“The day of making money in oil and gas is over,” said Ken Harbeck, a project management office coordinator at MacEwan University. “It’s over. It’s history.”
In a province where the petroleum industry has thrived for decades, comments like Harbeck’s can be harsh to Albertans’ ears. A loss of faith in Alberta’s primary industry, however, may have become more common since the price of oil collapsed over two years ago — a collapse that saw the price per barrel in USD drop from $105.54 in June 2014 to $28.50 in January 2016, according to macrotrends.net.
While thousands of people are without jobs and Alberta’s economy continues to stumble, Harbeck, who acts as a consultant for MacEwan’s investment group, said an opportunity exists to change the way Albertans invest their money.
Instead of investing in the conventional energy sector, Harbeck said now is a time when people can look toward industries that thrive off of “profitable sustainability.”
The renewable energy sector is one of these industries.
Alberta’s energy and emissions
In November of 2015, the provincial government announced a plan to phase out coal-fired electrical plants by 2030.
According to the Government of Canada’s website, Alberta is one of Canada’s biggest contributors when it comes to greenhouse gas emissions, producing more coal pollution than all other provinces combined.
Stewart Duncan, the CEO of Alberta Wind Energy Corporation, said the absence of coal-fired electricity generation will likely make way for more sustainable forms of electricity generation.
“At the moment, that’s over 4,000 megawatts of generation that’s going to have to be replaced,” said Duncan, highlighting wind energy, solar energy, and biofuels as possible replacements. “I think there’s probably some opportunities for renewable energy going forward.”
Paula McGarrigle, co-founder and managing director of Solas Energy Consulting, highlighted that while these opportunities for sustainable substitutes exist, the overlap between the two industries doesn’t lend itself to one ever replacing the other entirely.
She noted that energy can come in forms useful for heat, power, and transportation.
“Oil and gas tends to be on the transportation side, and renewables only really overlap with them in two ways,” McGarrigle said. “One is biofuels and the second one is electric cars.”
Still, even major players in the oil industry, including Enbridge, Suncor Energy, and TransCanada, are investing in renewables. They cite environmental responsibility and the future growth of the renewables industry as the primary reasons for investing.
“Where the game is on at the moment is the renewables and thermal power on the electricity side of things. If you look at most jurisdictions in the world, they’re starting to increase their investments in the non-emitting renewables,” McGarrigle said.
Right now, most investments in renewables are found in those that generate electricity — namely solar and wind power — likely as a result of declining costs and increased awareness of the dangers of carbon emissions.
Because of these reduced costs, renewable energy is becoming more realistic for the province of Alberta.
Realistically renewable
McGarrigle highlighted the region’s natural resources as another reason why the renewables industry is becoming increasingly plausible to invest in.
“We have amazing resources — it’s not like we have crappy sun or wind,” she said. “Kind of like our oil sands is fantastic, so is our wind and so is our solar.”
In terms of solar energy, she said Alberta scores at the top quartile, and is comparable to Rio de Janeiro or Miami. In North America, the province also lands on top when it comes to the potential to generate wind energy.
“It’s kind of like Alberta’s just waking up to the fact that we’re sitting on this amazing resource,” McGarrigle said.
While investing in renewable energy could be on the rise, oil and gas aren’t going anywhere any time soon — and they don’t have to.
Oil, gas, and energy demand
Global energy demand is continuously growing. Because the renewables industry is still in its early stages, it will likely have to be used in combination with other forms of energy generation in order to meet these impending needs.
BP’s 2016 Energy Outlook predicts energy trends for the next 20 years and forecasts that the renewable sector will almost quadruple in size by 2035. The International Energy Outlook 2016 looks at change in energy markets to 2040 and suggests similar growth. It states that, at an average rate of 2.6 per cent per year, renewable energy is the world’s fastest-growing energy source.
At the same time, BP’s predictions say the oil market will rebalance, while Energy Outlook predicts the consumption of liquid fuels, natural gas, and coal will continue to increase and will be responsible for 78 per cent of world energy consumption in 2040.
“There will always be a use for oil — a demand for oil and gas — but the overall global use of oil products, petroleum products, is slowly in decline,” Harbeck said. “It’s over, from the investment perspective.”
Alberta industry investment is expected to drop by 11.9 per cent from 2015 to 2016, according to albertacanada.com. The decline is cited as being “the result of low oil and gas prices,” which will lead to a 31.3 per cent decrease in investing in the petroleum industry.
Because current oil prices are so low, Harbeck says it doesn’t make sense for people to invest there at the moment.
He added that there has been a slow increase in awareness of other means of investing, which he believes is driven partly by investment managers looking for different avenues for investment when their customers see their returns going down.
“We have amazing resources – it’s not like we have crappy sun or wind. Kind of like our oil sands is fantastic, so is our wind and so is our solar”
Paula McGariggle
While Harbeck acknowledges that increased interest in renewables is likely related to the crash in oil prices, he thinks awareness of profitable sustainability has been growing for a while.
“If you look at the track record of things like renewables … the crossover point where they started to become more profitable than conventional energy assets was actually before the crash,” he said.
The “go green” mindset has been on the rise for a while now, and Harbeck said small numbers of people are starting to take that to the bank with socially responsible investing (SRI).
Renewables fall into the SRI category, but this type of investment extends well beyond the renewable energy sector. It includes microfinacing and microsaving, and can range from investing in agricultural projects or entrepreneurs who are just starting out.
“To me, it’s a certain moral issue,” Harbeck said. “Instead of just being focused on return, be focused on ‘How am I getting that return?’”
A renewable future
The policies in Alberta are certainly in support of significant growth of the renewable energy sector in the near future, and Duncan, Harbeck, and McGarrigle all predict the same.
“International interest in climate and carbon emission levels has been key to sort of inspire people to think a little bit beyond (conventional methods for energy generation),” McGarrigle said.
She said the next step in increasing this global awareness, however, is improving people’s understanding of the subject.
“I think the education system needs to get more up-to-speed with energy and environment, because I think we’re graduating people … that definitely need more education there,” she said.
“I think the younger generations are way more interested in it, and I think it all originated from their education on the three Rs (reduce, reuse, recycle), frankly.”
These generations will grow up and will potentially invest in renewables, supplementing the monumental growth in the renewable energy sector that has been predicted to radically change the energy sector as it exists today.
Cover illustration by Alley MacLean.
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