Powering the Future: How Close Are We to Fusion Energy?

Powering the Future: How Close Are We to Fusion Energy?

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This week, Brian Appelbe, Research Fellow at the Centre for Inertial Fusion Studies (CIFS) at Imperial College London, who specializes in Inertial Confinement Fusion (ICF) and High Energy Density Physics, joins the podcast.

Fusion energy aims to create a miniature sun on Earth, utilizing the same process that powers the sun, where tiny atoms fuse together to release a massive amount of clean energy. Recent breakthroughs in fusion include experiments achieving net energy gain and private developers pledging to have grid-connected fusion electricity generation units by the mid-2030s.

Here are some questions Peter and Jackie asked Brian: What are the advantages of fusion energy? How does it differ from nuclear fission? Realistically, how long before fusion is a commercial reality delivering electrons to the grid? How has the entrance of private companies and almost $7 billion in total private investment changed the pace of innovation? Do you think fusion energy will eventually be low-cost, and if so, what are the potential new uses of this abundant and cheap form of electricity?

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Episode 278 transcript

Disclosure:

The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.

Announcer:

This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.

Jackie Forrest:

Welcome to the Arc Energy Ideas podcast. I’m Jackie Forrest.

Peter Tertzakian:

And I’m Peter Tertzakian and welcome. Well, we are releasing this podcast, not recording it on April Fool’s Day. And I can’t help but think there are a lot of fools around these days given the uncertainties in everything. But we’re going to talk about some serious things here and tomorrow is tariff day.

Jackie Forrest:

That’s right. And we also have lots of news with the Canadian election and tariffs and we will get to that all next week. But this week we want to have a different topic

Peter Tertzakian:

And it’s no joke, it is no joke at all. And we’re pursuing nuclear fusion, which used to get a chuckle as if it was so far out. But I follow the fusion news quite closely because I’ve long been a fan of the technology and now it’s really starting to get serious. Like if you go to websites like the Fusion Industry Association, and I think we should put a link to that. I mean just weekly, if not daily, it just seems like there’s breakthroughs in this space and I know that it garnered the subject of nuclear fusion. The potential of containing a sun on the earth to create almost an unlimited amount of energy is starting to become real and is even in mainstream discussions at conferences.

Jackie Forrest:

Yeah, so the big CERAWeek conference held a couple of weeks ago, we had an actual panel session on it, like if you’d gone to CERAWeek five years ago and you just did a poll of the people attending, I’m not sure anyone or half the people would even be able to describe fusion energy. And now, we have a panel and the Virginia governor basically said the US must speed up its development of fusion or risk falling behind China in energy dominance. And on this same panel was a company called Commonwealth Fusion, which is one of several private fusion start-ups.

They are saying that they’re going to have their first grid scale fusion power plant in Virginia by the early 2030s that actually connected to the grid. They’ve already raised $2 billion and of course they’re going to need a lot more to make that a reality. So, the fact that this is happening is I thought worthy of us revisiting. And we did have only one podcast on this in the past, and that was in November of 2021 where we had Arthur Turrell, the author of the Star Builders: Nuclear Fusion and the Race to Power the Planet, which I still recommend for everyone to read. And I will put a link-

Peter Tertzakian:

Yeah, that’s a great book.

Jackie Forrest:

… in the show note too, right?

Peter Tertzakian:

Yup. 2021, I can’t believe it was 2021. So, it’s high time we had someone back and guess what? We do. We have with us the distinct pleasure, Brian Appelbe, research fellow in the Centre for Inertial Fusion Studies at Imperial College straight from London. He’s working in internal confinement fusion, otherwise known as ICF and high energy density physics. And he assures me we are going to bring the discussion down to the common folk. So, welcome Brian.

Brian Appelbe:

Hello. Hi Peter, hi Jackie. It’s a pleasure to be here. Thank you for the invitation.

Jackie Forrest:

Well, hey, let’s start off, tell us a little bit about yourself and how did you become a plasma physicist?

Brian Appelbe:

Yeah, sure. So yeah, so I’m working in Department of Physics at Imperial College London, carrying out research related to nuclear fusion. The specific research is called plasma physics because we’re studying how plasmas behave, which is the sort of material that we use in nuclear fusion experiments. And so, my own background is always since I was a kid, I was interested in, I guess what you’d consider technical problems and mathematics. And it took me quite a while, started off doing an engineering degree and then I realized that the most interesting technical problems that you need to solve using mathematics were actually more in the physics side than engineering.

So, I did a PhD in physics and then I realized as I was doing that, well nuclear fusion is really it’s like the convergence of physics, engineering, lots of technological problems. So, I moved into researching in that area.

Peter Tertzakian:

So, talk about plasma, it’s a state of matter, it’s in the sun. Plasma is not blood plasma, this is a different kind of plasma. This is a state of matter that’s in the sun, it’s a nuclear reaction that happens and it’s at exceedingly high temperatures.

Brian Appelbe:

Yes, that’s correct. So, the easiest way really of introducing what we mean by a plasma is thinking about states of matter. And most people are familiar with three states of matter, solid, liquid, gas. And the difference between those states of matter, obviously we know the difference between ice, liquid water and steam. Physically it’s very obvious but really on a physics level, what the difference is the amount of energy that it contains. And you can think of if you start off with a block of ice, you heat it up, what you are doing is just adding energy to that system.

So therefore, it melts, it becomes liquid water. If you keep adding energy to it, it will evaporate, it’ll turn into steam, it’s transitioned to become a gas. If you keep heating, adding energy to that system, what begins to happen is that the electrons and ions that form the atoms in the substance in the water will separate. And so now, you’ve got something that behaves a bit like a gas, but what’s actually made up of is not neutrally charged atoms, but instead positively charged ions and negatively charged electrons.

So, we’ve got this system that’s somewhat like a gas in the way that it moves around due to individual particles, but these are charged particles and that’s a plasma. Now, it behaves very differently to a gas because these are charged particles. So, it means it can do things like it conduct electricity, it responds to magnetic fields. And so, that’s what a plasma is in general. The reason plasmas are important for nuclear fusion is that essentially, we need to make plasmas very, very hot to try to drive nuclear fusion reactions.

Jackie Forrest:

And you need to condense them so they all get close enough together that we start to get the fusion of the two atoms coming together. Right?

Brian Appelbe:

Yeah. So, that’s exactly it. So, you can make a plasma out of pretty much any material, any elements. This is what we do, a lot of experiments, we study how all sorts of plasmas behave just to gain an understanding. And I guess, I should say with plasmas, we’re not so familiar with them in our homes or everyday life, but like so much of the universe is made of plasmas, pretty much all stars, most of them are made up of plasma. So, this is a very common material throughout the universe, even if we don’t have much day-to-day interaction with it.

But then it’s of interest and importance for nuclear fusion because essentially what we want to do is we want to take, plasma is made up of specific elements or specific isotopes, in particular isotopes of hydrogen, which are deuterium and tritium. So, deuterium is a form of hydrogen that’s made up of one proton and one neutron joined together. Whereas, tritium then is made up of one proton and two neutrons joined together. And because these substances both have only one proton, they’re still forms of hydrogen, but they’re not the common hydrogen that we have day-to-day, they’re instead isotopes of it.

Peter Tertzakian:

We learned last time on the podcast in 2021 is that the longstanding issue has been, as you’ve stated earlier, to put enough energy in to turn it into plasma. And then as Jackie talked about, condensing it, confining it to the point where you get a self-sustaining nuclear fusion reaction going such that the energy out in heat exceeds the energy that you had to put into the system. And once you get that state and can contain, and we’re going to talk about this because I believe this is your area of expertise in things like a magnetic bottle because it’s so hot, it would melt anything. That that point of reaching the amount of energy out versus how much you had to put in is now being exceeded. Is that correct?

Brian Appelbe:

Yes, that’s correct in specific experiments. But really, so yes. So, for any general plasma that we want to do fusion with, we want to make it sufficiently hot that these ions that are whizzing around of deuterium and tritium can collide and react. And then when you get one of these deuterium and tritium reactions to happen, they release a lot of energy as they do so. So, it’s easy, we just take a plasma of deuterium and tritium, we heat it up, the reactions will happen. What makes it difficult is when you heat it up, it just tends to want to fly apart. Okay? It’s that high pressure, it wants to somehow explode.

