“Boom and bust” cycles in power plant construction: A simulation study of the temporal and geographical aspects of the Alberta competitive electrical industry

This dissertation describes a study undertaken to explore the potential for power plant construction to appear in the deregulated Alberta electrical system in waves of alternating under and over supply of electricity, or “boom and bust”. The ultimate impact to the market in such a case would be major swings in wholesale electricity prices as the industry transitions through the phases of a construction cycle.

The study begins by exploring a geographical perspective on electricity and energy in general. It then provides a brief historical context on electrical deregulation in Alberta and elsewhere, before discussing the relevant literature pertaining to simulating dynamic feedback within energy systems with a focus on electricity.

The work makes extensive use of Forrester's (1961) System Dynamics methodology to construct a simulation model called “APPCON” (for Alberta Power Plant Construction model). APPCON was used to demonstrate the conditions under which “boom and bust” construction cycles might occur using an explicit theory of investor behavior.

Construction cycles are a potentially serious problem but they are not inevitable. The research concludes with computer simulations demonstrating how construction cycles could be dampened or eliminated through two different policy mitigation strategies; (1) continuous capacity payment along side of the market clearing price for energy, and, (2) a conservation strategy based on price sensitive load curtailment.