Episode
78

Alberta Electricity Market Case Study – with Sheldon Fulton

March 29, 2023
|
Duration:
1905577
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In This Episode:

Join David Arkell, John Pooley, Lysandra Naom, and Sheldon Fulton, President of Forte Business Solutions Ltd. on an episode all about Alberta's electricity market. This episode features the initial market setup, current changes, how to improve an electricity market, top 3 learnings and more. Check out our 360 Carbon Excellence Program. You can find Sheldons recent paper to Alberta here https://www.linkedin.com/posts/360-energy_transitioning-power-market-activity-7036053568713347072-qjkZ/

Highlights

  • Alberta’s Market Deregulation Journey: In the late 1990s, Alberta’s government deregulated the electricity market to introduce competition, aiming to improve efficiency. However, the market design lacked a clear vision, resulting in various issues over time.
  • Imbalance of Buyer and Seller Influence: The market's initial setup favored established generators, particularly coal plants, leading to price signals that did not incentivize newer, cleaner energy technologies or a truly competitive environment.
  • Role of Coal in Pricing Structure: Since over 70% of Alberta’s electricity originally came from coal, market prices were set up to favor coal dispatch, which has become outdated as Alberta shifts away from coal to natural gas and renewables.
  • Challenges with Scope and Regulation: Alberta’s market operator, the Alberta Electricity System Operator (AESO), manages the market without enough regulatory oversight to address competitive imbalances, leading to issues with high prices and limited consumer choices.
  • Lessons from Global Markets: Fulton references other energy markets, such as those in the UK and California, which Alberta attempted to emulate but with limited success due to its unique, flat demand profile and high reliance on coal.

    • ‍

    Key Insights

  • Market Design and Policy Gaps: Effective market design requires clear policy objectives that balance demand, supply, and environmental goals. Without these, Alberta’s market struggled to evolve as conditions changed.
  • Importance of Price Signals for Clean Energy: Effective price signals can drive renewable energy adoption. Alberta’s reliance on coal-centric pricing has delayed a shift to sustainable energy sources, highlighting the need for market reforms that reward low-carbon energy.
  • Need for Forward Contracts and Risk Balancing: Fulton suggests that introducing forward contracts, where suppliers commit to future energy prices, would help reduce reliance on real-time pricing and encourage investment in reliable, cleaner power sources.
  • Risk Management as a Market Driver: Unlike other commodity markets that balance risk between buyers and sellers, Alberta’s market design does not effectively manage risk, which hampers investments in new energy infrastructure.
  • Encouraging Local Generation: Alberta’s focus on large-scale generation located far from consumption areas should shift to more distributed generation closer to demand centers, improving reliability and reducing transmission costs
    • Share this story
    Energy Infrastructure
    Energy Markets
    Natural Gas
    Risk Management
    Renewable Energy
    Distributed Generation
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