CIAC Market Transition Principles and Desired Outcomes

Transcription

1 CIAC Market Transition Principles and Desired Outcomes April 18, 2018

2 From AE presentation, December 2,

3 From AE presentation, December 2,

4 Government of Alberta Desired Outcomes for Electricity System 1. Reliable and resilient system 2. Environmental performance 3. Reasonable cost to consumers 4. Economic development 5. Orderly transition 3

5 1. Reliable and Resilient System Expected unserved energy Variability of reserve margin Compatibility with increased interties Reliable and efficient integration of renewable generation and new technologies Compatibility with managing coal phase-out 4

6 2. Environmental Performance Compatibility with REP objectives and implementation Resiliency of market to environmental policy Compatibility with increased cogeneration, energy efficiency, micro and distributed generation Compatibility with carbon pricing Compatibility with future expansion of renewable energy and new technology 5

7 3. Reasonable Cost to Consumers Reasonable cost of delivered energy Stability of price Fair, efficient and openly competitive Ability to hedge or manage price or cost exposure Compatible with changes to Regulated Rate Option (RRO) Effective and appropriate regulatory oversight Impact on transmission costs Does not fundamentally alter the market 6

8 4. Economic Development & 5. Orderly Transition Economic Development Ability to incorporate social drivers Impact on trade-exposed or key industries Enables economic growth Orderly Transition Minimize transition impact 7

9 Desired End State of Capacity Market Development The desired end state is a stable and transparent capacity market that relies on competitive market forces, and works efficiently with the energy and ancillary service markets, to achieve sufficient investment to maintain supply adequacy and reliability at the lowest cost for consumers, while working effectively within Alberta s unique electricity structure. April 25, 2017 AESO capacity market design stakeholder session 8

10 Key Structural Questions Resource adequacy requirement (How much capacity needs to be procured? Includes demand curve) Cost allocation (How will capacity costs be allocated?) Obligation to procure (Who will buy the capacity? Includes question of cogeneration treatment/self-supply) Procurement timing and frequency (When/how often will capacity be purchased?) Term (How long will the capacity delivery period be?) Eligibility (Who can provide capacity? How much can they provide?) Performance assessments (How do we know that capacity has been provided?) Market mechanics (How will capacity market work?) Capacity market settlement (How will capacity providers be paid?) Inter-operability implications (How will capacity market impact the energy and ancillary services markets?) Governance/role of agencies (How is regulatory oversight applied?) 9

11 Design Criteria The design criteria are meant to document what the capacity market is intended to achieve and high-level measures of success. For ease of discussion, design criteria have been grouped into the categories below: Market Cost and Risk Supply Adequacy and Reliability Flexibility Timely Development 10

12 Proposed Criteria Supply Adequacy and Reliability The capacity market should achieve desired reliability objectives by creating a real and measurable supply adequacy product designed to provide energy production or reduced consumption when needed The capacity market should contribute to the reliable operation of the electricity grid, and implementation should be consistent with, and complementary to, existing measures aimed at ensuring reliability 11

13 Proposed Criteria Market The capacity market should be fair, efficient, and openly competitive The procurement of capacity should employ market-based mechanisms and a competitive market for capacity should be developed A wide variety of technologies should be able to compete to provide capacity provided they are qualified to meet the eligibility criteria Capacity market mechanisms, outcomes and relevant data should be transparent There should be a well-defined product and an effective and efficient price signal 12

14 Proposed Criteria Cost and Risk Investment risks should continue to be largely borne by investors rather than consumer The market structure, which includes the capacity market, energy market and ancillary services, should create conditions such that private investment can be reasonably expected There should be an effective balance between capacity cost and supply adequacy The term of the capacity obligation should be as short as possible, while ensuring supply adequacy objectives are achieved through sufficient investment in new capacity supply The design should consumers to manage the cost of capacity if and where appropriate 13

15 Proposed Criteria Flexibility Unique aspects of Alberta s electricity system should be considered in the design of the capacity market e.g. nature of load/generation, levels of cogeneration, limited interties, large geographic area, etc. The capacity market should be compatible with other components of the electricity framework 14

16 Proposed Criteria Timely Development Market should be targeted to open in 2019 for start of first capacity procurement for delivery of capacity starting in 2021 Changes to the energy and ancillary service markets required to achieve the most efficient steady state electricity market possible may need to be staged to ensure timely initial implementation To the extent a staged implementation of the overall electricity market is pursued, the expected timing and nature of future changes should be provided before opening the first procurement The risks of regulatory delay and need for re-design should be minimized Common practices and lessons learned from other capacity market implementations should be leveraged as much as practicable and applicable Simple and straightforward initial implementation should be a priority 15

17 Discussion Has anything changed that would suggest the need to alter any of the desired outcomes? If so, what and why? Are there new desired outcomes that may not have been contemplated a year ago? Are the proposed design criteria still appropriate? Are any of them no longer relevant? Are there new design criteria that you would consider critical, that may not have been contemplated a year ago? How would you approach trade-offs across the various design criteria? 16

18 Discussion

19 Thank you