Alberta is overhauling its energy market. Here's what's happening, and why
Alberta is overhauling its energy market through a suite of changes aimed at making the system more reliable and affordable – a gargantuan task that involves a raft of reviews, consultations, and legislative and regulatory changes.
One of the largest drivers of that transformation is the development of the Restructured Energy Market. The REM process is examining the main rules and principles that govern Alberta's electricity market in an effort to ensure that the system remains as reliable and affordable as possible.
The REM is being overseen by the Alberta Electric System Operator, which operates the province's power grid. The United Conservative government tasked the AESO with developing a new system for how the electricity market operates following years of volatile prices and, later, shortages that led to provincewide outages and pleas for consumers to power down.
The REM redesign process began as the Market Pathways initiative, launched on Aug. 1, 2023. In March of 2024, however, the government changed its directive to the AESO. It asked for a much broader overhaul, which was renamed the REM.
Alberta's power system is unique in Canada in that it has no central or Crown power provider. Instead, private companies run the plants that feed electricity into the grid. The AESO works with the industry and the government to manage and plan that market.
Alberta restructures utilities rules ahead of major power market overhaul
The overhaul comes as jurisdictions across North America grapple with how to meet rocketing demand for electricity. Industries are becoming increasingly electrified to reduce carbon emissions, and governments are trying to attract power-thirsty data centres. Alberta, for example, is aiming for $100-billion of investment over a few years.
Electricity generation technology has changed dramatically over the past few years. First, coal-fired power plants, which ran 24/7, were phased out. Most producers pivoted to natural gas-fired power stations, which present more flexibility and, for the most part, provide reliable – and cleaner – electricity, no matter the weather.
Then came what Matt Davis, the vice-president of policy with Edmonton-based Capital Power, called the 'spectacular build-out' of wind and solar. 'I don't think there's enough appreciation of what that actually does to the system and how challenging it is to operate.'
All those changes, coupled with the growing use of batteries to store power and improve reliability, has completely changed the the way Alberta's grid operates.
'Obviously the sun comes up in the morning and goes down at night. We know the wind doesn't always blow,' said Jason Wang, a senior electricity analyst with Pembina Institute, a think tank. 'It's important for electricity markets to be able to make sure it's an even playing field for all types of generation, but also for that reliability to be maintained.'
Those in Alberta's utilities sector say that the complexity of the REM review is off the charts – particularly when combined with other changes happening around the same time, including new transmission regulations, local access fees and distribution.
It's not easy, agrees Alberta's Affordability and Utilities Minister Nathan Neudorf.
'But we thought, 'If we're going to undertake this work, there's no point in doing it half-measure,' he says. 'If we were going to do some significant portions, why don't we do it fully – completely engage with stakeholders and make this adjustment all at the same time – so that we don't have to go through this multiple times over multiple administrations.'
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Alberta wants a new market in place by 2027. Other jurisdictions such as Texas, Ontario and California have undertaken similar reviews, but took much longer to implement changes.
Alberta could have taken its time, Mr. Neudorf says, but industry urged speedy completion of the task to avoid prolonging the market uncertainty that undermines investment.
But Pembina's Mr. Wang reckons the accelerated timeline has created more uncertainty – particularly when combined with the government's seven-month ban on renewable power project approvals in August, 2023.
'In a different world, the government could have said, 'We want to make market changes, but they won't be implemented until 2030, maybe even like 2034, 2035,' so that they were slowly phased in. Then investors would have short-term certainty, and they would have that longer-term certainty.'
The REM was initially to be completed by May, but that timeline has been pushed back owing to the scale of the exercise and concerns of the utilities sector. For example, AESO scrapped a mandatory day-ahead market rule that would have had participants agree a day ahead of time on the price and the duration of power production, and which industry said was far too complex.
Reliability and planning standards will likely be implemented within the next year, and Mr. Neudorf anticipates that most of the decisions around the REM will be made by this summer. The province has already tabled Bill 52, which allows changes to be made at a rapid clip, rather than going through another year of public consultations. More legislation is slated for fall or spring.
For the Athabasca Chipewyan First Nation, the REM raises broader economic concerns. The community has been investing in renewable power installations in Southern Alberta since around 2018.
But the price of power from its renewables sites dropped significantly; in the final quarter of 2024, revenue was down roughly 12 per cent, says Jason Schulz, Athabasca Chipewyan's executive director of strategic advisory services.
Promised power transmission infrastructure was never built to support renewable energy projects either, he says, which caused congestion on the grid. Electricity 'pretty well just gets dumped' as a result, he says, adding that the REM is unlikely to change that, given the distribution model being considered.
Still, he's hopeful the REM will be a good news story for those in the power sector. With some positive decisions and others yet to be determined, he says, 'time will tell.'
Capital Power's Mr. Davis is pleased the REM process has recognized the value of dispatchable, flexible generation capacity, be it batteries or gas-fired generators. 'There's more of an inherent acknowledgement that there is additional value to those resources because they provide critical reliability attributes to the system.'
Bob Myles, chief executive of Calgary-based Canadian Utilities Ltd., says he's much more optimistic about the REM today than he was six months ago, given how much the AESO is listening to industry.
'There were a lot of doubters for a long time, that a lot of the comments were not being heard,' he says. 'Do we have everything figured out yet? No, there's still some issues that could have significant negative impacts on generators. But I believe now we're heading in the right direction, in a better direction.'
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