The Alberta Electric System Operator (AESO) released its Net-Zero Emissions Pathways Report. We provided an analysis of the report to our clients and would like to share a summary overview with you.
The report is a 74-page analysis which concludes the broad electricity market framework can accommodate net-zero in 2035 while maintaining reliability, but highlights significant additional cost impacts from all net-zero scenarios. It is principally intended to inform the usual AESO processes of system forecasting (long-term outlooks, LTOs) and planning (long-term transmission plans, LTPs).
Despite this, the analysis includes “high-level” cost estimates for generation capital and operating costs, as well as transmission costs, for the following three different net-zero scenarios (all of which exclude cogeneration emissions and all of which have residual physical emissions from legacy gas generation that will need to be offset to reach net-zero):
- Dispatchable Dominant: predominantly thermal generation with post-combustion Carbon Capture and Sequestration (CCS) and blue hydrogen, with 4.8 Mt residual physical emissions;
- First Mover Advantage: predominantly renewable energy with blue hydrogen simple cycle generation, with 4.3 Mt residual physical emissions and the lowest estimated costs; and
- Renewables and Storage Rush: predominantly renewable energy with diverse storage compliment, with 3.8 Mt residual physical emissions and the highest estimated costs.
Prairie Sky has a number of concerns and questions about the analysis that it has shared with clients to discuss over coming days and weeks. However, the AESO reports the existing market structure will attain resource adequacy, though with some risks, operational challenges (such as ramping, inertia, frequency response and system fault response), and the need for increased demand response and flexibility to avoid supply shortfalls in some hours under all net-zero scenarios.
The AESO will feed this analysis into additional work through the end of 2023 and into the 2023 LTO and 2024 LTP, while the AESO also considers what reliability services and “other market initiatives” are needed to support reliability while maintaining the energy-only market structure.
At the same time, Alberta’s Ministry of Energy has initiated a competitive procurement for their own analysis to analyze “whether federal electricity-related policies are appropriate for Alberta’s deregulated electricity market” and to serve “as a check on the parallel work that Alberta Electric System Operator (AESO) is conducting.” It remains unclear what gaps or inadequacies the government seeks to fill through an additional analysis after the AESO’s report has been released.
To discuss our analysis or for more contact information, please contact:
Jeff Sterzuk – President
Ben Thibault – Senior Strategy Advisor
Richard Truscott- Vice-President
To learn more about Prairie Sky Strategy, please visit our website.