So, the real challenge is how do we make this material hot enough that the reactions will happen and we get the energy out, but at the same time that we actually keep the plasma contained such that it’s contained for long enough for enough reactions to happen, to release enough energy.

Peter Tertzakian:

Yeah. And when you say reaction, as the word implies fusion, that the atoms fuse together and release the energy and continue to do so in like a chain reaction effectively, so that the amount of energy coming out once you put the energy in, continues to exceed and then we’re net positive.

Brian Appelbe:

Yes. Yes, exactly and I think that’s the maybe for, we’re talking about fusion reactions as distinct from we have lots of nuclear power plants at the moment, they all operate from the basis of fission reactions. So, with fission reactions, you’re at the very far end of the periodic table, you’re taking heavy elements and you’re splitting them apart to release energy. In our case, we’re way back at the start of the periodic table, we are fusing joining together these isotopes to release energy. So yeah, it’s fusion reactions in particular we’re interested in.

Jackie Forrest:

Okay. And the breakthroughs that have been happening are around this net energy gain. I was just looking, and I have to admit, I looked at chat so it could be wrong, Brian, that’s why you have here. It seems like there’s been a number of experiments all over the world in China and different places, us even where you are in England, which have proven that you can get more energy out that you put in. And if I go back to 2021 when we had this interview, I think there was the one case at that Lawrence lab and that was the first one.

Peter Tertzakian:

Yeah, I think it was like a few microseconds. How long are the reactions sustaining themselves now?

Brian Appelbe:

Well, there are many developments in all different ways, and it depends on which experiment you’re talking about in terms of what their measure for success is. So, one of the things, and actually Jack, you mentioned that I’m in England, I’m not in England, I’m actually sitting in an Airbnb next to Lawrence Livermore National Laboratory because I’m out here on a visit to meet with collaborators. So, this is one of the places that have had big breakthroughs since 2021, but their method of doing this confinement is very different to some of the breakthroughs that we’ve had from say these Chinese experiments or some of the other experiments around the world.

So, in a way before we can decide which has been what the breakthroughs are, you have to consider what different forms of breakthroughs are needed for each experiment. So, I don’t know if we want to pick this apart, but I could start off with the one I guess that I have found most exciting because it’s the one that I’ve been working on most closely.

Peter Tertzakian:

Go for it.

Jackie Forrest:

Yeah, let’s go for that one.

Brian Appelbe:

Let’s go for that one. Yeah, yeah. So, I guess, and this is probably the big thing since, well I think in 2021 it was just happening. So, Lawrence Livermore National Laboratory, which is pursuing a form of fusion called inertial confinement fusion, they have the world’s largest laser built here. It is the National Ignition Facility laser, it is massive. It is, I think the building housing, the laser is about the size of three football fields, and I think football fields are about the same size as soccer fields, so it’s big. So, what that laser does, so we go back and we’re thinking of our plasma made up of deuterium tritium ions.

The way the laser experiments work is they essentially all the laser energy is used to compress down deuterium, tritium into a very small amount. And I mean like a really small size. So, you start off with all your deuterium, tritium ions in a little sphere that’s about a millimeter in diameter. So, it’s a pretty small sphere to start with. The laser energy essentially is deposited on the outer surface of that sphere and it just forces it to compress. And this is not too, the everyday comparison would be if you imagine taking something like a water balloon and you use your hands to try and compress a water balloon, okay?

And obviously as you do this, the water will try to squirt out between your fingers. But if you can deliver your laser energy sufficiently smoothly around your sphere, then what you can do is you can actually force this thing to compress down to a sphere that’s about, well it’s a volume of about 100 times smaller, so you make it much, much smaller. So, what that does is it makes it much, much hotter and much, much more dense and that’s the point at which, you know, all the nuclear reactions start to happen. But we talk about confinement times, in these experiments really the confinement time is super short.

We only keep it confined in this really hot dense sphere for less than 1 billionth of a second, about one 1/10th of a billionth of a second, we have this thing that’s sufficiently hot, sufficiently dense, all these nuclear reactions can happen and then that’s your energy coming out. The conditions when we make this thing really hot and really dense, it’s approximately the same temperature as the center of the sun and even more dense than the center of the sun. And so, we get all these reactions happening and then it just falls apart.

The exciting breakthrough that has been that we are now getting more energy out from the fusion reactions than the amount of energy that is in the laser that is actually driving those reactions in the first place. So, this is something that if you look up the stories about the National Ignition Facility, you’ll hear stories about ignition. And this is what we mean by ignition is that we’ve caused a chain reaction of nuclear fusion reactions in this plasma such that we’re getting more energy out than the laser energy that’s been delivered.

So, that’s just one of the fusion breakthroughs that have happened. It’s the one that I work most closely on, therefore is obviously the one that I’m most excited about.

Peter Tertzakian:

So, that’s exciting but let’s bring this to the real world of engineering, as you described at the very beginning of the podcast, which is okay, this thing is the size of a small ball bearing. It effectively fuses and creates more energy, but we need a lot more than a billionth of a second to run our society here. And what do you do keep dropping little ball bearings into the little chamber and zapping them? How does this work?

Brian Appelbe:

Yes. Well, I think first of all, I’ll put some caveats out there. So, NIF has only been built, it was only ever built as a science facility to do the basic research into this and to understand the physical processes. NIF fires the laser approximately once or twice per day. That means you can get this little burst of energy once or twice per day. If you want to make this into a commercial fusion power plant, then we have lots and lots of technical challenges to overcome. None of which NIF is designed or is intending to do, it’s purely a science facility, but others are looking at some of these challenges.

The biggest one really is how do you do this about 10 times per second rather than once or twice a day? So, that’s what we would have to do is we would have to shoot our laser 10 times a second, drop in these tiny little ball bearing pellets of fuel and then the energy would have to be recovered. At the moment, the NIF energy just gets dissipates away in the chamber and we’re not really using it for anything. Whereas, a power plant obviously would have to convert that to electricity. So, there are many technical challenges.

What’s interesting, I guess that’s really happened over the last five to 10 years, partly because of this success of facilities like NIF, is that a lot of commercial fusion companies have been started up to try to address some of these challenges. So, you’ve got a lot of fusion companies that have attracted quite significant investment and they are the ones who are taking on this challenge of how do we actually construct a power plant.

Jackie Forrest:

Yes, and I will put a link to this, there’s a Fusion Industry Association now, and there’s been about $7 billion of investment in private firms according to their 2024 report. Get this, there are 45 different private fusion companies now trying to do this, which is like really a stunning number. And many of these are saying that they could have commercial plants in the mid-2030s, the one I mentioned at the onset, the Commonwealth Fusion. I think they’re the most aggressive saying that they could do this even in the early 2030s, most of them are mid-2030s.

So, tell us a bit about these companies. Now, I was looking, they don’t really publish their results the way the government labs do, so we don’t really have much information that I could tell in terms of the success they’re having.

Brian Appelbe:

Yeah, yeah. So, I think that’s very true, but it’s been really interesting, like I said I’ve been working in this field for about 15 years and I think in that time, I’m not sure the exact statistics, but if you’re saying there’s 45 now, I suspect there was only about five fusion companies, if not less when I started off in the field. So, there’s been this really exciting development. I think what’s also interesting is like they’re doing very different things. So, so far we’ve just talked about these laser driven fusion experiments, like the ones I work on at Lawrence Livermore.

But there are very different ones where you have people, I’m not sure if people are familiar with fusion, you might have heard of Tokamaks, whereby you use a large magnetic field to try to confine your hot plasma.

Peter Tertzakian:

It’s the ones in the giant donut.

Brian Appelbe:

Giant magnetized doughnuts. Yes, that’s correct, yeah. And so, you’ve got fusion companies that are pursuing all sorts of schemes ranging from the laser driven ones to the giant magnetized doughnuts and everything in between. It’s interesting to see that, I guess ecosystem develop. It’s hard to know exactly which of these is best positioned to actually make significant breakthroughs, but it’s a very interesting time just to see these developments. I guess Jackie you mentioned about not publishing research, there are many reasons for that I guess, and I guess I’m not an economist or such like, so I can’t get into how their funding relates to their publications.

But many of them are having to build large scale labs just to get started, and so it takes several, many years from when you raise money to pursue your fusion scheme to when you actually start doing novel research. So, I think that’s not something that I would find too concerning right now. I think we have to let these companies get started and get off the ground and see where they go.

