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Varcoe: AESO report intensifies fight for zero-energy grid in Alberta

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A new long-term forecast shows that electricity consumption will increase over the next two decades

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The days of slower growth in Alberta's electricity sector are coming to an end. A new long-term forecast shows that electricity consumption will increase over the next two decades.

The new report from the Alberta Electric System Operator (AESO) forecasts an increase in demand – with annual growth of 1.2 per cent expected over the next 20 years, significantly higher than the previous forecast – and also raises questions about the adequacy of supply if Ottawa's Clean Electricity Regulations (CER) are implemented.

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Last week, the grid operator's long-term forecast was published, examining the factors affecting electricity supply and demand in the province for the next two decades.

It also examines the future role of electric vehicles, the continued growth of renewable energy, and the expected adoption of carbon capture technologies in power generation, as well as other key industry trends.

The grid operator assumes that in its base case scenario, electricity generation will be largely sufficient as the grid reaches net-zero emissions by 2050. Consumption will increase due to a strong economy, population growth, higher demand from the oil sands and the ongoing electrification of the transport and building sectors.

According to electricity consulting firm EDC Associates Ltd., Alberta's electricity demand has increased by only 0.2 percent annually over the past five years and is expected to decline by 0.3 percent in 2023.

“In the 2024 report, we see that new sources of load have been added through the electrification of the transport and building sectors,” said Ryan Scholefield, AESO manager of load forecasting and market analysis.

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“The (economic) outlook has improved and that accounts for some of the load growth, but the really significant increase and changes are in the electrification trends, particularly in the area of ​​electric vehicles.”

The report highlights the uncertainty facing the electricity sector, including technological changes and government policies.

Both the federal and provincial governments have set net-zero emissions targets – albeit with different timelines.

If the federal government succeeds in getting provincial power grids to net-zero emissions (or at least close to them) by 2035, reliability issues could arise toward the end of the forecast period, the report said.

Assuming a baseline scenario in which Alberta's electricity grid achieves net-zero emissions by 2050 – a timeline favoured by the province – “it is reasonable to assume that the grid will face only a limited risk of non-delivery of energy due to insufficient supply,” the AESO statement said.

Electricity demand in Alberta

“In the 2035 decarbonization scenario, the grid is more likely to experience downtime and there is limited flexibility available to mitigate such risks.”

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Achieving net zero emissions by 2035″“Electricity generation is at the highest risk of load shedding and undelivered energy,” it continues. Electricity generation could reach up to 174,000 megawatt hours, especially during periods of high demand.

AESO's forecast is sure to further fuel the heated debate between the Alberta government and the federal government over Ottawa's upcoming Clean Electricity Regulations (CER).

The Trudeau government believes that the provinces' electricity grids can achieve net-zero emissions sooner.

The Smith government points out that Alberta relies on natural gas to generate baseload electricity and believes the CER is unconstitutional, costly to consumers and could lead to blackouts.

According to the new AESO report, Alberta's baseline generation forecast is expected to meet the grid operator's resource adequacy standards for almost the entire period.

However, there is an increased risk of supply shortages in 2038, mainly due to the shutdown of gas-fired power plants.

According to the study, early adoption of decarbonization technologies such as CCUS and small modular reactors (SMRs) would help meet increasing load demands.

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By 2030, the province's renewable energy capacity – including wind, solar, hydro and biomass – is expected to exceed peak demand, “and additions beyond that capacity are expected to be curbed.”

The report also found that demand could further increase due to faster adoption of electric vehicles, increased hydrogen production and new data centers.

With the upcoming addition of new gas-fired power plants and increased use of renewable energy, Alberta is likely to experience periods of supply surpluses in the medium term.

And by 2035, under all scenarios studied by AESO, electricity grid emissions are expected to fall by 94 to 96 percent compared to 2005 levels.

Nathan Neudorf, Alberta's energy minister, said Friday the report underscores the rapid pace of change in the electricity sector and the need for careful planning and flexibility to keep up.

Alberta renewable solar wind
Solar panels with wind turbines in the distance west of Lomond. Mike Drew/Postmedia

The province is reforming its deregulated electricity market. AESO's detailed planning work for the restructured market is expected to be completed by the end of the year and come into force in 2027.

The study also highlights the risks associated with trying to achieve the 2035 net-zero emissions target in terms of system reliability and affordability, Neudorf said.

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“One of our biggest points of contention with the federal government is that they have shown virtually no common sense on this issue,” he said.

“While this is possible, it will certainly be extremely expensive and would render a large number of assets unusable. It would make our system unreliable, and that is not good for anyone in the long run.”

A federal source points out that the CER rules are still being developed and AESO modelling does not reflect their current approach. Ottawa's latest proposed changes, released in February, include several new flexibility measures, such as allowing gas-fired plants to exceed their annual emissions limits if the operator purchases offsets.

Jason Wang, a senior electricity analyst at the Pembina Institute, said AESO's long-term forecasts in recent years have not adequately anticipated the potential of new technologies, such as renewable energy.

The new study appears to underestimate storage options and opportunities to manage demand in the future, such as introducing time-based pricing to encourage consumers to reduce their consumption at certain times, he said.

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“We believe that a low-carbon grid is achievable by 2035 and can actually save a typical Alberta household up to $600 a year in electricity costs. The key is to act quickly,” he said.

But Duane Reid-Carlson, president of EDC Associates, said AESO's forecast was broadly in line with its own forecast of supply and demand in Alberta and was consistent with the potential risks of supply shortages under a net-zero approach by 2035.

“In the 2035 scenario, we are immediately threatened by reliability problems and high costs,” he said.

“Either you have reliability problems with existing technology, or you accelerate the development of technologies that are not yet commercially available – and that comes at an extremely high cost.”

Chris Varcoe is a columnist for the Calgary Herald.

[email protected]

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