As the mercury rises, Alberta set a new summer record for power consumption on Wednesday, using 12,219 megawatts
Alberta natural gas prices may be down in the dumps this summer, but one growth area is sparking the sector on these sizzling July days — soaring electricity use.
The Alberta Electric System Operator reports the province set a new summer record for power consumption on Wednesday, using 12,219 megawatts (MW) of power. It comes just a week after the last record was set and temperatures soared across the province.
With air conditioners kicking into overdrive, Alberta also hit a new record for natural gas used for gas-fired electricity generation, topping 2.5 billion cubic feet (bcf) per day, according to analysis by RBN Energy.
And with the mercury expected to climb even higher next week – Environment Canada forecasts Calgary’s temperature will peak at 35C next Tuesday – that record could fall soon, said Martin King, RBN Energy’s managing director of North America energy market analysis.
“On Monday, Tuesday next week, we could see another record because when you get this hot, dry weather in Alberta, the winds just simply don’t blow as much,” King said Friday.
“When the wind doesn’t blow and you need power, sorry guys, you’ve got to go to natural gas-fired power generation.”
The new record came during the middle of summer, not during the bitterly cold winter months when demand for gas-fired power typically peaks, King noted.
He believes the record use is a positive sign for the Alberta gas industry, indicating stronger domestic demand for the coming years as more baseload electricity is needed; for the power sector, it showed gas prices didn’t simply spike because of a sudden demand surge.
For producers, it is a slight reprieve after a period of gas prices in Alberta being stuck in a funk.
“It makes a difference,” said Pine Cliff Energy CEO Phil Hodge.
“Just in the last few days, we’ve seen the gas prices go from 70, 80 cents to back over $1. That’s still a very sad point for gas prices…We came into this spring with too much gas in storage.”
On the power side, the new summer peak was largely driven by increased demand in residential, commercial and industrial sectors as Albertans fired up their fans and air conditioners, AESO director of forecasting and analytics Dave Johnson said Friday.
But there were several reasons for an all-time high of gas being used to generate power, Johnson added.
“In this last week, wind was pretty much at zero. The intertie (line between Alberta and B.C.) had maintenance…and it was pretty much at zero, and load was significantly higher,” he said.
“Next week, all things being similar, it should not be higher because the intertie has returned back to service.”
The news underscores the critical importance of gas-fired power generation in the province, as the last coal-fired unit – at Capital Power’s Genesee Generating Station – stopped burning the fossil fuel in June and switched to lower-emitting gas.
The province now has 13,000 MW of gas-fired generation, about 62 per cent of all capacity in Alberta, while more renewable projects are also being developed.
New large-scale generating projects are coming online or expected to enter the market in the next year, including the new 900 MW gas-fired Cascade Power Project being built near Edson, Capital Power switching its Genesee 1 and 2 units from coal to gas, and Suncor Energy’s new cogeneration project.
These developments and other coal-fired units that have already converted in recent years will add about one bcf per day of additional gas demand in Alberta, said Duane Reid-Carlson, CEO of electricity consulting firm EDC Associates Ltd.
“We’re looking to go higher yet would be my estimate from where we are today because we haven’t even got all the gas on and fully operating,” Reid-Carlson said.
He noted the province’s strong population growth – along with more housing and associated construction – is also driving increased electricity consumption.
For Alberta gas producers, the rise in domestic gas-fired power arrives at a fortuitous time after a gruelling spring and summer dominated by low prices.
AECO natural gas prices in the province sat at US85 cents per thousand cubic feet (mcf) on Thursday, while the benchmark U.S. price was $2.10, according to ATB Capital Markets.
“It’s good news in terms of demand,” said Sadiq Lalani, chief financial officer at Calgary-based producer Kelt Exploration.
“This little heat wave that we’re having might save the bacon for us, but it’s still a long way to go.”
A relatively warm winter led to high inventory levels and fears that storage in Western Canada could fill up by the end of August. If that happened, AECO prices could tumble into negative territory or producers would have to temporarily shut-in production, Lalani said.
Earlier this month, Kelt Exploration said it would postpone the startup of some newly drilled gas wells until the fourth quarter of the year due to weak prices. In the winter months, prices are expected to be higher with increased demand.
Hodge said the expected startup of the LNG Canada export facility next year on the B.C. coast and the rising demand for gas-fired electricity in Alberta – and potentially new data centres being built – offers hope for a stronger gas market in 2025.
“It’s a short-term issue that we will get through. We have done this before, this is nothing new,” Hodge added.
“Companies need to navigate the next (third and fourth quarters) but things are looking much more promising in ‘25.”
Chris Varcoe is a Calgary Herald columnist.