Peter Tertzakian:

We do hear some of these companies or through these news releases that there’s the possibility, well Jackie even said the mid-2030s, I’ve heard some say by 2030 we’re going to have a commercial scale fusion plant. Is that still nonsensical in your opinion, given the state of play?

Brian Appelbe:

This is where I plead, I’m just a scientist. I think what I would say to that is there’s a couple of things. First of all, there are many different technological challenges to getting a commercial fusion power plant. It’s not just getting lots of energy out of our reactions. We didn’t quite cover this, but you mentioned Peter that well, you have this deuterium and tritium that fuse and they emit two other particles. One of those particles is a helium nucleus, which is okay, that’s useful because it’s a charged particle and we can keep it in our system to heat.

The other is a neutron, which is a high energy neutron, which flies out of the plasma and this is the thing that’s carrying energy out of the experiment. So, what we have to do is we have to go from having a high energy neutron to electricity and neutrons are difficult to deal with because they’re not charged so they tend to just fly through things. And so, there are huge technological challenges in how even if we can produce lots of fusion reactions and get energy out of our plasma, how do we actually convert that from these high energy neutrons back into electricity?

So, that’s a class of problems that people are only starting to tackle right now. And I guess therefore these timelines about when companies say we will have fusion energy are based on how they think they will solve these problems, which they’re only just beginning to solve. Now, perhaps they have perfect solutions, but I might go back to NIF, which I’m familiar with and say, this is an incredibly successful time for NIF. It’s got ignition, it’s got these, we can do these experiments almost routinely now where we’re getting more energy out than we’re putting in.

But at the same time, it took 10 years to do that. So, NIF was switched on in I think 2019 and we as scientists hoped, well, we’ll switch it on and we’ll get these ignition experiments up automatically or immediately, but actually it took 10 years to sort out all the detailed physics to get to the point we’re at now. And so, with these private fusion companies, I think who knows, until you actually start doing things you don’t know what you’ll get.

Jackie Forrest:

Well, and I do want to mention too, we do have a Canadian fusion energy company, one of these ones based in Richmond, BC, General Fusion. On their website, they are also on track to deliver electricity to the grid by the mid-2030s. But I get your point, one thing getting the energy I actually didn’t understand it was neutrons that brought the energy out. I thought it was heat, which would have been easier because then you could just raise steam or something like that, right?

Brian Appelbe:

Yeah, yeah. So, this is the thing, well, as physicists, we just think about energy as a generic thing usually. And then it’s only when you start engineering that you realize, oh, well if energy is in the form of neutrons versus some other form that can make a big difference. I guess basically what we want to do is we would convert these high energy neutrons, get them to heat up some material, which would then drive, say a steam turbine. So, eventually we convert that energy to heat, but initially we’ll still deal with the high energy neutrons.

And maybe it’s worth mentioning that a few of these private fusion companies are also looking at schemes where you do what we call a neutronic fusion. So, instead of deuterium, tritium reactions, you use other reactions so proton, boron is one of them. And those reactions release energy in the fusion, but that energy comes out in the form of charged particles, which are much easier to deal with. The downside to that is the actual probability of a fusion reaction happening in a plasma is much, much smaller than for deuterium, tritium. But there are many solutions that people are looking at for all these problems.

Peter Tertzakian:

Right.

Jackie Forrest:

Well, and hey, come back to the sun. The sun is using hydrogen, right?

Brian Appelbe:

Yeah.

Jackie Forrest:

That’s how the sun’s doing. Yeah, so we know that that way works. We just have to figure out, they have the advantage of this gravity system that’s keeping it all contained where we don’t have that here on earth.

Peter Tertzakian:

So, it is obviously exceedingly technical, but at the highest level it’s also geopolitical. And we’ve got an arms race that I would say is between realistically the EU, the United States, and China, which have been working on this and now accelerating with a greater amount of dollars, many of those dollars are state-sponsored. Where are the Chinese at in this? Because we hear a lot coming out of there, the Virginia governor, as Jackie mentioned at the beginning, says the US must develop fusion or fall behind China on energy. Well, where are they at? Are they ahead? What’s the state of play?

Brian Appelbe:

That’s an interesting question. And I suppose in my mind when we talk strictly about nuclear fusion, it’s quite difficult to say there is one single race happening because there are so many different challenges. But by that I mean the US is obviously ahead in terms of laser driven inertial confinement fusion because we’ve got NIF, which ignites and has been a great success. So, that in a sense means the US is somehow ahead. But then as I said earlier, well NIF is not a facility that is going to be doing commercial fusion at all there is zero plans for that.

So therefore, you can say, well, does that mean the US is really ahead in some way? Similarly, with the other fusion experiments, things like the Tokamaks, there are many Tokamaks around the world in different countries, and many of them are better at some parts of the problem than others. So, my own instinct is, the easiest way to say who’s ahead might be who’s investing the most money. And in that sense, I think certainly, I don’t know if there in terms of the actual dollar amounts, but there is a big push within China for pushing more money into this area.

Peter Tertzakian:

Yeah, I guess what I think about the arms race, I think about the endpoint and the endpoint being a commercial power plant that is delivering electricity using some fusion process that is effectively this almost unending source of energy, it’s non-emitive. So, if we conjecture that that day is now on the horizon, we can envision it given that groups such as National Ignition Facility, NIF has proven energy out, can exceed energy in which is a major recent milestone. So now, we move into the independent of how we get to that endpoint who would you say, maybe it’s too early to say like what nation is ahead?

Brian Appelbe:

So, I would say, I think it is too early to say, and this comes back to the idea that there are too many different challenges that we just don’t know what the best solution to them is. So, I think the fact that we have this ecosystem of countries and companies that are investigating different approaches and looking at different aspects of the technological challenges, that’s quite healthy. It’s encouraging, but I think t’s really just too difficult to down select for how we can actually do it. And I guess one of them, we didn’t get onto this yet, but one of my key, you asked me earlier was 2030 a realistic prediction or not.

And obviously I did my best to sensibly avoid answering that question. But I think one of the big issues could be all the different like little technological challenges that I’ve mentioned and many other ones, I think in isolation we can overcome them all. We can obviously as NIF has showed, we can get more energy out than in, I think people will be able to build facilities where we can reproduce, do the laser, fire laser 10 times per second. People will be able to find materials and ways of capturing the neutron energy and converting it to steam turbines.

Each individual challenge should be surmountable, but it’s really not clear that we would ever be able to do that in a cost-effective, efficient commercial manner. If we have to have these exotic materials for capturing the neutrons and converting their energy into electricity, then maybe it’s a case. Sure, it works, but it’s just very expensive to do it and more expensive than say solar panels or wind turbines. So, I think that’s the greatest unknown for me.

Peter Tertzakian:

But surely also the things like AI, artificial intelligence is able to accelerate, whether it’s development of the materials and new age alloys, whatever, and the processes, it seems like, as you said, these challenges are surmountable. It’s a question of when and whether or not it makes economic sense ultimately.

Brian Appelbe:

Yeah, yeah, exactly. And I guess the challenges are surmountable, but it’s always a case that we will need, say highly engineered materials, very bespoke materials for building these types of experiments or power plants. And maybe, I guess the example with deuterium, tritium, we have lots of deuterium, that’s not a problem, it’s easy to extract from seawater. There is a lot far less tritium available. Now, we can make it in nuclear experiments using lithium, but at the same time, tritium is something that we would need to manufacture for doing fusion and what will be the price of doing that?

How much will our fuel cost effectively? And I think that’s something that’s just, well, for me at least, it’s very hard to predict.

Jackie Forrest:

Well, I think you’re coming to an important point. This has always been plugged as abundant, extremely cheap energy. And when we figure out fusion, we’re just going to have so much electricity, like we can literally capture using direct air capture all the CO2, we can solve all our problems. And yeah, I would say it seems like it could be quite expensive. You described three football field building with lasers and now you’re telling me you need to do that many times a second did you say for this to be continuous, right?

So, maybe you could address that. It sounds like cheap is a question mark. What about abundant? Someone described to me like with a cup of hydrogen, you could create energy that would last a city for a very long time. Is it abundant? Like you just described, there may be some issues on the feedstock too.

Brian Appelbe:

No, no, you’re right. I feel like maybe perhaps I’ve wandered into being too negative about this, so maybe I should recalibrate. Yeah, so historically, why have we spent so much time and money in years pursuing nuclear fusion? There are very good reasons why we have been doing that and trying to do that. And really a couple of the reasons that we’re so keen on it is that effectively the fuel is much more abundant than say for fission power plants. We know we can make the tritium, we can get the deuterium from seawater. So, that means we can have in a sense limitless fuel.

