Efficiency between markets is determined by the interplay of prices and costs. When one market offers lower prices compared to another, it tends to export more power, while higher prices result in increased power imports. Thus, a positive correlation is expected between prices and imports, and a negative correlation between prices and exports.
In 2023, from January to April, Alberta experienced a remarkable shift as it became a net exporter, reflecting relatively lower prices compared to the Mid-Columbia (Mid-C) region. Figure 1 indicates the daily price differential between the Alberta and Mid-C markets, alongside the daily volumes of imports and exports. The chart highlights a clear relationship between the price differential and the import-export dynamics. A higher price differential, reflecting higher prices in Alberta, corresponds to increased imports, whereas a lower price differential corresponds to increased exports. These findings align with the characteristics of price arbitrage between jurisdictions.
On average, 215 MW of electricity were imported while 367 MW were exported in the first four months of 2023. This contrasts sharply with 2021, where the average import level was 398 MW and exports stood at 101 MW. Notably, the average import and export levels have undergone significant changes. Furthermore, the frequency of imports and exports in 2021 and 2023, as shown in Figure 2, displays a similar trend, as the number of hours with imports decreased from 2827 in 2021 to 1294 in 2023. Conversely, the number of hours with exports increased from 52 in 2021 to 1585 in 2023.
This presents an interesting observation: despite Alberta prices increasing from 2021, with an average of $142 in 2023 compared to the previous average of $93.59, we are observing a decrease in imports. This decline can partly be attributed to the relatively lower prices in Alberta compared to the Mid-C region.
The change of flow in the Columbia River system offers part of the explanation for the altered price dynamics. From January to April, the average flow in 2021 was 150,550 ft3/s, while in 2023, it decreased to 117,439 ft3/s. As the flow has decreased, the capacity for exports from the Pacific Northwest region has also decreased, thus explaining the lower number of imports into Alberta.
It is important to note that the AESO has set a maximum of $999.99/MWh to the offer price, while CAISO has set a Hard Energy Bid Cap of $2,000/MWh and a Soft Energy Bid Cap of $1,000/MWh. Such difference can influence the direction of MW flow and impact import levels during times of constrained supply.
In Figures 3 and 4, the relationship between imports and price differentials is presented for the months of January to April in 2021 and 2023, respectively. These figures reveal a positive correlation, with a stronger link evident in 2023. We observe a difference in the intercepts of both regressions, which can be further understood with the analysis of the Load Shed Service for imports (LSSi).
The AESO utilizes LSSi, a transmission system reliability product, to manage risk of sudden reduction to import volumes. LSSi enables the AESO to curtail load when necessary to ensure grid reliability. Consequently, availability of LSSi can impact import levels and intertie behavior.
The minimum amount of LSSi Load Requirement for 2023 was published on March 10th, and it shows an increase in the LSSi requirements for the same ATC levels compared to the one from 2021. This means that more LSSi is required in 2023 to enable the same level of flows as 2021. Additionally, the Available Transfer Capability (ATC) was higher in 2021, enabling a larger volume of imports at a given price differential. These factors are contributing to the observed decrease in imports during the current year.
Looking ahead, the AESO's 2023 Reliability Requirements Roadmap and the ongoing intertie restoration project provide insights into the direction of the intertie system. The AESO is assessing plans to restore intertie scheduling capability, including B.C. intertie restoration options. As part of the strategic approach for the Alberta-B.C. intertie restoration, the AESO plans to increase Fast Frequency Response (FFR) requirements by increasing the required arming levels in the LSSi/FFR Arming Table.
These developments underscore a key message: the interplay of price differentials resulting in lower flows and LSSi changes have contributed to a noticeable shift in intertie dynamics.