SaskPower quietly announces natural gas-fired Aspen Power Station at Lanigan

 

Major project could soon run afoul of impending federal greenhouse gas emissions regulations, but Saskatchewan needs to keep the lights on, and power its mines

REGINA, LANIGAN – You might not have noticed it, but last week SaskPower made known it is intent on building a major new natural gas power station near Lanigan. This will be the third in a string of similar-sized facilities, after Swift Current and Moose Jaw.

There’s been talk of this new facility, but up until now, it was “proposed.” Now it’s planned, as an application has gone in to the federal government to allow construction of the power station. The intention is to scratch dirt in April 2024.

There was no press release, no blog update, and little fanfare. SaskPower simply updated its website. But the 370 megawatt project now has a name – Aspen Power Station – and it’s going to cost the better part of a billion dollars. Once built, it will be a critical part of Saskatchewan’s power grid as the province is forced out of coal-fired power by 2030.

(UPDATE: SaskPower put out a press release on May 11 which mentioned Aspen in its capital plan, the day after this story was originally published.)

And it also comes at a time when the federal government is working on a “Clean Electricity Standard,” which, if implemented in its current form, would outlaw not only coal, but natural gas-fired power generation, except in exceptional circumstance, by 2035.

In other words, we might build it, and about seven years later, have to shut it down.

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Price

While tenders haven’t come back yet, the minister responsible, Don Morgan, expects it to cost in the ballpark of $850 million. Expected to be in commercial operation by early 2027, Aspen will be built on a quarter section 17 kilometres west of Lanigan. That puts it in a central location to several of Saskatchewan’s potash mines. But more specifically, it will be near the BHP Jansen mine, which will be the largest in the world once in operation. And that mine is expected to eventually use over 200 megawatts of power, meaning over half of Aspen’s output could be used by that mine, alone.

It is estimated that during construction there will be 375 people on site with a peak of around 450 people. SaskPower is looking into potential construction camps to accommodate these large numbers. In operation and maintenance, the power station will employ approximately 25 people.

 

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Committee discussion reveals plenty

Aspen was discussed at length on May 3 during the Legislature’s Crown and Central Agencies Committee, with Crown Investments Minister Don Morgan and three top SaskPower officials taking questions from NDP SaskPower Critic Aleana Young.

In his opening comments, Morgan said, “SaskPower is currently seeking approval to proceed with Aspen, and the federal review process is currently under way. SaskPower will continue to engage with communities to ensure Indigenous and stakeholder interest and concerns are integrated into the project plans to the greatest extent possible.”

Referring to this and other capital projects, Morgan spoke of the need “to continue to ensure that Saskatchewan has safe, reliable electricity at the lowest possible costs.”

Morgan said, “This is especially important as the federal government is trying to impose an unrealistic and impossible goal of net zero by 2035 — a goal that will have us shut down our coal and natural gas plants. In the coming years, investments will continue to be focused on strengthening our electricity system and moving closer to a cleaner energy future for SaskPower customers and Saskatchewan communities.

As for Aspen, Morgan said, “The project is the early planning stages now. Application has been made to the federal government under the impact assessment legislation. The facility would be similar to the Moose Jaw and Swift Current operation, I think 370 megawatts. And that construction has not yet started, but it’s an area of the province that is seeing some significant development. It is relatively close to the BHP facility at Jansen, so it would be of benefit for that project.”

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Bill C-69

That approval would be under the federal Impact Assessments Act, the much-derided legislation that used to be known as Bill C-69. The Saskatchewan Party government had referred to that act as the “No More Pipelines” bill.

Now, its next major megaproject will be reviewed under that act. This is the application: SaskPower Aspen Power Station Impact Assessment applicaiton April 2023 147387E

The application, on the Impact Assessment Agency website, says, “Saskatchewan Power Corporation is proposing the construction, operation and decommissioning of the Aspen Power Station, a 370-megawatt combined-cycle natural gas power plant located about 17 kilometres west of Lanigan, Saskatchewan. As proposed, the project would include both a gas and steam turbine generator, along with a heat recovery generator. The project is expected to have an operational lifespan of 25 years.”

The 410 page application, under federal legislation, even includes “Gender Based Analysis Plus.”

