Demand Management in Canada’s Wild West

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We’re living in crazy times, but it’s not just COVID-19 that is upending things – the recent record breaking heat wave that swept across many parts of Canada in July has also left its mark.

This article takes a look at some serious variability in energy pricing in Alberta over July and August this summer. We look at what exactly caused these price spikes and how consumers can take advantage of the swings to reduce their energy bills.

In Alberta, the sweltering heat (alongside several other factors) overloaded the provincial grid, causing electricity prices to go absolutely nuts. Specifically, this past July both the average daily pool price and the System Marginal Price (SMP) both saw drastic swings.

Let’s start by looking at the average daily pool price, which on most days falls between $20 and $50 per megawatt. Last year, the daily average for July was $40.34, compared to $52.24 for July 2020. This difference is further highlighted if we only look at the On Peak average for both months, which comes in at $43.85 in July 2019, and $68.62 in 2020.

Naturally, many factors play a role in determining usage and pricing in Alberta during any given month, but we can clearly see that the influence of successive high On Peak averages led to a sizable jump in prices in July 2020.

Triple digit prices due to Peaks occurred in both July 2020 and July 2019, but what made this July different was not only the scale of the Peak pricing in question, but also the duration, as six days of influential pricing occurred on July 22nd ($103.57MW/h), and everyday between July 27th and 31st ($147.2, $181.24, $219.51, $236.75, and $83.87, respectively).

What exactly happened in July?

What’s crazier is that these prices are the daily averages; numbers that are themselves dwarfed by some of the shorter term (hourly) spikes in electricity prices during July.

For example, on July 22nd, a combination of warm temperatures, low wind generation, and a reduced coal power station fleet (due to downtime, upgrading etc.) saw the System Marginal Price (SMP) hit $776.79 per megawatt for more than an hour, with the SMP continuing to remain in the triple digits between 3pm and 8pm.

Navigating the electricity market may seem like a headache, but the savings potential is nothing to sniff at.

The persistent heatwave continued to play havoc with Alberta’s prices between July 27th and 31st, increasing demand (especially from HVAC and refrigeration systems) to over 10,123MW, with daily average internal load (AIL) peaking at 10,385MW on July 29th.

The inability of Alberta to fully utilize its coal powered generating stations also contributed to the drastic price increases, as the 420MW normally generated by Keephills 1 was not available. Consequently, reduced generation and high heat led the SPM to reach $785 per megawatt on July 27th, with prices remaining above $700 for over three hours.

As if that wasn’t bad enough, on July 29th ongoing high temperatures, low wind speeds, and reduced output from Sheerness 1 and 2 (nameplate capacity 780MW) led to 9 hours of triple digit prices, setting the peak load for the month.

The following day saw the highest price day for the entire month, with a further nine hours of triple digit prices: the SMP hit $750. While July 31st offered a respite (due to the return of the 450MW Keephills 3 generator) in comparison to the rest of the week, unfavorable conditions continued to persist, with the SMP hitting $668.

How you could have saved thousands

July 2020 may have been a perfect storm of circumstances cooperating to undermine Alberta’s grid; however, don’t think that it was a ‘100 year storm’ type of scenario, since the numbers for August haven’t been much better. Four days in August saw Alberta’s pool price reach eye watering prices.

Specifically, the August 16th – 19th window saw hourly prices reach; $565.30 (4pm, Aug.16th), $543.53 (4pm, Aug.17th), and $424.43 (4pm, Aug. 18th), with the highest price – $716.19 – occurring at 6pm on August 19th.

Both the July and August data also demonstrate the need for Alberta to increase grid resilience and flexibility. That’s a tall order, and in the meantime, customers are going to keep having to pay the price: or are they? Navigating the electricity market may seem like a headache, but the savings potential is nothing to sniff at.

Specifically, electricity customers could have seen substantial savings in July if they opted out of supply contracts and enrolled in the default supply option offered by utilities, namely a pool price based, real-time option.

A customer who had so would have managed to compensate for the price hikes during the Peak hours mentioned above (including periods on July 15th) which totaled 28 hours – of which the highest 7 ultimately influenced Peak pricing. To put it plainly, customers could have saved $17,370 per MWh, just by avoiding the 7 hours mentioned above.

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