In a bid to align with the changing requirements of the grid with the rising share of clean energy sources, the province of Alberta in Canada is navigating policy changes and initiatives to achieve three key objectives of the grid – affordability, reliability and environmental performance. In line with this, the Government of Alberta in October 2023 released a green paper, ‘Transmission Policy Review: Delivering the Electricity of Tomorrow’, while outlining the province’s analysis of current transmission policies and solicited feedback on key policy issues. These included the zero-congestion policy, cost allocation for transmission wires and ancillary services, and intertie development. The document proposed discrete changes to transmission regulation, emphasising the government’s objective to amend transmission policies to support its grid objectives.

The paper highlighted that Alberta’s Transmission Regulation, which was established in 2004 under the Electric Utilities Act and within the purview of the Ministry of Affordability and Utilities, has not been significantly updated since its inception, while the electricity industry has undergone a fundamental transformation, and evolution is expected to continue over the next decade. In addition to the utility-scale development of new renewable energy sources (RES), deployment of distribution-connected generation and storage has also grown rapidly in recent decades, changing the relationship between the grid and its users. Many of these new distributed energy resources (DERs) allow for the creation of “prosumers”, entities that both consume and produce electricity. This is in stark contrast to the previous generation landscape in Alberta under which the Transmission Regulation was first contemplated and featured fewer highly centralised thermal generation units serving large load centres from afar. Further, the development of new generation sources is now outpacing the development of transmission, leading to new challenges related to interconnection not previously considered.

As a result, many of the foundational policies in the Transmission Regulation, which were created at a time when the landscape of both generation sources and load distribution were markedly different, may not optimally serve the present and future requirements of the Alberta grid. For these reasons, a comprehensive review of Alberta’s transmission policies is required to ensure the transmission system can continue to effectively deliver affordable, reliable and clean electricity to Albertans.

Electricity industry structure

Transmission is a designated monopoly service in Alberta, developed and operated by companies known as Transmission Facility Owners (TFOs). The primary TFOs in Alberta are AltaLink Management Limited, ATCO Electric Limited, ENMAX Power Corporation and EPCOR Distribution and Transmission Inc., which all serve distinct regions of the province. The Alberta Electric System Operator (AESO), a not-for-profit government agency, carries out long-term planning to identify transmission developments required to ensure that generators can transmit the power they generate and to connect load customers to the grid, either directly or indirectly through further distribution networks.

The electric grid in Alberta includes approximately 26,000 km of transmission lines and connects over 400 generating units to the wholesale market. The costs associated with building a transmission line are submitted for approval to the Alberta Utilities Commission (AUC), a quasi-judicial agency that oversees the electricity system. These costs are amortised over the life of the transmission assets and paid almost entirely by electricity consumers and do not vary significantly based on where those consumers live.

Figure 1: Map of Alberta’s transmission system

Source: Government of Alberta

Highlights of the green paper

The Government of Alberta has been engaged in a range of transmission policies since 2021 and has received valuable stakeholder feedback that has informed its current direction on several policies. For the following topics, the Ministry of Affordability and Utilities is aiming to indicate the status of its policy analysis (where changes are expected), though the status quo remains an option until it finalises them.

Generating unit owner’s contribution (GUOC): This is a one-time financial contribution made by the generators to the AESO at the time of connection, which is refunded over time based on generator size, location and performance. The objective of GUOC is to incentivise generators to locate their generation resources closer to existing transmission capacity. Currently, GUOC is capped in the exiting Transmission Regulations at CAD50,000 per MW and is required to be refunded over a 10-year period when the unit begins to generate electricity, and if the unit meets performance criteria determined by the AESO. This has not changed in nearly two decades, eroding its impact.

Analysis: Amendments to Section 29 of the Transmission Regulation and others related to GUOC may be explored to ensure that GUOC provides a sufficient locational price signal to drive efficient use of existing transmission capacity, in an effort to mitigate against rising transmission costs for consumers. These amendments could include formally acknowledging that GUOC should be assessed based on proximity to existing transmission rather than load, removing the legislated cap of CAD50,000/MW, and adjusting the 10-year refundability period, to provide the AESO with the ability to determine the necessary values for GUOC to optimise the locational signal.

Line loss calculation: Since 2003, generators have been responsible for the cost of electricity that is lost as heat during its transmission along a line. The AESO recovers the cost of transmission losses from generating units, export and import paths, and other services identified by the AESO, by establishing a percentage loss factor for each generating facility or service that reflects its location and contribution to transmission losses. Similar to GUOC, this policy was intended to serve as an incentive for generators to locate in areas close to load, thereby reducing overall line losses. However, the cost associated with line losses has not been high enough to incentivise generators to consider transmission impacts in choosing their location. Concerns have also been raised about annual variability of loss factors, and complexities involved in its calculations.

Analysis: The government may consider alternative approaches to the current line loss methodology, such as a system-wide average approach (which would apply similarly to each generator regardless of their location and operating profile); and regional average approach (which would apply to all generators within a given region regardless of their specific location and operating profile), to increase certainty and ease the administrative burden for generators and the AESO. However, both approaches have their limitations. The system-wide average approach would result in higher payments for some generators, while the regional average approach would not address the issue of line loss charges being too small and unpredictable to act as a meaningful locational signal. Other suggestions, such as assessing line losses every month instead of on an hourly basis, were considered but did not have the support of the majority of stakeholders.

