Climate Change Disclosure

We believe in open and transparent reporting on climate change

Our climate change reporting is guided by the Financial Stability Board (FSB) Task Force for Climate Disclosure (“TFCD”) recommendations.

 

Governance

TransAlta’s Governance and Environment Committee (“GEC”) is a committee of the Board that assists the Board in fulfilling oversight responsibility with respect to environment, health, and safety. In conjunction, the GEC and Board hold the highest levels of oversight in regards to TransAlta’s climate change policy and sustainability initiatives. All Board members have a climate change skillset acquired through professional background, regulatory or legislative oversight or industry involvement. Our Board adds strategic oversight on climate change related strategy (risk and opportunity), major actions such adaption and mitigation (i.e. coal to gas conversion and growth in renewable energy), and oversight of the risk management processes and associated budget and cost implications.

Our executive team are actively addressing, planning and setting strategy and tactics related to climate related risks and opportunities. Executive incentives are not directly tied to climate change related performance, but our focus and long-term strategy is to be a clean power corporation. Hence, indirectly our associated incentive performance is tied to reducing our carbon footprint and growing low carbon power generation. 

 

Strategy

Climate change related risks are monitored through our Corporation-wide risk management processes and actively managed. Identified climate change risks and opportunities are also reviewed by our management team. We apply regionally specific carbon pricing, both current and anticipated, as a mechanism to manage future risks pertaining to uncertainty in the carbon market and as a safeguard to anticipate future impacts of regulatory changes on our facilities. It is also a method of modelling for future electricity prices and to analyze the viability of acquisitions. Identified climate change risks or opportunities and carbon pricing are recognized in the annual TransAlta long-and-medium range forecasting processes. Regulatory risk/compliance (coal electricity generation), physical risks (hydro and drought/floods), and monetary opportunities (gas and renewable electricity generation) are the main drivers of integration into business strategy.

Aligned with our business strategy is our climate change strategy, which is implemented and managed on a corporate-wide business unit level, consisting of four main areas of focus:

  • Energy-efficiency improvements,
  • Development of emissions offsets portfolios to achieve emissions reductions at competitive costs,
  • Development of clean combustion technologies,
  • Growth of our renewables portfolio as an increasing component of our total generation portfolio.

We seek investment in climate change related mitigation solutions where we can maximize value creation for our shareholders, local communities, and the environment. Conversion of our large coal fleet to gas-fired generation highlights this approach, which will allow us to run our assets longer than the federally mandated coal retirement schedule. Our goals for undertaking such anticipated actions are to enhance value for our shareholders, ensure low-cost and reliable power for Albertans, and reduce the environmental impact from coal-fired generation.

Our investment and growth in renewable energy is highlighted by our diverse portfolio of renewable energy generating assets. We currently operate over 2,200 MW of hydro, wind, and solar power. We are the largest producer of wind power in Canada and the largest producer of hydro power in Alberta. Production from renewable energy in 2017 resulted in avoidance of over 3.1 million tonnes of CO2e, which is equivalent to removing over 660,000 vehicles from North American roads over the same year.

 

Weather

Abnormal weather events can impact our operations and give rise to risks. In addition, normal year-over-year variations in wind, solar, water, and temperatures give rise to various levels of volume risk depending on the input fuel of each facility; events outside the design parameters of our facilities give rise to equipment risk; and fluctuations in temperatures can cause commodity price risk through impact on customer demand for heating or cooling.

During the past five years, some deviations from expected weather patterns have negatively impacted our annual financial results:

  • The southern Alberta flood of 2013 disrupted our hydro operations and caused us to invest in substantial repair work. Our losses have been largely covered through insurance.
  • Warm weather in Alberta in 2015 increased derates at our coal facilities due to its impact on the Sundance cooling ponds. These cooling ponds are susceptible to warm weather; however, we anticipate that decreased coal production and the retirement and mothballing of Sundance Units 1 and 2, respectively, in the medium term will reduce the stress from such occurrence.
  • Our Alberta mine was susceptible to significant rain starting in August of 2016, which resulted in several weeks of flooding and impacted our coal deliveries. We focused on improving drainage infrastructure and use of stockpiles to mitigate future risks.

