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Changing channel: Calgary clean energy investment, net zero
Gary Park for Petroleum News
The economic outlook for Calgary, the city that for decades reveled in its role as the home base for Canada’s petroleum industry, along with far-flung global operations, has been dominated in the last six years by a ballooning vacancy rate in its forest of downtown skyscrapers.
By the latest count, the empty space totals 15 million square feet or 34%.
That has been accompanied by signs of an exodus by those under the age of 30, disillusioned with their job prospects in the oil and gas sector, which has shrunk the industry’s Canadian payroll by an estimated 100,000-plus since 2015 as companies have slashed capital budgets and been pummeled by a federal government that seems bent on destroying the oil sands sector.
But all that has changed - though no one in authority will predict for how long - with a stunning rebound in oil and natural gas prices, accompanied by the first glimmerings of hope for a fast-growing high-tech sector that has attracted pledges in the past month of C$7 billion in upfront investment.
Plans for city Mayor Jyoti Gondek has wasted no time rolling out plans in the month since she was elected to rescue Calgary from its economic funk.
While warning that the city should not expect an “easy road out” of its difficulties, she has won her council’s approval by a vote of 13-2 to declare a “climate emergency” for Calgary - a variation of similar versions adopted by scores of North American cities.
The declaration gives bureaucracies in municipal governments the go ahead to develop plans for tackling climate change, while drafting budgets to achieve net-zero carbon emissions by 2050.
Gondek and her allies on council view the declaration as proof that Calgary is ready to step forward with a strong environmental policy to solidify its position as an energy and climate leader that can overcome its image as a fossil fuel town and attract the investment needed to spur a transition to cleaner energy forms.
“Future (energy) investment is trending towards energy transition, not reinvestment in existing technology,” said the majority of council.
“As civic leaders, we are acting to align our goals with energy leaders who are set on embracing our economic and environmental prosperity.”
Other key players The initiative has been spurred on by most key players in the petroleum industry and other opinion-shapers, such as Deborah Yedlin, who took the reins as president and CEO of the Calgary Chamber of Commerce in July.
“We have to change the channel on Calgary,” Yedlin said on taking office. “We need to invest in the economy of tomorrow and make sure we have access to markets and make sure our businesses are competitive.”
She said Calgary has an opportunity to draw on its wealth of talent to become “the Silicon Valley for energy transition technologies,” adding “there is a lot of money on the sidelines looking to invest in the energy transformation.”
Prior to the debate on the “climate emergency,” Gondek met with the bulk of energy leaders from companies such as Suncor Energy, Shell, Enbridge, Imperial Oil, TC Energy and Canada’s Oil Sands Innovation Alliance.
Industry commitment Explorers and Producers Association of Canada President Tristen Goodman said the bulk of oil and gas companies have long since made commitments to pursue net-zero goals.
“We know we have an emissions problem and we have to show to Canadians, along with our own investors, that we do treat this issue seriously,” he said.
Avatar Innovations CEO Kevin Krausert welcomed moves by Gondek to strengthen ties between municipal leaders and the energy sector.
“Calgary stands at an important crossroads,” he said. “The energy transition is the single greatest economic opportunity facing Calgary. We’re literally talking about rewiring and repowering the world.”
Cost C$2 trillion The cost of transitioning Canada to net-zero has been pegged at C$2 trillion over the next 30 years by the Royal Bank of Canada, RBC, the country’s largest financial institution.
John Stackhouse, a bank senior vice president, said that “daunting number” is manageable when it’s broken down to C$60 billion to C$80 billion a year, much less than Canada’s spending on health care or what is planned for childcare.
A report by the RBC said the oil sands sector is expected to remain the industry’s key emissions driver even if it achieves targets to lower carbon dioxide output from 70 million metric tons in 2020 to 46 million mt in 2030 and possibly 30 million mt “with extensive carbon abatement.”
The bank said the cost of emissions reductions in the oil sands is projected to be C$5.5 billion a year, noting that it has committed C$500 billion to sustainable financing.
The Canadian Institute for Climate Choices said “the transition is coming irrespective of decisions” by the federal and provincial governments and will be driven by factors outside of Canada’s control with more than 880,000 Canadian jobs at risk unless “we prepare ourselves for a shift that is making its way to our shores no matter what.”
Worker transitions The TD Bank warned early this year that up to 450,000 of 600,000 Canadians employed directly or indirectly in oil and gas could lose their jobs as governments pursue aggressive climate targets.
The bank warned that plans must be developed for worker transitions, otherwise society could face displacement similar to that of the U.S. and Canadian manufacturing sectors in the 1990s and early 2000s when automation and technology changes led to a decline in manual work.
Francis Fong, a TD senior economist, said it’s dangerous to assume that displaced oil and gas workers will find new jobs in the clean-energy sector, given the skills needed for those jobs and the fact that energy derived from renewables won’t be tied to the location of natural deposits of fossil fuels.
A symbol of the changes that are needed is taking place in a building that once housed the headquarters of Suncor and is now being revamped into a new Energy Transition Center that will include offices for an accelerator program where startup companies try to figure out how to decarbonize the world, underscoring the city’s efforts to diversify from fossil fuel production.
Yedlin called the project a “profound shift” in the energy sector that “is going to evolve with the need to decarbonize. I don’t think anybody should underestimate how important this is. Major players are at the table and that’s absolutely critical to be successful.”
Gondek shares the view of the latest annual survey of citizen satisfaction in Calgary that found 76% of citizens believe Calgary is on the right track to being a better place to live 10 years from now.
“While recovery is clearly going to be slow and steady, it also gives us opportunities to plan and imagine and perform with more foresight than some of the boom and bust cycles that we’ve become accustomed to. We must take action to ensure that Calgary is in a position to succeed.”
- GARY PARK
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