Capacity markets are not the electricity markets you are looking for

CALGARY— Binnu Jeyakumar, Director of Clean Energy at the Pembina Institute, made the following statement in response to the Government of Alberta announcement of the cancellation of the capacity market:

“Since day one, the Pembina Institute, like most electricity industry players, has been critical of the capacity market for several reasons, and we’re pleased to see the cancellation. While the market was originally suggested to attract investors to Alberta, it has several risks. Notably, the capacity market would have shifted risk away from investors and onto consumers, likely resulting in more costs to ratepayers. It also creates an uneven playing field, providing an advantage for coal- and gas-fired generation over renewable energy resources such as solar and wind.

“What we do need is an update to our current electricity market, and we hope to see the government move in that direction. Experience from other jurisdictions, such as Texas, shows how energy markets can be adjusted to ensure reliability while protecting consumers — and integrating the lowest cost option, which are renewable energy resources.

“A fair system that is cost effective and efficient would include all technologies being treated equitably and fully compensated for services provided. To ensure we are taking advantage of the benefits of emerging technologies, we need to look at the entire electricity system, beyond just the wholesale market. For example, the most cost-efficient solutions would ensure energy efficiency is prioritized, and smart technologies are used to manage usage at peak demand times. The good news is that many electricity systems are well along this path and we can learn from them.

“Globally, the electricity sector is undergoing a shift at a level that we haven’t seen in over a century. Renewables are cheaper than conventional generation, and we have new technologies that are changing how we generate, deliver and consume energy. 

“Our electricity market needs to be ready to adapt to changing innovation in a 21st century de-carbonized future grid that is lower emitting, lowest cost and more reliable.”

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