WHY ARE POWER PRICES SO DARN HIGH? in Alberta

[wade]

I googled heat pumps also.. It seems they are the same as green energy. They suggest a backup system if you live in Alberta.

[chuckChuck]

Best to have a ground source heat pump as they pull heat out of the ground and can work to minus 40. I have 2 friends who installed them because gas was too expensive to bring into their yards. Apparently some air source heat pumps can work to minus 30 as the technology has improved. They often have backup electric for the really cold weather. Someone should tell Curly Moe because the dumbass said heat heat pumps dont work in western Canada! What he meant to say was he thinks we should only burn natural gas to support his oil company friends!

[chuckChuck]

Solar and wind in Alberta have reduced generation costs because they are some of the lowest cost new generation sources that displace gas generation. The IEA said as much in the EU as well. Gas plants in Alberta can ramp up and down as needed depending on demand. Wind and solar are supplemental sources.

The primary cause of higher electricity costs in Alberta is a deregulated market with companies charging what the market will bare in non competitive markets.

"Why the sudden jump? The end of Alberta’s 20 year PPAs (Power Purchase Arrangements)
left control of more power plants in the hands of fewer power companies. This increase in
market concentration, coupled with a generally tighter market overall, means firms can more
easily exercise market power and profitably raise their offer prices."

Its explained by the economists from the U of C. I posted it again so you can read it.

[chuckChuck]

WHY ARE POWER PRICES SO DARN HIGH?
Blake Shaffer, David Brown & Andrew Eckert
It’s a question we keep hearing from Albertans. In this Policy Trends, we leverage new
research to break down what’s behind Alberta’s rising power prices.
In 2021, Alberta’s wholesale power price more than doubled, rising from roughly $48 per
MWh (5 cents per kWh) in 2020 to over $105. For many Albertans, nearly half of whom whoare on a floating rate tied to the wholesale market, this led to shockingly high bills.
Some have pointed to transmission as the reason for high power bills. And while it’s true
delivery fees have risen substantially over the past 10 years, now making up a large part of a
typical bill, they’re not the reason for the large and sudden jump in prices. Others point to
the federal carbon tax, an oft-used fodder for complaints. But the federal carbon tax doesn’t
even apply to the electricity sector. The provincial large emitter program, TIER, does apply
but it turns out the change from 2020 to 2021 only had a small effect on prices.
So to properly answer what’s driving power prices we constructed a model, or what-if
scenario, based on every available power plant offering power into the market at their
marginal cost. It tells us where prices would be in a (fictional) perfectly competitive world.
We can then see what happens when we change certain inputs. Here’s what we find:
• First, the mix of power plants changed in 2021, with many coal plants converting to natural
gas. Also, the hourly shape of load differs between the years. Both factors combine to raise
our “benchmark price” by about $2.50/MWh (0.3c/kWh).
• Second, demand was nearly 3% higher in 2021 versus the year before. Higher demand
means more costly power plants are needed to keep the lights on. This adds $10/MWh
(1c/kWh) to our competitive benchmark.
• Third, natural gas prices—a key input to most power plants in Alberta—rose by over 60%.
Higher gas prices mean higher costs to generate power. This adds $7/MWh (0.7c/kWh).
• Next, the provincial “TIER” carbon price increased by $10/tonne. Despite the attention,
this adds only a small amount, roughly $2.50/MWh (0.3c/kWh).
All told, these changes to the cost to generate power account for $22 of the $57/MWh price
increase. So what’s behind the other $35? The answer lies in how Alberta’s power market
differs from much of the rest of Canada. In other provinces, regulated utilities pass on all
their costs to consumers through regulated rates. Whereas in Alberta, generators compete
in an open market, with no guarantee the revenue they earn will be sufficient to recoup their
fixed costs of investing in power plants. To do so, they need to earn revenues over and above
their marginal costs of generating power.
In 2020, the difference between the realized market price and what we get from our model
with all firms offering at their marginal cost—what we call the “market markup”—was only
$9/MWh. In 2021, this markup nearly quintupled: to $44/MWh—a change of $35/MWh.
Why the sudden jump? The end of Alberta’s 20 year PPAs (Power Purchase Arrangements)
left control of more power plants in the hands of fewer power companies. This increase in
market concentration, coupled with a generally tighter market overall, means firms can more
easily exercise market power and profitably raise their offer prices.
So, what does this mean for Alberta’s power market? On this, views will differ. Some will
respond with calls to re-regulate. Others will note that occasional periods of high prices are
needed for generators to recoup their fixed costs. After a period of low prices for the past 6
years, firms may be seizing the opportunity to earn a return on their investments. Over time,
it is expected that market power will get disciplined by new entry. And we’re seeing this, with
thousands of megawatts currently in the development queue, but it will take time. In our
view, the end of the PPAs and the resulting pop in prices raises important questions about
the degree of market concentration and the potential benefits of forward contracting.
In the meantime, consumers wishing to be removed from the cut and thrust of wholesale
power markets would do well considering a fixed rate for their power. Even with the runup in
prices, fixed rates look attractive relative to floating rates for at least the next year

[wade]

Would you buy a piece of cheap operating equipment if you need a second reliable one in the shed for a backup ?

[AlbertaFarmer5]

Perhaps You missed my question. Should Alberta follow Sweden's model to tackle high electricity prices?
Instead of downloading the high cost of the lowest cost renewables onto the consumers, Sweden is making the generators themselves pay for the cost of intermittency.
As an avowed socialist and NDP, you should be in favor of this since it supports the consumer at the expense of big energy companies.

[furrowtickler]

Seems to be very conflicting reports on what’s going on in the “renewable” energy sector …

[furrowtickler]

Strong opinions on both sides

[fjlip]

"Should Alberta follow Sweden's model to tackle high electricity prices?
Instead of downloading the high cost of the lowest cost renewables onto the consumers, Sweden is making the generators themselves pay for the cost of intermittency.
As an avowed socialist and NDP, you should be in favor of this since it supports the consumer at the expense of big energy companies."

Answer the question.

[Hamloc]

Solar and wind in Alberta have reduced generation costs because they are some of the lowest cost new generation sources that displace gas generation. The IEA said as much in the EU as well. Gas plants in Alberta can ramp up and down as needed depending on demand. Wind and solar are supplemental sources.

The primary cause of higher electricity costs in Alberta is a deregulated market with companies charging what the market will bare in non competitive markets.

"Why the sudden jump? The end of Alberta’s 20 year PPAs (Power Purchase Arrangements)
left control of more power plants in the hands of fewer power companies. This increase in
market concentration, coupled with a generally tighter market overall, means firms can more
easily exercise market power and profitably raise their offer prices."

Its explained by the economists from the U of C. I posted it again so you can read it.

Chuck2 I quoted my October power bill above. If you took the time to read it(which I doubt) you would see transmission and distribution are by far the highest part of my cost. Nothing to do with generation. In the graph I posted, solar is the most expensive source of electricity, wind the cheapest. Quit telling us how solar is so cheap.