A few weeks ago we told you about capacity market design in Alberta, and the debate going on over the length of the delivery period that will apply in the capacity market for new facilities. Yesterday the AESO issued SAM 3.0. It describes the provisional recommendations of the 5 stakeholder working groups struck by the AESO to provide feedback on various capacity market design issues. With respect to the delivery period issue, SAM 3.0 says the following:
The WG [Working Group] recommended that the obligation [a.k.a. delivery] period will be one year for all resource types. A one-year term for all was viewed as the best and lowest-cost option and would be non-discriminatory between asset types, would provide better liquidity in the market and would reduce the risk of over-procurement. There was considerable discussion regarding this key design element and the recommendation was passed with eight votes for and six against. Those who voted against the recommendation preferred a seven-year obligation period for new assets. They were concerned that a one-year obligation period would not be long enough to attract new entrants and it would increase financing costs for new resources, which may result in higher capacity market costs for consumers. (emphasis added)
Interestingly, we did not see anywhere else in SAM 3.0 where a vote on a particular design issue was recorded and reported on by the AESO. This is not the end of this matter. The working group’s recommendation on the length of the delivery period will now be considered by the AESO as it develops and releases its first draft of a comprehensive capacity market design for Alberta early in 2018.
Kent Howie is the head of the Electricity Markets Group at the Calgary, Alberta office of the national law firm Borden Ladner Gervais LLP. He is also the editor of and regular contributor to AlbertaPowerMarket.com. The views expressed in this article are the personal views of the author, and not the views of Borden Ladner Gervais LLP.