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Alberta Flooded with Surplus Power

A tightening squeeze by high fuel prices and a regional surplus of generating capacity is pushing Alberta toward adding electricity to its traditional product lines of natural gas and oil as Canada's principal energy exporting jurisdiction.

The pressure showed in 2004 results by one of the province's chief power suppliers -- Edmonton's city-owned Epcor Utilities Inc., which has mushroomed in recent years from a staid century-old civic department into an international-scale generator with a network of gas-, coal- and wind-driven projects from Ontario to Washington state. Only efficiency measures, such as improvements to billing systems and plant reliability, enabled Epcor to maintain its long record as a stalwart income mainstay for Alberta's capital city.

Unlike gas and oil, electricity is trapped in sustained downward price trends in the province. "There is an overbuild of generation in Alberta and the U.S. Pacific Northwest while demand catches up to supply," Epcor told the civic government and residents of Edmonton. "Relatively high natural gas prices and low electricity prices have compressed the 'spark spread' on natural gas-fired generation plants, reducing the periods of time in which they are economical to operate."

One of Epcor's oldest and highest-profile stations, the Rossdale gas-fired plant in a river valley location at the geographical center of the Alberta capital, did not run at all this past winter. The missing heat ordinarily given off by the site erased two generations-old local winter landmarks, a huge steam cloud over the plant's tall stacks and a stretch of open water in the otherwise deeply frozen ice cap on the North Saskatchewan River.

The landmarks will not be coming back any time soon. "Wholesale electricity prices are expected to be lower in 2005 than 2004 levels in Alberta while prices in Ontario and the U.S. Pacific Northwest are expected to rise," Epcor said.

Since 1999, the Alberta grid's capacity jumped 3,300 MW, or 40%, to 11,800 MW, show records kept by the Independent Power Producers Society of Alberta. The province accounted for 40% of total Canadian power station construction since 1999. Maximum generating capacity exceeds the province's estimated 2004 average consumption of 7,000 MW by nearly 70%. At any given time, estimated excess capacity averages 30% or more.

Annual average wholesale power prices in Alberta dropped to about C$53 (US$42) per megawatt hour in 2004 from C$63 ($50) in 2003. Prices in the province peaked in 2001 at an annual average C$71 (US$57).

While the province's Conservative government likes to credit the growth in generating capacity to an aggressive deregulation policy, much of the construction was associated with expansion by other industries. Cogeneration power stations were built in central and northern Alberta as part of a wave of oilsands and petrochemical projects that got underway in the late 1990s.

The wave is far from breaking. A recent survey of the northern oilsands region by the independent producers group counted 15 plans to build more cogeneration sites by 2013. The industrial power plants are invariably constructed with spare capacity for sales into the provincial grid. If all the new ones are built, another 1,343 MW will be added to the system and looking for sales.

The result is a slow but steady drive to increase transmission capacity, with an eye on possibilities of establishing export links into the United States every step of the way. The Alberta Electric System Operator, a provincial planning agency responsible for orderly development of the transmission grid, has identified about 50 projects described as needed as soon as it can find sponsors to build them. The agenda is topped by plans for an expanded "backbone" north-south transmission link between Edmonton and Calgary.

Edmonton, already a main hub for Canada's long-distance oil and gas pipelines, is also expected to evolve into an electricity switching point where northern power supplies meet southbound transmission lines. Export proposals have been an on-again, off-again sidelight to Alberta's oil and gas trade for decades but show signs of at last coming on strong.

Current export ambitions start with an initial, small connection. Known as MATL, short for Montana Alberta Tie Ltd., the first project has set a target of 2007 for completing a C$95-million (US$76-million) 180-mile line for up to 300 MW between Lethbridge in southern Alberta and Great Falls in its namesake northwestern state.

Next in line stands vastly larger Northern Lights Transmission, a proposal being developed by the power side of TransCanada PipeLines Ltd. The plan calls for a power transmission corridor stretching from the oilsands region around Fort McMurray in northeastern Alberta to south-central Washington state.

Northern Lights includes two proposed transmission projects: Celilo, an 1,100-mile connection for 2,000-plus MW to reach the Spokane, WA, area; and Inland, a 1,700-mile line for 3,000-plus MW to points in Montana, Idaho and Nevada. Celilo is forecast to cost US$1.2-$1.4 billion. The price tag on Inland is US$1.6-$2 billion.

The Northern Lights plan calls for power to be collected from generating stations in Montana, Wyoming and possibly other states along the route as well as the lines' originating point at Fort McMurray. TransCanada forecasts that more than 2,000 MW will be available for export from the oilsands region by 2010.

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