The Alberta Electric System Operator (AESO) recently released the first draft of its proposed Comprehensive Market Design (CMD 1) for Alberta’s future capacity market. The document sets out the AESO’s proposed framework of the technical design of the capacity market, as informed by industry stakeholders, third party expert advice and internal AESO analysis. Two more drafts of the CMD are expected in the coming months and will involve broad industry review and feedback.
What is a capacity market and why is Alberta making the transition?
Unlike Alberta’s current “energy-only” market where generators are only paid for the electricity sold to the grid, a capacity market includes an additional payment to generators for having the ability to reliably make power available regardless of how often they sell electricity to the grid. The electricity held in capacity can be quickly dispatched onto the grid during times of consumer peak demand, or an unexpected shut-down of a power generating unit, which helps to ensure the reliability and adequacy of the system as well as reduce price volatility to consumers. Capacity markets are common and can be found throughout the Northeastern United States as well as overseas in the UK and Ireland.
Capacity also provides an additional revenue stream for generators that helps encourage investment. It is estimated that Alberta will require up to $25 billion of new investment in electricity generation over the next 14 years to meet the forecasted energy needs of Albertans and to support a transition to cleaner sources.
When will the transition occur?
The first capacity procurements are scheduled to occur in 2019 and the market will fully transition to a capacity market in 2021.
To find out how this market change will impact AMSC Energy Retail Program customers, contact us at 310-AUMA or email us at email@example.com.