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Alberta to switch to capacity market for electricity by 2021


November 24, 2016
By Renée Francoeur


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Alberta Energy minister Margaret McCuaig-Boyd (left) announces the decision to move the province to a capacity market for electricity.

November 24, 2016 – The Alberta government says it will create a “capacity market” for electricity as part of its plan to “ensure that consumers are protected from price volatility with a reliable supply of electricity at stable, affordable prices”.

In capacity markets, private power generators are paid through a mix of a competitively auctioned payment of their fixed costs and prices from the spot market. According to the province, the benefits include: reducing price spikes and market uncertainty, driving efficient use of the existing transmission system, and accommodating energy-efficiency initiatives better than Alberta’s current system.

This transition was recommended to the government by current and potential energy investors, as well as by the Alberta Electric System Operator (AESO), which oversees the province’s electricity system in the interests of the public.

“Experts tell us that our current ‘energy-only’ system won’t deliver the reliable electricity system that Albertans need to grow in the future”, said Alberta Energy minister Margaret McCuaig-Boyd. “And, because they’re used all over the world, capacity markets are familiar to investors, who like the stability and predictability they bring. Moving in this direction will help Alberta attract investment in the new, lowest-cost capacity we need to smooth our move away from coal-fired generations and create jobs as we do.”

Alberta says its capacity market will be developed in consultation with stakeholders and in place by 2021.

“We welcome a shift to a capacity market in Alberta. It will enhance our ability to make investments in existing and new generation to the benefit of customers and other stakeholders in the services we provide,” said Dawn Farrell, president and CEO of TransAlta.

“New capacity will be needed to back up renewables in Alberta”, said Scott Thon, president and CEO of AltaLink. “We have seen the government take steps to ensure low costs for Albertans by requiring new generation be sited near existing transmission, by offering long-term contracts and by focusing on universal, or grid-scale, projects. We are confident the government will continue on this path and find the lowest cost way to add new capacity for Albertans.”