Increasing Micro-Generation in Alberta: A Step in the Right Direction

Alberta brought legislation into force in 2009 to encourage micro-generation in the Province. The Micro-Generation Regulation (the “Regulation”) encourages Alberta customers to use renewable or alternative sources of energy to generate their own electricity by (i) reducing the administrative burden and interconnection costs to those customers; and (ii) permitting those customers to be compensated through “net billing” for any surplus electricity they generate and deliver to the electricity grid.

Micro-generation is akin to distributed generation, but a micro-generation project has some tests that must be met before it can use the advantages provided in the Regulation for micro-generation. Those advantages include the obligation of an owner of the distribution system (“DFO”) to install, at no charge to the customer, a net meter.  The net meter is bi-directional, and is either a cumulative or interval meter depending on the size of the micro-generation project.  Larger micro-generation projects (≥ 150 kW) get an interval meter – something that is important in Alberta because it allows them to be paid the higher peak power pool prices for electricity delivered to the grid in the peak periods. Smaller micro-generation projects on the other hand are paid their retailer’s retail energy rate (e.g. the Regulated Rate Option rate) for all of the electricity they generate and deliver to the grid. If a project meets the tests in the Regulation, the DFO not only installs a meter, but also pays all of the customer’s costs of interconnection and load settlement. Those costs are included in the DFO’s tariff and passed on to all of the DFO’s customers (i.e. they become system costs).

There are currently about 1850 micro-generation sites in Alberta with generation capacity that approaches 17.5 MW. The vast majority of those utilize roof top solar.  However, the number, type and size of micro-generation projects in Alberta are expected to shift as a result of the announcement of two major changes to the Regulation made in December of 2016.  The changes create greater flexibility and capacity for customers to generate and use their own electricity.

The first change relates to the maximum permitted generation capacity of a project, which increased from 1 MW to 5 MW. The second change permits the aggregation of sites being serviced by the micro-generation project. A micro-generation project may now service two or more sites that are located on property that is owned or leased by the same customer and connected by a single feeder line owned by the same DFO.  In other words, there is now flexibility to construct micro-generation projects that will service adjacent sites owned or leased by the same customer.

A 5 MW micro-generation project can now be constructed by a customer to provide electricity to all of the customer’s buildings located around the project. The micro-generation project must be sized to the customer’s service, but surplus electricity at any time can be delivered to the grid resulting in revenues for the customer.  Universities, hospitals, and farms are examples of organizations that may be able to take advantage of these changes. Alberta’s municipalities also applauded the changes, which now provide municipalities with more options to install solar PV and other renewable energy projects for their adjacent buildings.

The changes are not enough to set off a micro-generation boom given Alberta’s current low power pool prices that have averaged $24/MWh so far in 2017 and the fact that micro-generators still do not receive any price premium. Plus, the Province has not yet come through with any of the additional financial incentives (read subsidies) that have been rumoured to be on the way. However, the December changes are a step in the right direction and will provide for some scalability of projects, including the ability for existing micro-generating customers to increase the capacity of their current projects. It may also help to encourage small-scale community generation, something that has been identified as a priority by the Province. There is a strong appetite for micro-generation in Alberta. Accordingly, we expect the historical growth trend for micro-generation in Alberta (20-25% annual increase) to continue following these two changes.

Authors: Kent D. Howie and Steven Bodi

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