AESOs Emergency Alert, Generation shortage, and more...

Overview

We hope you all had a safe and warm weekend despite the extreme weather alert that was in effect. The Arcus team, including our Power Market and AI experts, had their analytical lens on and put our optimized price and CPD model to use as we analyzed the events of the weekend.

As many of you may have noticed, #AESO issued an emergency alert due to the anticipated higher-than-usual demand, it's not surprising that many thought demand had exceeded record levels. However with hydro at only 10% capacity, solar and storage at 0%, and wind at less than 8%, this can be attributed more to a generation shortfall.

On Friday, our price model forecasted that the weekend would see higher prices, which was observed on Saturday. However, with our CPD model optimized by the price forecast, we anticipated demand values that were below the month-to-day peak, so we chose not to issue a drop alert. The benefit of this is avoiding unnecessary shutdowns and incurring opportunity costs.

It was a difficult call to make in light of the extreme wintry conditions and the expected high demand. However, our extensive analysis, considering the lower level of generation in a broader sense, coupled with our high price forecasts, justified the call.

"We anticipate that high prices will continue through Sunday and we will keep our analytical lens on the market as we navigate these events." - Dr. Mike Quashie, Chief Modeling Officer, Arcus Power Corp.

Record-breaking Peak Demand

On the evening of January 11th, the actual demand spiked to 12,384 MW, which was just a few megawatts above the day-ahead forecast. Alberta set a new record for the most megawatts of electricity consumed in a single hour.

Demand Variability: Following the peak, actual demand drops below the forecast for several intervals, suggesting the price-responsive behavior of market participants to reduce load.

Emergency alert across Alberta

The emergency alert was issued early Saturday evening, urging residents to limit their electricity consumption to essential needs only. This critical measure was implemented to alleviate strain on the province's electrical grid, which had been operating under a grid alert since 3:30 p.m.

The actions taken by the public in response to the alert were both swift and significant. Within moments, the AESO reported a staggering 100 megawatt (MW) decrease in demand. Within a matter of minutes, this demand reduction would reach an impressive 200 MW drop.

At one point, the grid had less than 10MW in reserve power on Saturday Night as per the AESO demand report, corroborated by the Arcus dashboard. This number later jumped to 404 MW at around 7:45 PM MST.

Outages and generation shortage:

A grid alert was issued on Friday as well due to high power demand, two natural gas generator outages, and very low renewable power on the system. Invariably, these outages also led to a generation shortage. Some offline generators returned online on Friday, however, they were generating below usual capacity, HR Milner for instance was operating at less than 50%. Siksika Nation, located just east of Calgary was still under emergency on Sunday, wherein 50 homes were affected after ATCO reported a gas line outage.

"With pool prices at these high levels as shown above, there would be price-responsive demand reduction by market participants as observed during the afternoon hours of the 13th and most of Sunday. Also, the grid operator was likely to issue demand-responsive (DR) directives to maintain power and grid balance and preserve grid reliability, something the DR players might want to pay attention to." - Dr. Mike Quashie, Chief Modeling Officer

Pool Price and the cost of constraint

It is evident why the pool prices shot up significantly, it wasn’t just the demand but particularly it was also the generation shortage.

It's important to note that the power grid was stable, and the alert was issued to help maintain its stability. We are currently experiencing a shortage of over 1 GW (as of Sunday, Jan 14th) of wind generation, and some unavailable gas generating capacity, combined with higher-than-expected weekend demand.

The high pool prices observed on the AESO dashboard likely triggered market responses, where participants reduced demand as a cost-saving measure. During peak price periods, such as yesterday afternoon and today, this behavior is expected as participants aim to minimize expenses.

Additionally, AESO would issue directives to demand response (DR) players to curtail usage to maintain grid stability. These actions are crucial for preserving grid reliability during extreme conditions and highlight the value of demand response as a tool for balancing the grid in real-time. Market participants engaged in DR can leverage these high-price events to offer load flexibility, potentially gaining financial benefits while aiding in grid management.

Subsequently, The added cost of constraint shot up from $47.19 to $10,285 in a matter of a few hours on the 13th. Scott Moe declared providing 153 MW of electricity from SaskPower which assisted the overall shortage and constraints.

According to a statement from Minister of Affordability and Utilities Nathan Neudorf, Alberta also relies on electricity imports from other provinces. However, recent extreme weather conditions in other western provinces have affected their ability to share electricity. AESO's supply-demand report indicated that Alberta received 239 MW of electricity on Saturday night from B.C., Saskatchewan, and Montana.

For a more in-depth analysis, reach out to our experts at Arcus Power.