What if the oilsands could become part of Canada’s climate change solution instead of being part of the problem?

It’s hardly what policymakers have in mind in their push to reduce greenhouse gases (GHG). But researchers at University of Calgary (U of C) say there is a better way that involves producing both oil and electricity from the oilsands.

Steam assisted gravity drainage (SAGD) operations in Northern Alberta could become big producers of electricity by expanding co-generation, which uses natural gas to produce both electricity and heat. That results in greater and faster GHG reductions by accelerating the retirement of coal-generated power, they say.

“SAGD co-generation represents a ‘made in Alberta’ solution to the government’s desire to drive coal off the grid and increase the role for renewables in the province,” said David Layzell, director of the Canadian Energy Systems Analysis Centre (CESAR) at the U of C, which produced two major studies to support the idea. “Most jurisdictions in the world do not have an industrial heat demand that could use the waste heat from thermal power generation. Alberta does – and it is SAGD.”

Some producers are already big users of co-gen. The technology ensures a reliable supply of electricity in remote places. The production of both electricity and heat is in turn used to make steam, which is injected in reservoirs to mobilize bitumen so it flows to the surface.

By putting oilsands co-gen “on steroids,” Alberta could achieve more carbon reductions than under its climate leadership plan, the research shows.

The net improvement is an estimated 142 million tonnes in the next 14 years.

Co-gen wouldn’t replace renewable energy but offer a stable backup and make the transition away from coal less costly, Layzell said.

The two studies looked at whether SAGD development has the capacity to install additional cogeneration to match its growth and to assist in the retirement of coal-fired power. Researchers drew on a wide range of data, built computer models and used them to visualize future energy scenarios.

The studies will be presented Thursday to members of Canada’s Oil Sands Innovation Alliance, a coalition of major oilsands companies. They have already attracted the interest of producers like Suncor Energy Inc., Cenovus Energy Inc., MEG Energy Corp. and Nexen Energy ULC.

“We are recommending a discussion between policy makers and the industry,” Layzell said. “We are saying, there is 142 million tonnes on the table and lower priced electricity. We shouldn’t just walk away from it, especially with the federal government saying we have to get off coal.”

The strategy would require oilsands and coal companies to work closely together on a transition plan, and governments to change the policy environment to encourage it, for example by giving oilsands companies emissions credits temporarily, or for the period they take coal off the grid that exceeds regulations, Layzell said.

The strategy would involve boosting co-generation in the oilsands seven-fold. Many operations don’t have co-generation and instead draw power from the public grid, which uses electricity that is 51 per cent produced from coal.

“Let’s incentivize the oilsands companies to go in there, work with the coal fired power generation to put the power generation up in the oilsands region, and increase the overall efficiency of the whole system,” Layzell said. “Wouldn’t it make sense to get two industries to work together so one uses waste from another?”

Building co-gen capacity helps with another goal – it boosts the attractiveness of new electrical solvent extraction technologies, which have a lower carbon footprint. Layzell said the province might as well have the lowest carbon oil until it doesn’t need the fossil fuel.

The research has just been completed and wasn’t available when Alberta was designing its climate change plan, announced a year ago.

Alberta’s NDP government said Wednesday it will overhaul the electricity market from one that relies on a free-market price of electricity, to one based on capacity. The move aims to encourage green power generation while coal is phased out. The province is having difficulties attracting investors in renewable energy due to low power prices in an oversupplied market and uncertainty about the investment climate.

The Alberta plan involves the early retirement of six coal power plants, which could leave taxpayers on the hook for stranded assets, and subsidizing renewable energy. It also includes a cap on oilsands emissions.

If the province gives oilsands co-generation a chance, the researchers believe it could mean easing up on policies to restrain oilsands emissions growth.

“We have 170 billion barrels of oil in the ground, if we don’t this, perhaps a lot of it will be left in the ground,” said Song Sit, a co-author of the studies who recently retired from Cenovus after a 28-year career in oilsands technology development.

Song said co-gen technology is readily available and easy to incorporate in new projects, though retrofitting older projects would be more complex and more expensive.

Some oilsands companies that use co-generation already push excess electricity onto the provincial power grid, but in the past weren’t interested in entering the power business in a big way because it’s a different commodity.

Lower oil prices are changing that view.

“In a low oilsands price environment, which is what we are looking at for the next 15 years, this becomes a lot more attractive,” Layzell said. “Now you have got two sources of income, and you have a chance to potentially shift between the two.”

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