Alberta's restructured energy market bill comes amid development uncertainty, high power prices

Recently introduced legislation in Alberta would restructure the Canadian province's energy market amid a costly energy transition, but some elements of the market design are still in motion and investors need more clarity to boost confidence, a renewable energy industry participant said.

Spearheaded by Minister of Affordability and Utilities Nathan Neudorf, Alberta's Bill 52 would bring sweeping changes to the province's energy market, including new cost management regulations and a day-ahead reliability market. The new policies would maximize the use of existing transmission lines and only build new power plants in "optimal locations" to protect ratepayers from higher costs.

Renewable stakeholders have raised concerns over the proposed changes, including the Canadian Renewable Energy Association which said the changes are "punitive and unfairly target the renewable energy sector."

The restructured energy market's design originally included a day-ahead commitment market and a day-ahead energy scheduling market, but these markets were removed from the design in response to the industry feedback, according to the Alberta Electric System Operator.

The day-ahead marketwas "essentially a penalty for renewable generators," Business Renewables Centre-Canada Director Jorden Dye said in an April 15 interview, so taking parts of it off the table is "encouraging."

However, Dye said a lack of transparency is driving uncertainty in the industry. Various "major" changes to the design, including a recent backpedaling on the inclusion of locational marginal pricing, are making renewable investors less confident to move forward with new projects, he said.

In 2024, BRC-Canada tracked just one public corporate renewable power purchase agreement. Overall, 2024 saw 52 MW added from this type of agreement compared with more than 1 GW added in 2023.

"We're talking about restructuring the energy market," Dye said. "There's the short-term implications on investment, and then there's a long term structure... It's hard to comment on what is good and bad when we don't even know what is within the ballpark."

When announcing the legislation, Neudorf cited Albertans' "frustration with rising transmission costs." The updated design "takes into account some of those concerns raised by stakeholders," he added.

The bill also includes a new "cost-causation principle" which would give regulators more authority to evaluate new energy project developments and distribute the costs "instead of just indiscriminate rate payers paying for whatever development comes to the province," he said.

"If the population is growing or industry is growing, then obviously there's a need for additional generation, and they can pay their share of that," he said. "If it's going into an area where that isn't the driving factor, then development can still proceed, but the development will have to carry a larger portion of that."

The Alberta Utilities Commission will determine where the proportion of costs is allocated, Neudorf added.

The market restructuring is slated to take effect in 2027.

Power prices, demand

The restructured energy market is still in the stakeholder and design stage and has not been finalized but is "focused on maintaining reliability through the energy transition and intended to support any required supply growth," the Alberta Electric System Operator said April 14. AESO's current long-term outlook published in May 2024 projects an average rate of 1.2% electricity demand growth annually until 2043.

AESO cited oil sands production and new load connection projects as drivers of near-term demand, while pointing to electrification and hydrogen as fueling longer-term demand growth. The province expects to remain a winter-peaking grid due to "extreme temperatures and additional load requirements from transportation and building electrification."

"While load growth is robust through the forecast period, a doubling or tripling of Alberta Internal Load is not expected; however, past the forecast period, an acceleration of electrification trends may lead to a doubling of load," AESO spokesperson Diane Kossman said April 14.

Average monthly power selling prices over 5 MW in Alberta were 61% above 2014 levels in February, according to April 15 Statistics Canada data. This average is higher than the 2024 annual average of 46% above 2014 levels, but represents a year-over-year decrease from 80% above 2014 levels in February 2024.

The AESO February 2025 average on-peak power price was C$64.05/MWh, a 45% increase year over year from C$92.94/MWh in February 2024.

The province's power prices are recovering from highs in 2022 and 2023 caused by coal retirements.

Annual average power prices in Alberta peaked in 2022 at C$162.46/MWh but have since fallen to C$63/MWh on average in 2024, according to Commodity Insights data. New gas capacity from coal-to-gas conversions in Alberta alongside new wind and solar will bolster supply security and provide a "sufficient reserve" to the province, pressuring prices lower, S&P Global Commodity Insights analysts say.