 

Risk Management

Climate change related risks are monitored through our corporation-wide risk management processes and actively managed. Identified climate change risks and opportunities are identified at the business unit level and through corporate functions (government relations, regulatory, emissions trading, sustainability). Risks and opportunities are reviewed by our management team quarterly and reported to the GEC the Board and Audit and Risk Committee of the Board, as applicable. We have highlighted some climate change related risk and opportunities below, including our management approach to the risk or opportunity.

Risk or Opportunity Management Approach
Policy Requirements TransAlta supports smart regulation and carbon pricing that ensures economic growth and certainty for investment. We have also demonstrated cooperation and collaboration on climate related to policy, while ensuring we protect value for employees and shareholders. This is evidenced by our off-coal agreement with the Alberta Government, totaling $524 million and Memorandum of Understanding to convert coal plants to gas. Further climate related policy updates can be found in our 2017 Integrated Report.
Carbon Pricing Our corporate function attributes regionally specific carbon pricing, both current and anticipated, as a mechanism to manage future risks pertaining to uncertainty in the carbon market and as a safeguard to anticipate future impacts of regulatory changes on facilities. This information is directed to the business unit level for further integration. Identified climate change risks or opportunities and carbon pricing are recognized in the annual TransAlta long-and-medium range forecasting processes. We capture economic profit from carbon markets through generation of renewable energy credits or offsets and via our emission trading function, which seeks to commoditize and profit from carbon trading.
New Technology We have demonstrated upside in growing renewable and gas power generation. From 2000 to 2017 we have grown renewable capacity from approximately 900 MW to over 2200 MW. Our proposed Brazeau hydro expansion is an innovative energy storage project, which would involve a 900 MW expansion of the facility to operate as pumped hydro facility.
Adaption and mitigation Our clean power strategy means that all new investment must meet clean standards in order to mitigate potential future risk related to carbon policy and pricing. Our target is for 100 per cent of net generation capacity to be from gas & renewables capacity by 2025. Using existing infrastructure significantly reduces capital costs comparatively with new gas builds and also results in the avoidance of approximately $15/MW in carbon related pricing (assuming a $30 carbon price). Our new gas facility at South Hedland is built with adaption in mind. The facility will operate with a best in class emission intensity, the facility uses less water than traditional gas plants as we use dry cooling towers as opposed to the normal wet cooling towers (wet cooling tower have heavy water consumption). The plant is designed to withstand a category 5 cyclone, which can frequent NW Western Australia. Category 5 is the highest cyclone rating. Floods, which can occur in the area, have been mitigated by construction above the normal flood levels.
Water Stress Our thermal plants require water for operation. The majority of our thermal facilities are operated in low water stress environments. Our most water-stressed area of operation is at Sarnia, however due to the nature of the facility operation 98 per cent of water is recycled. The plant is a cogeneration facility. At all of our coal facilities we hold licences to pull water from low stressed areas. In Australia we purchase water for operations, despite operating in remote locations these areas are not currently water-stressed. Water purchasing will allow us to minimize local water stress if this becomes an issue. Our operating cost increase exposure due to water in Australia is low as our thermal operations are small.

Metrics and Targets

GHG Performance

In 2017, we estimate that 29.9 million tonnes of GHGs with an intensity of 0.86 tonnes per MWh (2016-30.7 million tonnes of GHGs with an intensity of 0.84 tonnes per MWh) were emitted as a result of normal operating activities.([1]) Our GHG emissions decreased in 2017, primarily as a result of lower emissions from our gas facilities. In 2017 our Mississauga plant was no longer operational and our Windsor plant transitioned to a peaking facility. In Australia, our diesel burn at Parkeston and Solomon Power Station significantly declined. Our coal GHG emissions were relatively flat overall. At our Centralia plant in Washington State production increased due to market demand, which increased our emissions from the facility by 1.4 Mt CO2e. This was offset by lower production and associated emissions (-1.6 Mt CO2e) from our Alberta coal fleet.