Non-wires solutions: Non-wires solutions are an electricity grid investment or project that uses non-traditional transmission and distribution solutions, such as DERs, energy storage and energy efficiency measures, to delay or avoid the need for specific wire upgrades. The existing Transmission Regulation includes tight boundaries on the use of non-wires solutions to provide confidence to the investors that non-wires solutions will not distort market outcomes. It also allows AESO to propose a non-wires solution to relieve congestion on the transmission system. However, as the energy market matures, a range of new technologies that can defer the need for additional wires are becoming more prominent. This broadens the opportunities to use non-wire solutions as a mechanism to manage transmission costs.

Analysis: The government plans to expand the use of non-wires solutions. Two options are being considered – procuring non-wires solutions as a service or as a regulated asset. As a service, the AESO would competitively procure the transmission attributes of non-wires solutions from market participants operating in the market via short-term contracts, which will give the AESO the ability to assess the need for these contracts regularly. When procured as regulated assets, the AESO would file a Need Identification Document (NID) with the AUC and procure the non-wires solutions from TFOs. However, the industry stakeholders differed on who should be allowed to own them, generators or TFOs. The ministry is still working on figuring out the solution.

Broader policy considerations

The Ministry of Affordability and Utilities has also identified the following transmission policy areas that have not recently received extensive or detailed stakeholder feedback. It does not have a proposed direction on the policy areas listed below and is seeking stakeholder feedback to inform its path forward under the recently published paper.

  1. Zero congestion: This mandate of the existing transmission policy requires AESO to make sure that the transmission network is operating at its maximum capacity to provide maximum benefits to the customers. However, lately, the costs associated with maintaining a zero-congestion system have started to increase with the coming up of RES projects and the planned phase-out of existing coal and gas projects. To verify that the benefits of maintaining the zero-congestion policy still outweigh the costs, the ministry is examining alternative transmission planning frameworks adopted by other jurisdictions, like Texas and New York, such as optimal transmission planning and increasing the level of allowable congestion. Under the former, new transmission investments would only be triggered when the additional benefits from increased transmission expansion outweigh their additional costs, or transmission investments are required to satisfy reliability requirements. In the case of the second method, transmission projects would only be triggered when the risk of congestion is above the new adjusted percentage threshold.
  2. Cost allocation: This includes policies related to infrastructure-related costs (wires) and ancillary services (which maintain the required level of flexibility, frequency and voltage).
  3. Wires: The existing load-based wire cost allocation methodology does not fit in with the current scenario where transmission projects are being proposed or developed based on generation projects’ requirements, rather than to meet the demand of a particular region. Considering this changing scenario, the ministry is examining alternative policies that could offer Albertans a more appropriate and efficient allocation of wires costs. These include the creation of transmission rights (generators can buy transmission rights); alternative cost-sharing framework (this would split wires costs between load and generation, shifting more costs to generators); redefining some costs incurred during the connection process [redefining costs as interconnection costs via amendments to the independent system operator (ISO) rules or providing some clarity on what constitutes an interconnection cost within the Transmission Regulation]. As per the stakeholders, generators may feel more entitled to the right to use the line if they are accountable for the cost of the line.
  4. Ancillary services: These are the additional electricity services that the AESO procures outside of the power pool to ensure that the system remains reliable. They are added to other transmission costs and assigned to load customers as specified in Section 48 of the Transmission Regulation. Over the past years, the cost of ancillary services has increased with the rising prices of the wholesale market. From 2020 to 2022, the annual cost of ancillary services has increased from CAD150 million to CAD500 million. In 2023, it accounted for about 20 per cent of total transmission cost. AESO has indicated in its Reliability Requirements Roadmap that there is a need for more ancillary services to maintain overall system reliability with the rising share of intermittent generation projects and the shutting down of coal-based synchronised generators. This could increase the cost further. The government could require AESO and AUC to take into account the principle of cost causation as a base for assigning these costs and clarify that they may be assigned to generators, imports, exports and/or loads.
  5. Interties: Electricity transmission connections to other jurisdictions are commonly referred to as interties, which provide the flexibility of power exchange as an immediate response to generator outages and intermittent generation. Alberta currently has three interties that facilitate electricity imports and exports, one each with British Columbia, Montana and Saskatchewan. The state is a net importer of electricity. These interties are becoming crucial as intermittent generation sources are increasing. Given the important role interties will play in Alberta’s ability to maintain reliability and affordability with a changing generation mix, analysis of current policies is required to determine whether amendments are needed to achieve the desired level of intertie development by the province. Towards this, amendments to the Transmission Regulation may be explored to formally outline the government’s intent to develop additional interties with its neighbouring provincial and state jurisdictions and clarify how these developments may fit into the broader planning of the Alberta interconnected electricity system. This could include measures such as payment in lieu of taxes for imports to balance additional use of interties and ensure a level playing field for all the parties involved. Section 27 of the Transmission Regulation currently states that the cost of planning, designing, constructing, operating and interconnecting an intertie must be paid by the person proposing the intertie and other persons to the extent that they directly benefit from the intertie. Ensuring a level playing field may trigger a re-evaluation of this section to ensure that importers are recognised as a beneficiary of intertie expansion.

 Conclusion

The electricity industry is undergoing a rapid evolution, both in Alberta and worldwide, as a result of new technologies and decrease in their costs, the growing imperative to reduce emissions, and societal shifts towards electrification. In light of these changes, Alberta is undertaking a comprehensive analysis of the province’s transmission policies to ensure they are well suited to meet the needs of the electricity system of today and are prepared for the changes coming tomorrow. The green paper has analysed several major transmission policies that have been fundamental to the design of Alberta’s electricity system for nearly 20 years and have been successful in delivering cost-effective and reliable electricity to consumers. However, those policies may no longer be optimal for the new supply mix and needs of users. The government is currently working on the stakeholders’ comments received on the paper, to determine the ideal path of action for Alberta’s transmission policies.