Strategic Reserves

Key Dates and Materials

Dec. 12, 2024 | RFI Submissions due via SupplyAdequacyRFI@aeso.ca

Nov. 27, 2024 | RFI Questions & Answers posted

Nov. 18, 2024 | RFI Questions due via SupplyAdequacyRFI@aeso.ca

Oct. 30, 2024 | Launch Request for Information (RFI): Solutions to Mitigate Supply Adequacy Risk through Strategic Reserves

Oct. 30, 2024 | Materials posted

Oct. 3, 2024 | Consolidated Stakeholder Feedback posted



Oct. 30, 2024 | Stakeholder Update

The AESO regularly monitors supply adequacy with its accountability for the reliable and economic operation of the Alberta Interconnected Electric System. We first raised strategic reserves as an option to maintain dispatchable capacity to protect against supply shortfall in the Restructured Energy Market (REM) Recommendation Report published in March 2024.

Strategic reserves are supply adequacy services (from either generation or load) procured and dispatched outside the existing market structure to meet supply adequacy needs during an Energy Emergency Alert (EEA) and when the grid is at risk of rotating outages. Strategic reserves would only be dispatched when market resources are exhausted, to prevent load shed when the grid is under stress. They would be designed to maintain price signals necessary for ongoing market investment by, for example, price re-constitution.

Strategic reserves should not be conflated with contracting retiring coal-to-gas (CTG) units. Contracting retiring CTG units could be one form of strategic reserves and if contracted, would not participate in the energy market and would be retired on termination of the strategic reserve contract. Other forms of strategic reserves could include demand response or emergency supply.

In early September 2024, the AESO held a stakeholder information session to explore the concept of strategic reserves as a solution to address potential supply adequacy concerns, including considerations related to retiring CTG units. Following that session, we sought written feedback from stakeholders on the overall concept of strategic reserves, including feedback specific to CTG units.

That feedback centered around the following four themes:

  • Concerns about using an out-of-market mechanism that could potentially disrupt the competitive electricity market.
  • Requests for more detailed data and further analysis to define the level of supply adequacy and corresponding forecasted volumes that may be needed for strategic reserves.
  • Questions about the suitability of retiring CTG units to provide guaranteed capability during an EEA, given the lead times associated with start-ups and whether retaining retiring CTG units could delay progress on Alberta’s decarbonization objectives and advocacy for solutions that align with long-term climate targets.
  • General support for demand response programs as a more flexible and effective means of managing shortfalls because of faster ramp times and ability to respond, particularly during unexpected EEAs.

The AESO will consider recommendations from stakeholder feedback and has added a supplementary information document for your reference. See summary of that feedback for more information.

The AESO has launched a Request for Information (RFI) process to gather more input from market participants on potential solutions to mitigate supply adequacy risk through strategic reserves. Review the RFI document, submit any questions or other inquiries by Monday, November 18, 2024, at 3:30 p.m. MST and provide your final submission by Thursday, December 12, 2024, at 3:30 p.m. MST by emailing SupplyAdequacyRFI@aeso.ca.

Thank you for your interest and engagement in this topic and we look forward to ongoing discussions and inputs from stakeholders on how best to mitigate the AESO’s concerns related to supply adequacy. Another update will be shared in early 2025 following our review of the RFI submissions.


Background

Over the mid-term, the AESO anticipates limited development of net dispatchable generation as investors seek policy clarity on the design and implementation of the REM, the Transmission Regulation and the Clean Electricity Regulations (CER). Supply adequacy may be challenged if significant CTG capacity retires and limited new dispatchable supply comes online.

Given the supply and demand uncertainties over the next five to eight years, the AESO is contemplating strategic reserves as supply adequacy insurance during those few occasions throughout the year when we are in an EEA and at risk of rotating outages. Strategic reserves would be out-of-market capacity that could include options such as CTG units that exit the market, demand response, and backup supply. Strategic reserves would be designed to maintain the market price signals necessary for investment in the market.

Several U.S. jurisdictions have implemented similar programs or products to ensure sufficient extreme event supply. The AESO will ensure that any strategic reserves options to address supply adequacy will not alter market price signals as support for investment and retirement decisions.

Key Dates and Materials

Dec. 12, 2024 | RFI Submissions due via SupplyAdequacyRFI@aeso.ca

Nov. 27, 2024 | RFI Questions & Answers posted

Nov. 18, 2024 | RFI Questions due via SupplyAdequacyRFI@aeso.ca

Oct. 30, 2024 | Launch Request for Information (RFI): Solutions to Mitigate Supply Adequacy Risk through Strategic Reserves

Oct. 30, 2024 | Materials posted

Oct. 3, 2024 | Consolidated Stakeholder Feedback posted



Oct. 30, 2024 | Stakeholder Update

The AESO regularly monitors supply adequacy with its accountability for the reliable and economic operation of the Alberta Interconnected Electric System. We first raised strategic reserves as an option to maintain dispatchable capacity to protect against supply shortfall in the Restructured Energy Market (REM) Recommendation Report published in March 2024.

Strategic reserves are supply adequacy services (from either generation or load) procured and dispatched outside the existing market structure to meet supply adequacy needs during an Energy Emergency Alert (EEA) and when the grid is at risk of rotating outages. Strategic reserves would only be dispatched when market resources are exhausted, to prevent load shed when the grid is under stress. They would be designed to maintain price signals necessary for ongoing market investment by, for example, price re-constitution.

