Alberta will need up to $25 billion of new investment in electricity generation by 2030 to support the transition toward cleaner sources of energy and meet the needs of electricity consumers. In order to attract this investment, protect consumers from price volatility and maintain system reliability, Alberta is transitioning to a capacity market system. In a capacity market, private power generators are paid through a mix of competitively auctioned contracts that pay their fixed capital costs and revenue from the spot market.
A capacity market will allow Alberta’s current generators, along with investors from outside the province, to compete to provide generation at the lowest cost. This transition was recommended by current and potential energy investors, external experts, consumer groups, and the Alberta Electric System Operator (AESO), which oversees the province’s electricity system in the interest of the public.
While the province makes the necessary reforms to the electricity system, government is protecting Alberta families, farms and small businesses from volatile electricity costs through a four-year price cap of 6.8 cents per kilowatt hour on the Regulated Rate Option. The Regulated Rate Option is the default electricity contract available to most Alberta electricity consumers. From June 1, 2017 to May 31, 2021, should the market price of electricity rise above 6.8 cents, consumers on the regulated rate will not see an increase on their bills.
A capacity market will also support Alberta’s transition to cleaner power. To reduce emissions and increase the use of renewables to generate electricity in Alberta, the government launched the Renewable Electricity Program on March 31, 2017. This program will add 5,000 megawatts of renewable electricity capacity by 2030 using a competitive process, administered by the Alberta Electric System Operator (AESO), and puts Alberta on a path to achieve a target of 30 per cent renewable energy by that time. In addition, under the Climate Leadership Plan , pollution from coal-fired electricity generation will be phased out by 2030.
The first competition of the Renewable Electricity Program is currently underway, with investors bidding to provide up to 400 megawatts of renewable electricity. Successful projects are expected to be announced by the end of 2017 and operational by 2019. Alberta Energy is currently exploring options for future competitions.
To make it easier for Albertans to generate their own electricity, the micro-generation rules were amended to increase the capacity limit from one megawatt to five megawatts and allow a system to serve adjacent sites, providing more flexibility with system configurations. The province is also exploring ways to promote community generation of electricity from renewable or alternative sources, such as solar or wind, by communities or organizations.