By Charlotte Morritt-Jacobs - (@morrittjacobs on Twitter)

AB Government Transitioning To “Capacity Market” For Electricity

Nov 23, 2016 | 2:38 PM

ALBERTA – The Alberta government is changing the way energy is produced and paid for.

In a press conference on Wednesday (Nov. 23), provincial Energy Minister Marg McCuaig-Boyd told the media that Alberta will transition from full deregulation to a “capacity market.”

McCuaig-Boyd said that the move is part of its plan to ensure that consumers are protected from price volatility with a reliable supply of electricity at stable, affordable prices.

What is price volatility?

Price volatility describes how quickly or widely prices can alter in reference to electricity relative to consumer demand. Price volatility is caused by energy price fluctuation spurred by changes in supply and demand. When energy supply increases, prices typically go down; however when there is a shortage of energy, consumers see a spike in costs. Similarly, when demand for energy soars, prices follow suit as vice versa.

Week-in-review: Federal Budget, water agreements and success for tourism industry

Apr 20, 2024

What's Happening in Lethbridge this weekend: April 19, 2024

Apr 19, 2024

What's Happening in Lethbridge this week: April 15, 2024

Apr 15, 2024

Factors such as extreme weather conditions, economic conditions and supply demands all impact the market prices.

Alberta’s capacity market will be developed and set in place by 2021.

In capacity markets, private power generators are paid through a mix of a competitively auctioned payment of their fixed costs and prices from the spot market.

Under the capacity market there is the chance that Albertans will wind up paying more for excess capacity, but it is expected to reduce market volatility.

McCuaig-Boyd says the move will ensure prices remain affordable as Alberta moves away from coal-fired electricity to natural gas and to renewables such as wind and solar.

The Minister says that the change was recommended to the NDP government by current and potential energy investors, as well as by the Alberta Electric System Operator (AESO), which oversees the province’s electricity system in the interests of the public.

“Think of capacity markets as ‘Market Plus.’ They support better planning and reliability, while using markets and competition to meet the energy demands in the most cost-effective way possible. And, because they’re used all over the world, capacity markets are familiar to investors, who like the stability and predictability they bring.”

This announcement follows the government’s move to put a price cap of 6.8 cents per kilowatt hour in place for families and small businesses on the Regulated Rate Option from June 2017 until June 2021.