Thread by @SPhillipsAB

This piece by @bcshaffer and @joshdr83 is a must-read on what's happening in TX, and relevant comparisons between AB and TX's energy-only electricity market design. I have a few points to add/underline...a thread!

https://twitter.com/bcshaffer/status/1362149967486357504

The similarities between our two systems, as I see it, are: 1. energy-only, deregulated electricity market, 2. No large interties with other electricity grids, 3. An energy-only market and grid that hasn't really grappled with demand-side in terms of design...

and 4. an infrastructure built for one type of extreme weather event - long periods of hot weather (TX) and long periods of cold weather (AB), but not the other way around.
The biggest difference? Sheer scale of the grid in TX compared to AB. It's TX. It's freakin huge.

Anyway, let's dispense w/ your uncle Randy's rightwing nonsense at this point in our story. Natural gas-fired electricity generation *and* distribution froze in TX. The infrastructure was not built for -10C. 65% of winter electricity generation comes from natgas in TX.

30 mw of power went offline, of which 3-5mw (13%) was wind.
The problem was that all TX generation (coal, nukes too) was hit by inability to move through the grid - or to fire up in the first place, in the case of NG. So that spiked the price. bloomberg.com/news/articles/…

So, now we have an understanding of what happened: you've got grid infrastructure (no matter what the generation source) that wasn't designed for those temps. Natgas distribution systems not designed for it, either. Natgas extraction froze up throughout the Permian, too.

So, the first point of comparison would be: TX's energy-only market - without interties to build in climate-related risk mitigation -couldn't bring in power from somewhere else when things froze up. There was redundancy built in with respect to generation source...

but not in terms of the whole system, regardless of generation type, being challenged by an extreme weather event. That part is instructive for electricity markets that don't have interties. Albertans may want to consider that challenge.

Texas, like, Alberta, doesn't have much in the way of interties with other electricity grids. In an energy market, incumbent generators like it that way -they make money off volatility. Who pays for that volatility? Consumers do, my friends.

There are ways we can smooth out volatility in electricity markets, and one of the ways is to have a capacity market operating in parallel. This is what other deregulated electricity systems do around the world - and the system our govt was moving toward. The UCP scrapped that.

A capacity market makes system operations a little easier & makes a better economic case for longer-term projects like some forms of hydro. But would that have saved TX? As Princeton prof Jesse Jenkins argues, no:

https://twitter.com/JesseJenkins/status/1362464548591124480?s=20

I don't know if a capacity market is a good idea for TX or not, I'll happily leave that to them to decide. But for AB, price volatility has been good and bad for consumers, but our outlook was more to the bad, so that's why we moved forward with capacity market design in '17.

I will pause to say this about a capacity market: electricity is moving very quickly wrt tech changes, demand, etc. That's why our capacity contracts were envisaged at 5-7 years. A progressive AB govt would have to take another look at market design, technology, storage...

..so I don't think it would be wise, at this stage, to be orthodox about market design in AB. I just don't have enough info to be definitive on that. But! There's two *other* factors that we *should* have our eye on after what's happened in Texas...

The first is climate adaptation. TX had a system-wide freezeup. Our infrastructure is built to certain climactic conditions and those conditions just aren't as reliable anymore. For AB, our climate risk is hotter temperatures in summer, but flooding and hail are massive risks...

...that insurance companies are sort of talking about, but govt procurement, building standards, etc haven't grappled with this, to my mind, with anything approaching the level of seriousness that's required. Business also needs guidance in how to account for these risks.

So, sure, we can most certainly ask whether the AUC approvals process, AESO standards, etc are actually built to account for and adapt to what we know will be more frequent and more severe extreme weather events. But that's not exclusive to electricity, it's across the economy.

And how do we know what those risks are? Well the first thing is to get our heads around what the science can tell us now and what our gaps in knowledge are, which is why I commissioned a report on exactly this question, a report the UCP tried to bury: globalnews.ca/news/6600989/a…

But another piece we can ensure happens is on the demand and efficiency side. As Blake points out in his piece, a properly functioning energy-only market depends on consumers being able to respond to high demand=high price moments by reducing demand.

The old way of running electricity - from one big plant through a wire to your house - didn't allow consumers much control over demand. But two things help. One: policy direction for smart metering, net metering, distributed generation & integration of storage, large and small

And two: we need policy direction to the operator to better implement demand-side management. @S_HastingsSimon has talked a lot about this. It's worth considering what kinds of directives/supports could be given to AESO. Consumer efficiency also important; scrapped by UCP.

Finally, a word on regulation vs deregulation. I've thought a lot about this over the years. I've concluded one-utility-owned systems have advantages and significant disadvantages wrt decarbonization & new tech. Also, deregulated systems are still subject to many regulations.

When Ralph Klein "deregulated" electricity, he didn't *simplify* anything. There were still a whole bunch of regulations. Some kept renewables out. Some regs tilted the playing field toward big incumbents, esp coal. You can find those bad ideas in regulated systems, too.

So as electricity changes, those of us who are interested in decarbonization, jobs, clean tech, attracting new investments shouldn't paint ourselves in to a corner of "regulated = one utility = only virtuous rules = low prices =good," or "deregulated = no rules = bad"

AND! Don't let anyone tell you there's no place for co-op energy, public interest equity(eg the FN equity requirements for AB's renewable procurement), distributed generation, micro gen. We pushed those fwd, but you don't necessarily see them in "regulated" systems, either.