Under Premier Danielle Smith’s government, Alberta’s power grid operator has been developing a new system for how the electricity market operates.Jeff McIntosh/The Canadian Press
The Alberta government’s upcoming changes to its electricity market structure will put the renewable energy sector at an even greater disadvantage after the province imposed a series of restrictions on wind and solar development, industry leaders say.
At the behest of Premier Danielle Smith’s government, Alberta’s power grid operator has been developing a new system for how the electricity market operates. The objective, it says, is to ensure affordability and reliability after years of volatile prices and recent shortages that led to provincewide outages and pleas for consumers to power down.
One big change is the move to a system in which generators commit to supplying electricity a day ahead, instead of just a couple of hours in advance. This is aimed at smoothing out the wild gyrations in prices. Another is building and maintaining connections with grids in British Columbia and Saskatchewan.
However, wind and solar generators say the changes fail to address shortages of capacity on parts of the Alberta grid that hamper their ability to deliver all the power they produce.
Under the current system, generators were promised no capacity constraints, but recently they have been unable to deliver all the electricity they generate. In the third quarter, the industry struggled with congestion 45 per cent of the time, according to the Canadian Renewable Energy Association, known as CanREA.
The sector should be offered compensation for that, said Vittoria Bellissimo, CanREA’s chief executive officer. Without it, generators are denied revenue, which hinders their ability to service their debt and could lead to credit downgrades, she said. That would only make it even tougher for developers to build new projects.
With forecasts of rising demand from an increasing population, power-hungry data centres and other industrial projects, Alberta should be looking for ways to provide a range of new generation sources, not limit them, she said.
“What we shouldn’t be doing is saying, ‘Hey, investors who built here in good faith, we’re going to start to impose additional costs upon you that you didn’t know about when you financed and built your project. We’re going to make it harder for you to get megawatt-hours to market and we’re going to change the system to make sure that, going forward, it’ll be harder to build the projects,’” Ms. Bellissimo said.
Alberta had previously taken a free-market approach to generation, a system in which corporate buyers could sign up for long-term renewable power. That led to a multibillion-dollar boom in investment in wind and solar farms.
But much of that development was spread out in the province’s south. Far from large population centres and vastly different from the way power has traditionally been generated in the province – via large gas- or coal-fired power plants that produce huge amounts of electricity – wind and solar farms required more transmission infrastructure to bring power to the grid.
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In 2023, the United Conservative Party government imposed a seven-month moratorium on new development, citing the developments’ impact on arable land and reliability of the electricity grid.
It has since imposed a series of restrictions on the industry, including limiting the ability to build projects in regions it deems as having “pristine viewscapes” or farmland that needs protecting. Investment in new projects has dwindled as a result.
The province has also set about devising the new market structure. The Alberta Electricity System Operator commissioned an analysis of its Restructured Electricity Market that suggested poor economics for renewables in the coming years. Under the new system, the study said, solar projects would not meet a 7.5-per-cent hurdle rate of weighted average capital cost from 2027, and wind would drop below by 2037.
Ms. Bellissimo questioned those calculations, saying they were made without knowing some key variables, including the future cost to connect to the grid or how ancillary services costs will be allocated. “The market picked that apart pretty hard,” she said.
Alberta Utilities Minister Nathan Neudorf was unavailable for an interview. His press secretary, Ryan Fournier, said in an e-mail that the changes were the result of comprehensive engagement with the industry.
Mr. Fournier did not respond to the criticisms from the renewables sector, but said the Restructured Energy Market would prioritize reliability and ensure investor certainty. “Moving to a cost-causation model for future transmission infrastructure will encourage investors to build new power projects in optimal locations, lowering costs,” he said.
“Moving forward, if generators choose to build far from existing transmission capacity, Albertans will no longer be burdened with the full cost of new builds.”
The year and a half of policy uncertainty has frozen investment in renewables as well as other forms of power generation, said Dan Balaban, CEO of Greengate Power Corp., which developed the $700-million Travers Solar farm in Southern Alberta, the country’s largest such project. After a decade of heavy investment, the company is not currently planning to develop new projects in the province.
“The mix in Alberta, at least going forward, is going to be much more fossil fuel-based generation and less renewables than we would have seen under the current market structure,” Mr. Balaban said. “It’s trying to drive a certain outcome that the province wants to see.”
Editor’s note: A previous version of this article incorrectly referred to Alberta Electricity System Operator as a regulator. The organization plans and manages the grid. This version has been updated.