City staff are preparing for upcoming changes to the electricity market as the province looks to introduce a new market design in 2027 with location-based pricing for electric generators. The city's north-end power station is shown in this 2022 file photo.--NEWS FILE PHOTO
bmiller@medicinehatnews.com
The province intends in 2027 to implement a new electric energy market design or restructured energy market (REM) that will introduce location-based pricing in response to real-time grid conditions, and city staff are making preparations.
Kevin Redden, director of environment, land and government relations, provided members of the energy, land and environment committee an update on the Alberta Electric System Operator’s (AESO) new market design and how it will impact Medicine Hat as a generator.
Redden told members of the Energy, Land and Environment Committee the AESO has completed high-level restructure plans for market design and is engaging with vendors on their implementation.
“They’ve completed the initial rules for that high-level design of what the next big steps are,” said Redden. “They’re looking at building up the platform and services needed to implement the new rules.”
The current market is based on a single province-wide pool price and does not take in consideration location of where the electricity is generated.
Under the new design, location-based pricing will be available to generators and will be determined for a number of nodes in the province based on the load-weighted average of the energy price at all pricing nodes.
The new market will also allow for increased caps on the cost of electricity. Since the early 2000s to present day the price pool for electric generation cannot exceed $1,000 per MHh, but under the new design this cap would increase to $1,500 in 2027 and to $2,000 by 2032.
Redden says the next key steps moving forward will be to work with the AESO as they implement four information manuals that detail all designs that must be considered due the city’s unique position as the owner of the utility.
“It will outline specific kinds of calculations of the rules, or how, for example, on a secondary offer cap, what is that cap and how is it? When does it kick in? Those kinds of things will be done in these manuals,” explained Redden.
City staff expect to receive the information manuals on the new market design in the first quarter of 2027.
Redden says the manuals will cover topics like local market power mitigation, net settlements, dispatching and pricing in real time, market pricing and reliability and unit connectability.
“It’s really those details that are going to be important for us to engage on and obviously getting ready, getting the system set up, understanding the rules so when it hits day one, we can make sure we’re participating in an efficient manner that works to maximize the city’s assets.
