An Alberta-British Columbia Electricity Grid Model
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An Alberta-British Columbia Electricity Grid Model by Tianyang (David) Zhang Bachelor of Science, University of Victoria, 2017 An Extended Essay Submitted in Partial Fulfillment of the Requirements for the Degree of MASTER OF ARTS in the Department of Economics We accept this extended essay as conforming to the required standard Dr. G. Cornelis van Kooten, Supervisor (Department of Economics) Dr. Fatemeh Mokhtarzadeh, Member (Department of Economics) © Tianyang (David) Zhang, 2020 University of Victoria All rights reserved. This extended essay may not be reproduced in whole or in part, by photocopy or other means, without the permission of the author. Page | 1 Abstract British Columbia (BC) and Alberta (AB) have different asset mixes for generating electricity. While BC relies primarily on hydropower, AB generates its power from various sources, but primarily fossil fuels. Although both provinces currently work independently from one another due to ideological and political disagreements, one might be curious about what would happen if both provinces work together. In this research project, we introduce an integrated electricity grid model of BC and AB, based on two stand-alone grid allocation models of each province. After introducing each model, we conduct various case studies of the integrated model to address some popular topics in the economics of electricity grids, such as a carbon tax, renewable energy, and nuclear power. Key words: grid allocation model; renewable energy; hydroelectricity Acknowledgements The author’s sincerest gratitude goes to Dr. van Kooten, Jon Duan and Ms. Voss for their help on this project. He also wants to thank his parents and friends for their physical and emotional support through his seven years of journey at UVic. Page | 2 Table of Contents 1. Introduction ........................................................................................................................... 4 2. British Columbia’s Electricity System .................................................................................. 6 2.1 British Columbia Grid Allocation Model ..................................................................... 9 2.2 Reservoir Operation .................................................................................................... 11 2.3 Power Generation ........................................................................................................ 13 2.4. Upstream and Downstream Connections ................................................................... 14 3. Alberta Electricity System ................................................................................................... 14 3.1 Alberta Grid Allocation Model ................................................................................... 18 3.2 Hydroelectricity Generation in AB ............................................................................. 21 3.3 Thermal Generator Operation ..................................................................................... 21 3.4. Wind Operation .......................................................................................................... 22 4. Transmission Interties ......................................................................................................... 23 5. An Integrated Alberta-British Columbia Grid Model ......................................................... 24 6. Data Sources ........................................................................................................................ 24 7. Results and Sensitivity Analyses ......................................................................................... 26 8. Conclusions ......................................................................................................................... 33 9. References ........................................................................................................................... 36 Appendix 1. Hydro Data for BC .............................................................................................. 39 Appendix 2. GAMS CODE ...................................................................................................... 40 Page | 3 1. INTRODUCTION British Columbia relies primarily on hydroelectricity for its power needs, which makes it hard to reform its electrical generating system so as to reduce carbon dioxide (CO2) emissions. Contrarily, Alberta generates electricity from a variety of generating assets, including primarily fossil fuel assets, which enables the Alberta grid operator more flexibility to expand or contract production from some of its generators, at least in the longer run (Canadian Energy Research Institute, 2018). In particular, because Alberta relies heavily on fossil fuels for the generation of electricity, it has a broader scope to integrate renewable forms of energy into its generation composition, particularly solar and wind, thereby reducing CO2 emissions. In theory, it is more difficult for BC to bring in renewable sources because wind and solar energy might replace hydroelectric generation, thereby leaving CO2 emissions unchanged. Nonetheless, the two provinces can work together to lower overall CO2 emissions. Alberta can replace its fossil-fuel generators by wind and solar energy. At the same time, BC’s hydroelectric reservoirs can store excess electricity produced in Alberta against times when Alberta’s solar and wind production is low. Since Alberta has more sites and greater capacity potential for solar and wind energy, the province can utilize this advantage to reform its power-generation system, while using BC’s reservoirs as a battery to store excess energy (McWilliam, van Kooten, & Crawford, 2012; van Kooten, 2016; van Kooten & Mokhtarzadeh, 2019). Currently, the Alberta and BC electricity grids operate independent of one another, but trade when necessary. Exchanges of power are made along extant transmission interties. Our project is based on two stand-alone grid allocation models, each representing one province. Each model describes the electricity generating system of a province and its trade with Page | 4 the other and the United States (U.S.).1 While each model is stand alone, they can also be integrated so that non-dispatchable renewable energy generated in AB can be stored in reservoirs behind hydroelectric dams in BC, thereby reducing the costs of ramping output from thermal power plants in Alberta to accommodate intermittent wind and solar sources of electricity. Energy stored in BC can then be used in peak times to facilitate load requirements in both provinces at the least cost. By using BC’s storage facilities, Alberta can integrate wind and solar energy to a greater extent, thereby reducing CO2 emissions by lowering the need for thermal power plants. Electricity operators also have less need to run thermal generators at less-than-potential levels in the case of lower generation from wind and solar, thereby also lowering CO2 emissions. The integrated AB-BC grid model aims to maximize the aggregate net revenue to the operators of the two electricity grids. It is expressed as: Z = ZBC + ZAB (1) where Z refers to the total net revenue accruing to the grid operators and consisting of the sum of benefits to the individual provinces.2 Both provinces trade with the U.S. and with each other. From a social planner’s point of view, any import and export payments between AB and BC constitute transfers and do not affect the management of the grids. Therefore, the objective function can be interpreted as the net revenue accruing to BC and AB minus any payments to the U.S. for imported power. The rest of this paper is organized as follows. The independent BC and Alberta grid models are introduced in sections 2 and 3, respectively. Sections 4 and 5 provide details on transmission 1 A minor transmission intertie exists between Alberta and Saskatchewan; although discussed below, exchanges of power between these provinces are assumed to be insignificant. 2 Rather than net revenue, it is more appropriate to refer to Z as the gross margin because it does not include all of the costs incurred by the system operators. For example, costs related to ancillary services are ignored, such as spinning reserves and other backup resources. Page | 5 interties and the integrated model, which links the two independent models together. Section 6 introduces the sources of data used in the model. Section 7 presents various runs of the model and discusses the results. Finally, Section 8 provides concluding remarks and acknowledges problems with the current version of the model. 2. BRITISH COLUMBIA’S ELECTRICITY SYSTEM British Columbia has vast hydraulic resources for generating electricity. Table 1 provides a breakdown of BC’s power generation in 2017. Hydropower and biomass are the main generation sources, but hydro’s share is larger at 90%. In 2016, 96.5% of generating capacity consisted of renewables, which included biomass and wind sources in addition to hydropower; 98.4% of electricity generated in the province in 2016 came from renewable sources, with 88.0% from hydraulics (National Energy Board, 2017). For 2018, BC’s peak hourly load of 10,490 MW occurred at around 6 pm on January 2, with the smallest load of 5,033 MW occurring June 14 at about 6 am(both in pacific time). BC’s load duration curve for 2018 is depicted in Figure 1. During 2018, the hourly load varied by some 5,480 MW, or by more than 52% of peak load; 5,033MW is the lowest load, constituting the province’s