The Alberta government under Premier Danielle Smith has taken a keen interest in reshaping the province’s electricity grid. First it set its sights on renewable energy, imposing a sudden moratorium on all new project approvals, then it instituted tough new regulations on wind and solar, including limiting where they can be built. But their target wasn’t always renewable power. Previously, the government also took umbrage with large natural gas generators withholding power to drive high prices even higher. Electricity bills in Alberta were soaring, which inevitably leads to government action. Throw in a dash of federal regulations tied to emissions and the timing was perfect for Smith’s government to initiate wide-ranging reforms of Alberta’s grid. Last year, at the request of the government, the system operator set out to restructure Alberta’s market for the first time in more than 30 years — right around that sudden moratorium on renewable energy development, which the industry still hasn’t recovered from. Consultations on the restructured energy market, which the system operator said included over 230 organizations, started in the spring of 2024. The new market is not expected to be fully operational until 2030. The Alberta Electric System Operator, which oversees the grid, recently announced the final design of its reforms, called the Restructured Energy Market: a dense set of guidelines that will hurt renewable energy, potentially increase prices and could impact investments in new power generation for years. New rules governing Alberta’s private electricity market could make it harder to build and operate renewable energy projects by making them pay for the transmission lines that connect them to the grid. Photo: Leah Hennel / The Narwhal The process included numerous consultations over 18 months with generators, distributors and large consumers, navigating a complex mix of proposals meant to rein in the market power of generators and ensure more reliability on the grid — including balancing intermittent renewables with energy storage and gas generation. There were three pillars it was meant to address: affordability, reliability and decarbonization.Market insiders, some of whom spoke off the record with The Narwhal, say the new plan might address reliability, but affordability is a big question mark and decarbonization is nowhere to be found. The office of Nathan Neudorf, the minister of affordability and utilities, called the market redesign “a smart, forward-thinking solution,” in a statement to The Narwhal. “The changes that will be made through the Restructured Energy Market implementation will help ensure stronger grid reliability, more predictable and affordable costs for Albertans, and optimal infrastructure use and improved certainty for investors,” it read. Here’s what we know about the new market design and what it could mean for Alberta’s electricity grid, from prices to blackouts and more. Real quick recap — what is Alberta’s electricity grid? The grid has three main players: generators, distributors and consumers. Electricity comes from many different privately owned generators, or suppliers. Most of the electricity generated in Alberta is from natural gas, on average almost 80 per cent. Then there are the distributors, which build and run wires going from the generation source and send it along the big high-tension wires criss-crossing the province, then through smaller wires to your home. In other provinces, the prevailing model is a Crown corporation that generates and distributes electricity, with prices set by a regulator. This was the model in Alberta until the mid-to-late ’90s. Not so anymore. Then there’s you, the consumer. Not to mention other large consumers (say, a bitcoin mining facility). Overseeing it all is the Alberta Electric System Operator, a statutory corporation mandated by provincial legislation to ensure the lights stay on — making decisions about how much power is required, who to buy it from and for how much. The electricity market is changing? What does that even mean? Alberta currently has a complex and often confusing private electricity market, where private generators offer electricity at different prices. The system operator determines how much electricity it needs to keep the lights on and picks which generators actually get to supply their power (and get paid) based on the best prices. If, as a power generator, your price is too high and there’s enough power at lower prices to cover the need, you’re out of luck. Logically, Albertans should get a good price amidst all of this competition. Right?Wellllllllll. One issue in Alberta has been the consolidation of generation in the hands of fewer, larger corporations. These big generators withheld power from some plants to restrict the amount of power available and drive up prices. That’s called “economic withholding” and it was costing Albertans a lot of money, which caught the government’s attention. There was also concern from the government and the system operator over uncertainty caused by federal regulations including the proposed Clean Electricity Regulations. There was a feeling that something needed to be done to incentivize investment. Under the new plan, there are new financial incentives for generators to guarantee facilities produce power when demand is high and supply is low — in other words, to help prevent blackouts or brownouts — and incentives for power that can fill shortfalls quickly. Economic withholding is still technically possible under the final designs, but the Restructured Energy Market includes a rule that a generator must charge a lower price once its profits reach a set threshold. “[The new plan] ensures that when there is limited competition, generators cannot use market power to maintain prices above fair levels over a prolonged period,” the system operator said in response to questions from The Narwhal. “These rules protect consumer affordability while allowing cost recovery to attract investments that enhance grid reliability.” But experts say one key sector will likely struggle the most under the new plan: renewables. New plan will force renewables to pay for their own power lines There are two big changes to the market that will make it difficult for renewable energy to build or operate in Alberta. The first is a change to the government’s transmission (power line) policy. It didn’t actually stem from the market reform process, but it still has an impact and led to the introduction of a regional pricing system and some relief for generators impacted by power line changes — which critics say isn’t enough. Previously, Alberta had what’s called a “zero-congestion