Micro-Generation in Alberta
Since January 2009 Alberta energy regulations allow for Albertans to generate and be credited for their own environmentally-friendly electricity. How has this policy affected the Albertan energy market? Is micro-generation a good idea for everyone?
Micro-Generation Explained
Micro-generation is electricity generation on a small scale, which in Alberta is defined as 1 megawatt (MW) or less. Alberta's micro-generation regulations classify micro-generation by size: small micro-generators, who have generating capacity up to 150 kW (what is the difference between a kW and a kWh?), and large micro-generators, who have capacity between 150 kW and 1 MW. These regulations concern generation exclusively from renewable or alternative energy, such as solar panels, small-scale hydro, wind, biomass, micro-cogeneration, geothermal, and fuel cells, and must be located on or adjacent to the property of the person wishing to generate their own electricity. Electricity generation must be EcoLogo-certified, or proven to emit less than 418 kilograms per megawatt hour (kg/MWh) of greenhouse gas emissions.
Alberta's Micro-Generation Regulation
The Electric Utilities Act Micro-generation Regulation was passed in 2008, and came into effect in January 2009. Micro-generators were able to connect to the grid prior to the implementation of the regulations, but the process was long and complicated. The 2009 micro-generation regulations simplified the process to make it more accessible to Albertans. The current regulation will expire at the end of 2015 so that it can be, in the words of the Regulation, reviewed "for ongoing relevancy and necessity". The regulation gives the Alberta Utilities Commission (AUC) responsibility to oversee the implementation of the regulation, and to investigate any disputes.
Consistent with Alberta energy policy, customers wishing to install micro-generation must do so at their own cost. However, the electricity utility (wire services provider) is responsible for the costs of connecting a micro-generation generating unit to the grid, as well as for metering and meter data management.
The purpose of the regulation is to open up options to energy customers and allow them to become self-sufficient in their electricity generation. Customers with micro-generation can not sell electricity, and any electricity that they can return to the grid is excluded from the Alberta Power Pool. They can instead receive credit for excess electricity that goes to the grid. The regulation gives customers and energy retailers the right to decide the terms of compensation for excess electricity (which must be expressed in writing), otherwise small micro-generators are to receive credit for their electricity at the retailer's retail energy rate, and large micro-generators at the hourly pool price for each hour in the billing period.
Impacts of the Micro-Generation Regulations in Alberta
The number of micro-generation units in Alberta has been rapidly increasing since the Micro-generation Regulations were passed in 2009. As of January 2014 there were almost 890 micro-generation units in Alberta, with a combined capacity of 4.5 MW. While this does not represent a significant portion of Alberta's energy consumption or generation capacity, it is at least a considerable jump from only 122 micro-generation units in January 2010.
Source: Alberta Energy
Controversies relating to the Micro-generation Regulations
The Micro-generation Regulations have been revised once, in 2013. Prior to this revision several competitive energy suppliers were able to offer a two-tiered compensation system to micro-generators, in which micro-generators were compensated at a rate that was higher than the rate at which they purchased energy. The 2013 revision removed this possibility, so that excess electricity returned to the grid by micro-generators receives a rate equal to the retail rate. Smaller retail companies that had been offering this two-tier rate argued that this decision was a result of pressure from larger, more established retail energy companies that did not offer this option.
While the micro-generation policy is not intended to encourage generation for commercial profit, this reduction in the potential for profit from micro-generation means that it may take longer for customers to pay off the costs of investing in micro-generation. Indeed, the revision in compensation for micro-generation has attracted criticism from environmental think-tank the Pembina Institute and others, who argue that the revised regulations force micro-generators to sell their electricity at a discount. This is because the retail rate is typically less than the wholesale market price at the times of day when micro-generators produce excess electricity. Considering that micro-generation combined capacity represents a tiny proportion of total Alberta electricity capacity, it is unlikely that this would have a great impact on prices. However, it does highlight how the current micro-generation regulations could provide better incentives to encourage consumers to install more micro-generation capacity
Should I Install a Micro-Generation Unit?
The intention of the Micro-generation Regulation is to open up options for consumers for their energy source by simplifying the process of installing micro-generation units. The government of Alberta does not provide any financial incentives (such as grants for construction, or guaranteed prices for electricity generation) to further encourage micro-generation development. This is in line with Alberta's energy policy, which has been to encourage electricity generation costs to be borne by private actors. You should also keep in mind that these regulations are designed to facilitate self-sufficiency in electricity generation; customers who wish primarily to sell their energy are not able to build a generation unit under these regulations.
This means that installing your own micro-generation capacity could involve a considerable investment, with some estimates ranging from 15 to 45 years for the costs to be paid off. How quickly you could pay off the costs of installation depends on how much electricity you generate (keeping in mind that you are not allowed to install generation capacity that exceeds your estimated net annual consumption), and the price of electricity. However, electricity generation would essentially be free once the costs of the system were paid off. Furthermore, it is unlikely that anyone considering installing a micro-generation is doing it for purely economic reasons; the renewable energy/low emissions requirement makes it a strong option for those who would like to reduce their carbon footprint.
For those who are interested in installing micro-generation but unsure whether they can afford paying the costs up-front, ENMAX offers a Home Solar 15-year lease program that allows you to make monthly payments over 15 years towards the costs of installing and maintaining your home solar system. This decreases some of the up-front investment costs associated with purchasing and installing solar equipment, but would also reduce impact of micro-generation on your monthly bill (as you would have to make monthly payments to ENMAX) and is a long-term commitment.
Want to know more about the steps involved for installing micro-generation on your property?