Also, nuclear fusion reactions, like per unit mass are just released far more energy than any other form of energy that we currently use. So, you get a tremendous amount of energy out of just one of these fusion reactions in comparison with the fission reaction. So, it’s a very powerful energy source. Also, one of the nice things about it is sure it is nuclear reactions and we have a lot of complex materials, but in comparison with fission, we should produce a lot less radioactive materials that hang around for much shorter durations.

And that’s effectively because we’re operating with elements that are near the start of the periodic table than near the end. So, the radioactivity issues for fusion are much, much less than they would be for fission. So, that’s also much to its advantage. Also, in terms of nuclear safety, the way in which these reactions work just means there is no physical way whatsoever in which we could have any catastrophic nuclear accidents in these facilities. So, there are a lot of advantages to it that make it worth pursuing.

Jackie Forrest:

One thing that I was also wondering about is it seems like this is only going to really work in these massive large facilities. Would this ever be a fuel source that could power ships or rocket ships or provide electricity to remote locations? Or does it have to be this massive plant? Now, I’m imagining many football fields because of all of the lasers and magnetic fields you’re going to need.

Brian Appelbe:

I think I would love to know the answer to that question too. I think at its heart we could design experiments where we’re releasing quite small amounts of energy from the fusion reactions. It’s all the ancillary devices to drive that. Like how big is your laser? That will be the challenges. So, I know there are some companies that have put out designs where you have a fusion power plant in every neighborhood. And I think that there’s no fundamental reason, technological reason why we could not do that. Whether it’s economic, I have no idea, but I think it would require several generations of technological development to get that far.

Peter Tertzakian:

Well, I mean nuclear fission, which the first commercial facility was I think in 1959 in the UK, it’s Sellafield, it took quite a while before it became economic. That to me is not the issue, getting a commercial-sized facility is step one, and then costs come down over time as you get economies of scale and technology improves and processes improve. I think the promise of having this incredibly dense, which is really important, source of energy, energy density, as you said, like a cup of hydrogen can fuel a city. Well, I don’t know what the stats are.

Jackie Forrest:

Yeah, maybe you can tell us, Brian, what is the stats?

Peter Tertzakian:

Yeah, come on. How many Airbnbs can that thing?

Brian Appelbe:

Yeah, no, that’s, I’ll have to look up how much a cup of hydrogen would power, but I think you’re right that just fundamentally it’s per unit mass. It’s releasing orders of magnitude more energy than any other form of energy source that we’ve got. So, that’s the reason why in principle, you could use it to power spacecraft traveling very long distances or ships or whatever is because the energy density within the fuel is huge. We just have to figure out how we release that in an effective manner and what technology we need associated with it. But just, yeah, in terms of the fuel itself, then it is game changing compared to other energy sources,

Jackie Forrest:

Right, yeah. We’re not going to make it much past Mars if we have to rely on fossil fuels energy to get and to see the rest of the planets, right? If we had a system like this, you could actually get very far. I’m sure that’s what they’re using on Star Trek.

Peter Tertzakian:

Of course, they are, dilithium. Is that in there? Yeah. I want to get back to the geopolitics for a second. You’re at Lawrence Livermore, you’re obviously collaborating. What is the state of international collaboration? Is it now becoming increasingly secretive as the promise of fusion starts to materialize? So, it’s gone beyond collegial scientific community to something that is now of national security in the important sense of the collaborative spirit is starting to break down or what is going on?

Brian Appelbe:

Yeah, I think that’s interesting. I would not say that I would have noticed a breakdown in collaborative spirit, apart from the fact there are many fusion companies, which obviously for various reasons aren’t saying precisely what they’re doing. But right now, I think all these private fusion companies are very keen to engage with the publicly funded experiments because they are still the big beasts in this. Okay? All the biggest experiments are still the ones that are publicly funded. So therefore, private companies, they need to interact with that community.

I talked a lot about NIF showing my bias. We still haven’t mentioned Ether, which is the large Tokamak being built in the south of France, which it’s an internationally funded organization. China’s involved with it, the US, Europe, you have all the players in fusion are all collaborating and funding Ether, which has had some setbacks, but it’s due to be switched on and demonstrating energy release, energy gain by I think the mid-2030s. And that right now, despite all the excitement with private fusion companies and NIF, that’s the one that has had the most money invested in it.

But in the last couple of years, I think the private fusion companies have made the ones making more noise and are releasing aggressive timelines for when they’ll have success. NIF is the one that has had the biggest scientific breakthrough, but the fact remains, the biggest fusion experiment is still a fully publicly funded international collaborative experiment.

Peter Tertzakian:

Well, I’ve studied nuclear fusion, I’m not going to say how long ago and when I did my original physics degree. And the joke back then was that nuclear fusion is always 25 years out. But finally, as I followed the story over the years, the ignition and the energy released versus the energy and I think was a huge, huge breakthrough. And so, it seems to me like the amount of money, the amount of effort is really starting to materialize, we’re entering a new chapter in this story. Brian Appelbe, research fellow in the Centre for Inertial Fusion Studies at Imperial College.

Thank you very much for bringing us up to date, technically, and a little bit of sprinkling of geopolitics in there as to where we’re at. Delighted to have you and hope to have you back as you make more breakthroughs.

Brian Appelbe:

Thank you. It was a pleasure talking with you.

Jackie Forrest:

Thank you, Brian. And thanks to our audience. If you enjoyed this podcast, please rate us on the app that you listened to and tell someone else about us.

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Alberta’s Electricity Market Overhaul: A Costly Mistake?

Alberta’s Electricity Market Overhaul: A Costly Mistake?

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This week our guest is Duane Reid-Carlson, President of EDC Associates Ltd., an independent electricity-focused consulting firm based in Calgary, Canada. The firm focuses closely on Alberta power markets. 

EDC recently published its quarterly report and had some critical words about the government’s proposed changes for Alberta’s electricity market – called the Restructured Electricity Market (REM) – describing it as a “highly complex, expensive, inefficient experiment.” The same sentiment was reflected by almost all the 36 organizations that participated in the Alberta Electricity System Operator (AESO)’s feedback in early 2025. Stakeholders were nearly unanimous in their comments that the changes will make Alberta’s electricity markets more expensive and less reliable – the exact attributes the redesign promised to fix. The sharp criticism spans all industry segments – from natural gas generators and renewable energy developers to consumers and transmission companies. 

Participants also raised the issue of the AESO skipping the regulatory review from the Alberta Utility Commission (AUC), which provides an independent review by a regulatory body as a safeguard to prevent any unintended negative consequences from the redesign.   

Peter and Jackie examine the concerns and potential long-term negative implications for Alberta’s electricity grid, generators, and consumers with Duane Reid-Carlson. 

Content referenced in this podcast: 

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Episode 277 transcript

Disclosure:

The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.

Announcer:

This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.

Jackie Forrest:

Welcome to the Arc Energy Ideas podcast. I’m Jackie Forrest.

Peter Tertzakian:

And I’m Peter Tertzakian. Welcome back. So Jackie at CERAWeek, which was now a couple of weeks ago in Houston, the big gathering of energy stakeholders I’ll call it, the International Energy Agency seemed to make some interesting statements amidst, of course, the whole very loud background narrative in the United States about energy dominance, fossil fuels are the future, “drill, baby, drill,” et cetera, et cetera. And the International Energy Agency has really sort of almost fed into that now. Is that-

Jackie Forrest:

Yeah. Well so Fatih Birol, the head of the IEA, said there is a need for oil and gas investment. Full stop. Well compare that to the 2021 message where companies should not invest in new oil, coal, or gas projects to meet net-zero 2050. So to me, now there’s some nuances in the words, but that’s a big change in message. And you and I have had many debates about these imaginary net-zero scenarios and how they’re really not great, because people are sort of viewing an imaginary future and not preparing for a realistic one.

Peter Tertzakian:

Right.

Jackie Forrest:

And so I’m hoping that the IEA is going to come out with a realistic outlook. So we’ll look for their world energy outlook this fall, but it’s rumored they might have a slower net-zero scenario, or maybe even we’ll go back to seeing a scenario that they used to have pre-2020 when they were a bit more reasonable, showing kind of what current policies would get us in terms of energy.

