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Alberta’s Future Electricity Needs: What’s the Real Story? Economic Developers of Alberta Annual Professional Confer

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Alberta’s Future Electricity Needs: What’s the Real Story? Economic Developers of Alberta Annual Professional Conference April 10, 2014. John Esaiw, Director Analytics and Forecasting AESO. Public. Agenda. About the AESO 2013 Electricity Market Highlights Provincial Economic Outlook

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Alberta’s Future Electricity Needs:What’s the Real Story?Economic Developers of Alberta Annual Professional ConferenceApril 10, 2014

John Esaiw, Director Analytics and ForecastingAESO


  • About the AESO
  • 2013 Electricity Market Highlights
  • Provincial Economic Outlook
  • Long-term Electricity Outlook
  • Outlook Risks & Mitigation
about the aeso
About the AESO
  • Not-for-profit corporation established by the 2003 Electric Utilities Act as the “Independent System Operator”
  • Operates in the public interest
  • May not own or hold an interest in any transmission facility, electric distribution system or generating unit
  • Has visibility of all market and transmission activities and data
  • No government funding
the aeso s core functions
The AESO’sCore Functions

System Operations

Direct the reliable 24/7 operation of Alberta’s power grid

Transmission System Access

Provide access for both electricity generators and large industrial customers

Transmission SystemDevelopment

Provide continued reliability and facilitate the competitive market and investment in new supply

Market Services

Develop and operate Alberta’s real-time wholesale energy market to facilitate fair, efficient and open competition

alberta energy market overview
Alberta Energy Market Overview
  • 176 market participants in 2013
  • $8 billion in annual energy transactions
  • High industrial load
  • Relatively small market with limited interconnections
  • $999/MWh price cap and $0/MWh price floor
long term objectives of our wholesale market
Long-term Objectives of our Wholesale Market
  • Long-term stability and competitively priced electricity for Albertans
  • Support for investment and a foundation for economic growth
    • Suppliers need confidence they can move their product to market and have the opportunity to compete
    • Load customers need confidence they can access electricity in a predictable fashion and at a competitive price
  • No central planning of generation
    • Investors make decisions and bear all the risk of type, timing and location of investments

A competitive wholesale market for energy coupled with an unconstrained transmission system deliver a long-term supply of needed electricity without government contracts or public debt

alberta electricity market 2013 highlights
Alberta Electricity Market 2013 Highlights


  • New winter and summer records for Alberta Internal Load
  • Peak load growth of 5%
  • Almost 1,000 MW of load growth over the past 5 years
  • Average 2.8% load growth
    • On track for 20-year forecasted annual growth of 2.6%


  • Almost 1,000 MW of supply back to the grid
    • Sundance 1 and Sundance 2 back in action, as well as Keephills 1
  • Strong market price produces strong build signal: 1,500 MW currently under construction


  • Montana – Alberta Tie Line in commercial operation since September 2013
  • 10th year in a row of being a net importer
strong price year
Strong Price Year
  • Pool Price:+24.7%
  • Gas Price: +32.7%
  • Heat Rate: -2.1%
strong load growth
Strong Load Growth
  • Load growth follows seasonal patterns
demand growth and new generation
Demand Growth and New Generation
  • 2013 Installed Capacity: +1.1%, Load Increase +2.8%, 1,500 MW under construction
cogeneration facility expansion
Cogeneration Facility Expansion
  • Cogen: +139 MW
  • Net: +164 MW
total time smp exceeded 990 mwh
Total Time SMP Exceeded $990/MWh
  • SMP over $990/MWh more frequently then in 2012
decreased supply surplus events
Decreased Supply Surplus Events
  • 4 hours of supply surplus in 2013; 58 hours in 2012
imports serve 3 3 of load
Imports Serve 3.3% of Load
  • Alberta has three interties: B.C., Saskatchewan and Montana
  • Flows vary depending on intertie limitations, market price spreads in Alberta versus other jurisdictions, water flow levels, and other factors
  • Alberta remains a net importer for the tenth year in a row
  • Decrease in imports in 2013
  • MATL imports following similar behaviour to B.C. imports
alberta s economy the role of electricity
Alberta’s EconomyThe Role of Electricity

“Electricity is the facilitator of economic development in Alberta”

(2008 Provincial Energy Strategy)

  • Enables: - $hundreds of billions in infrastructure development
        • - Conference Board of Canada predicts GDP growth to exceed $500 Billion in 10 years

$500 Billion GDP by 2023

AESO forecasts 2.6% growth until 2032

$220 billion in current Alberta capital projects*

Electricity Industry

*Source: Alberta Innovation and Advanced Education

alberta s economy oilsands expansion capital spend
Alberta’s EconomyOilsands Expansion Capital Spend

Source: Alberta Innovation and Advanced Education

electricity demand the long term view
Electricity DemandThe Long-term View

Oilsands energy grows from 17% of total in 2010 to 31% in 2022


Electricity Demand

Highly Correlated with the Economy

the alberta economy full steam ahead
The Alberta Economy Full Steam Ahead


Average Weekly Wages


Gross Fixed Business Capital

Source: Conference Board of Canada

the alberta economy primacy of the energy sector
The Alberta EconomyPrimacy of the Energy Sector

Most other industries are connected to the energy industry in some way

Source: Conference Board of Canada

future electricity demand the regional road map
Future Electricity DemandThe Regional Road Map

Source: AESO. Load outlook by region at AIL Winter Peak, excluding transmission losses

electricity generation filling the gap
Electricity GenerationFilling the Gap

Medium Term: Additions of 5,900 MW to 7,500 MW

Long Term: Additions of 11,800 MW to 13,700 MW

serving future demand increasing capacity decreasing co2
Serving Future DemandIncreasing Capacity, Decreasing CO2

Forecast – 20 year

Forecast – 10 year


Capacity: ~15,000 MW

CO2 Intensity: 0.76 TCOE/MWh

Capacity: 21,000 MW

CO2 Intensity: 0.67 TCOE/MWh

Capacity: 25,000 MW

CO2 Intensity: 0.63 TCOE/MWh

Source: AESO

electricity generation strong growth in wind
Electricity GenerationStrong Growth in Wind
  • Since 2000, Alberta has seen strong growth in the development of wind generation
    • Wind generation capacity is currently 7.5% of Alberta’s total installed generating capacity
    • 347 MW under construction today
  • There is approximately 2,400 MW of wind generation at various stages of development
  • With committed transmission reinforcement, in combination with Wind Power Management, an additional 2,700 MW of wind can be incorporated onto the grid

Source: AESO

20 year electricity forecasts planning for uncertainty
20-Year Electricity ForecastsPlanning for Uncertainty

Policy Uncertainty




Access to markets

Supply Adequacy

Green Energy Policy?

Emissions reductions

= How to plan for a multiple of futures?


Oilsands Growth

Cost inflation

Technology Choice

  • The Alberta economy will continue to grow
    • Oilsands and related industries will drive the economy
  • Electricity demand is driven by new customer connections
  • Risks of long-term transmission planning are mitigated by scenario planning
    • Policy uncertainty is the greatest risk
    • Technology shifts are a wild card
  • Alberta’s competitive wholesale market provides significant opportunitiesfor generation investment in the next 10 – 20 years
  • Coal retirements will create opportunities for alternate fuel choices
  • A competitive wholesale market price sends signals to market participants through:
    • Short-term supply adequacy (generator availability, load response)
    • Long-term supply adequacy (signal to incent build or retirement)