An economic transition is already underway, but it will be a slow one.
Alberta’s economic fate shifted gears in 1947 with Leduc’s famous gusher, famous gusher, and the western Canadian province has been a place of boom-and-bust ever since.
Albertans have this become accustomed to economic roller-coasters, but as the province heads towards elections this spring, experts claim that the ride is different this time.
Movers and shakers in the energy sector, especially, are making changes based on the expectation of new realities, notably regulation.
As a result, the future looks promising, but uncertain.
Diversification is key. Oft-mentioned options include transportation, agriculture and hi-tech.
If the latest version of the bust-downturn-recession-recovery pattern is indeed different, then perhaps Alberta has an opportunity to reorganize and transform the way it thinks about the economy — and in these technologically fast-moving times, perhaps even the concept of work itself.
Energy Dependence
During the recent downturn in the energy sector, billion-dollar decisions were still being made. Radical employment shifts took place. Companies adjusted to a new government with new ideas on the future of the industry. Technological advances combined with ongoing global economic and social forces continue to drive further change.
“I call them the biggest changes in 100 years,” Peter Tertzakian, executive director of the ARC Energy Research Institute, told CBC.
A New Era
The transition from oil and gas to renewable power is already well underway and likely to reach a tipping point in less than two decades, according to a report produced last fall by energy consultancy Wood Mackenzie.
The report predicts that nearly 20% of global power needs will be met by solar or wind by 2035. Meanwhile, upwards of 20% of all distances travelled globally by vehicles — from buses to bikes — will use electric motors. The firm also estimates oil demand will peak by 2036.
Calgary, embracing the future
Analysts insist Calgary will remain an energy city for the foreseeable future, yet it is also looking for new ways to exploit its potential.
Technology and automation mean that fewer people are needed to do the same work. So even if Alberta’s boom returned, some of the old jobs may not. Simply put, oil producers can now unlock more oil and natural gas from the ground than ever before, and they don’t need to drill nearly as many wells to do it.
The flipside of the coin is that innovation brings new opportunities.
Shell Canada, for example, is running a project that aims to extract vanadium (a metal) from oilsands bitumen and use it to make large, utility-scale electricity storage for the renewable energy sector.
This trend comes as energy companies worldwide invest large sums in renewable energy. The industry has already seen some of its largest companies — Shell, Total, BP and others — make billion-dollar investments in renewables.
Meanwhile, Alberta itself has also become a hotbed of wind and solar activity within Canada.
Slow but Sure Progress
Oilsands and conventional drilling still represents 30% of all economic activity in the province, according to the Canadian Association of Petroleum Producers (CAPP), “when direct, indirect, and induced factors are taken into consideration.”
By 2020, CAPP hopes growth in Alberta will help Canada become the fourth-largest oil producer in the world, surpassing Iraq and China.
The hope among analysts is that this isn’t an either/or discussion, but rather that Alberta’s energy sector can evolve and thrive while other industries strengthen and grow.
Yet there are naturally obstacles along the way.
Peter Tertzakian, for example, believes Alberta’s energy leaders ought to do more to help Canadians understand the challenges the industry is facing and what that means on a national level.
What are those challenges?
The importance of energy revenue to the national economy. The need for pipelines. The changes industry has already made – contrary to criticism from environmentalists – to control emissions. The potential of renewable resources.
Canadians see global climate change as a greater threat to their country than cyber-attacks, ISIS or the state of the world economy, according to a Pew Research survey conducted last year.
“Global pressure to decarbonise is growing,” The Economist warned in a December article that focused on Alberta.
Diversify or Die
Diversification remains the buzzword and an ATB Financial report released last week helped explain why.
“Despite concern around pipelines and other global pressures, Alberta continues to hold its own among the provinces,” the report reads. “Retail activity, manufacturing, wholesale trade, and other economic indicators are hovering around pre-recession levels while sectors including agriculture, tourism and the tech sector have seen growth.”
Yet not everybody is on the same page.
“Our economy is overly dependent upon mature resource-based industries … [and] we have yet to establish new economic drivers,” warned one civic study, which pointed to growing environmental concern with fossil fuels as just one reason to diversify.
“When you’re facing unemployment and you’re running out of savings … patience is not tonic,” Adam Legge, director of the Haskayne School of Business, told CBC. “But the reality is you cannot fill the hole of what was impacted from oil and gas in anything probably less than a decade.”
Calgary Economic Development (CED) is trying to capitalize on the city’s core strengths — energy, agribusiness, and transportation logistics — as well as emerging sectors such as life sciences, health, tourism, and the creative industries.
CED is out selling Calgary to a wide variety of business in Silicon Valley, Seattle, Vancouver and London. It’s been active in India and China as well.
Speaking to CBC, Adam Legge believes Calgary should focus on things it already does well, because landing the “big fish” — think Amazon’s HQ2 — rarely happens.
Legge’s main criticism of CED’s current strategy is that it’s “probably too broad.”
Hi-Tech Salvation
For years, people with tech ambitions in Calgary struggled to make a mark. Many left to find the expertise, money or mentorship they craved. In other words, these are early days for hi-tech in Alberta.
“Back in the late ’90s, early 2000s, there was nowhere near the support and the infrastructure that there is today,” said Alice Reimer, who co-founded (and later sold) a firm whose technology is now used by retailers like Walmart, Home Depot, and Staples.
But there are many positives to light up the road ahead.
For example, the Creative Destruction Lab at the University of Calgary’s Haskayne School of Business, where Reimer is the site lead, tries to help science projects become high-growth companies. In its first year, it received 170 applications for the 25 spots. The startups chosen raised nearly $14 million in seed funding. Last fall, another 25 spots were added to the program, with a focus on energy.
Set to open in July, the university’s Life Sciences Innovation Hub will also help support specialized programming for entrepreneurs and early-stage companies.
Yet this road, too, will be a long one.
One of the main explanations proffered for Calgary’s failed Amazon HQ2 bid was the city’s lack of pre-existing talent in the hi-tech industry.
“By 2023, you’re looking at a shortfall of 1,200 positions — that’s for programmers, database analysts, software engineers,” said Alan Fedoruk, chair of mathematics and computing at Mount Royal University.
Plenty of choices are available, but choosing the right ones and committing to the long haul will be the keys to Alberta’s future.
