March 29th, 2020

City’s power situation unique

By Collin Gallant on November 25, 2016.

Clues about how Medicine Hat’s power plant can plug into a new Alberta Energy system could come from the oilsands.

The provincial government announced Wednesday it will move to switch the open energy market to a capacity market over four years.

Administrators say it would provide more money to generators which earmark production for the grid, as opposed to setting extremely high rates in times of shortages.

That volatility is paid for by consumers, said Energy Minister Margaret McCuaig-Boyd, and is too unstable to capture new plant investment.

However, the system — in place since deregulation in the mid-1990s — has put millions in the coffers in Medicine Hat.

“The question now is really how we participate in the energy market and the capacity market,” city CAO Merete Heggelund said this week.

The city’s generation charter allows it to only be able to produce enough energy to meet its own needs, though in practice usage never meets capacity, and the excess has been available for sale.

As a grandfathered municipal producer however, it must meet its own energy needs before exporting is an option.

Medicine Hat’s capacity question somewhat mirrors the situation of certain oilsands producers. Cogeneration plants around Fort McMurray often produce power for internal use, but also sell on the Alberta market to augment profit or recover costs.

Provincial administrators said Wednesday there will need to be some flexibility available for co-generators and access to the capacity auction.

However, the power that’s promised must be put on the grid when needed.

“They will have a decision to make about whether they want to continue (exporting), but that comes with obligations to have capacity available,” said David Ericksen, president of Alberta Electrical System Operator.

“All of this says that we need to do a good job over the next several years (developing the system).”

McCuaig-Boyd said Medicine Hat’s situation is unique as the only remaining municipally-owned power producer, and that details of any new program would be developed through consultations.

Mayor Ted Clugston said he would take a wait-and-see approach while staff and forecasters in the utility digest a 104-page report from the AESO.

The changes may, in the end, provide more stable revenue for the city, he said.

“We know our baseload and were good at predicting it,” said Mayor Ted Clugston, adding that over the course of a five-year contract to supply contingency power, the city’s usage may change.

“We’re going to have a little bit of trouble and we may have to maintain a cushion.”

Production capacity in the City of Medicine Hat is set at its maximum load — a theoretical amount equal to the energy needed if every outlet and light in the city was on at the same time.

Since that never occurs, there is always gap typically of about 50 to 70 megawatts, which has in the past been exported at up to $1,000 per megawatt hour.

The city’s capacity is 203 megawatts with another 43 megawatts being added when the new north-end power plant is completed next year.

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