Rising costs, coal plant closings leave grid’s future uncertain

Power plant operators currently have to indicate one year before the expiry date whether they will keep running.

Wood of Alberta Energy says electricity prices will likely “go up hugely near 2020� and send “the best signal in the world for investors to come in and invest.�

Whether the price cap has to be raised to incent more investment has yet to be decided, she says.

“We are going to have that conversation at some point.�

The report notes that if there are supply issues in Saskatchewan and British Columbia, Alberta wouldn’t be able to import power from those provinces to meet its own demand.

Alberta generators could even sell their power to the other provinces rather than serve the local market.

“Because Alberta generators do not have the obligation to serve Alberta load, they have the option to export power to neighbouring systems, even during peak conditions, and would rationally choose to do so any time external power prices are higher,� the Brattle Group notes.

However, AESO could intervene if the situation became critical, it adds.

AESO market director Miranda Keating Erickson says the report outlined future challenges, but suggested generating companies will continue to build power plants “and that in fact, there was no compelling reason to change our market design going forward.�

“As long as we have clarity in terms of what the rules are . . . that will drive decisions. People will say: ‘Hey, Alberta is going to need power. Let’s go invest there.’�

Keating Erickson expects future replacement supply to be mainly gas and wind-generated.

Martin Kennedy, a vice-president at Capital Power in Edmonton, agrees some of the early replacement plants will likely be gas-fired plants because they can built in two years, compared to three or four years for a coal-fired facility. Future coal-fired facilities will have to incorporate carbon capture controls to meet federal and provincial greenhouse gas targets.

But there are nagging concerns about replacing all the coal plants with natural gas facilities.

Spot prices for Alberta natural gas, which averaged $7.79 per gigajoule just three years ago, closed Tuesday at only $2.71.

Norval Horner, an engineer and provincial Liberal candidate in Calgary Currie, worries about Alberta’s electricity supply being too dependent on cheap natural gas.

“Gas is currently way out of whack from its historic (price) relationship to crude oil on an energy basis. … If gas were to resume its historic relationship, the price would increase to 60 per cent of crude.â€?

He notes electricity prices are already spiking during a period of low gas prices.

“We could see a triple whammy if gas prices were to spike as well.�

Even the short-term future is complicated in the Alberta electricity markets.

With the regulated rate option — the price that consumers pay if they haven’t locked into a contract — hitting a record high of 15 cents a kilowatt-hour this month, the actual wholesale price of power dropped to an extreme low of 2.5 cents this week because of warm weather, low demand and more wind.

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