dale mcmaster, president & ceo alberta electric system operator november 2006 alberta:...
TRANSCRIPT
Dale McMaster, President & CEO
Alberta Electric System Operator
November 2006
Alberta: Canada’s First Competitive Electricity Market
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Presentation Overview
An introduction to Alberta
The structure of the electricity industry
Transmission Policy and its implementation
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Alberta the Centre of Western Canada
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Alberta’s Electric Industry More than 21,000 km transmission
Single control area of 660,000 km²
Interties to B.C. (up to 780 MW) & Sask. (up to 150 MW)
Over 280 generating units
9,580 MW system peak
About 200 market participants
11,734 MW internal generation capacity net to grid
BC
Alta
Sask
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Alberta’s Electricity Generation
Net to grid 5770 49% 4604 39%
899 .07%
Wind 298 .03%
Wood waste 133 0.1%
Other 30 0.002%
Total 11,734 (MW)(year-end 2005)
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Transmission Interconnections
Import Export
British Columbia 0-780 0-800 MW
Saskatchewan 0-150 0-60 MW
Note: Intertie capability varies with system operating conditions including the generation pattern
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Alberta Outlook: Load and Supply A Bit of History:
More than 3,000 MW of new generation added to the system since 2001 4.2% average annual growth rate over the past five years for energy and peak demand 4.9% year-to-date growth in energy
10-year Outlook: 2007 to 2016 3% average annual growth rate in energy and peak demand requirement for about 3,800 MW of new generation by 2016
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Competitive Restructuring
competitiveforces
competitiveforces
naturalmonopoly
Generation
Transmission
Distribution
FunctionalSeparation
VerticallyIntegrated
Utility
naturalmonopoly
Retail
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Evolution to Competition Timeline
ElectricUtilitiesActpassed
May 1995
June 1995
Jan.1996
May1998
June1998
Aug.2000
Jan. 2001
PowerPoolCouncil (PPC)formed
EUAtakeseffectPower Poolbegins operation
IndependentPPC & Market Surveillance Administrator appointed
IndependentTransmissionAdministrator appointed
Gov’t auctions rights to formerly regulated generator output (PPAs)
PPAs go into affect
Retail Competition begins
June2003
AESO formed
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Electric Utilities Act
Minister of EnergyAppoints BP and AESO Boards, EUB Chairman & MSA
MarketSurveillance Administrator
(MSA)
BalancingPool(BP)
Wholesale Energy Market
Alberta Electric System Operator
System Operator
Alberta Energy& Utilities
Board (EUB)
Regulates AESO’s Transmission
business
Alberta Industry Structure
Transmission System Development
and System Access Service
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The AESO: Background Created as part of electric industry
restructuring
Our mandate is defined by legislation
• Do not own transmission or generation assets
• Independent of industry (no commercial interests)
• “not - for - profit” organization
• Act in the public interest
Our mission:
The AESO facilitates a fair, efficient, openly competitive and sustainable market for electricity and provides for the safe, reliable and economic operation of the Alberta Interconnected Electric System.
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The AESO: Core BusinessDevelop and operate Alberta’s real-time
electric energy market
• Facilitate the fair, efficient and openly competitive market for electricity
Direct the operation of Alberta’s power grid to ensure reliability
Plan development of Alberta’s transmission system to ensure reliability and to facilitate the competitive market and investment in new supply
Provide system access for both generation and load customers
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Transmission System Roles
Responsible for system reliability
Responsible for reliability of transmission facilities
Directs system operation: Operating Authority
Operates & maintains transmission facilities
Plans transmission system development
Builds and owns transmission facilities
Develops and implements transmission tariff
Revenue collected via AESO transmission tariff
Provides system access Constructs, owns, operates and maintains system facilities providing system access
Procures ancillary services
AESOTransmission FacilityOwners
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Energy & Utilities Board (EUB)
The EUB is an independent, quasi-judicial agency of the Alberta government
Regulatory oversight of:
• transmission system development
• transmission system access
• AESO transmission tariff
- AESO “own costs” and cost of ancillary services and system losses
- TFO facility and operating costs
• generation projects
- environmental and siting approvals
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Transmission Policy:Drivers for change…
Alberta relies on the competitive market to provide investment for new generation
Only one significant transmission line built in the last 20 years
A once robust transmission system becoming inadequate
Increasing transmission congestion:
• System losses and the associated costs
• System reliability – voltage stability
• Reliance on Transmission Must Run (TMR) generation – excessive costs and distortion of the price signal
• Compromising the competitive energy market
Impediment to the investment in new supply Potential impact on the economy of Alberta
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Why was this happening?
Expectation – “the market” would drive the development of the transmission system
The market signals weren’t adequate:
• Postage stamp transmission tariff
• “Energy only” real time pool market – single price
• No significant locational signals -- i.e. no LMP
• Ineffective system planning
- Absence of decision making criteria
- Chicken and egg conundrum
Resulted in an over reliance on location critical gas-fired generation and no new transmission
A clear government policy for transmission system development was required
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The Policy – an overview
Transmission planning must be proactive leading load growth and generation development -- market signals and/or congestion pricing schemes will not result in timely construction of transmission facilities
• it is appropriate and necessary to align timelines, milestones and commitment of generation and transmission to ensure transmission is developed in a timely manner
• preconstruction activities (planning, engineering and ROW) to be proactive and aggressive -- costs deemed to be necessary and prudent
• actual construction to be timed with generation commitment and milestones to assure coincident completion
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The Policy cont’d…
Transmission must facilitate a competitive wholesale market – system must be reinforced such that about 95% of expected wholesale transactions can be realized without congestion
• all in-merit generation can be dispatched and virtually all economic wholesale transactions may be realized without congestion under normal operating conditions
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The Policy cont’d…
Transmission development should eliminate the need for most Transmission Must-Run (TMR) Generation
• TMR is not to be considered as a substitute for transmission development
• ISO to be given flexibility to consider TMR where economic or an acceptable alternative to transmission
• TMR costs to be based on “cost of service” model
Internal transmission should be reinforced to restore the existing inter-ties to their full import/export ratings
• transmission internal to Alberta should be reinforced so that under normal conditions the existing interconnections can import and export on a continuous basis in accordance with design capability
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Since Policy Implementation… AESO has about $1 billion in transmission
investment approved and underway
Major Projects Approved:
• 500 kV Edmonton to Calgary
• SW System Reinforcement
• City of Edmonton Reinforcement
• NW System Reinforcement
Upwards of $3 billion in new transmission could be required in the next 10 to 15 years
Merchant Transmission – planning stage
• Montana Alberta Tie Line
• Northern Lights (major DC Transmission from Northern Alberta to the Pacific NW in USA)
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Summary
Industry/market structure established in 1996 and enhanced in 2003 has served Alberta well
Merging of the market and transmission functions within the ISO provided efficiencies
Independence of the transmission function is essential to develop competition for generation
System operation has remained reliable The Transmission Policy has proven effective
in advancing the “needs” approvals The “energy only” market structure has
provided sufficient incentives for investment in new supply