Peter Tertzakian:

When is their next big report coming out?

Jackie Forrest:

It’s the fall of 2025.

Peter Tertzakian:

Oh, the fall.

Jackie Forrest:

Well, not until October usually.

Peter Tertzakian:

Right. But they do have a monthly energy report that comes up. But this is the big fall-

Jackie Forrest:

Yeah. The big one that had the net-zero scenario, and in 2021 came out with messaging around no more investments in oil and gas, which really did affect, I think, how people viewed the oil and gas industry as a sunset industry.

Peter Tertzakian:

Right. Well there definitely is I’ll call it change of tunes going on everywhere. And we have-

Jackie Forrest:

Including here in Canada, by the way.

Peter Tertzakian:

Including here in Canada. Yeah. Another topic that’s front of mind is of course the federal election, which has just been called. We’re going to be following that, and we’ll have no shortage of things to talk about, particularly from an energy perspective. While speaking of energy at large, let’s talk a little bit about electricity. And let me ask you, the audience, if this morning when you woke up and flipped that light switch you wondered where the electricity came from, or when you put the coffee pot on? I certainly didn’t, I have to confess. Although every now and then I do think about these things given that Jackie and I live and breathe energy. But we need to have a conversation about electricity, electricity in particular in Alberta, because behind that light switch things are getting quite heated. And we have had guests on the podcast that have talked about our Albert electricity grid, we’ve talked about the clean electricity regulations, we’ve talked about the AESO, the Alberta Electricity System Operator, but there’s a review going on and we’ve talked about that, Jackie, right as well on the podcast?

Jackie Forrest:

Mm-hmm.

Peter Tertzakian:

So we’re delighted today to really get into some of the contentious things going on behind the scenes. And we’ve got a special guest, Duane Reid-Carlson, he’s president of EDC Associates Ltd. I’ve known Duane for a long time and I know that his consulting firm specializes in electricity. And I don’t know, you’ve been doing this for decades, so you are the voice of experience here. But Jackie, one of Duane’s reports sort of tweaked your interest, and that’s why we’re bringing Duane aboard.

Jackie Forrest:

Yeah, that’s right. So welcome Duane.

Duane Reid-Carlson:

Thank you.

Jackie Forrest:

You know Duane I’m really happy to have on because I’ve actually wanted to do this episode since the beginning of the year, but we’ve had tariffs and everything else going on. But earlier this year, the Alberta Electricity System Operator, AESO, as you just said Peter, asked for feedback on this redesign of the Alberta electricity market. Which is actually a really big thing, it’s not just the market, it’s how they do transmission. There’s just a whole range of changes being proposed. And I have to say there was 36 organizations that participated in this now public document, which we will put a link to in the show notes, but it’s scathing, it’s concerning, and I really want Albertans to know that almost every company that’s involved in the power markets, whether you’re a generator, a transmission company, a consumer, across the board, a distributor, is very angry about where we’re at and very concerned about the future of reliability and affordability of electricity in this province. And your firm put out an excellent report, you do that every quarter, and we will put a link to that in the show notes. Not the report, but to how people can find out about your firm and ask about getting the report. You also had some critical words. You called the Alberta electricity redesign, “highly complex, expensive, and inefficient experiment.” So with that Duane, we’re just happy to have you on and get more awareness to this issue.

Duane Reid-Carlson:

Great, thank you.

Peter Tertzakian:

Well Duane, I mean let’s just project ahead. Are the lights going to go off when the switch goes on?

Duane Reid-Carlson:

Likely not, but we might have trials and tribulations with respect to that if we get into trouble down the road.

Jackie Forrest:

All right, well let’s get into the details. But before we do that, I think it’s probably just good to give people a bit of background about Alberta power markets. Prices right now, consumers are enjoying fairly low prices, and the whole point of this redesign was to have affordable pricing. And we had very high pricing in the previous years. I think average power price in 2022 was $147 a megawatt hour, it’s about a third of that right now. So we don’t seem to have an affordability issue right now, so can you tell us why are prices soft and do we even need this redesign considering that?

Duane Reid-Carlson:

Well, that’s a good question. Just to be a little more accurate, prices averaged $133 a megawatt hour over ’21 to ’23. So that three year period. Which equates to the highest price that we experienced previously in the market in the year 2000, but that was for a three-year period. Prices have fallen to $63 a megawatt hour in 2024, and averaged, as you pointed out, $41 a megawatt hour year to date, 2025. So the cause of that, which was well-known for over the last four years to anybody watching in particular, was 13,500 megawatts of generation has been added. 7,500 megawatts of thermal, 6,000 megawatts of renewable, and 5,000 megawatts of that was developed in the last year alone in 2024. And 3000 megawatts of that was a conversion of coal to natural gas. So all of that has conspired and come along and is now operating and prices have miraculously fallen, as fully expected by us, our forecasting, our firm, and everybody that subscribes to our reports had insight to that, including the government of Alberta.

Jackie Forrest:

Right. So there’s no affordability issue now, but let’s start out then with why are we doing this redesign? It was about a year ago that the Alberta government announced these sweeping changes. In your view, what problem were they trying to solve and what’s the process?

Duane Reid-Carlson:

So basically the government’s stated objectives for their market intervention, as it is, were three things: high prices or affordability, or market power concerns or abuses thereof, and reliability. And as you know, there was two broad steps to the process. The first was the interim measures that took effect in mid-2024, and the subsequent restructured electricity market process that’s now underway, which is expected to be completed by 2027 when the interim regulations expire.

Jackie Forrest:

Well, so that was the stated goals that they wanted to, but this document which I will put on, and I think a lot of Albertans should read at least parts of this, a broad group of stakeholders are consistently saying that this new design has a big risk of increasing electricity costs, reducing new investment in the province, and reducing reliability. Just the things that this whole redesign was expected to solve, it seems to be making them worse. Described by one submitter, “a highly experimental, bespoke, and unconventional, untested design.” There’s other ones like, “It’s an exotic product. It could create harm in reliability and investment. It’s outrageous. Could lead to market failure.” These are things that very credible companies are saying about this redesign. And I know there’s so many details to get into, and we’ll get into kind of the concerns of different types of participants because I do have different lenses on this, but what went wrong here? Why are we at this point a year later with almost everyone in the industry saying that this is almost a disaster?

Duane Reid-Carlson:

Well again, another very good question, and there’s many reasons to dislike the initial design scope, and everyone has pointed out from their lens their own favorite element to dislike or hate. But I think the most common thread is just the sheer size and complexity of the scope and scale of the endeavor, which is quite unique, and as many people have called it, bespoke.

Jackie Forrest:

Yeah. I think there was one quote that in Texas and California, they tried to do something similar in terms of such a full wholesale change of everything at once, and it took something like seven to eight years. And what is the timeframe that we’re trying to get this done in?

Duane Reid-Carlson:

By 2027 is the target.

Jackie Forrest:

Right. So in two years. And then some of that is actually implementation time, but the actual design is a year and a half or something? Right?

Duane Reid-Carlson:

Exactly.

Jackie Forrest:

Like really, really, really tight.

Duane Reid-Carlson:

Really tight.

Peter Tertzakian:

Let’s just sort of back up here for a second. This word design, what does that mean? Electricity redesign? Does that mean… Like we’re trying to redesign, first of all, how electricity is traded. We’re trying to redesign who can get onto the electricity grid in terms of whether it’s natural gas-fired power versus renewables. Maybe just sort of talk to us, broadly speaking, help our audience understand what this nebulous word redesign means.

Duane Reid-Carlson:

So market redesign is taking the current structure that we have in place, which is an energy only market design, which is very simple in its nature. It has its various degrees of complexities like any market does, but very straightforward. Generators put their power into the market, it’s assembled by the AESO, and the dispatch occurs and prices settled against load. Very simple structure. So now they’re looking at taking that and putting in more complex systems and procedures with respect to many things, I won’t get into all the details, but just the redesign of how generators interact with the market, how price formation takes place, and how revenue is generated.

