July 2023 Alberta Electricity Newsletter: Market Pathways and Reliability Roadmap

July 31, 2023
Christine Runge & Ketan Lakhani

On June 27, 2023, the AESO held what it called its “Inaugural Stakeholder Symposium” which was an all day event focused on the issues the AESO has been experiencing with reliability.

Mike Law noted material reliability challenges and extreme price volatility as the system moves from supply surplus to supply shortfall intraday and expressed his views that these issues cannot be solved within the current market framework. He also noted issues with connection timelines that flow from increasing timelines to develop transmission paired with decreasing timelines to develop generation and concerns with transmission constraints.

The AESO’s original focus on the path forward will be within the current limitations of its mandate and existing regulations; however, Mike Law also noted that the Transmission Regulation is outdated and that it may be time to revisit the premise that load pays for transmission.

The AESO’s approach is to work with industry to mitigate reliability issues and they have laid out three different time horizons (immediate, mid and longer term with different initiatives in each horizon.

To immediately improve urgent reliability issues, the AESO plans to procure fast frequency response (FFR) and fast net demand response (FNDR), restore the interties to full capacity, explore options to increase the most severe since contingency (MSSC) limit, and develop a MATL back-to-back converter which will allow MATL to operate independently from the BC-AB intertie.

The AESO concluded an FFR study in which two lithium-ion batteries for a total of 30 MW participated. Next year, the AESO intends on procuring additional FFR resources for which battery energy storage systems are suited for, however the size of the current market is 90 MW and the question remains whether the AESO will be able to procure enough FFR to meaningfully restore the intertie.

FNDR is anticipated to be a similar product to FFR with procurement in the two to five year timeframe. The battery resources that may be able to provide FNDR are also expected to be able to provide FFR and contingency reserves, and preliminary indications are that there are not enough battery systems to meaningfully and independently restore the intertie, increase/maintain MSSC and to participate in the contingency reserves market.

AESO has been considering changes to the MSSC and have decided to maintain the limit at 466 MW. The implications are that generators larger than 466 MW must have controls in place to not exceed that limit or limit the physical capacity of the generators. Additionally, transmission wires also have to have controls in place to limit the MW. Large thermal resources can provide much-needed support to a system that is being proliferated by inverter-based technologies, however, if a large thermal resource trips, there can be reliability impacts to the grid without an MSSC limit. The dilemma is akin to a system that is evolving beyond its current market design.

Simultaneously with these immediate reliability actions, the AESO also plans to begin consultation on Market Pathways starting this fall. This consultation is expected to include any market design rule changes in order to address the issues the AESO is currently facing. This will be a holistic review of the energy and ancillary services markets and is expected to follow a format similar to the one used for the capacity market development, with working group membership to be determined later this summer.

As one example, the AESO noted that the long lead time rule likely needs to be revisited as generators have been changing the way they operate and the AESO been experiencing supply adequacy issues where units are offline and unable to turn on to supply the market.  A working group discussion to deal with this issue could include anything from introducing a day ahead market to changing the definition of physical withholding to co-optimization of the energy and ancillary services market.