The City of Medicine Hat doesn't expect proposed power grid legislation at the provincial level to affect local operations but will monitor closely any result that occurs.--NEWS FILE PHOTO
cgallant@medicinehatnews.com@CollinGallant
The Alberta government is proposing opening up Alberta’s power market to battery storage and new generators in legislation tabled Wednesday, stating that “enabling” new technology and more flexible ways to sell on to the grid will lower prices.
Officials with the City of Medicine Hat – where the effects of such changes on export power prices were studied in depth last year – say Bill 22 proposes no major changes for operating the municipal power company, but the overall effect will be watched closely.
“It appears to be relatively status quo, but we will pay specific attention to how (regulations) and the effect on markets develop,” said Rochelle Pancoast, managing director of strategy for the city.
It produces and retails power in a grandfathered monopoly in Medicine Hat – which remains untouched by changes tabled in the legislature this week – and also profits from export sales to the Alberta grid.
“Regardless, we’ll work very intently on how the regulations impact our relative competitiveness against the rest of the province,” said Pancoast.
Provincial Associate Minister of Natural Gas and Electricity Dale Nally tabled Bill 22 on Wednesday, calling it a modernization that could stoke investment in new power production while avoiding increased build-up of the transmission system.
That is paid for by consumers outside Medicine Hat’s self-sufficient franchise area, but evening out power supply from solar and wind production could avoid the need for new line upgrades, some analysts say.
“We think it will bring affordability, it brings choice and competition to customers and it’s what investors are asking for,” Nally told reporters.
“We’ve seen in the last 12 months, demand records on our electrical system three times, and it’s the increase in demand that’s pushing up prices, so we want to provide more choice and competition in the marketplace to bring down the cost of energy for consumers.”
The bill, an updated version of Bill 86 which was presented last fall, would allow new entries to produce an unlimited amount for their own onsite use plus allow them to sell onto market. Battery storage facilities could hold back production until prices rise.
In the short term, Pancoast doesn’t see much effect on pricing as construction could still be years away, though administrators in the utility department have repeatedly warned that the power market is highly unpredictable and planners shouldn’t expect current record prices to continue in the medium-term.
In early 2021 the utility department announced it would launch a valuation process for the power plant and study how its profitability on grid sales might be affected by increased renewable power production battery storage.
That was quickly scaled back to negate the possibility of a sale of the 110-year-old power company before last fall’s municipal election.
In it, incumbent council candidates warned the volatile power market would see major changes with battery storage in the short term. This summer, the first battery storage facility in the region is being constructed at the site of the Chappice Lake Solar project, northeast of Medicine Hat.
Last year the city’s power plant banked a $70-million dividend, mostly from sales onto the provincial system. It has recorded $150 million in profits over the past three years following a $5-million net loss in 2018. Most of the dividend has gone to absorb losses in the natural gas division, pay for city infrastructure spending or cover longer term liabilities.
The bill would also create an “unlimited self supply” scenario that might tamp down growing demand for power coming off the grid, but could also cut into the city’s advantage to draw industry with promises of low-cost municipal power.
Industrial complexes use cogeneration or heat recovery to supply their own power as well as to sell excess power to the grid once tariffs are determined.
That could also bolster growing interest to co-locate new industrial operations, like cryptocurrency processing centres or hydrogen production plants, on site with either solar, wind facilities or at natural gas plants.
That “limitless” capacity rule is also much wider than the city’s, which limits local generating capacity to only the amount needed to supply its franchise area (in practice, however, surplus capacity can be exported).
More supply in the province would suggest lower prices and less profit for the city on exports.
“We’ll have to be very nimble,” said Pancoast.
