Shifting Subsidies: Implications of Redirecting Alberta’s Oil and Gas Government Support to Solar Power

Canada’s fossil fuel production is highly subsidized despite the pollution. In the Province of Alberta, subsidies for oil and gas total approximately CAD 1.78 billion/year. This study develops a model to quantify the impacts of shifting fossil fuel subsidies towards solar photovoltaic (PV) capital investments. Although solar is already the lowest-cost form of electricity, such a subsidy shift would accelerate the renewable energy transition. This study found such a shift would enable the installation of 1.53 GW of new solar PV capacity annually with the current investment tax credit (ITC) or 1.07 GW without it. These new solar PV systems can generate 2.02 TWh/year of clean electricity if the ITC is applied on capital investments, and 1.41 TWh/year without it. Solar electricity is cost-competitive with natural gas generation, with levelized costs ranging from 49.01 to 61.97 CAD/MWh with the ITC, and from 63.62 to 80.45 CAD/MWh without the ITC across Alberta. High solar resource locations in Alberta, including Lethbridge (49.01 CAD/MWh) and Calgary (49.28 CAD/MWh), achieve lower costs than natural gas (51.80 CAD/MWh). This excludes carbon externalities, fuel price volatility, and the long-term operational subsidies required to maintain fossil fuel competitiveness, suggesting that solar PV systems are already an economically rational alternative. Shifting Alberta’s fossil fuel subsidies is a solution for Canada’s 2050 net-zero commitments. Solar–fossil fuel generation parity would be achieved by 2040 with the ITC credits or by 2045 without it. The subsidy redirection can reduce Alberta’s grid emission intensity from the current 450 kg-CO2e/MWh to 68.8 kg-CO2e/MWh (with the ITC) or 119.2 kg-CO2e/MWh (without the ITC) by 2050, representing reductions of 84.7% and 73.5%, respectively.