On November 17, 2021, the Alberta government introduced Bill 86, the Electricity Statutes Amendment Act (“Bill 86”), which clarifies the integration of energy storage into the Alberta’s interconnected electric system (“AIES” or “grid”) and permits unlimited self-supply with export to the grid. The introduction of Bill 86 is the culmination of a number of years of stakeholder engagements, including: the government’s engagement related to energy storage; the Alberta Utilities Commission’s (“Commission”) Distribution System Inquiry; and the Commission’s engagement related to power plant self-supply and export. Our 2-part blog series summarizing the Final Report from the Distribution System Inquiry can be found here and here.
Integration of Energy Storage
During the Distribution System Inquiry, parties expressed concerns about how the current legislative regulatory framework for electricity in Alberta impedes the deployment of energy storage resources. These concerns include:
- The absence of a statutory or regulatory definition of energy storage resources within the current legislative and regulatory framework results in a lack of clarity and certainty in how, when, where and for what purpose such resources can be deployed. Many parties argued legislative clarity is required.
- Limitations on the ability of customers to self-supply and export electricity to the grid.
- The absence of specific rates for energy storage resources in the AESO and distribution utilities’ tariffs.
- Lack of clarity or process with respect to when and how energy storage resources may be considered as non-wires alternatives.
- Lack of clarity on how energy storage assets would be treated with respect to a utility’s rate base, whether the utility owns the asset or obtains the services under contract with a third-party-owned asset.
If enacted, Bill 86 would provide much needed clarity on: 1) what constitutes an energy storage asset; 2) who may own an energy storage asset; and 3) electricity market participation.
1) What constitutes an energy storage asset
Bill 86 defines an energy storage resource as a “…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…” Notably, this establishes a distinct asset class for energy storage, whereas previously energy storage was considered a “generating unit” when it discharged electric energy and a “load” when it charged or consumed electric energy.
2) Who may own an energy storage asset
Bill 86 would permit energy storage resources to be owned by a private company (for their own use or export to the grid); by a transmission facility owner or utility; or by a distribution facility owner, or utility.
3) Market participation
Notwithstanding transmission and distribution facility owners or utilities can own energy storage resources, Bill 86 would prohibit market participation for these energy storage resources. This is prohibition is directed at facilitating the use of these utility owned energy storage resources as non-wires alternatives in transmission and distribution system planning. Conversely, all electric energy from an energy storage resource owned by a private company that enters or leaves the grid must be exchanged through the power pool (i.e., must participate in the market).
Unlimited self-supply with export
Subject to certain limited exceptions, under the current legislative and regulatory framework there currently exists a general prohibition from on-site or “behind the fence” generators exporting excess electricity to the grid. The limited exceptions are:
- industrial operations with an industrial system designation (“ISD”);
- small-scale renewable energy sources (“micro-generators”);
- oil and gas facilities using natural gas that would otherwise be flared; or
- certain municipally owned generators.
That is, currently only those on-site or “behind the fence” generators meeting any one of the exceptions outlined above can both: consume electric energy produced on-site without exchanging that electric energy through the power pool; and, at the same time, exchange any excess electric energy produced on-site with the power pool (i.e., export to the grid).
Prior to 2019 there had been ambiguity and uncertainty surrounding the general prohibition on self-supply export and how the exceptions operated. However, in 2019 and 2020 the Commission issued several decisions clarifying that generators that operate “behind the fence” (i.e., self-suppliers) and that were generating and consuming electricity on their own site, were prohibited from exporting the excess to the power pool. A number of existing on-site generators were caught in the fallout from these Commission decisions, leading to implicit forbearance on the part of the Commission pending legislative and regulatory change. Bill 86 seeks to remove this general prohibition by permitting the unlimited export of excess electricity from self-suppliers to the power pool, which was the policy supported by most stakeholders in Alberta.
It is important to note that the exemption to the requirement to exchange electric energy through the power pool for the portion of electric energy consumed on-site (i.e., the self-supply, which is expressly defined in Bill 86) remains unchanged under Bill 86. All exempted self-supply electrical energy must be produced and consumed on the same property for the consuming parties “own use”. For further commentary related to the “Own Use Requirement”, see our blog here.
Although Bill 86 contemplates and provides for the high-level integration of energy storage into the grid, it provides considerable discretion to each of: industry, the AESO and ultimately the Commission, in respect of when and how the deployment of energy storage will be considered and implemented. While this discretion ultimately comes with some continued uncertainty, there is also opportunity to develop effective policies in a number of areas, including:
- When and how energy storage will be utilized as non-wires alternatives in transmission and distribution system planning;
- How “hybrid assets” (i.e., generation co-located and operationally integrated with energy storage) will be considered in light of the requirements outlined in Bill 86, particularly in circumstances where a utility owns one asset, and a private company owns the other asset;
- Whether and how the allocation of transmission systems costs, through any future amendments to the AESO tariff, will ultimately be adjusted for self-suppliers;
- Treatment of energy storage in AESO and distribution utilities’ tariffs.
Although there is still some work to be done to clarify the framework for energy storage, Bill 86 addresses the major policy decisions – perhaps most importantly the ownership of energy storage – that will allow industry, the AESO and the Commission to proceed with development of more detailed policy and guidelines.
With respect to allowing self-suppliers exporting excess electric to the grid, Bill 86 would allow self-suppliers to efficiently deploy their generating assets so as to offer the opportunity to fully realize the economic benefits of that generation.
At the time of writing, Bill 86 is scheduled for the Third Reading on December 1, 2021. If passed, these amendments are expected to be proclaimed into force at the same time the related regulations are brought into force, with a goal of finalizing the amendments in 2022.