The government of Alberta has decided to return to an “energy-only” market, which is expected to be a boon for the Canadian wind industry.
Reviewing which market-based system would be best for Albertans was a government commitment, and the decision came after stakeholders – including industry and consumers – expressed overwhelming support for maintaining Alberta’s energy-only market, rather than creating a complex capacity market, the government says. Feedback was received through consultations and written submissions.
Alberta has been operating an energy-only market for electricity since 1996. In 2016, the previous government announced that the province would transition to a capacity market, which would have been operational in 2021.
A key difference between the markets is how electricity generators are paid:
- In energy-only markets, electricity generators are paid only for the electricity they produce in real time when electricity is required.
- In capacity markets, electricity generators are paid for their overall ability to produce electricity, in addition to the electricity they produce and sell in real time.
The government says it will table the necessary legislation and amend regulations to stop the implementation of the capacity market as soon as possible.
“The former government’s ideological meddling with our electricity system resulted in the return of the power purchase arrangements, costing consumers C$2 billion,” says Sonya Savage, minister of energy. “The response from industry to maintain an energy-only market was overwhelming, and this is yet another example of ‘promise made, promise kept.'”
Currently, there are nearly 5 GW of natural gas, wind and solar generation projects fully approved in the province. This decision provides additional investor certainty in putting shovels in the ground, resulting in additional jobs for Albertans, according to the government.
The Canadian Wind Energy Association (CanWEA) says an energy-only market structure provides a critical revenue stream for wind energy facilities, allocating all revenues collected to generators based upon the electricity they produce. Given the strength of Alberta’s wind energy resources, the energy-only market, if combined with the sale of carbon credits under the Technology Innovation and Emission Reduction (TIER) program, will continue to deliver significant investment in wind energy, in addition to ongoing landowner and property tax payments.
“With a smart, competitive market design that demonstrates that the province is ‘open for business,’ we can finance and build wind energy projects,” comments Evan Wilson, regional director for the prairies at CanWEA. “Both the energy‐only market and the TIER program, including a robust carbon credit trading program, will be required for Alberta to fully capitalize on its wind energy potential – ensuring the continued economic operation of existing assets while also making Alberta a competitive destination for new investment in wind energy.”