alberta’s future electricity needs: what’s the real story? economic developers of alberta annual...
TRANSCRIPT
Alberta’s Future Electricity Needs:What’s the Real Story?
Economic Developers of Alberta Annual Professional ConferenceApril 10, 2014
John Esaiw, Director Analytics and ForecastingAESO
Public
2
Agenda
1. About the AESO
2. 2013 Electricity Market Highlights
3. Provincial Economic Outlook
4. Long-term Electricity Outlook
5. Outlook Risks & Mitigation
While the AESO strives to make the information contained in this document as timely and accurate as possible, the AESO makes no claims, promises, or guarantees about the accuracy, completeness or adequacy of the contents of this document, and expressly disclaims liability for errors or omissions. As such, any reliance placed on the information contained herein is done so at the reader’s own risk.
3
About the AESO
• Not-for-profit corporation established by the 2003 Electric Utilities Act as the “Independent System Operator”
• Operates in the public interest
• May not own or hold an interest in any transmission facility, electric distribution system or generating unit
• Has visibility of all market and transmission activities and data
• No government funding
4
The AESO’s Core Functions
System Operations
Direct the reliable 24/7 operation of Alberta’s
power grid
Market ServicesDevelop and operate
Alberta’s real-time wholesale energy
market to facilitate fair, efficient and open
competition
Transmission System
Development
Provide continued reliability and facilitate the competitive market and investment in new
supply
Transmission System Access
Provide access for both electricity generators and large industrial
customers
Alberta Energy Market Overview
• 176 market participants in 2013
• $8 billion in annual energy transactions
• High industrial load
• Relatively small market with limited interconnections
• $999/MWh price cap and $0/MWh price floor
5
Long-term Objectives of our Wholesale Market
• Long-term stability and competitively priced electricity for Albertans
• Support for investment and a foundation for economic growth– Suppliers need confidence they can move their product to
market and have the opportunity to compete
– Load customers need confidence they can access electricity in a predictable fashion and at a competitive price
• No central planning of generation– Investors make decisions and bear all the risk of type, timing
and location of investments
6
A competitive wholesale market for energy coupled with an unconstrained transmission system deliver a long-term supply of needed electricity without government contracts or public debt
7
Alberta Electricity Market 2013 Highlights
Load• New winter and summer records for Alberta Internal Load
• Peak load growth of 5%
• Almost 1,000 MW of load growth over the past 5 years
• Average 2.8% load growth– On track for 20-year forecasted annual growth of 2.6%
Interties• Montana – Alberta Tie Line in commercial operation since September 2013
• 10th year in a row of being a net importer
Generation• Almost 1,000 MW of supply back to the grid
– Sundance 1 and Sundance 2 back in action, as well as Keephills 1
• Strong market price produces strong build signal: 1,500 MW currently under construction
8
Strong Price Year
• Pool Price:+24.7% • Gas Price: +32.7% • Heat Rate: -2.1%
8.79 8.23 13.99 11.45 12.16 13.15 13.63 22.39 28.10 27.50
$6.19
$8.27
$6.17 $6.10
$7.73
$3.76 $3.79 $3.44
$2.27$3.01
$54.59
$70.36
$80.79
$66.95
$89.95
$47.81
$50.88
$76.22
$64.32
$80.19
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
0
5
10
15
20
25
30
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Po
ol
Pri
ce (
$/M
Wh
)
Hea
t R
ate
(GJ/
MW
h),
Gas
Pri
ce (
$/G
J)
Market Heat Rate Gas Price Pool Price
9
Strong Load Growth
• Load growth follows seasonal patterns
0%
2%
4%
6%
8%
10%
7,500
8,000
8,500
9,000
9,500
10,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Yea
r-O
ver-
Yea
r P
erce
nta
ge
Lo
ad G
row
th
Alb
erta
Inte
rnal
Lo
ad (
MW
)
Year-Over-Year Percentage Load Growth 2012 2013
10
Continuous Load Growth Over 5 Years
11
Peak Demand Forecasting Results
2009 2010 2011 2012 20138,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
AIL Winter Peak Forecast & Actuals
Forecast Actual
AIL
Win
ter
Pe
ak
(M
W)
12
2013 Demand Sets New Peak Record
9,236
9,5809,661 9,710
9,806
10,236 10,226
10,609 10,599
11,139
8,578 8,566
9,050
9,321
9,541
9,108
9,343
9,552
9,885
10,063
7,500
8,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Peak
Sea
sona
l Dem
and
(MW
)
Winter Summer
13
Demand Growth and New Generation
• 2013 Installed Capacity: +1.1%, Load Increase +2.8%, 1,500 MW under construction
