Government is restoring investor confidence in Alberta’s electricity system by returning to a cost-effective, reliable energy-only market.
Reviewing which market-based system is best for Albertans was a government commitment, and this decision comes after stakeholders – including industry and consumers – expressed overwhelming support for maintaining Alberta’s energy-only market, rather than creating a complex capacity market. Feedback was received through consultations and written submissions.
“Albertans and investors need certainty in our province’s electricity market system, not an experiment. The energy-only market works. Investors want to participate in it and it provides Albertans with reliable and affordable electricity.”Sonya Savage, Minister of Energy
Currently, there are nearly 5,000 megawatts of natural gas, wind and solar generation projects fully approved in the province. This decision provides additional investor certainty in putting shovels in the ground, and will result in additional jobs for Albertans.
Alberta has been operating an energy-only market for electricity since 1996. In 2016, the previous government announced the province would transition to a capacity market, which would have been operational in 2021.
“The former government’s ideological meddling with our electricity system resulted in the return of the Power Purchase Arrangements (PPAs), costing consumers $2 billion. The response from industry to maintain an energy-only market was overwhelming, and this is yet another example of promise made, promise kept.”Sonya Savage, Minister of Energy
Energy-only market versus capacity market
A key difference between the markets is how electricity generators are paid.
- In energy-only markets, electricity generators are paid only for the electricity they produce in real time when electricity is required.
- In capacity markets, electricity generators are paid for their overall ability to produce electricity, in addition to the electricity they produce and sell in real time.
Government will table the necessary legislation and amend regulations to stop the implementation of the capacity market as soon as possible.
Why a review was needed
The Government of Alberta promised to consult with industry experts on whether Alberta should return to an energy-only market or create a capacity market, and report back to Albertans within 90 days.
The energy minister held five roundtable sessions with key stakeholders. All stakeholder groups were represented at these sessions: generators, (including renewable generators and co-generators), regulated utilities and retail providers, representatives of small and industrial consumers, and financial institutions and other investors.
Additionally, stakeholders were invited to provide written feedback. The energy minister met separately with senior executives from the Alberta Electric System Operator.
The feedback received indicated an overwhelming preference among stakeholders for the energy-only market design.
Why an energy-only market is best for Alberta
An energy-only market:
- Offers structural and administrative simplicity.
- Has a proven track record for providing affordable electricity in Alberta.
- Has a proven track record for providing a reliable supply of electricity in Alberta.
- Is already established and understood by investors, which offers them greater certainty regarding its future performance.
- Is supported by the majority of electricity stakeholders and consumer groups.