Alberta
Province “rewiring” Alberta’s electricity grid for growth
Rewiring Alberta’s electricity market
Alberta’s government is making changes to the province’s electricity market rules to restore the balance between affordability, reliability and sustainability.
Alberta’s government is modernizing the province’s electricity system to put Albertans first, restoring the balance between affordability, reliability and sustainability. To achieve this, Alberta’s government continues to work with its partners on power market reforms. Alberta’s transmission policies are also being updated to improve reliability, increase efficiency, protect ratepayers, and align Alberta with other jurisdictions. Alberta’s government is committed to the province’s unique competitive electricity market, which provides consumers with choice and makes the province a premier destination for investors.
Alberta’s electricity system was designed for a small number of baseload power plants generating reliable electricity. In 2016, Alberta’s accelerated coal phase out was rushed through without proper due diligence. With a growing supply of intermittent renewables instead of natural gas, the province’s power grid and prices can become as volatile as the weather.
The thousands of kilometres of new transmission lines that were required to connect renewables added costs for Albertans, and back-up sources are required to keep the lights on. As demand for electricity only continues to increase, it’s expected that Alberta’s need for electricity could more than quadruple in the coming decades. It is critical that Alberta’s government make changes now to ensure the affordability, reliability, and sustainability of the provincial grid in the decades to come as demand surges.
“Albertans deserve a modern electricity system that prioritizes affordability and reliability. As our electricity supply mix evolves so should our policies, and these updates to transmission policies are essential to ensuring Albertans are well-served by our electricity system for years to come.”
Following three years of engagement with industry, Alberta’s government is making changes to ensure the province’s ratepayers are no longer burdened with the full costs of building new transmission lines. Instead, costs for new transmission infrastructure will be assigned on a cost-causation basis going forward. This will incentivise new power plants to be built in optimal locations that take advantage of existing infrastructure, saving costs for both Alberta ratepayers and job creators. As a result of engagement with industry, Alberta’s government is aligning the province with other jurisdictions by giving the Alberta Electric System Operator (AESO) more market-based tools to increase the efficiency of the province’s grid, prioritizing the use of pre-existing infrastructure.
Updating Alberta’s Transmission Regulation is a significant and necessary step in modernizing the province’s electricity system. To enhance grid reliability, Alberta’s government is also making changes to streamline the process to build and maintain connections between our electricity grid and other jurisdictions. This will reduce red tape and enable critical improvements to happen more quickly. This will also help improve reliability by restoring the electricity grid connections between Alberta and British Columbia, as well as expanding the connections between Alberta and Saskatchewan.
“This is a positive milestone borne out of significant engagement and consultation with industry stakeholders, our partner agencies and the Government of Alberta. We appreciate the tremendous investment of time and effort that everyone has put into this process to reach this point, and we look forward to additional engagement in 2025 to further the detailed market design.”
Over the past year, the AESO has engaged extensively with industry on the technical design of a Restructured Energy Market with direction from Alberta’s government. A key aspect of these market reforms includes moving to a day-ahead market, where power generators will be required to commit their power on the previous day, rather than a couple of hours beforehand, making the system better positioned to respond to power fluctuations. This will increase reliability and stability, helping reduce the risk of potential grid alerts. With these changes, Alberta’s government is ensuring that reliability is prioritized, strengthening the grid so that Albertans can get the power they need regardless of the weather.
“Market design features like a day ahead market can help significantly reduce the likelihood of future grid alerts and will ensure that all necessary generators needed to meet electricity demand are online to provide power.”
Minister of Affordability and Utilities Nathan Neudorf has sent a letter to inform the AESO of the government’s latest decisions on changes to the Transmission Regulation and further guide the ongoing technical design of a Restructured Energy Market. Alberta’s government intends to bring forward legislation to support these changes in the new year. In the meantime, the temporary measures enacted by Alberta’s government on July 1, 2024 will continue to protect Albertans, ensuring reliable power and predictable utility bills.
Quick facts
- The Alberta Electric System Operator (AESO) manages and operates the provincial power grid on behalf of Albertans.
- The Market Surveillance Administrator (MSA) is a public agency that protects and promotes the fair, efficient and openly competitive operation of Alberta’s electricity and retail natural gas markets.
