Simons: Blackouts point to structural weaknesses in our electrical system

By Paula Simons, July 11, 2012

EDMONTON – Never ascribe to malice that which can be adequately explained by incompetence.

It’s an adage I keep in mind, when conspiracy theories beckon.

It’s easy to understand why many politicians, consumer advocates, and other people are suspicious about Monday’s extraordinary rolling blackouts, triggered when five major power plants went off-line during the heat wave, sending power prices skyrocketing to the maximum ceiling price, $1,000 per megawatt-hour. That several plants would shut down at a time of peak demand does seem fishy, especially when AESO, the Alberta Electrical System Operator, refuses to reveal why they failed. Gaming the system isn’t new: six months ago, TransAlta, one of the province’s biggest generators, was fined $370,000 for creating an artificial energy shortage and inflating electricity prices, for which TransAlta benefited to the tune of $5.5 million.

But Monday’s mess had less to do with collusion than with structural weaknesses in our electrical system.

Records provided Wednesday by AESO and Capital Power, show power prices began to sharply climb because of record temperatures and record power use, well before three of the power plants in question broke down.

The price was already at $597.53 MWh at noon before Atco’s 385 MW Battle River 5 generator failed just after 1 p.m.

The price hit $999.99 before Capital Power’s 400 MW Genesee 2 plant went down.

Far from profiteering, it looks as if power producers actually blew an opportunity to cash in on our insatiable demand for air conditioning.

Who were the real conspirators driving up prices? Perhaps we were.

Martin Kennedy, Capital Power’s vice-president of external relations, says their plant failed because of a malfunctioning heat sensor, which threw the plant into automatic shutdown.

“We had absolutely no financial incentive for that unit to go down. The maximum price had already been reached.”

On top of that, he says, Capital Power must now pay contractual penalties to its clients for failing to produce the power promised to them.

Richard Dixon, executive director of the Centre for Applied Business Research in Energy and the Environment at the University of Alberta, also laughs off talk of conspiracy, especially because Alberta’s electricity market isn’t a regulated monopoly, but a competitive enterprise.

“The way to look at it from an economist’s point of view is to see if they were capturing maximum profit. You’re not benefiting from the fact you went off-line. Who’s going to make money? The guy down the road. Economically, that doesn’t make sense.”

Dixon’s research into Monday’s blackouts suggests at least three plants failed because of problems with their heat sensors, which reacted to the hot weather.

Wind power also failed dramatically. At peak, wind adds 939 MW to our electrical supply Monday, the air was so calm, there were 6 MW of wind power available.

Just because there was no nefarious scheme to drive up prices doesn’t mean there aren’t problems. When electricity was a regulated utility, companies could overbuild to create excess generation capacity to be fired up in the event of a crisis. They were guaranteed a rate of return, and in exchange, promised supply stability.

Now, in a free market system, where private companies assume all risk, there’s no incentive to build anything that isn’t practically profitable. That makes the system less elastic and could lead us into occasional darkness.

According to an AESO report published this May, by 2013 Alberta’s electric system daily supply cushion — its ability to meet peak demand — won’t be adequate to handle power usage spikes. For the period between May 1, 2012 to April 30, 2014, the supply shortfall was estimated to be 686 MWh. Some pressure will be reduced when Enmax’s major new 800 MW gas power plant opens in 2015. Until then, however, there may be more days when Alberta’s system strains to meet demand.

Dixon thinks it’s time we stopped gorging on electricity and started thinking about conservation.

“We haven’t had a serious demand-side discussion in this province for years. If you want your air conditioning on, maybe you have to turn your lights off.”

Monday, it was 33 C, not 43 C; still, our electricity use spiked at 9885 MW. That’s 333 MW more than we used at our peak last July — almost a power plant’s worth of juice.

If our free market model, growing reliance on wind, and growing energy appetite mean we won’t have enough electricity on demand to cushion us through a supply crisis, maybe it’s time to have a serious conversation about just how much how much we’re demanding.

Blackout timeline

8 a.m. — Electrical system demand in Alberta is 8589 MW. The price per $14.29 per megawatt hour. The temperature is 24 degrees Celsius

8:34 a.m. — ATCO Power’s coal-fired Battle River Plant 5, with a capacity of 385 MW, goes off-line.

10 a.m. — The temperature climbs to 28 degrees C. Electricity use climbs to 9355 MW. The price rises to $125.64 per MWh.

11 a.m. — Electricity use hits 9589 MW, a new summertime record for Alberta. The price hits $502.59.

1 p.m. — Electricity use climbs to 9842 MW. The price hits $899.52.

1:06 p.m. — TransAlta’s Keephills 1 power plant, with 406 MW generation capacity goes off-line.

1:08 p.m. — The price of electricity hits $999.99 per MWh

1:37 p.m.  — AESO, the Alberta Electrical Systems Operator, issues a Level 1 alert.

2 p.m. — The temperature climbs to 32 degrees C. Electricity use climbs to 9885 MW, a record. The price stays at $999.99 per MWh

2:06 p.m. — AESO declares a Level 2 electricity alert.

2:07 p.m. — A heat sensor malfunctions at Capital Power’s Genesee 2 plant, with a capacity of 400 MW.

2:10 p.m. — AESO declares a Level 3 alert, orders major distributors including Enmax and Epcor, to shed electricity load. The price hits the maximum $1000.00 MWh

2:58 p.m. — TransAlta’s 362 megawatt Sundance 3 generator, which had been off-line for servicing since Friday, comes back into service.

3 p.m. — The temperature hits 32 degrees. Thanks to rolling blackouts, electricity use drops slightly to 9654 MW. Price remains at $1000 per MWh

3:46 p.m. — ATCO Power’s 385 MW Joffre natural gas power plant goes off-line.

4 p.m. — The temperature is 33 degrees C. Electricity use declines to 9573 MW. Price remains at $1000.

5 p.m. — AESO reduces alert status to level two. Power use rises to 9606 MW. The price stays at $1000.

5:13 p.m. — ATCO’s Joffre plant comes back on line.

5:14 p.m. — Capital Power’s Genesee 2 back on line

5:41 p.m. — AESO reduces power alert status to level 1

11 p.m. — The price of electricity falls sharply to $19.74 MWh. Demand levels to 8936 MW.