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Inst
alle
d Ca
paci
ty (M
W)
Coal Cogen Gas Peaker Hydro Wind Other Average hourly load Peak hourly load
14
Cogeneration Facility Expansion
• Cogen: +139 MW • Net: +164 MW
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Poo
l Pric
e ($
/MW
h)
Ch
an
ge
In G
ener
atio
n C
apac
ity
(MW
)
Coal Cogen Gas Peaker Hydro Wind Other Retirements Pool Price
15
Average Revenue by Technology
$80.19 $77.26 $83.13
$112.18
$213.59
$98.02
$54.97
$95.85
$126.17
$100.34
$52.80
$0
$50
$100
$150
$200
$250
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Contribution toAnnual Average
Pool Price
Coal Cogen Gas Peaker Hydro Wind Other SK Imports BC Imports MT Imports
Av
erag
e R
even
ue
($/M
Wh
)
Per
cen
tag
e o
f R
even
ues
Asset Type
$0 to $99.99/MWh $100 to $149.99/MWh $150 to $249.99/MWh $250 to $499.99/MWh $500 to $899.99/MWh $900 to $1000/MWh Average Revenue
16
Total Time SMP Exceeded $990/MWh
• SMP over $990/MWh more frequently then in 2012
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
0
10
20
30
40
50
60
70
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Po
ol
Pri
ce (
$/M
Wh
)
Fre
qu
ency
(h
ou
rs)
$990 - $998.99/MWh $999 - $999.98/MWh $999.99 - $1,000/MWh Pool Price
17
Decreased Supply Surplus Events
• 4 hours of supply surplus in 2013; 58 hours in 2012
0
10
20
30
40
50
60
70
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Freq
uenc
y (h
ours
)
$0.00/MWh $0.01 to $0.50/MWh $0.51 to $5.00/MWh
Imports Serve 3.3% of Load
• Alberta has three interties: B.C., Saskatchewan and Montana
• Flows vary depending on intertie limitations, market price spreads in Alberta versus other jurisdictions, water flow levels, and other factors
• Alberta remains a net importer for the tenth year in a row
• Decrease in imports in 2013
• MATL imports following similar behaviour to B.C. imports
18
19
Annual Intertie Utilization with WECC
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Tran
sfer
Util
izat
ion
of W
EC
C In
terc
onne
ctio
n
Percentage of Time
2009 2010 2011 2012 2013
Export Utilization
Import Utilization
Economic Drivers
$500 Billion GDP by 2023
AESO forecasts 2.6%
growth until 2032
$220 billion in current Alberta capital
projects*
Alberta’s EconomyThe Role of Electricity
“Electricity is the facilitator of economic development in Alberta” (2008 Provincial Energy Strategy)
Electricity Industry
Enables: - $hundreds of billions in infrastructure development
- Conference Board of Canada predicts GDP growth to exceed $500 Billion in 10 years
*Source: Alberta Innovation and Advanced Education
21
22
Alberta’s EconomyOilsands Expansion Capital Spend
Jan-12 Jan-13 Jan-14 $-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000 Alberta Project Inventory
Infrastructure Power Other Oil Sands
Can
adia
n M
illio
ns
Source: Alberta Innovation and Advanced Education
23
Electricity DemandThe Long-term View
20022004
20062008
20102012
20142016
20182020
20222024
20262028
20302032
20340
20,000
40,000
60,000
80,000
100,000
120,000
140,000Electricity Energy by Sector
Oilsands Farm Residential Commercial Industrial
En
erg
y (
GW
h)
Source: AESO
Oilsands energy grows from 17% of total in 2010 to 31% in 2022
24
Oilsands Projects Growth
2013 2014 2015 2016 2017 2018 2019 2020 2021 20220
1,000
2,000
3,000
4,000
5,000
6,000
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Operating Ramping Up Under Construction Approved
Oils
an
ds
Pro
du
cti
on
(k
bb
l/d)
Oils
an
ds
Lo
ad
(M
W)
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0
50,000
100,000
150,000
200,000
Average AIL GDP
Ave
rag
e A
IL (
MW
)
Alb
ert
a G
DP
($
20
02
Mill
ion
s)
Electricity Demand Highly Correlated with the Economy
25
Provincial EconomiesGrowth Comparison
26
BC AB SASK MAN ONT QUE NB NS PEI NF TERR CAN-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
Average Annual Provincial GDP, Population & Electricity Demand Growth 2005-2012
GDP Growth Population Growth Electricity Demand Growth
Source: Conference Board of Canada, Statscan, AESO
27
The Alberta Economy Full Steam Ahead
Source: Conference Board of Canada
Population Average Weekly Wages
Gross Fixed Business Capital Employment
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
0
1,000
2,000
3,000
4,000
5,000
6,000
(00
0s
)
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
20
31
20
32
20
33
20
34
20
35
0
500
1,000
1,500
2,000
2,500
(Le
ve
l $
, In
du
str
ial
Co
mp
os
ite
)
20
10
20
12
20
14
20
16
20
18
20
20
20
22
20
24
20
26
20
28
20
30
20
32
20
34
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
(Mil
lio
ns
, C
ha
ine
d 2
00
7$
)
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
20
31
20
32
20
33
20
34
20
35
0
500
1,000
1,500
2,000
