Varcoe: Faster electricity growth coming, as new AESO report adds to net-zero power grid battle

A new long-term outlook shows the appetite for power consumption will increase over the next two decades

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The days of slower growth for Alberta’s electricity sector are coming to an end, with a new long-term outlook showing the appetite for power consumption will increase over the next two decades.

The new Alberta Electric System Operator (AESO) report, which calls for an upswing in demand — expected to grow by 1.2 per cent annually over the next 20 years, much higher than its previous outlook — also raises questions around supply adequacy if Ottawa’s Clean Electricity Regulations (CER) move ahead.

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The grid operator’s long-term forecast was released last week, examining electricity supply, and demand factors for the province over the next two decades.

It also explores the future role of electric vehicles, the continued growth of renewable energy and the expected emergence of carbon capture technology in power generation, along with other major industry trends.

The grid operator anticipates there will largely be sufficient generation under its base case scenario, based on the grid reaching net-zero emissions by 2050. Consumption will rise due to a strong economy, population growth, more demand from the oilsands, and the ongoing electrification of the transportation and building sectors.

Electricity demand in Alberta has increased by an annual rate of just 0.2 per cent over the past five years and dipped by 0.3 per cent in 2023, according to electricity consultancy EDC Associates Ltd.

“Within the 2024 (report), we see that the electrification of transportation and building has added new sources of load,” said Ryan Scholefield, AESO’s manager of load forecasting and market analytics.

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“(Economic) outlooks have improved and that drives some of the load growth, but the real significant uptake and the significant changes are in the electrification trends, specifically around electric vehicles.”

The report points to the uncertainty that’s facing the electricity sector, including technological changes and government policies.

Both the federal and provincial governments have adopted net-zero emissions targets — but have different timelines.

If the federal government’s push to see provincial electricity grids hit (or nearly reach) net-zero emissions by 2035, the report said there could be reliability challenges towards the end of the forecasting period.

Under its base-case outlook of Alberta’s grid reaching net-zero emissions by 2050 — a timeline favoured by the province — “it is reasonable to conclude that the grid sees limited risk of unserved energy due to lack of adequate supply,” the AESO states.

Alberta power demand

“In the Decarbonization by 2035 scenario, it is more likely the grid will experience reliability events with limited flexibility available to mitigate such risk.”

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Reaching net-zero emissions by 2035 “poses the highest risk for load shedding and unserved energy,” reaching up to 174,000 megawatt hours, mostly during high-demand periods, it adds.

The AESO’s outlook is sure to add more fuel to the fiery debate between the Alberta and federal governments over Ottawa’s incoming Clean Electricity Regulations (CER).

The Trudeau government believes provincial power grids can reach net-zero emissions in the earlier timeframe.

The Smith government has noted Alberta relies on natural gas to generate baseload electricity and believes the CER is unconstitutional, would be costly for consumers and could lead to blackouts.

According to the new AESO report, Alberta’s generation supply forecast is expected to meet the grid operator’s resource adequacy standards throughout virtually all of the period under the base case.

However, there is an increased risk of supply shortfalls in 2038, largely because of the retirement of gas-fired units.

The study said early adoption of decarbonization technologies, such as CCUS and small modular reactors (SMRs), would help address escalating load demands.

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By 2030, renewable capacity in the province — including wind, solar, hydro and biomass — is expected to exceed peak demand “and additions beyond that capacity are expected to be moderated.”

The report also found that further growth in demand could come from the faster adoption of EVs, increased production of hydrogen and new data centres.

With the imminent addition of new gas-fired generation and more renewable power, Alberta is expected to see periods of supply surplus in the mid-term.

And by 2035, electricity system emissions are expected to see 94 to 96 per cent reductions from 2005 levels under all of the scenarios the AESO examined.

Alberta Utilities Minister Nathan Neudorf said Friday the report underscores the rapid pace of change within 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 power market. Detailed design work by the AESO on the restructured market is due by the end of the year, kicking into place in 2027

The study also highlights the risks of trying to hit the 2035 net-zero emissions target on system reliability and affordability, Neudorf said.

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“One of our greatest contentions with the federal government is that they’ve brought almost zero common sense approach to this,” he said.

“While it might be possible, it will certainly be extremely expensive and abandon a huge number of assets, make our system unreliable, and that’s not good for anybody in the long term.”

A federal source points out the CER rules are still under development and AESO modelling doesn’t reflect its current approach. Ottawa’s latest proposed changes released in February include several new flexibility measures, such as allowing gas-fired units to exceed their annual emissions limits if the operator acquires offsets.

Jason Wang, a senior electricity analyst with the Pembina Institute, said the long-term outlooks by the AESO in recent years haven’t adequately forecast the potential of new technologies, such as renewables.

The new study appears to underestimate the opportunities for storage and ways to manage demand in the future, such as by adopting time-of-use pricing to encourage consumers to reduce consumption during certain times, he said.

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“We think a low-carbon grid by 2035 is achievable and can, in fact, save … the typical Alberta household up to $600 a year on their electricity bills. The most important part of achieving that is quick action,” he said.

But EDC Associates president Duane Reid-Carlson said AESO’s outlook largely lines up with its own forecast of supply and demand in Alberta and is consistent with the potential risks of supply shortfalls under a net-zero by 2035 approach.

“There are reliability issues and high-cost issues that come imminently under the 2035 scenario,” he said.

“You either suffer reliability issues under the technology we have, or you fast-track the technologies that aren’t yet commercially available — and it’s a super high cost.”

Chris Varcoe is a Calgary Herald columnist.

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