Alberta-Power: Regime Change!
In our Q2 market update we talked about faster-than-expected change. At the end of Q3, it is probably fair to talk of a regime change. From 2005-2023, the highest annual number of zero-dollar pool price hours was 47 in 2023, followed by 42 in 2020 and 41 in 2017. In Q3 of this year, we saw a total of 159 zero-dollar hours, with 114 in September alone.
That’s right, 2.4 times the amount of zero-dollar hours in the month of September than in any entire year since at least 2005.
We had already talked about the root cause of this change - a massive expansion of new gas and renewable power generation capacity - in Part 1 of our Alberta Power series. The pace and depth of change is still taking us by surprise, and judging from industry player comments, we are not alone.
Let’s review a few summary statistics before some “drawing by numbers for adults”, i.e. heat maps!
[This article is not financial or investment advice, but provided for general information purposes only. All information is subject to change and should not be relied upon for any decision making. See Webpage Terms of Use.]
Statistics
The average quarterly pool price was down to CAD 55/MWh, down from CAD 160/MWh just one year ago, in line with long-term averages.
It’s a “back to normal” story for average prices.
Looking at the daily average lowest cost 8 hours though, things start to get a lot more interesting. July and August were relatively low, but September, at just over CAD 6/MWh, was the lowest on record since at least 2005. This means that a dispatchable load that can pick the cheapest 8 hours of each day would have paid CAD 6/MWh on average during the month of September, and just CAD 14/MWh on average throughout Q3.
Thus whilst averages look “normal” again, we can see that big changes happened on the low-end of the range.
And this was primarily driven by zero-dollar and near-zero prices:
As indicated in the intro, zero-dollar prices reached record levels, with power being “free” for 159 hours in Q3 - the chart really speaks for itself!
Heat Maps
But statistics tables are boring, so let’s have a look at a price heat map comparing 2024 to the prior three years, including the extremely high-price 2022:
How to read this:
the four vertical blocks are years 2021 (top) to 2024 (bottom);
the three horizontal blocks are the months July (07) to September (09);
within each of the blocks, each row is one hour (from midnight 0 hrs on top, to midnight 24 hrs at the bottom), and each column is one day, from first day of the month on the left, to last day on the right;
the color of each cell indicates the hourly pool price, from the zero dollar price floor in dark purple to the CAD 1,000/MWh ceiling in bright yellow.
We can see how the number of high-priced hours has dramatically decreased over the last years, with the remaining high-priced hours concentrated in peak hours during heat waves.
In More Detail
Since excess supply is becoming a more dominant theme, as most clearly seen through zero-dollar hours, let’s zoom into that part more by “bucketing” prices:
Black - Zero Dollars
“Free” power; usually (a lot) more supply than demand; once the price floor is adjusted downward (expected with market restructuring from ~2026), these are the hours that with high likelihood will trade in negative terrain
Grey - CAD 0.01-30/MWh
“(Very) Cheap” power, and very favorable for intermittent load use cases that we will explore further in upcoming articles
Light Blue - CAD 30.01-70/MWh
“Normal” prices that allow generators to recover full costs without “breaking the business case” for most intermittent load use cases
Amber - CAD 70.01-100/MWh
Upper end of “normal”; it’s getting expensive for intermittent load use cases
Red - CAD 100.01-1,000/MWh
High prices providing a strong incentive for dispatchable loads to go offline, and dispatchable supply (batteries, dispatchable hydro) to come online
The picture really speaks for itself:
Importantly, note that even during the days in July that saw price flare-ups during peak afternoon / evening hours, a significant portion of the hours still traded in the “Free” / “Cheap” / “Normal” price ranges.
Stay Tuned …
And this is where we will continue next time, examining use cases for intermittent loads that not only operate profitably in this new environment, but also help stabilize the power grid. We spent a lot of time in Q3 on economic and technical feasibility reviews, and the results look very promising - electrifying just ~1% of the industrial heat load with ETES systems could absorb the entire temporary oversupply.
Stay tuned! Or, if you want to explore these opportunities further, please contact us.