Brattle Releases Study On Alberta’s Electricity Market

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A new report highlights several challenges that Alberta's electricity market will face in the near future, including integrating more wind power and expanding interconnection agreements.

The Brattle Group released the report analyzing the efficiency and long-term sustainability of Alberta's electricity market during a recent stakeholder meeting hosted by the Alberta Electric System Operator (AESO).

The report analyzes a number of challenges to resource adequacy that the Alberta energy-only market will face over the coming decade, including the potential introduction of new environmental regulations that could force aging plants to retire, the expiration of power purchase arrangements (PPAs), the addition of wind generation capacity, expanded interconnections with neighboring markets, and the continued long-term outlook of low natural-gas and power prices.

‘Based on the scale and timing of PPA expirations and environmental mandates, these challenges are projected to increase the rate of generation retirements in Alberta by 50 percent over the next two decades,’ says Brattle principal Johannes Pfeifenberger, a co-author of the study. ‘These retirements, along with high anticipated load growth, will require the rate of investment in new capacity to nearly double to 740 MW per year over the next 20 years. Of particular note are a number of PPA expirations that will occur simultaneously in 2020.’

The study concludes, however, that the current market design is generally functioning well and should be able to support this higher and more challenging rate of generation additions, as long as large simultaneous retirements can be avoided.

The report contains several recommendations, including the following:

– The AESO should continue to monitor the outlook for resource adequacy over time, based on a recommended set of indicators;

– Alberta policymakers should consider relaxing or revising the current decommissioning cost-recovery rule to reduce the risk of simultaneous plant retirements in 2020 when the last tranche of the existing PPAs expire; and

– The AESO should continue its ongoing evolution of market design, including wind integration, demand-response expansion, and expansion of intertie capability, and consider their resource-adequacy implications.

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