QRG - Grid Planning in Alberta

Photo by Andrey Metelev on Unsplash

As the Alberta government considers revisions to the electricity policy framework in Alberta, I thought it may be helpful to provide a brief explanation of how power system planning is performed in Alberta and how it differs from the rest of Canada. Here is my attempt at a quick reference guide (QRG) for grid planning in Alberta.

Power System Planning in Regulated Provinces

Regulated Provinces like BC, Saskatchewan, Manitoba, Quebec have vertically integrated models in which a single Provincial entity, a crown-owned electric utility, is responsible for generation, distribution, and transmission planning and operations. These utilities plan new transmission and generation to meet forecast demand while simultaneously implementing government social and environmental policy objectives.

Crown-owned utilities use an approach called integrated resource planning (IRP) to determine the optimum economic and technical combination of generation, transmission, and distribution investments to satisfy their demand forecasts, reliability and resource adequacy requirements, and social and environmental policy objectives. The main sources of planning uncertainty in this approach are the pace and location of demand growth.

In the regulated Provinces, the crown-owned utilities are responsible for resource adequacy, reliability, and power system operations, which includes generator dispatch and transmission and distribution operations.

Power System Planning in Alberta

Alberta has a very different planning paradigm. There is no single entity that is responsible for both generation and transmission planning. Generation planning and investment decisions are made by numerous private investors based on expected long-term economic returns from Alberta’s wholesale markets for power and ancillary services. Transmission planning and investment decisions are made by Alberta’s ISO, the Alberta Electric System Operator (AESO) which has the legal responsibility to plan the Alberta transmission system to satisfy forecast demand and provide unconstrained transmission capacity for anticipated new generation. So, while the AESO controls transmission planning and investment, there are numerous private entities that determine the timing, location, type, and size of new generation projects.

In order to plan the transmission system, the AESO must not only forecast the pace and location of demand across the Province, they must also make assumptions about the type, size, timing, and location of new generation and plan to ensure there is sufficient transmission capacity for them to reliably and safely connect to the system without constraints. In Alberta, the sources of planning uncertainty are the pace and location of demand growth as well as the timing, location, size, and type of future generation on the system. In other words, the AESO must essentially make educated guesses as to what kinds of generators show up when and where and plan to ensure sufficient transmission capacity is in place before they want to connect to the system.

The end result is that there is no integration of generation and transmission planning in Alberta. And, unlike the regulated Provinces, there is no entity responsible for integrating social and environmental policy objectives into power system plans.

In Alberta, the AESO is responsible for power system reliability, but resource adequacy depends on investor confidence in the market as the mechanism for timely and sufficient generation investment. The AESO is responsible for transmission system operations and market operations, while distribution companies are responsible for distribution system planning, reliability, and operations.

Here’s a summary of how the two approaches compare:

A Path Forward

The AESO recently published transmission policy changes it recommended to the Alberta government that address these planning challenges. The AESO makes 5 recommendations as follows:

1. A move away from a congestion free transmission policy to an optimized transmission planning approach.

2. Enhancing the AESO’s ability to act in a timely manner to reflect the rapidly changing nature of the grid and to put the system infrastructure in place required to mitigate reliability issues quickly.

3. Changes to cost allocation to require suppliers to pay more to reflect their impact to system costs.

4. Enhancing the AESO’s ability to direct where resources connect to the grid.

5. Clarifying volume and timing targets for the restoration of existing interconnections with other jurisdictions and the expansion or development of new interconnections.

To these recommendations, I would add a few other enhancements that I believe we need in Alberta:

• An explicit minimum reserve margin for Alberta articulated in regulation to provide the AESO and market participants with target resource adequacy levels

• The implementation of a capacity accreditation process to provide a consistent, structured, and transparent process for managing resource adequacy

• Legislated requirements for planning and operational coordination of natural gas and electricity infrastructure in recognition of the fact that Alberta’s power system is now fully dependent on the reliable supply and delivery of natural gas

These changes to how the grid is planned in Alberta would address the planning challenges and uncertainties outlined above.

Final Thoughts

Our policy framework in Alberta depends on investor confidence to drive sufficient generation investment to provide resource adequacy and reliability. And it worked remarkably well for about 20 years. However, things have changed, and now generation investment decisions are increasingly being driven by environmental and social policy and out-of-market generator compensation, such as generator power purchase agreements with corporations looking to meet ESG objectives. The result is declining resource adequacy and reliability in Alberta.

These are the problems the Alberta government is trying to solve as it considers changes to the electricity policy framework that has served us well for so many years. I believe a market-based approach can continue to succeed, but the market design and planning paradigm must both evolve to ensure continued resource adequacy, reliability, and affordability in Alberta.

The need for change is urgent and transmission policy certainty is required as soon as possible because it will take some time to design and implement market and transmission planning changes and Alberta’s power system will continue to be at risk in the interim. The key will be to keep it simple, and not let perfect be the enemy of good.