Spotlight on Alberta Power: An Interview with Mike Law, CEO at AESO
On this week’s podcast our guest is Mike Law, President and Chief Executive Officer at the Alberta Electric System Operator (AESO).
Here are some of the questions that Jackie and Peter asked Mike: Are consumers exposed to the volatile power price in Alberta’s deregulated electric market? Why are electricity prices in Alberta higher now? Are the costs for transmission too high? Is net-zero electricity by 2035 achievable? What is the current status of the federal government’s Clean Electricity Standard? In a deregulated market, how can Alberta ensure that enough clean electricity generation capacity is constructed by 2035? Do you think a pan-Canadian grid is part of the solution for achieving net-zero electricity?
Other information referenced in this podcast:
- AESO’s Net Zero Emissions Pathways Report (June 2022)
- AESO’s Real Time Dashboard of Alberta’s Power System
- AESO Twitter @theAESO
Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/
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LinkedIn: @ARC Energy Research Institute
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Episode 177 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. Well, welcome back everyone. It is now, I don’t know, mid-November and couple weeks into daylight saving time, but it’s not enough. When we wake up in the morning, it’s decisively dark and well maybe I’ll ask you in the audience, how many of you stumble into the shower in the morning, flip the light switch on and wonder where your energy comes from? I often ask that question because I feel people take their energy for granted. I mean, I have to admit, this morning I stumbled out of bed and I didn’t think about where the electricity came from when I turned on the light switch. Did you, Jackie?
Jackie Forrest:
I don’t normally, but you know I got a greater appreciation. In the spring I got to visit Alberta’s Control Center and the Alberta electric system operator who keeps the lights running every day, I got to see the people that do it.
Peter Tertzakian:
Behind the scenes that are awake all night.
Jackie Forrest:
Yeah, they’re 24/7 and they’re doing things like watching the frequency and seeing the different generation coming on and yeah, it was a great experience and it really made me understand just all the work that goes behind the scenes when we flip the switch on. We just don’t appreciate it.
Peter Tertzakian:
Right. Well we have a very special guest with us today to tell us about what happens behind the scenes and the trends that are happening for when we flip the light switch on in future. We are delighted to have Mike Law, President and Chief Executive Officer at the Alberta Electric System Operator, otherwise known as the AESO. Welcome, Mike.
Mike Law:
Well, thank you Jackie and Peter. It’s great to be here this morning.
Jackie Forrest:
Well, Mike, maybe you should just tell our listeners about the role of the AESO.
Mike Law:
Yeah, absolutely. It is very sort of high level. We are the organization that is tasked with ensuring the safe, reliable, and affordable delivery of wholesale electricity across the province of Alberta. We plan the transmission infrastructure within the province and we direct its physical operation. We ensure that customers, large wholesale customers can have access to that transmission grid. So connect to the facilities whether they’re load or generation customers and local utilities, your distribution utilities, are one of our major customers. And then we plan and operate the electricity market that prices electricity within the province.
Peter Tertzakian:
So before we descend into this discussion, I want to just get some of the jargon sort of out for our audience. So when we talk grid and transmission, we are talking about those big high tension lines that we see when we drive around. Well, certainly if you drive from here to Medicine Hat along the Trans Canada, you can see just massive transmission lines, right?
Mike Law:
That’s right. It’s the high voltage, it’s the big high voltage lines, not the small lines.
Peter Tertzakian:
So that’s transmission. And so distribution is then when you’ve take off high voltage electricity from the grid into local distribution neighborhoods.
Mike Law:
That’s right. It runs locally around within cities and smaller areas.
Peter Tertzakian:
And then ultimately it comes into the home, into the retail store or the factory.
Mike Law:
That’s right.
Peter Tertzakian:
Okay.
Jackie Forrest:
Okay. Now that’s good clarification because we’ll be talking about some of these words. Well, let’s start. Alberta is the only deregulated electricity market in Canada, and one feature is the prices, they’re very volatile. They can vary I think between zero some days and up to 99 cents per kilowatt hour, I think that’s a regulated cap, depending on if the system is constrained or oversupplied. Now who pays these volatile prices? Is it industrial users? And how are consumers protected from that?
