Wednesday, September 3, 2025
Earlier this year, the Alberta government announced it was changing electricity regulations in order to strengthen the power grid, lower and stabilize utility bills, and encourage investment in the province. However, critics say the electricity market rules recently released encourage more expensive means of power generation and discourage new investment in wind and solar projects—the lowest-cost forms of energy generation.
“This means Albertans will be forced to pay more for electricity than they would if all options competed on a level playing field,” says Jason Wang, senior analyst of the Pembina Institute’s Electricity program, made the following statement in response to the Alberta Electric System Operator’s (AESO) finalized design for the province’s Restructured Energy Market (REM).
“Multiple analyses of near-final versions of REM, including those commissioned by the AESO, consistently show the changes increase electricity prices by at least eight per cent and as high as 30 per cent,” explains Wang. “In fact, if changes are not phased in carefully, we could see some existing renewable energy projects put immediately into the red, resulting in the cancellation of contracts and projects shutting down early. At the same time, there would be very little investment in new renewable energy projects.
According to Wang, the Pembina Institute is also concerned that the finalized REM is currently intended to bypass the Alberta Utilities Commission’s (AUC) approvals process. AUC review is a critical mechanism that ensures new electricity regulations and changes to the market are done in a way that protects the social, economic and environmental interests of Albertans. The new rules represent a significant change to the existing market setup and should be subject to public scrutiny beyond industry engagement.
“While the new rules do provide some positive signals for energy storage, other ways to strengthen the grid are left on the sidelines, including demand-side management (DSM) and interties,” states Wang. “DSM is the most efficient way to manage demand on the grid and has been shown in provinces like Ontario to save money for both utilities and their customers. In addition, despite substantial discussion about removing market barriers to interprovincial electricity trade, these changes have been postponed.”
The objectives of the Restructured Energy Market design, outlined in late 2024, are to ensure a reliable, affordable electricity system that facilitates decarbonization by mid-century.
“Taken together, this restructured market will increase costs for Albertans, disincentivize investment in the cheapest forms of energy, and rely on a limited set of tools to strengthen the grid,” says Wang, who advises that Alberta should manage its electricity supply in a way that encourages the scale up of the lowest-cost, most readily deployable energy resources — wind and solar energy.
A key aspect of the new design involves a fundamental change to the structure of the price of power. Currently, Alberta’s market operates using a uniform price for the entire system where, in any given hour, all generators are paid the same price for their power regardless of their location. Under the new design there will be different prices for different locations, based on how much it costs to make and deliver the power, including any traffic (congestion) in the power lines. It’s analogous to paying more for a package delivery if the roads are busy. This system is called locational marginal pricing.
“We know from examples around the world that, when paired with grid enhancements such as interprovincial transmission, renewables help to deliver a reliable, affordable and energy-secure grid. In the last two years, the province has seen almost 11 gigawatts of clean energy projects get cancelled in Alberta due to regulatory uncertainty,” he emphasizes. “At the same time, other governments in Canada and around the world are rapidly scaling up their supply of low-cost clean electricity to support their economic growth. In this way, Alberta is losing a competitive advantage in attracting new investment, jobs and tax revenues to the province.”
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Featured photo credit: istock.
