Alberta-Power: Faster-than-expected change
It’s almost hard to believe that our Alberta-Power series is just over 3 months old, yet the market has changed so much in the meantime. In short, what happened matches the outlook from Part 3, but it happened MUCH faster, with no end in sight. And this makes the opportunity for dispatchable loads even bigger and more imminent. This in turn opens up a great opportunity for cost-effective production decarbonization, much cheaper than with Carbon Capture & Storage or Small Modular Reactors.
Let’s dive a bit deeper.
Statistics
Q2 saw three major changes to prior years (we evaluated the last 20 years, i.e. based on hourly Alberta pool prices since 2005:
Lower average prices
The average quarterly pool price was down to CAD 45/MWh, down from CAD 160/MWh just one year ago, back in line with long-term averages. And for June, it was down to CAD 32/MWh, the third-lowest in 20 years (after 2016 and 2017).
Much cheaper low-cost hours
The average pool price for the daily lowest-cost 8 hours fell under CAD 20/MWh for the quarter, and to just CAD 14/MWh in June. As this is the amount of time it takes to charge a heat battery, this metric drives the (huge) opportunity for ETES technology.
Record zero-dollar hours
A new record number of zero-dollar hourly pool prices for the the quarter as a whole (67) and each of the months (April - 8; May - 20; June - 39). The previous record for Q2 was 2017 with 41 zero-dollar hours, now beaten by 63%. As the current price floor is zero dollars in the Alberta market, zero-dollar hours are an indication of up to how many hours could have been negative without the floor in place.
Outlook
An intensification of the three trends identified above: The AESO’s May 2024 Long-Term Adequacy Report details 5.1 GW of nameplate generation capacity as under construction, with 3.8 GW expected to be completed by end of 2024. This compares to 20.8 GW of operational peak nameplate capacity as of end 2023 per the AESO’s Annual Market Statistics. Over 3 GW of this increase consists of Solar & Wind projects, and about 1 GW of Cogen. With Cogen units producing 24/7 to meet steam requirements and renewable assets having near-zero operating costs, we will get over 4 GW additional “price-insensitive” nameplate capacity into an 8-12 GW market. And a further 4.4 GW of projects have received the required permits, with a much larger queue behind them. In short, this huge addition will drive even more low-cost hours, and curtailments. And negative prices if / when allowed under the expected restructured Energy Market rules.
Implications
In “Alberta-Power, Part 3” we provided a high-level assessment of the prospects for grid-scale Batteries (significant growth almost certain), intermittent hydrogen production (challenging at best) and Electro-Thermal Energy Storage, ETES (huge potential). Our confidence in this outlook has only grown over the last quarter. Whilst most of the public debate has focused on sources of supply and grid balancing via batteries & interconnects, the potential of dispatchable loads - those that can be brought on-line when power is plentiful and cheap, and taken offline quickly when the supply / demand balance becomes tight - remain underappreciated.
Industrial heat & steam consume a huge amount of energy. The heat demand of the Alberta oil sands industry alone is over 20GW, more than twice the size of the Alberta electricity market. Electrifying just a small portion of this load with dispatchable technologies - like ETES, or electric Boilers in hybrid operation with gas boilers - could help stabilize the power market & grid, and lead to very cost-effective decarbonization, at a fraction of the cost of Carbon Capture & Storage. And with negative power prices expected through Alberta’s restructured electricity market by 2027, this approach would also provide a profitable demand-sink for power plants that cannot easily be taken offline, like Cogen units, whilst retaining their capacity for high-demand / low-supply situations.
In our next articles, we will provide more details and calculations on use cases and economics. Stay tuned!
PS: yes, we don’t just talk about the potential of this technology but actively work on project deployment. More to come …