Alberta and its Recent Electricity Policy Changes

Alberta is Canada's fourth largest province, with a population of over 4 million people, and a land mass of 660,000 sq kms – about twice the size of Germany.

The market, composed of its generators, transmitters, distributors, retailers, electricity consumers, and wholesale electricity market, (the "Alberta Electricity Market") has had a peak load of 11,200 MW, but daily peak load now averages about 9,000 MW. It is predominantly (>60%) an industrial load due to Alberta's large oil and gas industry. The load is currently 90% serviced by thermal generation that is mainly coal based, with renewables generating only about 10% of the required electricity in Alberta. This is about to change.

The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market. Generators in Alberta will be forced to utilize lower-carbon natural gas and zero-carbon renewable forms of generation. Alberta is one of the last provinces in Canada to mandate a change in its fuel mix for generating power. The Alberta policy changes require that:

  1. There will be no pollution from coal-fired power generation in Alberta by 2030, as all coal-fired plants (approx. 6,300 MW) will either be phased out or be pollution free by then.
  2. Two-thirds of the current coal-generating capacity (approx. 4,200 MW) will be replaced by renewable energy, and one-third (approx. 2,100 MW) by natural gas.
  3. Beginning in 2018, all coal generators will pay $30 per tonne of CO2 on emissions above what Alberta's cleanest gas plant would emit to generate the same quantity of electricity.
  4. Renewable power will account for 30% of Alberta's total operating generating capacity by 2030.

These changes have created exciting business opportunities in Alberta for local, national and international power project developers.

Not surprisingly, Borden Ladner Gervais LLP ("BLG") and our Electricity Markets Group have seen a rise in the number of new project developers from outside Alberta who are seeking legal and business advice in this area. In this regard, we are periodically asked by potential entrants into the Alberta Electricity Market to provide an overview of the Alberta Electricity Market to assist them to better understand (i) the structure of the Alberta Electricity Market, (ii) the applicable legislation, regulations and governing agencies, (iii) the existing characteristics of Alberta's load and its generation mix, (iv) the way in which electricity prices are determined in Alberta, and, most importantly, (v) the recent developments that have occurred to create business opportunities for them in the Alberta Electricity Market.

We concluded that this general advice is something that would be of benefit to every new entrant into the Alberta Electricity Market, whether they are a prospective power project developer, investor, lender, constructor, operator or other participant in the market.

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