Our total GHG emissions include both scope 1 and scope 2 emissions.([2]) Scope 1 emissions in 2017 we’re estimated to be 29.7 million tonnes CO2e. Scope 2 emissions were estimated to be 0.2 million tonnes CO2e. We estimate our scope 3 emissions to be in the range of six million tonnes.

 

Targets

We recognize climate change risk and the goal set out in the 2015 Paris Agreement to prevent two degrees Celsius of global warming above pre-industrial levels. Our GHG reduction targets have been established to align with the UN Sustainable Development Goals, specifically Goal 13, which calls for “urgent action to combat climate change and its impacts.”

Our 2030 GHG reduction target is set based on climate-based science and the goal to prevent two degrees Celsius of global warming. This target has been tested by the Science Based Targets initiative, which is a partnership between the Carbon Disclosure Project, UN Global Compact, World Resources Institute and World Wildlife Fund, which helps companies determine how much they must cut emissions to prevent the worst impacts of climate change. Guidance from the TFCD also recommends setting a two-degree scenario to test the resilience of climate change strategy. Our GHG and clean power targets assume reasonably anticipated growth and operating scenarios.

Our GHG reduction targets are as follows:

  • Our goal, in line with a commitment to the UN Sustainable Development Goals (“SDGs”), is to reduce our total GHG emissions in 2021 to 30 per cent below 2015 levels.
  • Our goal, in line with a commitment to the UN SDGs and prevention of two degrees Celsius of global warming, is to reduce our total GHG emissions in 2030 to 60 per cent below 2015 levels.

We have also established a clean power goal, which is to be Canada’s leading clean power corporation by 2030. Our goal and targets support UN SDG Goal 7: Affordable and Clean Energy, related to “ensuring access to affordable, reliable, sustainable and modern energy”.

Our clean power targets are:

  • By 2022, we will convert certain of our coal units from coal-fired generation to gas-fired generation
  • By 2025, 100 per cent of corporation-wide net generation capacity will be from gas and renewables
  • We will continue to seek new opportunities to grow our portfolio of 2,265 MW gas, wind, hydro and solar assets
  • We will continue to explore viability of Brazeau 900 MW pumped hydro expansion – doubling our hydro capacity in Alberta

 


([1]) 2017 data are estimates based on best available data at the time of report production. GHGs include water vapour, carbon dioxide (“CO2”), methane, nitrous oxide, sulphur hexafluoride, hydrofluorocarbons, and perfluorocarbons. The majority of our estimated GHG emissions are comprised of CO2 emissions from stationary combustion. Emissions intensity data has been aligned with the ‘Setting Organizational Boundaries: Operational Control’ methodology set out in The GHG Protocol: A Corporate Accounting and Reporting Standard. As per the methodology, TransAlta reports emissions on an operation control basis, which means that we report 100 per cent of emissions at facilities in which we are the operator. Emissions intensity is calculated by dividing total operational emissions by 100 per cent of production (MWh) from operated facilities, regardless of financial ownership.

([2]) The GHG Protocol Corporate Standard classifies a company’s GHG emissions into three ‘scopes’. Scope 1 emissions are direct emissions from owned or controlled sources. Scope 2 emissions are indirect emissions from the generation of purchased energy. Scope 3 emissions are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.

Canadian Leader in Climate Change Disclosure

TransAlta aligns its corporate climate change goals with the UN Sustainable Development Goals and we have been recognized by CDP (formerly Climate Disclosure Project) as an industry leader on climate change management. Learn more:

  2017 CDP Report

Reporting our impact on the environment is how we do business.

Learn about our 2016 Annual Integrated Report


Graph: GHG reductions and renewable growth: past, present and future. Renewable growth is our strategy and anticipated, but we have not set external targets.