Landowner Duane Olson and his dog Bella walk past solar panels at the opening of the Michichi Solar project near Drumheller, Alta., on July 11, 2023.Jeff McIntosh/The Canadian Press
A series of reviews of Alberta’s electricity market, due early in the new year, are together set to reform the province’s power grid and regulatory regime.
Alberta’s electricity market is rarely the stuff of sensational headlines, content to tick along in the background when lights are switched on and industry rumbles. But 2023 threw it into the spotlight, as consumers’ bills skyrocketed, grid stability wobbled, and the government ordered a freeze on all renewable energy project approvals and a review of the market.
Not all of the reports due in 2024 will be made public, but Utilities and Affordability Minister Nathan Neudorf says they will be crucial to making sure power remains affordable and reliable as Alberta – like other jurisdictions around the world – grapples with the transition to cleaner, less carbon-intensive energy.
“It’s coming so quickly that we have to act, in response, very quickly,” Mr. Neudorf said in a recent interview.
Successive Alberta governments have for years taken a hands-off approach to the grid’s future, he said. But rapid global change means the “if it ain’t broke, don’t change it approach” of yore is no longer appropriate, and the government has a responsibility to Albertans to plan properly for the future, he said.
Mr. Neudorf said the inquiries will work in lock-step to help create a future power grid that will balance the transition to cleaner power with affordability as Alberta pursues its goal of a net-zero grid by 2050.
By Feb. 1, for example, he expects recommendations from a joint review of the province’s current market framework.
The Alberta Electric System Operator (AESO) and Market Surveillance Administrator were tasked with developing incentives and potential legislative changes to help improve grid reliability, including how nuclear, hydrogen, energy storage and hydro can help stabilize supply.
The AESO is also undertaking what it calls the Market Pathways Initiative, to anticipate future transformational grid changes and figure out how Alberta’s market design can, and should, respond.
That initiative was supposed to continue throughout 2024. But it will now land in the government’s hands in February, after it told the AESO to move more quickly.
The acceleration surprised Blake Shaffer, an associate professor at the University of Calgary’s School of Public Policy, because it will “lay the groundwork for what the future of Alberta’s power market will look like.”
And those changes could be big, Prof. Shaffer said in an interview. They run the gamut from tweaks to the current market design to heading down the path of re-regulation and moving back toward Crown corporations like those in other provinces.
Alberta’s power market is unique in Canada, in that the private sector bears the risks and responsibility for new capacity, mainly driven by revenues. Unlike other provinces, there is no centrally administered planning mechanism.
While Mr. Neudorf said the AESO will continue to play an important role in Alberta’s power regime, the government has also mused about pulling electricity back under government control.
It’s a proposal Premier Danielle Smith reiterated recently on her weekly radio show.
“If the market is not going to produce the long-term baseload power that we need, we will establish a Crown corporation,” she said in December, adding she’d still like to work with Alberta’s private-sector operators “to see if we can get the market discipline” needed to contain power prices.
Ms. Smith said reforms being rolled out by her government in 2024 will address long-term reliability and price stability, including moves to de-risk investments in natural-gas-fired power plants and other projects that use the fossil fuel.
Those changes, however, will have nothing to do with the lower power prices Albertans can expect to see in 2024.
They’re forecast to drop substantially come March, thanks to a record amount of new natural-gas-fired power set to come online. Instead of crippling retail prices that recently hit 32 cents per kilowatt-hour, Prof. Shaffer said the additions will see rates plunge to around 10 cents per kwh, or even into single digits.
Alberta is also reviewing its transmission-system policies to make sure they’re well suited to a future with new technologies, as well as a growing imperative to reduce emissions and societal shifts toward electrification. The government says that review will inform “the ideal path of action for Alberta’s transmission policies.”
It’s important to develop a clear end point about where Alberta’s grid is headed to make sure market players know the plan, said Sara Hastings-Simon, an assistant professor at the University of Calgary, whose work focuses on the energy transition.
But she cautioned that the government and system operators must listen to a range of perspectives, not just rely on the points of view of incumbents such as large natural-gas power providers.
The United Conservative government doubled down on its insistence in 2023 that a grid reliant on natural gas is crucial to keeping the lights on in Alberta, particularly as it launched a fight against Ottawa over federal draft clean electricity regulations, which it intends to ratchet up this year.
Ms. Smith has labelled the proposed rules irresponsible and unconstitutional, arguing they will doom the province’s power grid. The federal Liberal government counters that almost all of Alberta’s natural-gas-fuelled power plants could operate in some capacity after 2035 under the draft regulations.
While the natural-gas debate raged in 2023, Alberta added more renewable-energy capacity than any other province or territory.
As of August, 2023, there were more than 3,400 megawatts of wind and solar projects under construction in the province, worth upward of $2.7-billion.
Amid that skyrocketing growth, in August the government ordered the Alberta Utilities Commission (AUC) to halt all approvals for renewables projects for seven months, and review where installations can be built, how they affect the province’s power grid and potential mandatory security bonds to ensure projects can be cleaned up when they reach the ends of their lives.
The provincial government argued that the surge in wind and solar projects meant policies need updating. The industry countered that the moratorium would spook investors, put jobs at risk, create chaos in Alberta’s regulatory environment and undercut economic growth at a time when investment in clean energy is increasing worldwide.
Mr. Neudorf acknowledged that the decision to pause renewables “was contentious to say the least.” But he pledged that it would end on Feb. 29, and said it was part of the government’s responsibility to manage the electricity system.
“Pretty much everybody realizes that they may not like how we’ve chosen to approach it, but they have acknowledged that we do need to grapple with these types of questions,” he said.
The AUC review is due to be filed to the government by the end of March, likely ushering a series of changes that will rejig Alberta’s renewables landscape in 2024 and beyond.