2016 A year of change in Alberta s electricity market. Wednesday, February 1, 2017

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1 2016 A year of change in Alberta s electricity market Wednesday, February 1, 2017

2 Speakers John Carleton Senior Partner Calgary John Carleton practices extensively in the electric energy sector and coleads our practice in that area. He has represented clients in the project development, sale and financing of thermal and renewables facilities, and wholesale physical and financial energy trades. He has been closely involved, since its inception, in the deregulation of the Alberta electric energy sector and was involved in developing applicable legislation, regulation and market rules. Lincoln Mitchell Associate Calgary Lincoln Mitchell practices corporate and commercial law related to energy and infrastructure projects, assisting domestic and international clients on a broad range of energy sector and business matters. He represents AESO in its critical transmission infrastructure procurement and the development of Alberta s renewable electricity program. 2

3 Join the conversation Tweet using #NLawMotion and connect Connect with us on LinkedIn linkedin.com/company/nortonrosefulbright 3

4 Evolution of Alberta s wholesale electricity market Prior to 1996, electricity rates set by central regulator under a cost-of-service model Power Pool of Alberta created in 1996 a real-time electricity market Merit order and equilibrium price auction of Power Purchase Arrangements or PPAs 4

5 Energy-only market basics Energy-only: generators only paid for energy they produce All market participants have non-discriminatory system access Must offer requirements and price-quantity pairs Merit order and system marginal price Price signal for new generation 5

6 Specified Gas Emitters Regulation ( SGER ) Covers large emitters Requires reduction in emissions intensity 20% reduction in 2017 Emitters unable to comply can: (i) use or purchase performance credits (ii) purchase emissions offset credits or (iii) pay a carbon levy Price per tonne emitted above targets = $15 in

7 Climate Leadership Plan New carbon pricing regime (carbon levy) Phase out coal-generated electricity by 2030 Increase renewable generation capacity Cap oilsands emission at 100 megatonnes per year Reduce methane emissions 45% by

8 Carbon levy Exemption from end-use carbon price for large (SGER) emitters SGER will continue to apply to large emitters until the end of 2017 and then be replaced with Carbon Competitiveness Regulation Carbon price to be applied to large emitters with effects mitigated by good as best gas output based allocation Smaller emitters can opt-in to the output based allocation scheme 8

9 2016 A year of change in Alberta s electricity sector The Alberta PPAs The Renewables Electricity Program REP The Capacity Market 9

10 Battleground PPA Alberta s competitive wholesale electricity market The PPAs essential for Alberta s competitive market Relevant features of the PPAs The Balancing Pool 10

11 Battleground PPA (cont d) The low price environment The Change - SGER The terminations 11

12 Battleground PPA (cont d) The Enron Clause The government law suit The settlements 12

13 Renewable Electricity Program Government incentives Thirty by thirty 5000 MW of new renewables capacity by

14 Renewable Electricity Program (cont d) The first procurement up to 400 MW Eligibility Procurement process and timing 14

15 Renewable Electricity Program (cont d) CFD payment mechanism The REFA The carbon tax The carbon fund 15

16 Alberta s electricity capacity market Alberta s energy-only market today What has put it at risk? What is a capacity market? 16

17 Alberta s electricity capacity market (cont d) Implications of the REP for the energy-only market Implications of coal fleet retirement for the energy-only market Reliability 17

18 Alberta s electricity capacity market (cont d) Why an Alberta capacity market? Alternatives to the capacity market Capacity market benefits 18

19 What does a year of change in Alberta s electricity sector mean? Reliability Electricity prices Social and financial costs and benefits 19

20 Contact John Carleton Senior Partner, Norton Rose Fulbright Lincoln Mitchell Associate, Norton Rose Fulbright

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