Premier Danielle Smith issued the following statement on the April 2, 2025 U.S. tariff announcement:
“Today was an important win for Canada and Alberta, as it appears the United States has decided to uphold the majority of the free trade agreement (CUSMA) between our two nations. It also appears this will continue to be the case until after the Canadian federal election has concluded and the newly elected Canadian government is able to renegotiate CUSMA with the U.S. administration.
“This is precisely what I have been advocating for from the U.S. administration for months.
“It means that the majority of goods sold into the United States from Canada will have no tariffs applied to them, including zero per cent tariffs on energy, minerals, agricultural products, uranium, seafood, potash and host of other Canadian goods.
“There is still work to be done, of course. Unfortunately, tariffs previously announced by the United States on Canadian automobiles, steel and aluminum have not been removed. The efforts of premiers and the federal government should therefore shift towards removing or significantly reducing these remaining tariffs as we go forward and ensuring affected workers across Canada are generously supported until the situation is resolved.
“I again call on all involved in our national advocacy efforts to focus on diplomacy and persuasion while avoiding unnecessary escalation. Clearly, this strategy has been the most effective to this point.
“As it appears the worst of this tariff dispute is behind us (though there is still work to be done), it is my sincere hope that we, as Canadians, can abandon the disastrous policies that have made Canada vulnerable to and overly dependent on the United States, fast-track national resource corridors, get out of the way of provincial resource development and turn our country into an independent economic juggernaut and energy superpower.”
From the Fraser Institute
By any measure, Alberta is an energy powerhouse—within Canada, but also on a global scale. In 2023, it produced 85 per cent of Canada’s oil and three-fifths of the country’s natural gas. Most of Canada’s oil reserves are in Alberta, along with a majority of natural gas reserves. Alberta is the beating heart of the Canadian energy economy. And energy, in turn, accounts for one-quarter of Canada’s international exports.
Consider some key facts about the province’s energy landscape, as noted in the Alberta Energy Regulator’s (AER) 2023 annual report. Oil and natural gas production continued to rise (on a volume basis) in 2023, on the heels of steady increases over the preceding half decade. However, the dollar value of Alberta’s oil and gas production fell in 2023, as the surging prices recorded in 2022 following Russia’s invasion of Ukraine retreated. Capital spending in the province’s energy sector reached $30 billion in 2023, making it the leading driver of private-sector investment. And completion of the Trans Mountain pipeline expansion project has opened new offshore export avenues for Canada’s oil industry and should boost Alberta’s energy production and exports going forward.
In a world striving to address climate change, Alberta’s hydrocarbon-heavy energy sector faces challenges. At some point, the world may start to consume less oil and, later, less natural gas (in absolute terms). But such “peak” consumption hasn’t arrived yet, nor does it appear imminent. While the demand for certain refined petroleum products is trending down in some advanced economies, particularly in Europe, we should take a broader global perspective when assessing energy demand and supply trends.
Looking at the worldwide picture, Goldman Sachs’ 2024 global energy forecast predicts that “oil usage will increase through 2034” thanks to strong demand in emerging markets and growing production of petrochemicals that depend on oil as the principal feedstock. Global demand for natural gas (including LNG) will also continue to increase, particularly since natural gas is the least carbon-intensive fossil fuel and more of it is being traded in the form of liquefied natural gas (LNG).
Against this backdrop, there are reasons to be optimistic about the prospects for Alberta’s energy sector, particularly if the federal government dials back some of the economically destructive energy and climate policies adopted by the last government. According to the AER’s “base case” forecast, overall energy output will expand over the next 10 years. Oilsands output is projected to grow modestly; natural gas production will also rise, in part due to greater demand for Alberta’s upstream gas from LNG operators in British Columbia.
The AER’s forecast also points to a positive trajectory for capital spending across the province’s energy sector. The agency sees annual investment rising from almost $30 billion to $40 billion by 2033. Most of this takes place in the oil and gas industry, but “emerging” energy resources and projects aimed at climate mitigation are expected to represent a bigger slice of energy-related capital spending going forward.
Like many other oil and gas producing jurisdictions, Alberta must navigate the bumpy journey to a lower-carbon future. But the world is set to remain dependent on fossil fuels for decades to come. This suggests the energy sector will continue to underpin not only the Alberta economy but also Canada’s export portfolio for the foreseeable future.
Jock Finlayson
Senior Fellow, Fraser Institute
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