Peter Tertzakian:

Right. I mean if I could sort of characterize it, we all, as I said in my opening comments, turn the lights on in the morning, put the coffee pot on, then there’s sort of a surge in demand as everybody wakes up. And then as they come home again, maybe fire up the electric stove, turn on all the appliances and the television sets and maybe even plug in your electric vehicle. So the dynamics on the demand side, we sort of understand and they’re growing. And then there’s a supply side, which includes used to be coal, now dominantly natural gas fire generation in this province. Now we’ve got a lot of renewables coming in. And so the suppliers are coming into the market and selling through the system operator, and the consumers have prices that they pay, mostly which are regulated by some mechanism. And so what you’re talking about is changing the whole structure about how the goods of electrons are supplied in this market, and how we as consumers consume them. And that’s everything behind the light switch that I talked about this morning. We have no idea what’s going on, but the redesign is going to change the way the flows of electricity are going to occur, how the prices are settled, who makes money and who doesn’t. Is that it?

Duane Reid-Carlson:

That’s essentially correct. And a lot of the change has been driven, as I said, from cost concerns. But more importantly, reliability and operational considerations that the AESO is having to struggle with maintaining the system operations. And the ramp rates of thermal, which aren’t that quick versus the ramp rates of renewable, which in the scale that we now have are creating problems in terms of how quickly some of the renewables can come and go, and how hard it is to manage against the thermal generation to backstop that and managing the two. So that’s kind of the inner workings of the complexities that are causing problems for the AESO.

Peter Tertzakian:

Let’s explore that a little bit more. I always like to use a simple analogy of a farmer’s market, a supplier of peaches, and I can see that there’s too many stalls with peaches so I’m not going to build a plant. Right? So if we equate peaches to natural gas fire generation for example, and I can see that there’s too much oversupply, I’m not going to build a plant. Again, I’m trying to get back to this thing of understanding system redesign. It’s like reorganizing the farmer’s market and where the stalls go.

Jackie Forrest:

Well it’s kind of organizing who pays.

Peter Tertzakian:

Who can come in, who can buy, who can come in and sell, and how the prices are settled.

Duane Reid-Carlson:

How the prices created and settled. Basically, if you think about what EDC does for a living, we model the electric system, and we’ve done so for about 33 years. And the energy only system is fairly simple and transparent, and it’s taken decades for us and others who do economic and financial analytics for the power sector, for generators, but more importantly for their debt and equity providers and their lenders. And so those lenders have gotten very comfortable with the energy market design that we have, because they can see a straight line path through our analytics to how price is formatted and how generation is derived. And so from that they become comfortable. Contracts no longer for capacity are for the full life of an asset, nor for the full capacity at any point in time. So we’re seeing merchant tails on contracts, but that’s suggestive of the lending industry is very comfortable with the market. What we’re moving towards is looking more like a black box. We have not yet been able to figure out how to model the REM in its current sort of design proposal, and so it’s become a bit of a black box. So lenders have put down their pens, they can’t see the path to price formation and revenue determination as simply as it was before. So this is going to create a very difficult-

Peter Tertzakian:

So if I could extend this metaphor, the province is coming in and basically saying, “Okay, we’re going to rearrange the stalls in the market, the way prices are set. And by the way, we’re going to turn the lights out so you can’t see where the stalls are.” Is that-

Duane Reid-Carlson:

Well, one of the fears that I have is that the government has said affordability is its objective. And what worries me about that is when price formation is not determined transparently through a fair and openly competitive process as it is today, it opens for the AESO in this particular case that may be asked or being asked to manage prices through reliability concerns.

Peter Tertzakian:

So what is the catalyst? Like why are we doing this?

Duane Reid-Carlson:

Well, the government says affordability, and market power concerns and reliability. And so I worry that affordability or managing price is the primary concern, and it will be done through reliability means.

Peter Tertzakian:

So market power is when one supplier of electrical power has too much control over the market?

Duane Reid-Carlson:

[inaudible 00:15:20].

Jackie Forrest:

Mm-hmm.

Duane Reid-Carlson:

And the MSA is in the market. That’s its mandate is to look out for those kinds of things and look into it. And over the high price period of 2021 to ’23, the MSA was silent. There was no accusation, that I’m aware of, of anybody doing wrongdoings. There was no collusion, there was no price fixing. There was some hints of maybe prices were higher than they should be, but the MSA didn’t do or say anything. So market power is a concern, it’s always a concern, but it has tools at its disposal to manage those and sort of take care of things. And if they thought someone had too much capacity in the market and could use their position to maximize their price, they could change those rules very easily. The concentration is currently 30%. There’s only one participant that’s anywhere near that. But that number could be managed to sort of mitigate those fears and concerns.

Jackie Forrest:

MSA, just tell us what that means.

Duane Reid-Carlson:

Oh, the Market Surveillance Administrator. My apologies.

Jackie Forrest:

Right. And you could argue that the market worked, because we had high prices and all this capacity came on, and now we have low prices. And honestly, the people that come here and risk their capital are hoping there’ll be some periods of high prices, but having to risk periods like this where they make very little money. So we’re going to get to what the solutions are. But Peter, we had the head of the CAISO, the California-

Peter Tertzakian:

Elliot, yeah. Mm-hmm.

Jackie Forrest:

They had the same issue where there was renewables coming on and lower utilization for the natural gas generators, and they solved it through much more simple means, which is just providing some payments to those base load generators. We’ve created something very complicated.

Peter Tertzakian:

So what’s the biggest issue?

Jackie Forrest:

Well, I think one of the most concerning issues that’s throughout this document is the Alberta government has decided to not have the Alberta Utilities Commission, which is also called the AUC hearing, to ensure the proposed design is in the public interest, and will keep the lights on at an affordable price. There are comments in this feedback form saying this is a regulatory proceeding that is legally required. There are comments that to do a market redesign with the government just doing it via legislation, which is what’s they’re proposing. We’re not going to go through a regulator who’s going to model this, make sure it works, hear everyone’s feedback, adjust it for unintended negative consequences. We’re not going through that process because we are so concerned about doing this quickly that we’re just going to put this in effect without that, and it could lead to significant costs for Alberta consumers. Other comments from the document, “Deeply concerned by bypassing established regulatory review process.” Another comment, they’re concerned about the bypassing of regulatory oversight on this, “and especially considering you’re using an ill-defined, expedited process.” So first of all, it’s in the public interest that the lights come on, especially in a place like Alberta. If the lights don’t come on, remember that January two years ago? Remember what happened in Texas? People die.

Peter Tertzakian:

Mm-hmm. Yeah, no I completely agree.

Jackie Forrest:

And so the fact that we’re just slamming this thing at an accelerated speed through the system, and ignoring the requirement to have a regulatory proceeding, to have independent experts who are experts at electricity markets opine and model. You talked about the word modeling Duane, that’s another thing that comes up in here. There’s been no modeling to the typical process that you would use to show that this will actually deliver on prices that are affordable and that you will get investment in this province. And even though we are doing those steps, we’re skipping the most important part at the end of the process. So enough of my ranting, Duane, I’m very concerned by this. Am I wrong to be concerned?

Duane Reid-Carlson:

No, everybody should be very concerned. And I’m not a lawyer, but there’s some question whether the government can legally skip these steps. Maybe it can by the action of a pen, I’m not sure. But they say they want to skip these steps in the essence of time, recognizing that mistakes will be made anyway and we’ll just fix them on the fly. So with a bespoke design such as it is, they’re sure to be lots of unintended consequences with the design and the IT implementation, notwithstanding a significant cost.

Jackie Forrest:

Right. Yeah, that’s another thing, Peter, that came in through these documents. This is very complex and will require a huge investment in IT infrastructure to manage the prices and things the way that they’re proposing. That’s not even being talked about really.

Peter Tertzakian:

So based on what you know Duane, what is the rush that Jackie’s talking about? What’s the rush to ramrod this through without any oversight?

Duane Reid-Carlson:

Well, other markets representatives like CAISO and ERCOT and others have been to town and have all said that, “Don’t take on too much complexity at once, at any one time. And don’t arbitrarily rush it, sort of work through it. By not taking too much on your plate, you’re not going to take up too much time.” So taking too long actually causes the market to sort of stand down and wait and see, and all of that creates the fears that we’re now seeing.

Peter Tertzakian:

In terms of investment to build the electrical incremental capacity that we need to support economic growth, population growth, and AI and data centers and what have you.

Jackie Forrest:

Mm-hmm. We’re going to get to that.

Duane Reid-Carlson:

Just to go back to during the NDP government’s period, they looked at redesigning the market to implement a capacity market, which is more of a bolt on to the energy-only market rather than a full redesign. That process took several years and got to the point of the AUC decision, which had a lot of input from the experts on that particular instance whereas this one is not expected to, and that caused a four-year hiatus from generation being developed. Very few megawatts were put in place for a four-year period as a result of that process. It’s just a natural response by the market to stand back and wait and see how the market design’s going to turn out, and how price formation again and revenue determination comes out of it. So they need to understand those things in order to make a financial investment decision.

