Brian Zinchuk is editor and owner of Pipeline Online
This screen capture from the Alberta Electric System Operator web page shows six hours where the pool price was zero, as seen in the white caption window. AESO
The problem with no one making money is that no one is making money
Imagine, if you will, a Boxing Day sale where everything was free for everyone across every store at the same time, for several hours.
And imagine if in early morning hours of Dec. 26, Best Buy, Staples, Walmart, and indeed every single store in the entire economy got paid precisely zero dollars for their wares for several hours that morning.
Preposterous, you say!
Indeed, it did happen, in Alberta’s free-wheeling unregulated electrical market. The pool price, as recorded by the Alberta Electric System Operator (AESO) was $0.00 per megawatt at 4-7 a.m., and from 11 a.m. until noon.
And as a pool price, that means unless there’s some other contract going, that’s the price all generators get paid.
I might not have an MBA, but I’m fairly certain no business model in the world can survive getting paid nothing at all for their product for terribly long. If McDonalds, Burger King and Tim Horton’s all gave away their breakfasts on Dec. 26 to all comers, they couldn’t do it for long before someone would realize this is idiocy and shut the doors.
The problem with no one making money is that no one is making money. And that’s what you get when the price goes to zero. In hourly reporting that day, six hours showed zero dollars for the pool price.
So what was happening during those wee hours in the morning, as the Boxing Day madness shoppers were preparing to queue in line for their flat screen TVs? It turns out it was windy in Alberta – quite windy, in fact.
Lots of Alberta wind is great, right? Photo by Brian Zinchuk
X bot account @ReliableAB, which logs hourly reports of the AESO minute-by-minute reporting of the grid showed that wind generation was just a hummin’. For several weeks, Alberta wind power has been been frequently pumping out high numbers, often in excess of 70 per cent of its nameplate capacity. One would think this would be a great thing, right? It’s finally doing what it’s supposed to do.
At 4:38 a.m., @ReliableAB reported Alberta’s now 45 wind farms were putting out 3,508 megawatts of the installed capacity of 4,481 megawatts while the pool price was zero. This was confirmed from the AESO website.
At this moment 63.7% of Alberta's electricity is being produced by fossil fuels. Wind is at 78.3% of capacity and producing 33.0% of total generation, while solar is at 0.0% of capacity and producing 0.00% of total generation. At the same time we are exporting 995 MW pic.twitter.com/SRgUb4Ytj4
— Reliable AB Energy (@ReliableAB) December 26, 2023
At that point, wind was generating a full 33 per cent of total generation, which again, sounds like good news, even great news.
It was during one of the deadest periods of economic activity in the whole year, the night after Christmas. Demand in Alberta wasn’t very high, with an internal load of 9,632 megawatts. And the lack of demand happened to coincide with lots of surplus power being dumped onto the grid.
(As it was still dark, solar wasn’t a factor.)
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What to do? How about sell as much as you can?
And that’s what happened. Alberta was pumping out 995 megawatts of power exports to its neighbours, 967 megawatts to BC, 26 to Saskatchewan, and two megawatts to Montana. That probably helped out BC a bit, allowing it to retain a bit more water in its dams and use the extremely cheap power from across the border. This is an important consideration not just for the price, but that BC isn’t exactly swimming in excess water for its hydro right now.
This situation is also the converse of what I’ve been reporting on over almost precisely 24 months, the frequent collapse of wind power generation in Alberta. Almost every time that has happened, the pool price shoots up, often hitting $700, $800, $900 or even the theoretical maximum of $999.99 per megawatt hour. If the maximum was $2,000, I’m willing to bet it would have hit those heights, too. In Texas, they hit ungodly high numbers when power is desperately short. And the integral under that graph – what consumers get on their bill – is horrendous.
So here we have renewable, “green” power in surplus, driving prices down for everyone, and so much so that it can benefit the neighbours, too.
But therein is the fundamental problem. No one, not Best Buy, McDonalds or Capital Power can produce product for nothing, and definitely not for extended periods. There is a cost to generating power, be it capital or fuel or operating costs. Nor can they sell their products, be it flat screen TVs, hamburgers or power for next to nothing, either. The entire economic model will collapse, and then what? Who will provide the power then?
When I wrote my first story on Alberta wind power on Dec. 28, 2021, the province had 2,269 megawatts on nameplate wind generation capacity. It’s now double that, at 4,481 megawatts, a level where big swings in wind power production have a huge impact. And Alberta’s last coal plant will switch to natural gas in a few months.
And there’s more wind coming. Oct. 24, the Calgary Herald noted, “More than 3,500 megawatts of renewable power generation projects are now under construction in Alberta.
“By the end of August, the AESO received 74 wind and solar project applications after the moratorium was announced, (Premier Danielle) Smith noted.”
What’s going to happen when all that comes online, when Alberta will have around 9,600 megawatts of wind and solar, almost equal to daily demand? Will the grid be flooded with power so cheap that reliable, dispatchable power generators can’t stay in business, only to see prices skyrocket when wind and solar inevitably fail, as they frequently do, and at the worst times?
Sounds like a recipe for utter chaos. And blackouts.
Brian Zinchuk is editor and owner of Pipeline Online. He can be reached at brian.zinchuk@pipelineonline.ca.
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