Mike Law:
Yeah, realistically, the vast majority of Albertans are not exposed to wholesale price volatility, and the ones that are ultimately are doing so by choice. For large wholesale users that would normally be exposed to wholesale price volatility, they all have the ability to enter into commodity hedges with any number of commodity marketers, banks, et cetera, that provide those type of electricity and commodity hedges. And on the other end of the spectrum, the small residential and commercial organizations have access to fixed price retail contracts that are available from any number of retailers that operate within the province. Or if they prefer not to be on a fixed price contract, they can be on the regulated rate option, which does provide month to month price stability.
Jackie Forrest:
So I think that’s important. I remember back in the Texas power crisis where people were plugging in their Teslas and finding out that their power bill was like a thousand dollars because the retail person was actually seeing that volatile price, here in Alberta, the consumer is protected from that, but the industrial consumers, they may see it, but they can choose to use financial instruments to protect themselves as well. So there’s lots of levers to protect consumers, I guess.
Mike Law:
That’s right, it’s a choice.
Jackie Forrest:
Okay, well let’s talk about another feature of a deregulated market is that private capital can freely invest into new generations. So in a lot of places, actually anywhere else in Canada, in order to build a new power plant, the government, or the entity that runs the electrical system like the AESO, has to put out a request that there’s going to be new capacity and people can bid on it. But here in Alberta you could just at any point in time come in and build a power plant. So can you tell us how much new generation capacity has been added? Because unlike a centrally planned system, you just get what you get. How much has come in and has that exceeded your expectations?
Mike Law:
So one of the aspects of our deregulated market is that we’ve had very strong investment in generation over the years. Specifically in the past handful of years, we’ve seen a real influx of renewable generation, so the wind and solar, that has quite frankly exceeded our expectations. The development in the renewable space continues to accelerate. But over the full scope of deregulation, so now coming up to 22 years, we’ve seen the vast majority of the generation that is operating at present has actually been built during the deregulated environment and our high level estimates are that that’s probably somewhere around 20 to 25 billion dollars worth of generation investments that have been made within the province.
Jackie Forrest:
Well, and that’s great because unlike other places where the government sort of signs on long-term agreements and has to pay part of that, here in Alberta, it’s private capital that’s doing that.
Mike Law:
It is. It’s all… the risk is on the developer, on the merchant generator, and that is very good for consumers overall.
Peter Tertzakian:
Just as a side note, you just said that there’s been a higher than expected amount of renewables coming into the grid. What was the fraction of renewables into the Alberta grid now?
Mike Law:
We’re about 15% wind, about 7% solar, and it’s growing at a very rapid rate. Just effectively in the last year, we’ve seen the better part of a thousand megawatts of solar and 12, 1300 megawatts of wind come online.
Peter Tertzakian:
Okay.
Jackie Forrest:
When you say 15 and seven, is that of the capacity or the generation?
Mike Law:
That’s the generation. That’s the actual generation.
Peter Tertzakian:
That’s the actual generation. So skeptics, say for electric vehicles, would say, “Well if you plug in an electric vehicle, it’s just being powered by coal.” And I think maybe that was true over a decade ago when we had a large fraction of coal in the Alberta power grid. What is it now?
Mike Law:
So that absolutely would’ve been correct about 10 years ago. At the moment, coal is almost completely phased out. We really only have a small amount of coal left to coal facilities that are in the process of converting over to natural gas. Our natural gas base within the province from a generation perspective is about 63% of our electricity are currently coming from natural gas and only about 7% coming from coal at present. So a big shift over the last five to 10 years as we’ve moved to phase that coal out as a means of decarbonizing the system.
Jackie Forrest:
All right. So driving your Tesla is getting better all the time, Peter. Well, okay, so a question I have is, well that sounds great. We’re getting all this generation and we have more solar and wind coming on, but that would tell me, well if we have more supply, why wouldn’t we have lower prices? But actually power prices have been going higher. In fact, for residential consumers that are on the floating rate, November 2022 price is about 17 cents per kilowatt hour. That’s up about two and a half times over the average price in the last few years, which is more like seven cents. And so why is that happening?
