Key Dates and Materials

Dec. 12, 2024 | RFI Submissions due via SupplyAdequacyRFI@aeso.ca

Nov. 18, 2024 | RFI Questions due via SupplyAdequacyRFI@aeso.ca

Oct. 30, 2024 | Launch Request for Information (RFI): Solutions to Mitigate Supply Adequacy Risk through Strategic Reserves

Oct. 30, 2024 | Materials posted

• Summary of Stakeholder Feedback
• Strategic Reserves Supplementary Information

Oct. 3, 2024 | Consolidated Stakeholder Feedback posted

Oct. 30, 2024 | Stakeholder Update

The AESO regularly monitors supply adequacy with its accountability for the reliable and economic operation of the Alberta Interconnected Electric System. We first raised strategic reserves as an option to maintain dispatchable capacity to protect against supply shortfall in the Restructured Energy Market (REM) Recommendation Report published in March 2024.

Strategic reserves are supply adequacy services (from either generation or load) procured and dispatched outside the existing market structure to meet supply adequacy needs during an Energy Emergency Alert (EEA) and when the grid is at risk of rotating outages. Strategic reserves would only be dispatched when market resources are exhausted, to prevent load shed when the grid is under stress. They would be designed to maintain price signals necessary for ongoing market investment by, for example, price re-constitution.

Strategic reserves should not be conflated with contracting retiring coal-to-gas (CTG) units. Contracting retiring CTG units could be one form of strategic reserves and if contracted, would not participate in the energy market and would be retired on termination of the strategic reserve contract. Other forms of strategic reserves could include demand response or emergency supply.

In early September 2024, the AESO held a stakeholder information session to explore the concept of strategic reserves as a solution to address potential supply adequacy concerns, including considerations related to retiring CTG units. Following that session, we sought written feedback from stakeholders on the overall concept of strategic reserves, including feedback specific to CTG units.

That feedback centered around the following four themes:

• Concerns about using an out-of-market mechanism that could potentially disrupt the competitive electricity market.
• Requests for more detailed data and further analysis to define the level of supply adequacy and corresponding forecasted volumes that may be needed for strategic reserves.
• Questions about the suitability of retiring CTG units to provide guaranteed capability during an EEA, given the lead times associated with start-ups and whether retaining retiring CTG units could delay progress on Alberta’s decarbonization objectives and advocacy for solutions that align with long-term climate targets.
• General support for demand response programs as a more flexible and effective means of managing shortfalls because of faster ramp times and ability to respond, particularly during unexpected EEAs.

The AESO will consider recommendations from stakeholder feedback and has added a supplementary information document for your reference. See summary of that feedback for more information.

The AESO has launched a Request for Information (RFI) process to gather more input from market participants on potential solutions to mitigate supply adequacy risk through strategic reserves. Review the RFI document, submit any questions or other inquiries by Monday, November 18, 2024, at 3:30 p.m. MST and provide your final submission by Thursday, December 12, 2024, at 3:30 p.m. MST by emailing SupplyAdequacyRFI@aeso.ca.

Thank you for your interest and engagement in this topic and we look forward to ongoing discussions and inputs from stakeholders on how best to mitigate the AESO’s concerns related to supply adequacy. Another update will be shared in early 2025 following our review of the RFI submissions.

Background

Over the mid-term, the AESO anticipates limited development of net dispatchable generation as investors seek policy clarity on the design and implementation of the REM, the Transmission Regulation and the Clean Electricity Regulations (CER). Supply adequacy may be challenged if significant CTG capacity retires and limited new dispatchable supply comes online.

Given the supply and demand uncertainties over the next five to eight years, the AESO is contemplating strategic reserves as supply adequacy insurance during those few occasions throughout the year when we are in an EEA and at risk of rotating outages. Strategic reserves would be out-of-market capacity that could include options such as CTG units that exit the market, demand response, and backup supply. Strategic reserves would be designed to maintain the market price signals necessary for investment in the market.

Several U.S. jurisdictions have implemented similar programs or products to ensure sufficient extreme event supply. The AESO will ensure that any strategic reserves options to address supply adequacy will not alter market price signals as support for investment and retirement decisions.