Electricity Discussion: After a whole summer of volatility, the Alberta power market has taken a breather, but even September’s monthly weighted average price of $0.0363/kWh would have been a high-water market by a comfortable margin in both 2016 and 2017. Prices should remain steady as we enter shoulder season, but any increase in natural gas prices would have a knock-on effect for power generation and could send prices higher this winter.
Also worth discussing is the possibility of a new provincial government in Alberta - the election is set for May 31st, 2019 and Rachel Notley’s NDP will face a stiff challenge from Jason Kenney’s United Conservative Party. Kenney is running on an anti-carbon tax platform, similar to the Ford platform that recently won an election in Ontario. The carbon tax has drive significant change in the generation profile, accelerating the transition to renewable sources and the closure of coal plants, but at the cost of increased power rates. Eliminating the tax would reduce power costs, but the federal government may step in and impose and carbon tax on Alberta, which sets the stage for a very interesting year.
Natural Gas Discussion: The big news this month is that the LNG export plant in Kitimat, BC is a go. The Shell-led consortium approved the construction of the plant scheduled for completion in 2022/2023. The plant will only run at half capacity initially, but it will still be able to process a significant amount of Canada’s natural gas production. In the near term, slim storage injections have caused winter 2019 to increase in price. We will be going into winter with inventory levels below 5-year minimum levels, and a cold winter could exacerbate this condition and cause price spikes similar to the polar vortex winter of 2013/2014.