Kenney gov’t abandons NDP electricity reforms, returns to energy-only market

In energy-only markets, electricity generators are paid only for the electricity they produce in real time when electricity is required

a 2016 study by the AESO concluded that Alberta should move away from the energy-only market to a capacity market.

The Alberta government announced on Wednesday that it will follow through on its campaign promise to stop the Alberta power market’s shift to a capacity market and return to an energy-only market.

In 2017, the Alberta Electric System Operator (AESO) began work on the shift to a capacity market after a 2016 study by the AESO concluded that Alberta should move away from the energy-only market to a capacity market.

The Notley government called for the AESO to make the change and, under the NDP government plan, the capacity market would be in place by 2021. Power companies operating in a capacity market guarantee they will provide enough electricity to feed the grid.

For the past two years, the AESO worked with industry shareholders to develop the new system.  Three months after the UCP election victory, the Kenney government is halting the process.

Energy Minister Sonya Savage says the energy-only market has a proven track record for providing affordable electricity in Alberta.  “The response from industry to maintain an energy-only market was overwhelming, and this is yet another example of promise made, promise kept.”

Under the energy-only market system, power companies are paid based on fluctuating wholesale prices and companies profit under a volatile market when the price of power spikes.

The NDP’s energy critic, Irfan Sabir said in on Twitter that Alberta energy consumers will suffer due to the decision.  “Albertans remember days of price spikes and rolling power outages — and now this government wants to send us back to that time,” said Sabir.

Calling the capacity market “an experiment,” Savage said “The energy-only market works. Investors want to participate in it and it provides Albertans with reliable and affordable electricity.”

She said a capacity market would result in higher power costs for residential consumers because they would be charged for electricity that was fed into the grid, even if it was not used.

But, the UCP government’s decision ignores the 2016 AESO report which says “the Alberta wholesale electricity market is not attractive to investors.”  The report also argued that the energy-only market threatens the stability of the power system.

Savage argues that since 2016, conditions in Alberta “have changed substantially.”

She told the Edmonton Journal “We are not moving to as much renewable energy as was predicted at that time.”  She added that producers are switching to natural gas powered facilities and Alberta has not suffered a “coal cliff”.

The UCP government says investors will put money into Alberta’s power system under the energy-only market.  “We heard overwhelmingly from generators and the financial sector there would be more investment in an energy-only market and not a capacity market.”

A press release issued by the Alberta government says the necessary legislation will be tabled to amend regulations and “stop the implementation of the capacity market as soon as possible.”

Sabir warned the decision “will make things more expensive and less predictable for Albertans.”




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