Mike Law:
So we’re going through a transition time at the moment within the power system. That shift that I talked about, the phasing out of coal and the repowering of those facilities and conversion of those facilities to natural gas, is creating an environment where we have a short term supply demand tightening within the province and that’s driving prices up. The other aspect is you convert over to natural gas. Everybody knows, I think within Alberta, the price of natural gas has gone up fairly significantly over the last year or so. So input costs have gone up, as have carbon taxes that are applied to the large generators. So all of these aspects start to add to the input costs associated with the natural gas generation. And the efficiency of the units, especially the coal units that have been converted to natural gas, the efficiency is very low. So running those units is expensive and until we see the next tranche of new generation coming in, which we actually expect to see coming in the next year or two, we’re in that higher priced environment, but we expect that to moderate over the next year, two years.
Peter Tertzakian:
How much of the 17 cents currently is the carbon tax?
Mike Law:
So the carbon tax is probably accounting for… it’s different for every generator, but what it does is provide that uplift on the marginal price. So we’re probably seeing about $30 a megawatt hour additional.
Peter Tertzakian:
So it cost three cents.
Mike Law:
About three cents.
Peter Tertzakian:
So three of the 17. Okay.
Jackie Forrest:
Yeah. And I guess the problem is the most polluting plants pay the highest and there’s thresholds where some plants don’t pay very much at all if they’re below that threshold, so it’s hard to…
Peter Tertzakian:
That’s why at the end of the day, the electrons are all blended in together and you get the 17 cents. So the average is about three.
Mike Law:
That’s right. And that’s based on the highest priced units.
Peter Tertzakian:
Yes. Right.
Jackie Forrest:
Well, let’s talk about transmission. Transmission seems to be coming up more and more. The cost of transmission is spread over the user. So if any of us go to look at our utility bill, we’ll see there’s a fee, a variable fee, associated with transmission, and distribution, the big wires and the small wires as Peter described before. Now, some Albertans say, “We’re paying too much for transmission since the transmission lines are not being used and they’re in the wrong places.” How do you respond to that criticism?
Mike Law:
Well, I think firstly, as far as location is concerned, they are without a doubt in the locations that we need them and the argument that some individuals are making is that the grid was designed for past technologies, so the coal facilities, et cetera. And obviously the large transmission lines we’re running from the coal facilities to the cities, the load centers, et cetera. As we transition over to natural gas and to renewables, the reality is that the majority of the natural gas facilities that are being built are actually being built in the same locations that the decommissioned coal units were in. Those are natural sites for new gas generation, they’re permitted for those type of facilities, they’ve got the workforces around them, and surprisingly they’ve got the transmission infrastructure that runs to them. So there’s a natural economic draw to repurpose those sites.
And on the other side, with the increase in renewable and variable generation that’s happening in the south of the province, the transmission infrastructure is needed to move that power up and down and around the province, depending on whether the wind is blowing or the sun is shining. So the more transmission that you have, the greater your ability to efficiently move those electrons across the province as they’re needed. So that’s the first piece, absolutely no concern with respect to the location of the facilities themselves. As we develop more renewables within the province, yes, we will likely need to add some transmission facilities in the south of the province to collect that generation and move it up to the load centers.
From a utilization perspective, it’s always a challenging conversation to have. The reality with transmission is that you never a hundred percent utilize transmission facilities. As with many things, we need to plan our system to be able to manage the extreme peaks, because no one wants to hear the coldest, darkest day in winter, “I’m sorry we didn’t quite have enough transmission to get you the electricity, but that’s okay, it only happens once or twice a year. Don’t worry.”
So firstly, we have to plan for the extreme peaks. And the second piece is that we have to plan for a power system that’s going to have elements of transmission, whether that’s transformers or lines that are out of service either because of weather or maintenance. And as such, you need to have the flexibility within your power system to take lines out of service and still meet those extreme peaks. Electricity is also a challenging commodity in that it takes the path of least resistance from generation to load without being told where to go, it just goes, it flows on the lines where it needs to go. So if you have two lines running from one location to another, you can never load those lines more than 50% because if one trips off, a hundred percent has to flow on the other line.
Peter Tertzakian:
That’s the redundancy.
