cancellations. That province is also challenging the federal government's carbon tax in the Canadian Supreme Court. 

In order for solar to truly compete and achieve the successes seen by Canada’s peers, Jeyakumar said the country will have to overcome such policy stops and starts. She suggested the changes have kept significant investment at bay, which has been particularly difficult to surmount in an underexposed market.   

“The economics of these clean energy technologies are changing pretty rapidly, and in most of our provinces the policies and regulatory framework design haven’t kept up with the pace at which the economics of renewables are changing,” she said.

“Whether it’s procurement policies or having carbon-pricing signals that send long-term signals to investors, I think any steps we can take to provide policy certainty to investors will enable more" solar.