Strategic reserves should not be conflated with contracting retiring coal-to-gas (CTG) units. Contracting retiring CTG units could be one form of strategic reserves and if contracted, would not participate in the energy market and would be retired on termination of the strategic reserve contract. Other forms of strategic reserves could include demand response or emergency supply.

In early September 2024, the AESO held a stakeholder information session to explore the concept of strategic reserves as a solution to address potential supply adequacy concerns, including considerations related to retiring CTG units. Following that session, we sought written feedback from stakeholders on the overall concept of strategic reserves, including feedback specific to CTG units.

That feedback centered around the following four themes:

  • Concerns about using an out-of-market mechanism that could potentially disrupt the competitive electricity market.
  • Requests for more detailed data and further analysis to define the level of supply adequacy and corresponding forecasted volumes that may be needed for strategic reserves.
  • Questions about the suitability of retiring CTG units to provide guaranteed capability during an EEA, given the lead times associated with start-ups and whether retaining retiring CTG units could delay progress on Alberta’s decarbonization objectives and advocacy for solutions that align with long-term climate targets.
  • General support for demand response programs as a more flexible and effective means of managing shortfalls because of faster ramp times and ability to respond, particularly during unexpected EEAs.

The AESO will consider recommendations from stakeholder feedback and has added a supplementary information document for your reference. See summary of that feedback for more information.

The AESO has launched a Request for Information (RFI) process to gather more input from market participants on potential solutions to mitigate supply adequacy risk through strategic reserves. Review the RFI document, submit any questions or other inquiries by Monday, November 18, 2024, at 3:30 p.m. MST and provide your final submission by Thursday, December 12, 2024, at 3:30 p.m. MST by emailing SupplyAdequacyRFI@aeso.ca.

Thank you for your interest and engagement in this topic and we look forward to ongoing discussions and inputs from stakeholders on how best to mitigate the AESO’s concerns related to supply adequacy. Another update will be shared in early 2025 following our review of the RFI submissions.


Background

Over the mid-term, the AESO anticipates limited development of net dispatchable generation as investors seek policy clarity on the design and implementation of the REM, the Transmission Regulation and the Clean Electricity Regulations (CER). Supply adequacy may be challenged if significant CTG capacity retires and limited new dispatchable supply comes online.

Given the supply and demand uncertainties over the next five to eight years, the AESO is contemplating strategic reserves as supply adequacy insurance during those few occasions throughout the year when we are in an EEA and at risk of rotating outages. Strategic reserves would be out-of-market capacity that could include options such as CTG units that exit the market, demand response, and backup supply. Strategic reserves would be designed to maintain the market price signals necessary for investment in the market.

Several U.S. jurisdictions have implemented similar programs or products to ensure sufficient extreme event supply. The AESO will ensure that any strategic reserves options to address supply adequacy will not alter market price signals as support for investment and retirement decisions.

  • CLOSED: This written feedback period has concluded.

    Sept. 16, 2024 | Stakeholder Update

    During the Stakeholder Engagement Session on September 5, 2024, the AESO committed to issuing a Request for Information (RFI) to seek potential solutions from industry for Strategic Reserves as a means to mitigate supply adequacy risk. Given this decision, the Stakeholder Feedback Questions have been updated to remove questions 4, 5 and 6.  Instead, stakeholders are invited to provide information on potential solutions for Strategic Reserves through the RFI which is targeted to be issued in October.

    Purpose

    We value stakeholder input and invite all interested stakeholders to provide their feedback on Strategic Reserves via the questions set out below. The information and feedback shared will assist the AESO in assessing Strategic Reserves. The AESO would like to thank stakeholder in advance for their ideas, insights, and perspectives. Complete the survey by Sept. 27, 2024, at 4 p.m. MDT

    Instructions

    1. To submit your feedback, you will need to be registered and signed in on the AESO Engage platform.
    2. Please click on the "Complete Stakeholder Feedback" box below to provide your specific comments.
    3. Please submit one completed Stakeholder Feedback per organization.
    4. Stakeholder Feedback results will be posted on AESO Engage, in their original state.
    5. Responses are due on or before 4 p.m. on Friday September 27, 2024

    Materials

    You can refer to the presentation from the Sept. 5, 2024 Information Session if required. 

    Stakeholder Feedback Questions

    1. What segment of the industry do you represent? (select all that apply)
    2. Do you agree with the AESO's introduction of Strategic Reserves should we need to address the risk associated with supply adequacy during periods of market uncertainty?  
    3. Please provide rationale for your response to question 2 (above). 
    4. What other products or solutions should the AESO consider to address supply adequacy and ensure minimal market impact? Please be as specific as possible.
    5. Do you see value in the AESO conducting a Request for Information (RFI) process to further explore the alternatives?
    6.  Please provide rationale for your response for question 5 (above).
    7. If the AESO proceeds with Strategic Reserves, what recommendations do you have for designing and deploying them to ensure minimal market impact? Please provide rationale for your response. 
    8. If the AESO proceeds with Strategic Reserves from coal-to-gas assets, how should those assets be addressed at the end of the contracts? Please consider in your response whether they should be allowed to re-enter the market and if so, what special considerations would need to be made. 
    9. Is there anything else you would like to share with the AESO on the concept of Strategic Reserves? 
    10. If you would like to add a formatted version of your responses, please do so here.
Page last updated: 05 Dec 2024, 09:54 PM