Mike Law:
And that’s the redundancy piece. So when we plan and design the system, we’re taking all of these various aspects into account so that if you look at average utilizations, it looks like it’s not fully utilized, but that isn’t the reliability and safety level that we can actually provide within the province.
Peter Tertzakian:
Well, if you can build out this grid of transmission, I mean Alberta is in such an advantageous situation by the virtue of its size and especially it’s… I think there’s like 11 degrees of latitude from 49th parallel to 60, and so when the wind isn’t blowing in the south, it may be blowing in the north or sunshine in the south and on north. And it just creates a much more flexible system to be able to deploy things like intermittent renewables.
Mike Law:
Without a doubt, and I think that over time we’ll come to recognize that the transmission infrastructure that we have in the province is actually one of our greatest assets because we have infrastructure in place that many other jurisdictions are now struggling to get built just because of NIMBY issues and cost issues, that they practically can’t integrate the generation and the changing nature of their power system in a way that we actually are able to.
Jackie Forrest:
Well, and I think it’s important that that transmission is actually, really, it’s the highways for where the electricity flows and it is enabling all that capital investment and if we want to get to the future of net zero, we’re going to need those highways to be there for those investors at private capital, you talked about 20 to 25 billion. We need more of that, we’re going to talk about that, we are going to need that transmission and even more of it. And I actually looked at my bill and I didn’t think it was that unreasonable. We were talking before about utility bills, but if you look at my bill and I guess a house in Calgary, I think that the transmission piece was about $20 and energy cost was over a hundred dollars. So it doesn’t seem that material I guess in the context of the whole bill, in my view.
Mike Law:
Yeah. And as with all things, it’s important to focus on each aspect and understand how costs can be minimized. Affordability is a challenge within the province for everybody and making sure that we do our best as the grid operator and planner to minimize those costs is important. But we also have to look well into the future, these are very long lived assets, they’re 40 to 60 year assets, and make sure that we are building the right infrastructure for the future of the province.
Peter Tertzakian:
Right. I mean this 17 cents, which is a current number I know and it’s expected to decline, it is not the cheapest in Canada. The other provinces, BC and Quebec, which have hydro, are cheaper I think, but it still ranks very well. And from a global perspective, I mean 17 cents a kilowatt hour Canadian, so US 13 cents, ballpark, is really cheap compared to a lot of places, even in the United States and in certainly Europe right now.
Mike Law:
And 17 cents is, I would put it, at the high water mark of what we’ve seen within the province. Historically, it’s been more in the seven, eight cent range.
Peter Tertzakian:
Yeah, if you locked in, like I did. I mean it’s like 7 cents, it’s very…
Mike Law:
Which is very affordable realistically and we compare quite well across North America. And when you look at Europe, not even under the current circumstances, but in the past, they have significantly higher electricity costs.
Jackie Forrest:
Well, let’s move towards the future because there is a concern with going towards net zero that things are getting more expensive. As I know you know well, Mike, the federal government is developing the clean electricity standard that aims to achieve net zero electricity by 2035, 13 short years from now. Tell us the status of that and how the AESO has participated?
Mike Law:
Yeah. So the federal government is working on the clean electricity standard and what’ll soon become the clean electricity regulation. They’re in their final stage of putting together what is the draft regulation, and that’ll be in what they call Gazette one end of the year, early next year, which is the first draft of that regulation. They’ll take feedback on it and probably by the end of next year they will have the final regulation ready. The AESO is heavily involved in the conversation, both in Alberta and providing information to the federal government to support in many ways the work that the provincial government here is doing in the conversations. So we’re an organization that really provides as much of the data and input as we can with respect to the implications in the Alberta power system.
Jackie Forrest:
Well, and part of that is you put out a report, which we will put a link to in the show notes, June 2022 the AESO published the Net-Zero Pathways with three different scenarios, but one of the conclusions was the 2035 timeline is not achievable.
