New merchant transmission line with Montana a no-cost link for Albertans

By Dave Cooper, Edmonton JournalJune 7, 2013

EDMONTON – Alberta’s newest transmission line running between the Lethbridge area and Great Falls, Mont., will operate like a pipeline as a Spanish-owned wind energy firm and an American investment bank will pay to use it.

The Enbridge-owned link is the province’s only private or merchant line and operates as such because the power is coming from the U.S. rather than other provinces or local generators, says the Alberta’s Electric System Operator.

“The cost of planning, designing, constructing, operating and interconnecting a merchant intertie are not paid by Alberta rate payers,” said Dawn Delaney, AESO spokeswoman.

The $300-million, 340-kilometre, Montana-Alberta Tie Line (MATL) is expected to be energized within three weeks and be in full operation by midsummer. The line is rated at 300 megawatts and will be able to operate in either direction to either import or export power. Because Montana has excess power and limited connections to other states, the Enbridge (TSX:ENB) line will be supplied initially by Spanish-based Grupo NaturEner’s 189-megawatt Rim Rock wind farm near Kevin, Mont.

Enbridge spokeswoman Amber Pastoor said the line should “enable the development of new wind energy projects in northern Montana and southern Alberta, which are home to some of the best wind energy sources in North America.”

Alberta’s has two other intertie lines — a 1,200-megawatt link to B.C. and a 153-megawatt link to Saskatchewan. They can be used to move electricity back and forth in times of power shortages in any of the provinces, as happened last summer when several plants in Alberta went off-line during a few hot days.

Despite these links, Alberta continues to be one of the least interconnected jurisdictions in North America, said Delany. But that doesn’t mean there are more intertie lines proposed.

“We have not identified any plan (beyond MATL),” she said.

The B.C. and Saskatchewan intertie lines are “assets included in the regulated transmission costs … which are paid by Alberta rate payers,” she added.

Enbridge bought the MATL project in 2011 from Tonbridge Power and said at the time it could eventually be expanded.

Montana has the best wind resource in the U.S. and Grupo NaturEner has big expansion plans in that region, as well as in southern Alberta. Last month the company announced two large wind projects for the Medicine Hat area.

Unlike large coal-fired power plants and some natural-gas fired generators that supply a constant amount of power, called a base load, wind turbines provide electricity only about 30 to 40 per cent of the time — when the wind blows. As such, wind energy enters the Alberta competitive wholesale market at a price of zero, and then is a price-taker — getting the going rate which varies widely as demand goes up and down during the day.

AESO says there are 170 participants in the Alberta marketplace and the power traded each year is worth $6.4 billion. There are no green energy subsidies, although wind and solar electricity costs more to generate when compared to coal and natural gas.

In the Montana case, the risk is spread around, with Rim Rock electricity sold to Morgan Stanley Capital Group through a power purchase agreement that also includes the environmental green credits needed by San Diego Gas and Electric. It is the same kind of arrangement that made Alberta’s two recent wind farm projects economically possible in the province’s open marketplace.

Edmonton-based Capital Power (TSX:CPX) used the California credits to make its new Halkirk wind farm more economical, and says the Montana line and the new wind power is a viable option not in need of special treatment through provincial subsidies.

“Enbridge is not guaranteed their cost of recovery, so that is the whole idea of where a merchant line comes in,” said Bryan DeNeve, senior vice-president for corporate development.

“If consumers were forced to buy power from renewable sources, that would be a whole different approach to Alberta’s free market and we’d start to look like Ontario (with its Feed-in-Tariff) with its higher prices paid for wind energy.”

DeNeve says the open market forced generators like Capital Power to be innovative and take risks, unlike the old system where provincial utility planners allowed large coal-fired plants to be built based on optimistic long-term estimates that often meant plants were underused — but were still part of the rate structure.

The addition of up to 300 megawatts of Montana windpower is not expected to affect Alberta’s power prices, says AESO.

And with a booming economy that is demanding more power each year, plus the closure of what Capital Power expects will be 2,400 megawatts of older coal-fired power plants by 2021, there is plenty of room for new projects.

“Industry is already responding to this with new gas-fired plants being planned,” he said, adding that the new fast-start technology of the latest generation of gas turbines means they will be a perfect companion to wind energy, able to ramp up a matter of minutes to cover the periods when wind energy is not available.

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