Modernizing Alberta’s Electricity Legislation

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Courtesy of Osler. View original article here.

On November 24, 2021, Bill 86, the Electricity Statutes Amendment Act, 2021 (Bill 86) passed its second reading in the Legislative Assembly of Alberta.

Notable changes include amendments intended to facilitate greater participation by energy storage resources in the Alberta electricity market, allowing for unlimited self-supply and export, and facilitating the modernization of the distribution systems through greater integration of new technologies and distribution-connected generation.

In this Update, we summarize the proposed amendments and potential implications for market participants and other Alberta electricity market stakeholders. Additionally, given that Bill 86 is amendment legislation, we have published unofficial comparison versions of the affected legislation to aid in reviewing the proposed changes.

Facilitating energy storage

Bill 86, if passed in its current form, would add to the Electric Utilities Act (EUA) and the Hydro and Electric Energy Act (HEEA) legislative definitions for “energy storage facility” and “energy storage resource”, both of which are technology-agnostic. Under both acts, energy storage facility would be defined as “a facility that uses any technology or process that is capable of using electric energy as an input, storing the energy for a period of time and then discharging electric energy as an output.” Under the EUA, energy storage resource would be defined as “the component of an energy storage facility that uses a technology or process that is capable of using electric energy as an input, storing the energy for a period of time and then discharging electric energy as an output, and includes a share of … associated facilities that are necessary for the safe, reliable and economic operation of the energy storage resource, which may be used in common with other energy storage resources…”

Bill 86 allows competitive procurement of energy storage resources as non-wire solutions, which refers to investments or operating practices that defer or replace the need for building or expanding distribution or transmission systems. This is a notable change from the status quo. The Transmission Regulation currently only allows the Independent System Operator (ISO) to propose a non-wire solution for transmission constraints or reliability issues in very limited circumstances.

The amendments would allow a distribution facility owner (DFO) or a transmission facility owner (TFO) to own and operate energy storage facilities as part of their respective distribution or transmission systems under certain circumstances, specifically:

  • For a DFO to own and operate an energy storage facility, it would be required to first obtain approval from the Alberta Utilities Commission. A DFO would need to demonstrate that it is: (a) unable to competitively procure non-wire service, (b) competitively procuring non-wire services is not economic, or (c) the proposed use of an energy storage facility would provide superior safety and reliability to the electric distribution system.
  • A TFO would be allowed to own and operate an energy storage resource only if it is included in a needs identification document that has been approved by the Commission in accordance with section 34(3)(a) of the EUA.
  • A DFO or TFO that owns an energy storage resource would not be allowed to offer electric energy from that energy storage resource into the power pool. In other words, the amendments would allow an energy storage resource to either participate in the competitive electricity market or as part of a regulated distribution system or transmission line, but not both.

Self-supply with export

Bill 86 also enables electricity generation for unlimited self-supply and export, i.e., generating and/or storing electricity for a facility’s own use while exporting unused energy to the grid, a significant change from the limited exemptions under the current scheme. This change could present new opportunities for energy market participants looking to improve the economics of on-site generation.

However, to mitigate the risk of system bypass and associated costs to customers, Bill 86 would amend section 122 of the EUA, which governs transmission system cost recovery under the ISO tariff. The amendments suggest that market participants that are connected to the grid and that self-supply will be allocated a “just and reasonable” share of transmission costs, the details of which will be determined by the ISO (with Commission oversight).

Accommodating adoption of distribution connected generation and distribution system modernization

Bill 86 also includes amendments intended to facilitate the modernization of the distribution system to accommodate the rapid integration of energy storage resources and distribution-connected generation.

The amendments add a requirement for distribution owners to prepare long-term plans, with reference to yet-to-be-made regulations that will describe the outcomes and timing of the plans. According to the Commission vice chair in a recent decision to approve Fincastle substation upgrades, a DFO currently has no public interest mandate. This can be problematic when the Commission relies on the ISO to assess the need for ancillary grid support, and the ISO relies on a DFO’s own assessment of whether a non-wire solution is needed. The Bill 86 amendments may increase accountability for DFOs in assessing the long-term need for energy storage resources and non-wire support.

The proposed amendments would also give the Minister of Energy regulation-making authority to allow government to provide further guidance around a distribution planning framework.

Comments

Generally, the proposed amendments are intended to modernize Alberta’s electricity legislation and facilitate participation by energy storage resources in both the competitive energy market and as service providers to meet the needs of Alberta’s distribution and transmission systems.

The greater allowance for self-supply with export may assist commercial and industrial customers in managing electricity costs, depending on future decisions by regulatory authorities regarding how these customers should be allocated a “just and reasonable” share of transmission costs.

Although the proposed legislative amendments provide a more flexible legislative framework, the forthcoming regulations and ISO tariff proposals will be critically important in terms of establishing how market participants, DFOs, TFOs, and customers are ultimately impacted.

Courtesy of Osler. View original article here.