Mike Law:
Well, what we’re saying is that there’s significant risk to achieving the 2035 timeline. We’re not saying directly that it’s not achievable, but that there is significant risk associated with the ability to deliver that. There are a number of reasons for that. The first is in order to get that investment, and it’s a significant investment in new generations specifically that’s required to get there, yes, there’s some transmission infrastructure, but those merchant developers that need to put in the order of 35, 37 billion dollars of investment into new generation capacity need policy certainty. And at the moment we don’t have that level of policy certainty across the country. So making those kind of risk-based decisions is difficult when you’re not quite sure what the playing field looks like. The second component is that these are big investments that take a significant amount of time not only to build, but to get regulatory approval and permitting, et cetera, regularly, seven to 10 years to get these type of facilities built. So if you aren’t building them very soon, 2035 is only 12, 13 years away now, there’s not a lot of wiggle room from a timeline perspective.
Peter Tertzakian:
If I think about how fast we actually phased out coal, I mean, 20 years ago, we were two-thirds coal and now you’re saying we’re getting down to almost none and it’s two thirds natural gas. So aggressive change can happen.
Mike Law:
Absolutely, aggressive change can happen. One of the differences with that was that we were moving from a known technology to another known technology, so from coal to natural gas. With the shift in the decarbonization side, this leans heavily on carbon capture and storage technologies, it leans into hydrogen technologies and on the renewable side, pairing renewables with grid scale storage.
Peter Tertzakian:
Like mega batteries.
Mike Law:
That’s right. And what we know is that carbon capture and storage is a known deployed technology, but it’s not a truly commercialized in the power industry, nor is large grid scale batteries. And when we talk about large batteries, currently grid batteries have a four hour sort of charge, discharge time. We rarely need batteries with a much longer discharge duration to be able to get us through the dark Canadian winters and nights, four hours is really not sufficient.
Peter Tertzakian:
So what do we need? Is it 48 hours or is it 10 hours, or what?
Mike Law:
Well, that’s the challenge is that we really need long duration. The technology really isn’t there at that stage.
Peter Tertzakian:
But the carbon capture technology, we know where to sequester it. I mean, we’ve drilled up our geology for the last hundred years with several hundred thousand wells, so we know where the porosity is to be able to sequester it, and much of the province sits on porosity. And my sense is that the chemical engineering of capturing the carbon is there. It’s difficult off natural gas because the concentration of CO2 and natural gas emissions is relatively low. But I think we’re going to see a fairly rapid learning curve on carbon capture, especially learning from what’s going on in the United States where there’s some aggressive development, right?
Jackie Forrest:
Yeah.
Peter Tertzakian:
And so all of which is to come back to another question, which was you need the capital and the policy certainty. So does the fall economic statement from Chrystia Freeland not too long ago with the Clean Growth Fund, does it provide that kind of certainty for the utilities and other generators?
Mike Law:
I think it’s starting to and I think the… but the clean energy regulation is ultimately what’s going to start to provide that certainty on what we need to do as a province to meet those obligations. The challenge is always that CCUS is a very capital intensive path to take, effectively, give or take, doubles the cost of a natural gas generator from a capital perspective. So the merchant generators are reticent to make those kind of investments without knowing quite how they’re going to get their money back. And it’s that 13 year timeframe which is the challenge. Also, as you talked about, that sort of commercialization and cost curve getting dropped down over time, we’ve seen it in places like Ontario where the first movers, whether it’s in the renewables or in other areas, pay the high prices, give it a few years, and someone comes in and undercuts you. That’s okay if it’s, I’m going to say, government funded from a developer’s perspective, but if it’s commercial risk capital, you can’t afford to have no people coming in and undercutting you in a couple of years time.
Peter Tertzakian:
No.
Jackie Forrest:
Yeah. And oh, by the way, I do want to correct the record. I was reading wrongly in my notes, your report actually said it’s ambitious to make it by 2035. So I don’t want to put words in your mouth. But let’s talk about what you’re talking about the report, and you mentioned this already, talked about we need something like 27 to 37 billion in new capital investment to make the 2035 goal. And it’s interesting, actually, the lower side of that range was a scenario that included more CCS and the higher range was one that more used solar and batteries and some of the other technologies that could get you there. Now, Albertans don’t pay directly. Private capital needs to want to come in and do that. How can, in a deregulated system, Alberta ensure that all that money is spent and that we actually achieve that?