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SaskPower to build, own and operate

SaskPower would build, develop and own the power station, according to Morgan. This is in contrast to its growing number of wind and solar projects, which are all being developed under power purchase agreements with independent power producers. Since Northland Power built the North Battleford Power Station in 2013, SaskPower had built its own gas plants.

BHP needs juice

Young asked, “Is the construction of Aspen, obviously in Saskatchewan we need baseload power and we have a growing demand and all of those factors that we’re seeing not just unique to Saskatchewan, but is the construction of this primarily to serve BHP?”

Morgan replied, “I think that might be a reasonable connection to make because of the proximity and certainly … [inaudible] … but it’s needed in the grid in the broader, general sense of expansion. So as you’re aware, the grid interconnects all the way across the province. So even if BHP wasn’t going ahead, it would be required or an expectation to allow for the growth in the province’s population.

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“So that certainly would have been a factor in the location. That was where there would be a major customer, but regardless they would have had to go ahead in any event.”

SaskPower vice president of energy transition and asset management Tim Eckel said, “Yes, it’s required for just reinforcing the system. The station we’re building it right adjacent to has transmission lines that come from Saskatoon, Prince Albert, Yorkton, and Regina feeding into it. So it’s a really good central spot.

“The other good point about the location is from TransGas’s perspective. It’s close to their storage caverns so if we want to follow renewables with this plant, it doesn’t impact their system as bad as it could at other locations in the province.

 

Young asked if it would still be built there without the BHP mine, and Eckel responded “Yes, it could have. When we built the Swift Current project, it was between this location and Swift Current. At that time, Swift Current won out just for a number of other factors, but it would still be a good location. Having BHP there is just another benefit.”

And if the mine didn’t go ahead for some reason, SaskPower is still intent on building Aspen.

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Other sites considered

Other locations considered, but ultimately rejected, for a gas-fired power station included Regina and Estevan, Eckel said. Economics and “the TransGas situation,” determined Lanigan as the best location.

The impact assessment application noted Estevan (Shand Power Station), Aberdeen, Saskatoon (Queen Elizabeth Power Station) and Lanigan. SaskPower purchased the land at Lanigan in 2013, based on site selection undertaken from 2011-2015, when Chinook Power Station at Swift Current was under consideration.

It noted, “The Shand Power Station is an existing coal-fired facility under consideration for conversion to natural gas, which would utilize the existing local natural gas supply. Other potential generation and supply options in the Estevan area including the recently announced 100 MW solar facility and planned power purchase agreements with suppliers in the United States will fully utilize existing delivery capability in the area.”

 

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Price of gas

Young pointed out that over a decade ago, when SaskPower chose to go ahead with the Boundary Dam Unit 3 Integrated Carbon Capture and Storage Project, highly fluctuating gas prices were a key consideration, compared to cheap, stable coal. (In the previous decade, natural gas prices had exceeded $10 per gigajoule, which drove substantial gas drilling in Saskatchewan. For most of the past decade, natural gas prices have been around $2 per gigajoule, and Saskatchewan’s gas drilling resulted in less than 10 wells in 10 years. Gas prices as of May, 2023, were averaging a few pennies over $2 per gigajoule according to AECO, but in June of 2022, they were over $8 per gigajoule.)

King said in reply, “It would be based on our business plan price, and so it would likely be in that $4 to $6 range is what we’d have been forecasting.”

 

Other forms of generation

Asked if other forms of generation considered for the Aspen plant, Eckel responded, “Yes, there were. And we looked at all forms, everything from, you know, hydro, CCS on coal, to renewables, imports, and the options available to meet the end-service date. We’re looking at 2027 as the end-service date, the end of ’27. There wasn’t a lot of other options available. Renewables wouldn’t offer that baseload that we were looking for, and the imports would require more transmission, those types of things. And this was the most reasonable and practical, I guess, solution.”

Morgan pointed out that on May 1, 41 per cent of power generation in Saskatchewan came from natural gas, 33 per cent from coal, 14 per cent from hydro, and nine per cent from wind, with solar just eight megawatts.

While he said there’s more potential for wind, “unfortunately that is not baseload.”

