Simply put, it is extremely difficult to finance a wind or solar farm—or, for that matter, a hydroelectricity or geothermal power plant—in Alberta.
Renewable energy is a capital-intensive business. Once a given wind or solar farm is built, the developer can supply electricity at a very low operating cost for the life of the project—but in Alberta the first hurdle is the highest.
The province’s deregulated market offers generators both pros and cons. On one hand, a supplier of any kind can directly contract with a customer, and any generator can risk making an investment and sell directly to the market. On the other, the market does not adequately support the benefits of renewable energy; the societal costs of fossil fuel power are inadequately priced with a cap of $15/tonne for carbon and no air quality cap and trade program. Further, there are very few long-term power-purchase contracts available.
So, while renewable energy technologies may be competitive against any other new generation source on an apples-to-apples cost basis—for example, wind energy’s levelized cost of electricity is as low as any other energy source—the revenue uncertainty thwarts a developer’s ability to attract financing to a project.
This financing barrier remains the most significant barrier to renewable power in Alberta today. As KPMG recently determined, “Providing debt financing to a wind farm … will continue to be challenging unless some market mechanism can be introduced to manage downside risk, or some level of contracting can be arranged” (KPMG, 2014).