Mike Law:
That is always the challenge and it’s the nature and uncertainty of a deregulated, and specifically an energy only, market where you need to make the value proposition for a developer attractive and there needs to be certainty in the rules so that they know that they can get their capital back out of that investment. But it is something that as the AESO we watch on a continual basis, we look at what we’re seeing from a policy perspective and then what we’re seeing from an investment and development perspective and whether we are comfortable that over time we’re going to get to where we need to be. And if we don’t feel that the development within the province is going to be sufficient and we feel that ultimately we’re going to be short generation, we then start to have conversations about what needs to change.
Jackie Forrest:
So could you see a situation where we would be paying generators to bring on capacity or I know back with the NDP, there was that capacity market idea, the hybrid, because it just seems like a very short amount of time to think that that much is going to get done to achieve your goal.
Mike Law:
We’re very committed to the energy only market within the province and at the moment, the market itself, we don’t see as being the impediment to the delivery of the necessary generation that’s there, and I think our report kind of framed it as the market has the ability to deliver the supply adequacy required, it’s all of those other factors that play out from a developer perspective and get them comfortable making that investment in the end.
Peter Tertzakian:
I want to talk about the demand side for a minute because you said we don’t want to be caught, and using your words, short generation. Let’s talk about the aggressive electrification scenario on the route to net zero. In other words that we swap out natural gas fired stoves with electric stoves and all sorts of other appliances, move to electrification, mobility, electric vehicles come on much faster than we expect, and all of a sudden that loads up the grid and local distribution in neighborhoods and we fall potentially short. How is that being factored into your thinking for the future?
Mike Law:
So one of the aspects that our report does not completely cover is the impacts and costs associated with that distribution facilities, call it the last couple of miles, associated with the delivery of electricity. The broad electrification of buildings and vehicles is something that we see happening more slowly than the shift in the generation profiles. So there’s a lot of inertia associated with changing buildings, replacing stoves, et cetera. So we don’t see that happening quickly, that’s more of a back after 2035 type timeframe.
And electric vehicles, we see the adoption of those really ramping up in about that 2035 timeframe. Now you do see Teslas on the road now, but there’s not that broad adoption yet. But when those start to take hold, especially the electric vehicles and the impact of the charging profile becomes very important, so if everybody comes home with their electric vehicle and plugs it in after work, 5:00, 6:00, 7:00 o’clock, you get a fairly significant increase in that peak load at the end of the day. And our report looked at different charging cycles, or different charging profiles, and it is going to become important in the future that those charging profiles are managed and that will have a significant reduction on overall generation requirements, et cetera.
Peter Tertzakian:
So to be clear, just sort of backing up to something you said, AESO is not really responsible for the circuit breakers blowing in a small neighborhood?
Mike Law:
No, those are your distribution utilities, so ENMAX, EPCOR, et cetera, that handle those last few miles of wire.
Jackie Forrest:
But Mike, maybe a point is do you foresee that sometime in the future we will have variable pricing at the home to incent demand shifting? So today, like you just said, I’d pay if I’m on the floating rate the same rate all month no matter what I do. Do you think we’re going to have to come to that?
Mike Law:
I do. And jurisdictions across the world are moving in that direction. Interval meters and smart meters are actually being installed over time across the province already as some of the old infrastructure ages out. When they replace them, they’re replacing them with interval meters and smarter meters. They’re not necessarily utilizing them yet, but they’re making some of those capital investments over time.
Peter Tertzakian:
So what we’re talking about is putting a timer on your dryer to dry your clothes at two in the morning while you’re asleep and charging your car at two in the morning to even out the load because it’s not so much that we don’t have enough electricity generation, it’s just that certain times of the day, like morning and around dinner time is when it really peaks.
Jackie Forrest:
Yeah. Well, and it can make a big difference. I’m sure you’ve followed what happened in California in early September, but they were having a situation where they were very tight and they were sending text messages and people were voluntarily reducing demand enough that they got through that situation. And price is such a great motivator.
Peter Tertzakian:
Oh, it is.
Jackie Forrest:
Like small changes in price will motivate people to do that sort of thing, but today in Alberta doesn’t matter. You pay the same anyway, so we don’t really have the… I know obviously the wholesale industrial users get that motivation in real time and it works, but we don’t have it on the consumers.
