Alberta Electricity Market Heading into 2022.

Without question, the increase in the cost of Natural Gas will impact Power Pool prices of electricity, as the Alberta fleet of generators uses more gas as a fuel source.  With this said – the cost of electricity will go up and is far more volatile than the cost of natural gas.  But, you need to look at the bigger picture and consider the following to help you understand what is going on in the market.  Understanding the electricity market is far more complex and has many more moving parts. 

Overview

As a general rule, when forecasting the cost of electricity, the demand/supply curve is the driver of Alberta’s energy market. 

• The load forecast (Demand) in Alberta will be impacted by: the 2021/22 economic recovery, the landscape of our energy sector, plus seasonal volatility in our weather conditions.  
• The supply side of the equation (Generation) is subject to a Rubik’s Cube puzzle of different permutations and issues, including; government policies, clean-tech transformation initiatives as the market shifts toward more renewables, natural-gas generation built to replace retired coal facilities, co-generation, carbon tax, technology costs, industry trend, foreign investment s and long term additions to the supply change based on economics as well as planned and unexpected plant closures (Outages).  

Load Forecast

We looked at various scenarios published in AESO’s lastest Long Term Outlook.  The load is projected to increase, ranging from 0.5% to 2.0%, depending on the impact of Clean Tech initiatives and the rate of economic recovery in the province.

• Today, the average load is running on average in a band ranging from 6,869 MW to 7,036 MW. 
• Looking out five years (2026): the demand is forecasted to range from a low of 7,014 MW to a high of 7,504 MW.  
• Peak Demand, driven by seasonal temperature swings pushing up consumption to a forecasted high of 11,899 MW in 2021 to a possible high of 12,536 MW by 2026.

Generation

Alberta is in a state of flux with many moving parts, which impact the power pool prices.   

Renewables:

o    New solar farms are being built and added to the fleet in Alberta.  Production today is running at 284 MWh. Market Capacity (MC) will increase from 796.5 MW in 2022 and possibly to 1,203.5 MW by 2026.

o    New wind generation will be brought online.  The generation today is running at the peak of 1368 MWh. MC will increase from 2,353.5 MW to a potential of 4,167.3 MW by 2026.

o    Remember generation is intermittent and will never achieve the rated MC. See chart on UNET home page web site (https://www.utilitynet.net/).  

Mothballing

• Keephills 1 (MC 395 MW) is retiring effective December 31, 2021
• Sundance 4
  • Effective January 1, 2022, capacity to be reduced from 406 MW to 113 MW
  • Will be retired effective April 1, 2022

New Generation:

• Cascade (MC 900 MW) slated to open in 2023
• Suncor Cogen (MC 806 MW) slated to open Q4 2024
• Heartland Petrochemical (MC 116 MW) to open October 29, 2021
• Genesee 1 & 2 – current maximum capacity is 800 MW
  • Both units are getting repowered to gas-fired combustion turbines and heat recovery steam generators
  • Will add an additional 560 MW combined
  • Genesee 1 upgrade slated to be completed by Q4 2023
  • Genesee 2 upgrade slated to be completed by Q4 2024

Monthly Outages :

• Planned outages are scheduled to peak in April, 2022 at almost 3,000 MW.
• Major coal outages of approximately 1,000 MW are scheduled through 2022 

Power Pool Prices

When you factor all of the above into the impact on the market – the Power Pool Price during 2021 is running at a 20-year high point.  Electricity is what consumers should be concerned about … not Natural Gas prices. The wholesale cost of energy during the first week of October has spiked by more than 50% compared to last month. 

Fixed Electricity Prices

Our current retail prices are in the 8 cent range, which represents significant savings when compared to the RRO rates in the 10.5 cent/kWh range.   Our EMs and growth in the market should be focused on converting RRO customers to our Fixed Rates. And, if customers are concerned about the volatility in the energy market – we have fixed rates to help keep their utility bills as low as possible.  Our fixed rates are 25% lower than the government’s RRO. It is a good deal, especially when 50% of consumers in the province are stuck on the RRO.  This is where the opportunity lies