transmission policy,” which meant when you built a power-generation project, the government would invest in transmission infrastructure to ensure you could get your energy to market. That meant building power lines, though in practice those investments were uneven. Now, with the change to a new policy, generators will have to pay for new power lines if they can’t connect to the grid. The rules are meant to encourage generators to build in areas where there’s already transmission. It will also mean if the lines are full, you can’t get your power to market. But where the power lines already are is … not ideal for renewable power generators. In windy and sunny southern Alberta, for example, the government didn’t invest as much in power lines as it did in, say, the oilsands region. Then the government and system operator didn’t foresee — and then struggled to keep up with — the surge in renewable energy spread across the windier and sunnier areas. “The Alberta Electric System Operator and the government have consistently over the last almost decade underestimated how much renewable generation there would be in those areas, and therefore haven’t maintained, upgraded and modernized the transmission lines to those areas to allow the province to take advantage of those great wind and solar resources,” Jason Wang, an electricity analyst with the Pembina Institute, said in an interview. Now, the cards are stacked against wind and solar. The new transmission policy will also impact smaller generators and upstarts of all kinds. High prices for electricity partly motivated the Alberta government’s overhaul of its rules governing the power market. But according to modelling by one consulting firm, prices could rise as a result of the changes. Photo: Amber Bracken / The Narwhal And there’s one more blow to renewables on the power lines front. A new regional pricing mechanism, part of the market reforms, will encourage generators to build in regions with less congestion on those power lines — which in practice will impact the windy and sunny areas without as much power line capacity. Again, this will impact wind and solar projects in southern Alberta. “Alberta’s energy-only market works by encouraging new investment when more power is needed, using price signals to guide decisions,” the system operator said in an email. “A healthy market is one where supply and demand respond to these signals.” The new rules do provide some financial relief for existing projects that expected more transmission infrastructure to be built and didn’t budget for variable pricing. But critics say it’s not enough and will only last for eight years, too short for projects with lifespans up to 30 years. Modelling shows some existing renewable generators could face bankruptcy. The system operator said there are still some details to be worked out when it comes to transmission planning and it is currently engaging with stakeholders. It said renewables “dominate” its current connection list, although the majority of those projects are in the early stages of planning. The new plan will also single out renewables for penalties if there’s a power shortage The second big impact is from new charges applied to renewable generators for covering what’s known as ancillary services — power generation that can be brought on quickly in case there’s a big swing in demand or shortage of generation. It’s basically an insurance policy for situations when there unexpectedly isn’t enough power. That could stem from solar and wind going offline (i.e. an especially cloudy or still day), for example, but it can also be because the system operator got its forecast wrong. The new market calls for whoever is responsible for uncertainty in the system to pay the cost of the ancillary services. That means wind and solar. Even if the fault truly rests with the system operator’s forecasting models that don’t adapt in real time. In short, renewable generators would be squeezed and investors would be reluctant to invest. Things are certainly less dismal for gas generators and for storage projects, but even then, there’s so much uncertainty and instability that it could stall investments for years. Why aren’t we connecting to other provinces? Interties — the connections with other provinces and states that can provide an important reliability backstop by pulling in power from other jurisdictions — were not included in the final design, but the system operator says those conversations continue outside of this process. “We’re talking with our neighbours to see what’s next,” Aaron Eggen, the CEO of the system operator, said in response to a question from The Narwhal at a media briefing to launch the new market design. “That’s very much an exercise that’s ongoing and has been heightened over the past year.” The link with Saskatchewan isn’t currently functioning and B.C. has expressed concern over Alberta “restricting” electricity imports. To the south, Berkshire Hathaway Energy — the private company which owns the Montana intertie — argues Alberta is also restricting imports on the intertie it operates between Montana and Alberta and has filed a complaint with the Alberta Utilities Commission, the regulator of Alberta’s electricity grid. Has anyone reviewed this thing? The regulator review is coming at the end of this process, a reversal of how things are normally done. Typically, the review would come before the changes are introduced into the market. Insiders, some of whom spoke off the record, flagged this switch as a significant concern. As it stands, the system operator is on its own to shape the market changes, implement them and hope that everything works out for Alberta’s power grid — and the people who rely on it. So what happens to Albertans’ power bills? Are they going down, at least? There are still significant questions about real-world impacts and there are many factors that could push prices up or down, but modelling by Energy + Environmental Economics, a consulting firm, shows prices are expected to rise. Plus, if there are significant reductions in renewable investment, which produces cheap power, that could also impact prices. “They shield us from price volatility in gas markets, and if the government looked at the system comprehensively, they should see, if they do the proper analysis, that wind and solar reduce rates for Albertans,” Wang said. Recent Posts Alberta’s new plan for its electricity market punishes renewables Sept. 25, 2025 10 min. read Alberta’s private electricity grid is complicated. So are plans to overhaul it. 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Albertas new plan for its electricity market punishes renewables
