Farewell Capacity Market: Alberta to remain an Energy-Only Market

On July 24, 2019, the Government of Alberta announced it will not proceed with implementation of a capacity electricity market. 

This announcement is the result of a 90 day review by Alberta’s new United Conservative (UCP) government and its campaign promise to determine which market-based system is best for Alberta.  In 2016, Alberta’s previous government announced the province would transition to a capacity market, which would have been operational in 2021.

The decision to abandon the capacity market comes on the eve of a pending Alberta Utilities Commission decision with respect to the application by the Alberta Electric System Operator (AESO) for approval of the first set of provisional market rules essential for the implementation and operation of the Alberta capacity market.  The first capacity auction was scheduled to occur in the fall of 2019.

In an energy-only design, electricity is generated, sold and bought on the wholesale electricity market. Alberta has been operating an energy-only market for electricity since 2000 and recent highlights include:

  • Since the energy-only market opened, generators have invested approximately $20 billion of supply in Alberta.
  • According to the AESO, 201 market participants in the Alberta wholesale electricity market transacted approximately $6.6 billion of energy in 2018.
  • In 2018, the annual average pool price for wholesale electricity increased 127 per cent from its previous-year value to $50.35/MWh.  The average natural gas price fell 30 per cent, averaging $1.44/GJ.  The average spark spread based on a 7.5 GJ/MWh heat rate increased to $39.68/MWh from its previous-year value of $6.82/MWh.

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