Q&A: Alberta Power - October Snapshot
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Thank you for all the questions and feedback on our Alberta Power Snapshot for October 2024! Below please find the summary response.
Q: “That is a lot of $0 hours. But also, visually it appears there were a lot of $0-$30 hours. What % of hours in October settled in the black and grey zones? Vs in the red zone?“
A: Regarding "red vs black", in October, 75 hours (10%) settled in the red zone vs. 8.2% in black. There were however a lot of hours that were at just a few cents per MWh, i.e. practically zero.
Q: “[It] would be interesting to compare [Black/Grey vs Red zone statistics] to past years. Or to when new generation came online and seeing the shift.“
A: Regarding a comparison of “zone statistics” between years, we are working on it and will provide those in an upcoming articles.
As for the comparison to when new generation came online, we haven’t figured out a solid way to do that yet, also because commissioning periods often last many months before the asset has a real market impact. If any reader has a good suggestion, we’d be highly interested - please get in touch!
Q: “I’d also love to see what % of the hours each price block settled lets say Oct 2021-2024. Would tell an interesting story.“
A: Thanks for the suggestion, we will cover this analysis in an upcoming article shortly (our software needs some tweaks to provide this analysis - working on it!).
Q: Any plans to further break-out the very expensive hours? +$100, adding perhaps +$300 and/or +$500/MWh?
A: Done! Please see the corresponding heat map below.
Heatmap of October 2024 Alberta electricity pool hourly prices (CAD/MWh)
Compared to the heat map shown in our October 2024 Snapshot article, this heat map further splits the most expensive bin into three: orange (CAD 100-300/MWh), red (CAD 300-500/MWh), maroon (CAD 500-1,000/MWh).
Q: “Perhaps if you add the hours that were just a few cents to the black bucket, you end up having a similar % in your original red zone vs black zone, which would be kind of mind-blowing, that $0 hours happen as frequently as peak price hours!”
A: Spot on! By increasing the bin width to CAD 1 / MWh (i.e. CAD 0-1/MWh for “redefined black”) the numbers exactly match: 75 hours in "black" and 75 hours in "red". And below please see the heat map with “redefined black”.
Heatmap of October 2024 Alberta electricity pool hourly prices (CAD/MWh)
Compared to the heat map shown above, this heat map redefines the “black” zone by including hourly prices up to CAD 1/MWh. You will note the increase from 61 to 75 hours in the “black” zone.
Q: “What is so special about zero-dollar hours? Why not include ultra-low prices, e.g. under CAD 1/MWh, in the same category?”
A: Indeed many categorizations are possible, and each has its own merits. What makes “zero” so special is that this is the current price floor - lower prices are currently not allowed in the Alberta power pool.
At zero dollars, usually there is also Excess Supply, i.e. more electricity on offer than there is demand for, and the price cannot go any longer. Therefore, very often zero dollar prices are accompanied by supply curtailment. This also implies that if / when the price floor becomes negative (likely with the Electricity market restructuring expected for 2026/7), most of the zero-dollar hours will turn into negative-price hours. Thus current zero-dollar hours are a good proxy for the number of negative price hours we would witness if the price floor was lower.
In contrast, once the price is even just slightly above zero dollars, this is likely not the case, as almost always at least some capacity is offered at exactly zero dollars per MWh - thus these hours less likely to be affected by a change in the price floor. For the economics of dispatchable loads like Electro-Thermal Energy Storage (ETES) units, the low end of the cost curve is of huge importance, thus we pay particularly close attention to it.
Q: “Natural Gas prices in Alberta are currently extremely low, enabling inefficient and inflexible gas power plants like the coal-to-gas conversions or gas-fired steam cycle power plants to stay online even if power prices are zero. This seems to drive a lot of the oversupply and zero-dollar hours. Would the situation change significantly with higher gas prices?”
A: Agree, higher gas prices create a significant disincentive for inflexible power plants to stay on during low price hours to enable catching higher-priced ones, and this is one of the drivers for the sharp increase of zero-dollar hours. At the same time, as of November 2024, a significant amount of inflexible power generation remains under construction: 523 MW of gas-fired Cogen (plus 403MW of Cogen in commissioning), 422 MW of wind, and 2,474 MW of solar (see AESO Long Term Adequacy report, Nov 2024).
As most of this capacity goes online over the next 24 months, nameplate Cogen + renewable generation will significantly exceed any demand scenario, see illustration below. Thus “whenever the wind blows or the sun shines”, we will likely see significant excess supply, even if some of the older, inefficient gas power plants should be mothballed. More analysis coming in a future article!
Alberta nameplate capacity of existing generation plus generation under construction, as of November 2024 (source: lar (see AESO Long Term Adequacy report, Nov 2024)
Please note that this picture depicts nameplate capacity, i.e. it implies that all generation is running at 100% of capacity. This is clearly unrealistic. But the point is not an “average” situation, but one “when the wind blows and the sun shines”, which can get close to nameplate capacity for these renewable assets.
In an upcoming article, we will examine a number of scenarios more closely, including a “Dunkelflaute” bookend.
Q: “Only few electricity consumers can avoid transmission & distribution fees, thus how come you neglect those costs in ETES feasibility calculations?”
A: In short, we don’t. There are indeed cases where T&D costs render ETES applications economically infeasible. But there are many cases where that is not the case, for example:
Behind-fence Cogen tie-in: Many Cogen units produce more electricity than required for the facility they are serving and sell that electricity into the AB electricity market, i.e. the facility is “long power”. A lot of the facilities are also “short steam” however, i.e. they have additional steam requirements served by additional steam generators (Boiler / OTSG / HRSG). These facilities can augment or replace these additional steam generators with ETES units that get charged by the behind-fence Cogen during low price hours. The Cogen continues to capture high market prices, but avoids the low-price hours, and the ETES unit does not incur T&D costs.
Curtailed renewables integration: Some industrial facilities, especially in south east Alberta, are located close to wind and solar assets that are regularly production-curtailed. Instead of wasting the excess electricity, it can be used to power the industrial ETES unit. Key here is the affordability of the direct connection to the renewable asset.
DOS Dispatchable: On July 31st, 2024, the Alberta Utility Commission (AUC) approved the new “Demand Opportunity Service - Dispatchable” tariff for dispatchable / interruptible electricity consumers. This rate requires a business case approval, however when approved can provide transmission fees of currently less than CAD 8/MWh, which is economically feasible for many ETES applications.
These are just three specific examples of projects we are currently pursuing. Each case is different, but the initial feasibility review is fast and simple (and free of charge), thus if you are an industrial steam consumer looking to lower costs and / or cut emissions, please get in touch!
Q: “What if some of the older power plants get mothballed or fully retired, would this change the outlook for the low end of the cost curve and zero-dollar hours in particular?”
A: The impact on the low end of the cost curve would likely be similar to the impact of higher gas prices, see earlier response on that topic above. That said, we are working on an article outlining various supply / demand scenarios - stay tuned!