Mike Law:
Yeah, absolutely. And I think it’s a shift that’ll happen. And you’re absolutely right, California has in some ways trained their population to be responsive to pricing and to messages that they receive from their AESO.
Peter Tertzakian:
Right.
Jackie Forrest:
Yeah. I think to get to this net zero future, that’s got to be there.
Peter Tertzakian:
But I just want to clarify being the ability to change the price into the home by time of day, so it’s cheaper when we’re sleeping and more expensive during dinner time and when we wake up. That’s not an information technology challenge. Is that a policy challenge or what is it?
Mike Law:
It does require one level of technology shift, it’s not a dramatic shift, but our current meters are cumulative, they just click over all day, they create one number. If you’ve got time of use pricing, you need to be able to have a meter that recognizes morning usage, midday usage, evening usage.
Peter Tertzakian:
Okay.
Jackie Forrest:
Right. And you’re saying that right now as you change out meters, you’re putting those in, although you’re not using those features today?
Mike Law:
Yeah. Some of the distribution companies, it’s not our role, but they are doing it.
Jackie Forrest:
Okay. I have one last question, we’re a little over time, but I do want to talk to you about this. As you know, the federal government would like to have a grid council that would look about how we could have a massive transmission that interconnects all of our provinces. That way we could leverage our diverse assets. For example, hydro in BC and Manitoba could be used at night and wind and solar in the prairies could be used in the day, and it would be cheaper, they think, to deliver in the net zero future. Now, your net zero report did not consider this option and it said, I’ll get the quote right this time, “Given the monopoly and the monopsony nature of Alberta’s neighboring markets, competition and fairness concerns,” is a reason that you didn’t consider that as a solution in your net zero report.
Mike Law:
So, there were a couple of reasons why we didn’t look at large scale inter-ties. One is we fundamentally don’t believe that you can get them built by 2035. We’ve been talking inter-ties within the province for years and years. The political motivation, the regulatory structure, et cetera, takes a long time to get in place. So, we don’t think that it’s realistic by 2035. When we think about cross-Canadian infrastructure of that sort, I mean we are talking about a massive infrastructure development, that is going to take a lot of political capital across the country, and it is going to take a significant amount of funds. It’s also a challenge based on, and our quote was alluding to, the fact that we are a deregulated markets surrounded by Crown corporations effectively, and their motivation is quite different with respect to generation development and the supply of electricity to their consumers.
They subsidize it with tax dollars, whereas ours are all risk dollars by merchant developers. If we put ourselves in a position where, as a province, we’re utilizing other people’s electricity, we need to still ensure that we have sufficient generation to maintain our own reliability if that transmission line goes out or if they need the electricity for their own usage. So, it is quite difficult to structure that kind of a deal. And we’ve seen, I would say time and time again, large inter-jurisdictional, inter-provincial electricity deals going south on at least one side of the equation, whether it’s a Quebec type deal with Newfoundland, you name it, there’s always, when you look back, there’s there’s real challenges associated with these types of projects.
Jackie Forrest:
All right. So just politically, it seems hard to do and as you say, maybe doesn’t save us the money that we think because we have to assume that goes down and we still need to keep the lights on.
Peter Tertzakian:
Yeah. Well, Mike, thanks very much for your insights and for also the report, which we’ll post online. By the way, can you follow in real time, I haven’t been on your site for a long time, in real time the dispatch curves, the supply demand, and where we’re at?
Mike Law:
Yeah, absolutely.
Peter Tertzakian:
That’s really cool.
Mike Law:
It’s all on there, aeso.ca, and just work your way to the market reports.
Peter Tertzakian:
We’ll put that link there and you can see in real time what our electricity dispatch is in this province. So anyway, thanks to you, and especially thanks to the AESO staff for keeping the lights on.
Mike Law:
Excellent. Thanks for having me. It’s been enjoyable.
Jackie Forrest:
Thanks, Mike. And I also recommend your Twitter feed, which I’ll put a link to in the show notes, because it does tell you at times when the system is tight, and you can voluntarily stop using power as much. I know that that happened this summer a few times on your Twitter feed. So, it’s a way for you to easily access the information. And finally, thanks to our listeners for joining this podcast. If you like this podcast, please rate us on the app that you listen to and tell someone else about us.
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