Alberta’s Bioeconomy: Under Construction

bioeconomy

Last week the Government of Alberta announced its fourth renewal of the Bioenergy Producer Program. Bioenergy program history is summarized as follows, based on published program information:

2007-2011:  Support for liquid biofuels, electricity and biogas  ($239 Million, original estimated allocation to this program as well as programs supporting bioenergy infrastructure and capacity development over 5 years; reduced in subsequent provincial budgets)

2011-2016:  Support for liquid and solid (wood pellets) biofuels, electricity and heat, biogas ($336 Million, original estimated allocation over 5 years; reduced in subsequent provincial budgets)

2016-2017:  Support for liquid biofuels, electricity  ($60 Million allocated over 18 months)

2018-2020:  Support for electricity and liquid biofuels ($63 Million allocated over 2 years)

The original 2007 program was first announced as part of Alberta’s 2006 Nine Point Bioenergy Plan and was led by Alberta’s agriculture ministry to support development of a bio-industrial sector. Development and administration of Alberta’s bioenergy programs started in Alberta’s agriculture ministry, then moved to Alberta’s energy ministry in 2008, and then to Alberta’s environment ministry in 2016 where it is currently managed under the Climate Leadership Plan.  Primary policy intent has shifted between economic diversification (especially rural) and greenhouse gas emissions reductions over the years, but currently appears to be a combination of the two.  Energy diversity has been of interest, as well as social license to support access to export markets for Alberta’s non-renewable hydrocarbons ((e.g., under Alberta’s 2008 Energy Strategy).  Unlike the United States, however, energy security does not appear to have been a significant policy driver for Alberta to date.

Over the years, provincial support for bioenergy and Alberta’s Bioeconomy have also included the following:

  • an ethanol tax credit for blending ethanol in gasoline sold in Alberta was in place until it was replaced by the producer credit program in 2007;
  • Environmental regulations restricting pulp mill effluents put in place in the late 1980s was a significant factor in the development of biomass-fired generation at Alberta’s pulp mills  — mostly in place prior to 1998 and the main source of biomass-powered generation today;
  • the Small Power Research and Development Program Act, passed in 1988, supported renewable electricity including biomass-fired generation.  Government support was replaced with third party electricity contracts during deregulation of Alberta’s wholesale electricity generation in the 1990’s;
  • In 2011, Alberta introduced a Renewable Fuels Standard to require blending of biofuels in gasoline (5% ethanol) and diesel (2% biodiesel) fuel sold in Alberta;
  • Alberta Innovates, Innotech Alberta and predecessor organizations, as well as Alberta’s agriculture ministry have provided innovation funding, research facilities and technical expertise supporting technology development for bioenergy and the broader Bioeconomy; and
  •  Alberta’s environment ministry has also provided regulatory, technical guidance and programs to support composting of municipal waste for over 10 years.

While actual government program expenditures were less than the above allocations (and can be found by working through the Government of Alberta Annual Reports), Alberta’s total allocations since 2007 to present represent the largest commitment to the bioenergy sector ever made by any one province.  Unfortunately, efforts to stimulate this sector have not yielded the self-sustaining industry that has been hoped for.  The bioenergy and bio-industrial sector have faced substantial challenges over the years include the 2007-2008 Global Economic Crisis, policy uncertainties in Alberta, Canada, the United States and Europe, social license issues such as the “food versus fuel” debate, depressed natural gas and electricity prices, and a carbon price that has not been sufficient to close the gap between low energy prices and the economically viable price point for various forms of bioenergy.  Finding “patient capital” to support the typical 10-12 year bio-technology commercialization timeframe and longer ROI timelines than IT-based projects, has also been challenging.

Bioeconomy,biofuel,biomass

Global, national and provincial policies appear to be trending favourably for the bioeconomy:  Will Alberta’s policy framework delivery for our bioeconomy?  Alberta’s third and fourth renewal of the program appear to represent a transitional effort to sustain existing production until policy and market conditions are more favourable for a self-sustaining sector, but is not of sufficient duration to suggest long-term bioenergy price stability to attract new investment.  However, other programs announced as part of the $1.4 Billion recent provincial climate change leadership commitment, and other recent or future provincial and federal policies and programs may provide more positive signals to investors and developers. Positive actions might be including biomass-based generation in future renewable electricity program calls and a clean fuel standard including natural gas and increased biofuel blending requirements in gasoline and diesel fuels. Based on presentations delivered at the Scaling Up Bioeconomy conference in Ottaway November 27-29, 2017, it appears that interested investors and financers are willing to consider investment providing there is reasonable policy stability and they can be confident about security of feedstock supply.  Current risks include increasing competition for quality feedstocks which will drive up price, increasingly stringent sustainability and GHG quantification parameters for biomass feedstocks, and uncertainty about the role of liquid fuels vs. electricity in ground transportation.

At the Bioenergy for the Future event in Ottawa on November 27, 2017, hosted by Natural Resources Canada and the International Energy Agency, IEA experts stated that bioenergy is essential to meeting Paris COP 21 GHG emissions reduction targets by 2030, particularly to achieve emissions reductions in the transportation sector, the aviation sector in particular.  Paolo Frankl, Head of IEA Renewable Energy Division put it bluntly:  There is no Plan B for a low carbon future without a massive scale-up of bioenergy. Anne-Helene Mathey of the Canadian Forest Service reported that, according to recent studies, Canada could provide approximately 30% of the world’s biofuel supply for transportation but we also need to ensure sustainable supply.  Aviation transport is likely to be an important growth market for advanced biofuels. Current estimates identify the following unused annual wood/fibre biomass residues across Canada: 20 Million tonnes in unused forest harvest residues; 50 Million tonnes in salvage from natural disturbances, 20 Million tonnes in crop residues, not to mention other urban, commercial, agricultural and industrial wood and non-wood biomass sources.

Alberta should be well positioned to contribute to sector growth based on its diverse and abundant residual biomass supply alone, providing the investment and project development climate is attractive.

Susan Carlisle is President of Carlisle Consulting. She can be reached at 780-554-7134.