Alberta Electricity Regulatory Roundup - June 24, 2021
This blog entry originally appeared on June 24, 2021, on Matt Ayres’ LinkedIn page. It is reproduced here with permission.
In the last regulatory roundup, I touched on the quirks of the AESO’s supply adequacy report in light of the unseasonably warm weather in early June (Post | LinkedIn). With high temperatures forecast for the week of June 28, 2021, I wanted to take a closer look at forecasting supply adequacy, the balance between power supply and power demand.
The AESO’s public forecasting consists of three reports. A weekly supply adequacy report, a 24-month supply-demand outlook, and a long-term adequacy report. In this blog, I am going to focus on the first two, those most relevant to getting an insight in adequacy into the hot weather expected next week. The supply adequacy report and part of the 24-month supply-demand report (as reported on June 24, 2021) are reproduced below.
The supply adequacy report indicates conditions over the next week and reports at least 400MW of capacity is expected to be available and unused during this period, in addition to operating reserves (usually idle generation) that are procured to deal with contingency events (sudden loss of generation or transmission facilities)1. The report does not show any cause for concern.
The 24-month Supply and demand report shows that expected demand for the next week is considerably higher as a result of the expected hot weather. Demand, including the operating reserves, is expected to peak at around 12,300MW or about 11,650 without operating reserves, not far from the maximum demand ever seen in Alberta (in February of this year). The report shows a surplus at this time of 1,690MW of which 1,130MW is reported to be capacity available on the intertie. On the face of it, this report does not show much cause for concern either.
Digging a little deeper there are some assumptions underlaying this report that may prove optimistic in the event of such warm weather.
Firstly, the report assumes a capability to import of 1,130MW. While the interconnections with BC, Montana, and Saskatchewan can allow this level of flow, they are often constrained due to reliability concerns (e.g., the ability of the system to withstand the loss of one or more these lines). In particular, the import flow on the BC and Montana interconnections is supported by Load Shed Service Imports (or LSSi) for short, which consists of loads currently consuming energy who are willing and capable to shut down very quickly in response to the loss of an interconnection. The important part of this is that they have to have to be consuming (and willing to be cut). It may well be the case that if prices are higher due to the tightening supply demand balance some of these providers may have already chosen to reduce consumption and be unavailable for LSSi and as a result import capability may be considerably less. For this and other reasons the assumed capability to import next week looks optimistic to me.
Secondly, while both reports include any planned and scheduled outages that are known at generators there may be additional problems that crop-up close to real-time. The supply adequacy report does not include any allowance for these, whereas the 24-month supply demand report includes a reduction in expected supply of 300MW for “anticipated generating unit derates”.2 There are a few reasons to be concerned that this may be overly optimistic. The main concern I would have is that the Alberta system experiences considerable and predictable derates in the event of warm weather. At gas turbines, who are expected to provide most of Alberta’s power next week, high ambient temperatures and hotter air mean less dense air passes through the compressor and turbine with a corresponding reduction in electricity generation. Extreme temperatures may also result in higher levels of equipment failure and impact other generators in addition to gas turbines. The declaration for ambient temperature derates close to real-time may also be an issue. The ISO rules require declaration of outages when known (sometimes months in advance) but while derates are expected should temperatures hit the mid-30’s they are not necessarily declared much in advance.
Finally, there is one area where the 24-month supply demand outlook may be pessimistic. An allowance for wind generation of 145MW (less than 10% of the current installed capacity). High levels of wind generation could resolve any potential supply issues. However, in some cases where Alberta is stuck in a period of stable weather that may coincide with low wind output. The AESO’s seven-day wind forecast shows low levels expected early next week with much higher output expected from June 30. Unsurprisingly, solar output it expected to be strong through the daylight hours.
The rules prescribing the requirements for the AESO’s adequacy assessments are covered primarily under ISO Rule 202.6 (Section 202.6 - Adequacy Of Supply » AESO). This rule is currently under consultation and I provided some thoughts in a previous regulatory round-up. In certain circumstances, the AESO can cancel scheduled generator outages under ISO rule 306.5.
The forecasts of adequacy and wind generation are updated as we move closer to the expected weather next week and with those forecasts, the situation should become clearer. Making a call on whether Alberta faces problems next week this far ahead is extremely difficult. However, higher prices look extremely likely, and the risk of other problems appears elevated.
Other News
The AESO has provided an update on the consultation around mothball rules that includes providing options in a paper. I think this is a very welcome development, with complex subject matter trying to address the case for change in PowerPoint presentations is to my mind an exercise in frustration. PowerPoint slides can provide useful summaries, but it rarely provides anything approaching the detail required.
Also, a consultation has started on administrative amendments to ISO rule 201.6. The amendments do look extremely administrative; however, the suggestion is they also reduce overall requirements (presumably in the spirit of red tape reduction). Despite having read it a couple of times I do not see anything substantive that has been removed… if I am missing something perhaps someone can let me know.
Finally, in light of the extremely hot temperatures expected next week, I would note my personal contingency plan has thus far consisted of purchasing an unreasonably large box of popsicles. While this may provide a short-term and effective measure it does make me think that the province’s approach to issuing electricity conservation notices might be worth some consideration (my popsicle supply will not last a prolonged period of outage.
This blog entry originally appeared on June 24, 2021, on Matt Ayres’ LinkedIn page. It is reproduced here with permission.
About The Author
Matt Ayres, Ph.D.
Matt currently works as an economic consultant and has over 20 years of experience working in a number of electricity markets, including as the CEO and Chief Economist of Alberta’s electricity watchdog, the Market Surveillance Administrator. Matt is also an Executive Fellow at the School of Public Policy and an Adjunct Assistant Professor in the Department of Economics at the University of Calgary. Any views expressed are those of the author and not the views of any organization to which they are affiliated.