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Morgan said, “Natural gas is certainly the most viable and the most affordable at the present time. Certainly nuclear is and will be a factor going forward, but as you’re aware, the regulatory process is lengthy and it’s a difficult process. And if the process is flawed, interested parties, stakeholders, may apply and get an injunction preventing the purchase from going on. So in any event, that was the decision that’s been made on both the . . . well actually all three of the most recent natural gas facilities.”

 

Federal threat

Young pointed out that Premier Scott Moe, the day previous, had given a speech concerning the possibility of having to shut down natural gas power generation due to federal clean electricity regulations. Referring to the speech, Young said, “if these regulations come into place, we’ll have to shut down our natural gas power plants including, you know, the one that just opened, including Moose Jaw and now potentially including Aspen by 2035.

“And you know, yet the decision has been made to build a new natural gas plant, the cost of which I don’t believe was disclosed by SaskPower yesterday in the media coverage. So I suppose, Minister, can people in Saskatchewan expect an ongoing expansion of the natural gas fleet for SaskPower?”

Morgan responded, “We’ve indicated right now that we have the one at Moose Jaw under construction to come on in a little over a year. We also have the one at Lanigan, so effectively that’s in excess of 700 megawatts will come on from those two facilities. I think as time goes on, SaskPower is obliged to look at each and every option based on what the projections are at the time.

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“I think right now what we’re seeing in Canada is a number of provinces are facing the reality that it will be impossible to meet the federal standards. Ontario, which had over 90 per cent of nuclear and hydro, has indicated they can’t compete. And the Premier of Ontario announced earlier this week they’re going to be constructing a number of natural gas facilities.

“We’re seeing similar things taking place in New Brunswick, where they had a number of issues they’re trying to do, catching up to make sure they’re able to stay on. Alberta, which had a large number of coal facilities, is in the process of converting those coal facilities to natural gas. So at the present time natural gas is probably our best and most reliable option. Our long-term plan would include bringing on SMRs (small modular reactor) in different locations.

“The Premier, you know, has made reference to the fact that it will be a challenge to take coal out of our generating fleet at any time in the near or foreseeable future. We have not only a substantial investment in coal generating facilities, but the coal generating facilities are reliable. They are not at end of life. And we have a workforce in some areas of the province that have developed their careers around coal generation.”

Young expressed concern that the three latest natural gas-fired power stations, Swift Current’s Chinook, Moose Jaw’s Great Plains, and Lanigan’s Aspen, could end up costing around $2.5 billion, but have to shut down due to those proposed federal regulations. Young said, “Can people in the province, can customers take confidence then in knowing that this is money well spent and SaskPower is confident that we’re not going to end up in a situation where these will be, like gosh, 10-year-old stranded assets or 7-year-old stranded assets?”

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Morgan replied, “I appreciate the concern that citizens might have. The mandate for SaskPower is to provide reliable, clean, affordable electricity. That is the best option for SaskPower at the present time, and we expect them to fulfill that mandate. And absent quick access to nuclear or something else, that’s certainly the process that they’re going to follow. They are as open and transparent as can be with regard to the different options as they become available, and that’s certainly the direction that’s expected of them.”

Will feds turn them off?

Young said, “I hope there’s not going to be a federal government who like marches in and turns off the power plants or anything like that. But there could be a situation based on certainly the rhetoric that we see, and you know, having no details on how those discussions with the federal government are going forward, certainly not having those myself. Minister, are you aware of any potential penalties or risks that SaskPower could be facing should the clean electricity standards, as discussed, go forward and natural gas not be included?”

Morgan said, “We are already facing a substantial penalty in the carbon tax that exists and exists on every electron that flows out of a generating facility that’s powered by natural gas or by coal. So yes, those penalties are there. Those penalties might increase. I think we’ll want to have discussions and work things through with the federal government to the extent that we can work things out.

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“The mandate that we have is to ensure that there is safe, reliable electricity for our citizens. And I’m not prepared to leave our province in the same situation that Texas found itself in recently or some other jurisdictions may have found. We want to have a broad and varied electrical generating system with a number of different sources as well as interconnects into related adjacent areas.”

Young asked, “Should there be penalties, would those be borne by the government proper or by SaskPower?”

Morgan replied, “We have in our province summary financial statements, so the books of SaskPower are essentially the books of the province.”

 

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