High Electricity Prices Good For Wind Energy

February 7th, 2012

By: Tiffany Richmond

Abbas Chagani, Manager of Electricity at Energy Advantage, was recently featured in an article about electricity prices in Alberta. Check out the article, written by Alex McCuaig from the Medicine Hat News below. For further information about why the price of electricity in Alberta has been so high watch this short video.


By: Alex McCuaig

At current electricity prices, wind-power generators aren’t just breaking even, they’re making a healthy profit.

It’s a short-term benefit of the historical highs seen in Alberta’s deregulated electricity market but one which may be the first step in breaking down the economic barrier of renewable energy production.

Three-year fixed terms currently offered by various provincial utility providers outside Medicine Hat range between 9 and 11 cents per kilowatt hour (kWh). Variable residential per kWh prices remain near historic highs at more than 13 cents.

With wind energy production profitable at 10 cents per kWh, the economic gap is narrowing.

Gerry Labas, CEO of the city’s energy department, said Medicine Hat’s municipal windfarm project is not currently proceeding but is still viable.

“Historically, wind power has been a little bit higher priced than the pool (Alberta power grid). But there are customer groups who are prepared to pay more for green energy,” said Labas.

The value of tradable green credits provided for offsetting carbon emissions in Alberta can also add financial worth to renewable energy production.

As far as Medicine Hat taking advantage of these incentives, Labas said there are both challenges and benefits in proceeding municipally with wind projects.

One of the challenges is the location of the proposed city windfarm which doesn’t offer optimum conditions for energy production.

“We’re not quite as good as the wind regime near Elkwater,” said Labas.

In addition, the proposed city wind turbines would produce electricity only an estimated 35 per cent of the time which causes input costs to rise.

But one of the offsetting benefits would be having the turbines located within city limits, he said.

“As a result we potentially save the costs associated with using the provincial grid because it’s within our system,” said Labas.

The proposed project would only produce an estimated 3 per cent of annual demand.

However, Labas added, it would give Medicine Hat a third option to access power aside from the city’s natural gas electric plant or the provincial grid and the ability to pick the cheapest of the three depending on conditions.

That ability is unique to the city due it owning its own utilities, he said.

“We would look at what’s the cost of wind, what’s the cost on the grid at that point of time and what’s the cost of power at our power plant,” said Labas.

“Others who may have wind power are reduced to looking at two — their own wind power versus the grid.”

Predicting provincial electricity prices accurately over the next 12 to 24 months is difficult, said Labas, but current predictions show prices to remain high.

“The better the grid price, than obviously the more competitive wind power is,” said Labas.

“That wind production cost — as technology continues to improve — should come down. With the wind, there is no issue with costs there.”

But it’s the power demands of the oil sands over the next three decades that will likely see the market for wind power become more economically viable.

According to the Alberta Electric System Operator (AESO), by 2024 the province’s peak demand will rise by 74 per cent over 2007 levels, driven overwhelmingly by industrial development of the oilsands.

With future demands for energy being what they are in Alberta, just about any electrical generation project is economically viable, according to a electricity adviser with Energy Advantage.

Abbas Chagani, Manager of Electricity with the Company, which helps companies develop and implement energy management programs to help reduce energy costs and mitigate risks related to price volatility, said Alberta’s demand is over and above its growth.

“The growth Alberta is seeing is around 2.8 per cent but on a demand level on a yearly basis (AESO) is expecting closer to 3 to 4 per cent,” he said.

“That is astronomical compared to what is happening everywhere else across North America.”

The lack of investment in new fossil-fuel plants since 2008 will also figure predominantly in future electricity prices, according to Chagani.

“Looking forward, that lack of investment makes any new project in the future far more viable just because the supply situation is so poor,” he said.

Chagani pointed out Alberta’s spike in electricity prices comes during one of its warmest winters and “if it was minus 25, the prices would be triple.”

Source: Medicine Hat News


Tiffany Richmond has over five years of experience as a marketing professional and is responsible for online marketing strategies at Energy Advantage Inc.

Categories: Energy Procurement

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