Today’s energy charts are posted at https://aleach.ca/charts.
Our first order of business today is to welcome a new writer to the Energy Charts team. Kayla Layden is a fourth-year BA Honours student majoring in Economics, with a particular interest in microeconomics. Kayla has diverse experience in energy, oil and gas, insurance, office management, translation, and is a student leader in the Department of Economics. Kayla is the perfect addition to the team, as she says, “I love economics because it allows me to explore where math and analysis meet people and society.” My hope is to add a few other students, likely from economics, to our team over the coming weeks.
It’s a loaded update this week as we’ve got two stories this week from Kayla, two from Marc Vermette, one from Yousaff Habib, and a little trip down memory lane on the Climate Leadership Panel from me on the 7th anniversary. Kayla’s got an update on pipeline apportionment on the Enbridge system, and its link to oil price differentials as well as a piece on the CAODC State of the Industry. Marc’s got two international stories this week, on solar power in India and tidal power in the UK. Yousaff fills in another international story with a new offshore wind plant in France.
Also out this week, but a bit late to sneak into the stories, is S&P Commodity Insights’ new assessment of oil sands emissions intensity. They find that, emissions intensity fell 2% from 2020 to 2021, but increased output means that overall emissions were higher from the sector.
Now, a bit of a rant. With graphs.
One of my favorite podcasts is ARC Energy Ideas, featuring fellow Alberta energy nerds Jackie Forrest and Peter Tertzakian. This week, I’m going to reveal myself as being a few episodes behind, while taking issue with a few things that came up in Peter and Jackie’s interview with Mike Law, CEO of the Alberta Electric System Operator (AESO), our power grid management agency.
First, let me say that we partner a lot with the AESO, and the AESO has been a great supporter of our work, so I am not keen to dump on them, but there are some parts of this interview that rubbed me the wrong way.
The first thing that really jumped out at me was this conversation about the federal government’s clean electricity standard:
Why did this bother me? Mostly because the AESO has, at least recently, had a very pessimistic view of the deployment of renewables. The AESO’s recent outlooks have been repudiated by the rapid uptake of wind and solar power in the province (see graph below from a recent book chapter I’ve co-authored with Ben Thibault and Tim Weis). Alberta’s on pace to be at roughly 30% of generation from renewables by 2024 based on projects in construction right now. When you look at how far we’ve come in the last few years, there’s a lot we can do in the next 12 to 13 years.
Forecasting the evolution of Alberta’s power market is challenging - as the AESO’s previous forecasts shown below demonstrate. The graph below isn’t all bad: the AESO is, by its nature, cautious. Its responsibility is to ensure reliability, so it is always better for its forecasts to miss to the high side, in which case we end up with an over-built system rather than a big shortfall. However, it bothers me when that caution bleeds into policy advice in other areas.
To wit, the AESO also had a pessimistic view on the speed and feasibility of coal retirements in Alberta. In fact, as recently as 2019, the AESO was still forecasting coal units operating in Alberta through mid-2029. In reality, Alberta will see the conversion or retirement of all of its coal units in the next 13 months or so.
Yes, I am extremely sensitive to this as a result of how confidently it was explained to me during and after my Alberta Climate Leadership Panel work in 2015 that there was no way Alberta could phase out coal by 2030. It was impossible. It is revisionist history to say, as Mike Law does on the podcast, that we knew we could do it because “we were moving from a known technology to another known technology, so from coal to natural gas.”
That is really not what happened. At all.
At the time, the same concerns about the billions of dollars of investment required, the policy uncertainty, and the need to guarantee reliability through such a rapid transition were omnipresent. I heard them every single day.
Another part of the podcast that really grated on me was the discussion of interties with BC and Saskatchewan, for which I’ve included the transcript below (imagine these are charts, okay?)
The view that we might not be able to get even a single new intertie line built by 2035 is, in and of itself, depressing. The fact that our independent system operator is writing off that possibility entirely creates a self-fulfilling prophecy. And, the fact that they’re writing it off as a possibility BECAUSE the taxpayers of BC are subsidizing electricity production is even more mind-boggling. The responsibility of the AESO is reliability, not the protection of domestic producer profits. Given the big, blinking warning lights that should be going off with respect to the challenges that Mike Law rightly highlights with respect to the transition our power sector, the AESO should, right now, be planning for more interconnection as a core part of their reliability mandate, not writing interties off entirely. And no, this is not a case like Churchill Falls. No one is holding Alberta’s wind power (or BC’s hydro power) hostage. We know that more interties will be beneficial in a carbon constrained world, a world in which the AESO is worried about risks of intermittency and the need for storage. The AESO should be first in line to explain to people how more interconnection can improve reliability, not writing off more interconnection while worrying about reliability.
Finally, I was annoyed at the statement that carbon pricing is likely adding 3c/kWh to power prices in the province. How? The AESO’s own data show you why that isn’t likely to be the case, on average, through the month. The only generator facing a cost of carbon that high (right column below) are the two remaining sub-critical coal generators, and they are not on the margin much of the time. More than 2/3 of the time, gas generation (with a carbon cost almost always less than 1c/kWh) is on the margin. Curiously, what was not mentioned during the podcast was offer behaviour of power generators, which has changed significantly in ways that go beyond reflecting increases in natural gas and carbon pricing costs. In fact, the AESO’s 2021 report showed that, after adjusting for input costs, offers had increased dramatically, which they attributed in large part to “the combination of demand growth and the increased offer prices made by larger market participants.”
That’s my rant for this week. Next week, I think we’ll have a few charts on offer behaviour in Alberta’s power market.
Have a great weekend,
Andrew
Well that is a rant and backed up with relevant details. I too listen to ARC Energy podcast but I got nothing when it comes to the focused feedback you lay out. Thx.