Jackie Forrest:

But it’s kind of damned if you do and damned if you don’t. Because if you don’t do that process, I think investment stays away too. Because based on reading all these people’s feedback, none of them are investing in this province. And so taking longer or making this shorter isn’t going to bring a bunch of capital into this province any faster by the looks of it. It makes people feel even less confident about the durability of this new program.

Duane Reid-Carlson:

No, and the process, as I mentioned before, is far too broad in its scope and scale and just far too many things can go wrong.

Peter Tertzakian:

So there seems to be a mismatch as well in terms of the amount of new electrical supply that’s coming on in terms of including renewables and this notion of congestion plugging into the grid. And historically it’s been, I guess the term was zero congestion. In other words, anybody could build and plug in and it goes through those big high tension wires and ultimately to homes and factories and everything else in the economy. So can you talk about what’s going on with this whole transmission side and congestion that’s now starting to occur?

Duane Reid-Carlson:

Yep, that’s all correct. We’ve seen since about 2020 there’s been a substantial increase to about 3000 hours in 2024 where congestion has occurred. The AESO estimates that the congestion for the top 10 renewable projects is anywhere from 6-12% of production.

Peter Tertzakian:

Mm-hmm.

Duane Reid-Carlson:

That equates to about 16,000 megawatt hours to up to 50,000 megawatt hours.

Peter Tertzakian:

So what you’re saying it’s like 6-12% of the electricity they produce can’t get flowing through the wires.

Duane Reid-Carlson:

Yep, that’s right. So that aggregates to 16,000 to 50,000 megawatt hours, so not an insignificant amount of energy. But more importantly, this translates to about 7-10% of their revenues, and that’s not insignificant either.

Peter Tertzakian:

So what is the issue? Not enough transmission lines? Or does it go beyond that?

Duane Reid-Carlson:

Well it goes beyond that. Not enough transmission in certain locations where generation has rushed to connect and sort of over connected, if you will, with the transmission that’s available in those areas. So they rushed to where the resource is, the wind resources and the solar resources-

Peter Tertzakian:

Like down in Vulcan and places like that?

Duane Reid-Carlson:

Yes, in southern Alberta majorly. And so there’s been a rush on Alberta. When Alberta opened for renewables quite some time ago, the world took notice.

Peter Tertzakian:

So the rush comes from the renewables, we need more transmission lines. However, with the redesign and all the uncertainties that we’ve talked about, nobody wants to invest because they don’t know what the rules are. So this is the kind of situation that’s being created is that we’ve got mismatches between the electricity generation, the transmission, the loads going up, and there is not a lot of incentive to invest because of the tremendous amount of uncertainty in what this whole black box market is going to look like.

Duane Reid-Carlson:

Yeah. And low prices and volatility. We’re having more zero priced hours than we ever had, and more 999-priced hours than we ever had. So the pricing has become bifurcated. We’re either in a $0 hour or we’re in a very high-priced hour.

Peter Tertzakian:

Is that the max? 999?

Duane Reid-Carlson:

999, today.

Peter Tertzakian:

Today. Yeah.

Jackie Forrest:

Yeah, right now. They’re bringing it down potentially, which no one’s happy about. I want to talk about this congestion, because I think this is another big issue in terms of scaring capital throughout this document. We always had a zero congestion grid. So if you built a generation project in Alberta, you were guaranteed the transmission or the road to the market. And a lot of people came here with that expectation and built projects, and that has been a longstanding rule. Now whether that was smart economically or not is another question. So they want to change that, and they have this… I forget. It’s CAM they’re calling it, but some sort of congestion management thing where generators are going to pay a fee, then that fee will be going towards building more transmission. But there’s no guarantee that it will result in you getting more transmission or solving your problem or taking that risk away. And this is one that almost throughout all of the feedback of generators, every type, people see this as a huge barrier to investing. Because if you don’t know you can get the road to get your product to market, you’re not going to build your product. You’re not going to build that plant.

So it’s a big problem. And I also think it’s a problem because it’s going to apply retroactively to people that build projects thinking that that was part of the deal. And I think that’s another thing, Duane, that scares capital away from this province when the rules change so significantly.

Duane Reid-Carlson:

And through all sectors. The wholesale market as well as the transmission, as you’ve pointed out. Yeah. There’s so many balls in the air.

Peter Tertzakian:

Mm-hmm. So the renewable generators are quite upset because, A, they’re not getting on to the grid. And B, the revenue goes down, which Jack already talked about, therefore the returns go down. Talk a little bit more about the whole renewable surge and that whole constituency. What are they saying?

Jackie Forrest:

Yeah, I’ll just add to that, Peter. I’m on the CanREA board, so I’m hearing a lot of this firsthand. But there’s a broad set of problems, they call it death by a thousand cuts, really. But the way that the market redesign is shaping up, it looks like they’re going to get less money for their product, their electrons. It also looks like they’re going to face curtailment a lot. They may have extra costs. They’re saying that their renewables are going to potentially have to pay ancillary fees to account for the fact that they create maybe more cost to the system. All in all, most of the modeling is showing that some of these renewables, if not most of them, are going to be cashflow negative under the new system. And some are even saying they’re going to just disconnect from the grid, because you can’t afford to lose money every day. I don’t know, Duane, your thoughts on the renewables? And if they were to just disconnect from the grid, that’s a big problem I think. There’s something like six gigawatts of total capacity, and they are required now.

Duane Reid-Carlson:

Yeah, you’re correct. Financial harm can manifest itself in many ways to these projects, from increasing the cost to curtailed production, which reduces their revenues, and this would negatively affect their existing and future renewable merchant capacity and PPA valuations. So for existing contracted assets, these effects would be felt by PPA contract counterparties through lost value in their PPA.

Peter Tertzakian:

So that PPA is a power purchase agreement where a guaranteed price is [inaudible 00:27:00]. It’s a contract.

Duane Reid-Carlson:

Yep. Between generator and buyer. So no project gets built without a PPA. As I said earlier, because of the comfort in the market and our current market design they’ve gotten shorter, less for the length of the asset or for the full 100% of the asset. Which has made them easier to contract for buyers, because buyers don’t necessarily want to take full capacity for the full life of the assets. So there’s variability there that’s been very good to the market. So what could happen based on all of these rules changing in the market is that PPA buyer is going to be financially harmed through losses with respect to the value of that project or that contract. So you could have contracts that would fail in the hands of a purchaser, which would then roll up onto the project so the project could become insolvent because it no longer has a contract, now is exposed to merchant prices. And so that insolvency could occur. I don’t think these assets will disconnect from the grid, however, because it’s just going to take a financial write-down and some other party will buy it at a lower price that will presumably… The more times it’s bought and sold, there’ll be a price where it’s profitable under somebody’s purchase.

Jackie Forrest:

Even if it’s generating negative cashflow each year?

Duane Reid-Carlson:

Well, I don’t think it would be negative in aggregate necessarily. It could be during certain periods. But yeah.

Peter Tertzakian:

So I mean the renewables aren’t happy, and neither are the natural gas fire generators. Right, Jackie?

Jackie Forrest:

Yeah. I mean the natural gas generators, I mean many of them are concerned about limiting the upside, and the fact that, you alluded to it Duane, that the price is not as transparent. It’s being set by the AESO now, and they’re also limiting the market, the highest price and some of these market power interventions. But I mean, the whole point of this redesign, I thought, was to incent more natural gas base load to come on. And I do not think by reading this that it’s accomplishing that.

Duane Reid-Carlson:

No, not at all. Because part of the REM design, you have an element called an administrative scarcity pricing curve, which gets from the potential lower offer cap for generators, $800 a megawatt versus the current 999. And the only way to get to the price cap, the new price cap that’s proposed, $3,500 a megawatt hour, is through this administrative curve. That is administered by who? And that’s the AESO. And it’s only administered in the event of a scarcity emergency alert on the system that would create it to move up that curve. But if you think high prices and affordability is the problem, any movement up that curve is obviously going to get front headlines and perhaps maybe a tap on the shoulder from the parties, the powers to be, “Hey, let’s not go to prices at such that level for very often.” So it could arbitrarily be managed through reliability concerns by the AESO.