2,500
3,000
(000
s)
Electricity Consumption by Customer Type
Current Installed Generation
Industrial Oilsands Commercial Residential Farm28
29
The Alberta EconomyPrimacy of the Energy Sector
Source: Conference Board of Canada
Agriculture6%
Mining, Oil& Gas18%
Manufacturing8%
Construction8%
Other Goods-Producing0%
Transportation & Warehousing 8%
Wholesale & Retail Trade11%
Finance, Insurance & Real Estate16%
Community, business & personal service
21%
Public Administration & Defense4%
2013 GDP by Industry
Most other industries are connected to the energy industry in some way
30
Future Electricity DemandThe Regional Road Map
2003 2008 2013 2019 2024 20340
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Northwest
(M
W)
2003 2008 2013 2019 2024 20340
1,000
2,000
3,000
4,000
5,000
6,000
7,000 Northeast
(MW
)
2003 2008 2013 2019 2024 20340
4,000
8,000 Edmonton
(MW
)
2003 2008 2013 2019 2024 20340
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Central
(MW
)2003 2008 2013 2019 2024 2034
0
2,000
4,000
6,000
8,000 South
(MW
)Source: AESO. Load outlook by region at AIL Winter Peak, excluding transmission losses
31
Electricity GenerationFilling the Gap
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
0
5,000
10,000
15,000
20,000
25,000
Existing Coal-fired Existing Gas-fired Existing Effective Hydro Existing Effective Wind
Existing Other Demand Demand with Anticipated Reserve Margin
Inst
alle
d Ca
pacit
y (M
W) Estimated cost of additions 2014-2032:
2013 CAD 21 billion
Medium Term: Additions of 5,900 MW to 7,500 MW
Long Term: Additions of 11,800 MW to 13,700 MW
32
Electricity GenerationEstimated Costs
Wind Simple Cycle Combined Cycle
Cogeneration (Net Fuel)
Coal w/ CCS Photovoltaic Solar
Hydro IGCC w/CCS
-$60
-$10
$40
$90
$140
$190
$240
$290
$81.16
$109.37
$81.79
$109.63
$236.83
$166.98
$96.02
$271.37
Allocated Fuel Taxes SGER Costs/Revenues O&M Fuel Costs Capital Costs LEUC
20
13
CA
D/M
Wh
33
Coal-fired10%
Cogeneration27%
Combined Cycle35%
Simple Cy-cle
10%
Hydro4%
Wind11%
Other3%
Serving Future DemandIncreasing Capacity, Decreasing CO2
Forecast – 10 year
Capacity: 21,000 MW
CO2 Intensity: 0.67 TCOE/MWh
Forecast – 20 year
Existing
Capacity: 25,000 MW
CO2 Intensity: 0.63 TCOE/MWh
Capacity: ~15,000 MW
CO2 Intensity: 0.76 TCOE/MWh
Source: AESO
Coal-fired43%
Cogeneration29%
CC6%
Simple Cycle6%
Hydro6%
Wind
7%
Other3%
Coal-fired26%
Cogeneration30%
Combined Cycle19%
Simple Cycle8%
Hydro4%
Wind11%
Other2%
Electricity Generation Shifting Towards Lower Emissions
2003-2007 2008-2012 2013-2017 2018-2022 2023-2027 2028-2032
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Other Wind Hydro Gas Cogen Coal Coal Capacity
Capa
city
Cha
nges
(MW
)
(At end of each 5 year period)
34
35
Electricity SupplyUnregulated Market Continues to Respond
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Poo
l Pric
e ($
/MW
h)
Cha
nge
In G
ener
atio
n C
apac
ity (
MW
)
Coal Cogen Gas Peaker Hydro Wind Other Retirements Pool Price
Electricity GenerationStrong Growth in Wind
• Since 2000, Alberta has seen strong growth in the development of wind generation
– Wind generation capacity is currently 7.5% of Alberta’s total installed generating capacity
– 347 MW under construction today
• There is approximately 2,400 MW of wind generation at various stages of development
– With committed transmission reinforcement, in combination with Wind Power Management, an additional 2,700 MW of wind can be incorporated onto the grid
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
20180
500
1,000
1,500
2,000
2,500
Wind Capacity Under Construction AUC Approval
Win
d Ca
paci
ty (M
W)
Source: AESO 36
37
20-Year Electricity ForecastsPlanning for Uncertainty
Problem:
Policy Uncertainty
Solution:FLEXIBLE
Plans
Green Energy Policy?Emissions reductions= How to plan for a multiple of futures?
Supply Adequac
y
Access to
markets
Technology Choice
Cost inflation
Oilsands Growth
Distrib Gen
Conclusion
• The Alberta economy will continue to grow
– Oilsands and related industries will drive the economy
• Electricity demand is driven by new customer connections
• Risks of long-term transmission planning are mitigated by scenario planning
– Policy uncertainty is the greatest risk
– Technology shifts are a wild card
• Alberta’s competitive wholesale market provides significant opportunitiesfor generation investment in the next 10 – 20 years
• Coal retirements will create opportunities for alternate fuel choices
• A competitive wholesale market price sends signals to market participants through:
– Short-term supply adequacy (generator availability, load response)
– Long-term supply adequacy (signal to incent build or retirement)
38
Thank you