Jackie Forrest:

Okay. Well, let’s talk a little bit about these interconnects. That’s another contentious thing that the province is proposing. Now interconnects are good in some ways in that they should increase our reliability, because if we have more interconnects then we have more optionality if we are short power. However, there’s a lot of concerns that you come to this province to build a generator, and now they could just flood the market with low cost power and you never get a high price. And by the way, this is on top of the redesign. So this is an example, Duane, of you’re not only changing the market, but now you’re adding all these other things on the side, all changing at once. But what are your thoughts on this plan for I think there’s four interconnects?

Duane Reid-Carlson:

We actually have three interconnects, 1200 megawatts with BC, 300 megawatts with Montana, and 150 megawatts it’s a DC interconnect to Saskatchewan. So these ties are limited by operational concerns to levels lower than their rated capacity, and their commercial utilization is even lower than that. Having said that, the government wants to get the limits on the transfer capability of the various ties to a higher level so that we could implement or utilize the ties to a much higher level, either commercially or through contract.

Peter Tertzakian:

When you say utilize, is that for import?

Duane Reid-Carlson:

Import or export.

Peter Tertzakian:

Import or export.

Duane Reid-Carlson:

So Alberta is a net importer. It traditionally has been out of the last 25 years, it’s been a net exporter only three years. Last year, 2024, was one. 2025 and potentially 2026 could also be, given where prices are. So the government wants to increase all the transfer capacity limits with respect to the three ties to create a greater opportunity for utilization under various circumstances. The downside to this is that we have differences in the regulatory models that are used in adjacent markets, BC and Saskatchewan for instance, and even the US. Particularly where government owned utilities exist, which leads to an unfair competitive advantage of parties that could compete against domestic supply, particularly thermals, during peaking situations in Alberta.

Peter Tertzakian:

Mm-hmm.

Duane Reid-Carlson:

One of the key concerns.

Jackie Forrest:

Okay. So you’ve got to have a way to manage it so that you can still make money. Okay Duane, well we’re going to wrap up here pretty soon, but a couple more questions. I think one that’s on a lot of people’s minds is while we’re changing the whole supply side here, and maybe making it very fragile and no one investing in it, at the same time we’re talking about bringing more demand to this province with all of this talk of AI data centers. So I looked at the AESO Q, and currently there’s about nine gigawatts of potential new load from AI data centers that have applied to be grid connected. And of course we know that there’s also a bunch of other projects that are saying they don’t want to be grid connected, but they would come build here in the province as well. Just looking at the grid connected, our average consumption of electricity in this province is about 10 gigawatts. So that’s like talking about doubling demand at a time when the supply side seems rather shaky. So how concerned are you by that? Do you think this demand will materialize, and is that going to just add to our problems?

Duane Reid-Carlson:

Yes, if it materialized in the way that it’s being announced it would cause significant problems. Because a data center, from my understanding, can be built from anywhere from 24 to 36 months and bring some significant load with it. Our generation to cover that size would take six to eight years to build. But I think just to update your estimate, I looked at the AESO Q last week and it’s closer to 12,000 megawatts. But that said, the more I learn about data centers, the more I think there’s some significant hype here. And it reminds me of the air barrels during the oil pipeline nominations of the 1980s and 1990s, which you probably remember very well.

Jackie Forrest:

Mm-hmm. Those still happen when my line gets full.

Duane Reid-Carlson:

Yeah. So what I’ve come to learn is that all data center developers plan for future scaling to be able to match the project for the demand, which is exponential by the way. But that said, they will deploy in a very modular fashion, if they proceed, where a proposed 400 megawatt site will actually build out in four 100 megawatt phases. That could be as far as a year or more between each module as they gain customer contracts to fulfill the data centers. Also, some of the hype is towards the next generation data centers of the 1000 megawatt size, which the GPUs for that data center are not even existing yet, but they’re under development. So data centers expect to get there, so this is some of the future expectations.

Jackie Forrest:

So it’s not all happening right away when they put these big numbers out? Right?

Duane Reid-Carlson:

No, no, no. And just to give some context, there’s an estimated 40,000 megawatt of data center load worldwide, which is expected to grow somewhere between 90,000 to 130,000 by 2028. So very aggressive expectations from the industry. But by comparison for Alberta, Ireland which is a significant data center hub in Europe, took 15 years to build its current 2,500 megawatts of data center load. So based on these numbers in Alberta, should we expect to see some? Yes, we will. Will we see 12,000 megawatts or more? If we do, it’ll be in some distant future and we’ll see it coming and be able to prepare for it. But as you pointed out, the generation, the REM process and what’s going on in transmission and other things are the biggest inhibitor to a data center building because it potentially may not have supply.

Jackie Forrest:

Well, that’s interesting, because one of the feedbacks in the document of the 38 participants was from a data center developer. Okay, well to wrap up… I have actually one follow-up question, but if you were sitting there and giving advice to the Minister of Affordability and Utilities Nathan Neudorf, and Premier Smith, what would you suggest they do at this point?

Duane Reid-Carlson:

Well, it’s funny you ask this question, because I appointed myself minister for the day during a speech I gave to an IPSA luncheon last spring. And as minister for this podcast, here’s what I recommended then. First, if price of power was truly the concern, then I would’ve implemented a consumer rebate at a reasonable strike price for a reasonably defined short period of time. Just like many other that have been put in place by the Alberta government with respect to natural gas, gasoline, and power in the past. We’ve done that many times. The government is well aware of where prices were going, and they were expected to decline once all the new capacity that was under construction hit the market. So this was a relatively low, low cost fix.

Second, if market power and its abuse was a concern, then I would’ve asked the Market Surveillance Administrator, the MSA to look into that if they had not already seen existence of those issues. And they were silent during the period of high prices, so we know that potentially was not a problem.

Thirdly and lastly, if long-term reliability was a concern, then I would’ve tasked the AESO, which is its mandate, to work closely with industry to come up with new market products and procedures and rules to eliminate the perceived risks. So prices are down. Check mark. Now they should scale things back.

This is what I would recommend now, after the fact, because they didn’t listen to those recommendations when I was minister of the day a year ago. So now they should scale things back to a manageable scope and scale and work with industry to get it right, and then utilize off-the-shelf software that exists that other markets have used and implemented to minimize the errors and to maximize the speed to implementation. That’s what I would recommend.

Jackie Forrest:

So small tweaks, and back to the drawing board to just go after those issues that are around.

Duane Reid-Carlson:

They could probably take advantage of some of the design elements they have today, because not everybody hates everything. There’s pieces that could work, could fit into the market. But again, don’t do bespoke IT design projects that will take much longer and cost much more to complete.

Jackie Forrest:

Yeah. Highly experimental, as it has been described. Well I think going back to the drawing board, and how about slowing down and doing this at a reasonable pace with all of the checks and balances like the regulator reviewing it at the end too? So one last question before you go, and we really appreciated your time here Duane, is are you buying a backup generator for your home right now?

Duane Reid-Carlson:

Well, Albertans should be very concerned about future electricity supply, reliability, and affordability. But as you so eloquently pointed out at the top of this podcast, I think the current government actions are more likely to cause the very things that they say they’re trying to avoid. However, in saying that I believe the government’s intentions were sincere, I want to make that point. I just think we are not on the right path now, as I just outlined. So to answer your question, I’m not buying a generator, I’m not installing a Tesla battery or solar panels just yet. But to be honest, all residential and commercial customers don’t have the correct bidirectional digital meter to benefit from any of those investments. But when we do, I expect much more innovation would occur.

Jackie Forrest:

Yeah. And actually that was a feedback too. Why aren’t we talking about demand side management around things like giving people incentives to use electricity at different times of the day? Because although sending emergency messages to our phone worked on that cold January night, there’s got to be better ways of doing it.

Duane Reid-Carlson:

However, that crude method did work. We did get a demand response that helped those situations. So until we have an AI-driven app on our phones and tablets, we’ll have to use the crude methods that we have.

Peter Tertzakian:

Well, thanks Duane Reid-Carlson for shedding light, if you pardon the pun, on this redesign issue. Thanks for the work you do in highlighting the issue to the public and those practitioners who are in the business. It’s great to talk to you. So we’ll see how it all plays out, but in the meantime, again, thanks for coming.

Duane Reid-Carlson:

Thank you very much for having me.

Jackie Forrest:

And thanks to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.

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