the electrical grid - part 3 - current challenges · the electrical grid - part 3 - current...

The Electrical Grid - Part 3 - Current Challenges2

Part 1 – How It Works

Part 2 – Achieving Low Greenhouse Gas Emissions

Part 3 – Current Challenges

Part 4 – Potential Solutions

Outline

This seminar is the third in a series of 4 seminars


Government Energy Policy Goals

Challenges and Their Impacts

Rising Greenhouse Gas Emissions

Rising Electricity Prices

Ineffective Retail Price Plans

Low Load Factors

Curtailment (Waste) of Carbon-Free Energy

Conservation Program Creates Surplus Carbon-Free Energy

Adding Capacity During a Period of Flat Demand

Q/A

Outline



Reduce CO2 emissions from power plants by:

Phasing out high emission coal plants and build new lower emission Combined Cycle Gas Turbine (CCGT) plants.

Adding additional low emission energy sources:

Restarting 4 nuclear units at Bruce A and 2 at Pickering A.

Adding wind, solar, bio-energy and hydro generation.

Refurbishing Bruce and Darlington nuclear units as they reach end of design life.

Encourage conservation and energy efficiency.



Create 50,000 new green energy sector jobs by:

Introducing a feed-in-tariff (FIT) program to accelerate deployment of renewables (mainly wind and solar).

Supporting R&D in new green energy sector.

Closing 3,000 MW of nuclear capacity at Pickering in 2020 to make room for more wind and solar generation.

Keep power system transformation costs within 1% in additional costs by:

Installing smart meters with Time-of-Use (TOU) rates to encourage peak reduction/load flattening.



So how have we been doing ?

GHG emissions have dropped dramatically:

-80% since 1990.

-85% since 2005.

But, are now expected to rise again after 2016.

Electricity prices have gone up 3 to 5x the inflation rate in Ontario – almost doubled since 2008.

Created many new jobs in the green sector but not quite the 50,000 hoped for (adverse WTO ruling). High and rising electricity prices are believed to have discouraged investments in other sectors.



So what went wrong ?

Inadequate understanding of how the integrated power system works.

Inflexible base-load plants make integration of intermittent sources like wind and solar generation costly and curtailment (waste) of carbon-free energy was necessary.

Inadequate analysis of the implementation details.

Wind and solar are not carbon-free when you also include their gas-fired backup.

Over commitment of carbon-free capacity required curtailment (waste) of that energy.

Retail price plans have fundamental design flaws which discourage use of carbon-free electricity when it is available.


Rising GHG Emissions

Let’s look at GHG emissions in more detail.

GHG emissions have dropped dramatically but are scheduled to rise again after 2016. Why?

Carbon-free nuclear capacity is dropping after 2016:

Darlington refurbishments start in 2016.

Bruce refurbishments start in 2016.

Pickering closure starts in 2020.

Nuclear capacity is being replaced primarily by:

Wind and solar with gas-fired backup.

Gas-fired backup emits 398 kg CO2 /MWh.


Primary Fuel Lifetime Emissionskg CO2 per MWh (1)

Plant Operating Emissionskg CO2 per MWh (2)

Coal 1,001 973

Oil 840 Not available

Natural Gas 469 398

Hydroelectric 4 0

Nuclear 17 0

Wind 12 0

Solar PV 46 0

1) Lifetime Emission Data is from IPCC and reported on the CNA website.

2) Operating Emission Data is from OSPE report “Wind and the Electrical Grid”,

March 14, 2012.

Wind and solar with gas-fired backup

means the integrated solution is not

a zero emitting source.



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CO

2Em

issi

on

s (M

egaT

on

nes

)

Emissions projection Historical emissions

Notes: The above graph appears as Figure 20: Greenhouse Gas Emissions Forecast in the Ministry of

Energy 2013 LTEP. Emissions in any one year could be higher, or lower, than the projection depending

on the specific operating conditions experienced in the system. Data for 1990 came from the Ministry of

Environment and Climate Change report titled Ontario’s Climate Change Update 2014.

4.25 MTonnes in 2015



If we stay below the 5 Mtonne

line we will continue to achieve

the 80% carbon reduction goal.

This rise in 2020 is due to the closure

of Pickering Nuclear. Gas-fired

generation will be used for base load.



Rising Electricity Prices Let’s look at electricity prices in more detail.

Electricity prices have risen about 3 to 5x faster than inflation. Nearly 100% in 7 years. That is about double the rate of low cost jurisdictions in North America. Why?

Some of the increase was needed to refurbish/upgrade existing facilities like other utilities did in North America.

Some of the increase was needed to pay for more expensive but cleaner energy such as wind, solar, bio-energy and to replace coal with natural gas and nuclear.

Some of the increase was needed to pay for conservation.

Some of the increase was needed to pay for curtailment (waste) of clean energy due to a lack of power system flexibility and storage.

Some of the funds were used to pay a higher rate of return to privatize a greater share of the power sector.


Rising Electricity Prices

Ontario Energy Board 2015 cost projections for “energy” only:

Hydro-electric generation 5.6 cents/kWh

Nuclear generation 6.6 cents/kWh

Gas/Oil fired generation 12.7 cents/kWh

Wind turbine generation 12.5 cents/kWh

Solar generation 47.3 cents/kWh

Bio-energy generation 21.1 cents/kWh

The costs above include costs for lost production due to curtailment during low demand periods.

The 2015 blended average price for residential loads will be 10.2 cents/kWh for energy and about 15.4 cents/kWh delivered to homes.

These 2 help

keep prices down.

These 4 help drive

prices up.



Let’s look at electricity retail price plans in more detail.

There are two components to the “energy” commodity price. The Wholesale Market Price and the Global Adjustment (GA).

Most residential customers are on the Time-Of-Use (TOU) price plan for the “energy” portion of their electricity bill. The TOU price plan incorporates the Wholesale Market Price + GA.

Industry is divided into either Class A or Class B. They effectively pay the Wholesale Market Price + GA for their “energy”. Class A consumers get a discount on their GA charges.

Some consumers have opted to purchase power from a retailer which means they pay the Contract Price + GA. The contract price effectively incorporates the Wholesale Market Price and a business risk premium to guarantee a firm contract price throughout the year.


Let’s take a look at the TOU price plan in more detail.

The residential and small commercial (< 50kW) TOU price plan (May 1, 2015) charges electricity at the following rates:

Off-peak energy is priced at 8.0 cents/kWh

Mid-Peak energy is priced at 12.2 cents/kWh

On-peak energy is priced at 16.1 cents/kWh

Delivery and regulatory charges are in addition to the above “energy” commodity charges.



Price Impact of TOU Price Plan

600 kWh per month – variable load.

$63 /month for energy if no load flattening occurs – no new technology added.

Price Impact of TOU Price Plan with Flat Load Profile

600 kWh per month – load flattened using technology.

$61 /month if load is completely flat over 24 hrs.

Only a 3% savings on the energy component.

The TOU price plan charges on-

peak rates for base load energy.

The TOU price plan does not generate

enough savings to purchase the

technology to accomplish the load shift.

Weekends

and

holidays

are at off-

peak rates.



The TOU price plan has the following design flaws:

It does not differentiate between base-load consumption and peak load consumption (consumption above the base load).

It overcharges for base-load energy both at night and daytime. It only costs 6.1 cents/kWh to make base-load energy.

It undercharges for peak load consumption especially on high demand days. The peak to off-peak price ratio is too low.

It does not allow consumers to access clean low cost energy that is being exported to adjoining grids at the Wholesale Market Price.

It does not allow consumers to access surplus clean energy at the Wholesale Market Price that is being curtailed (wasted).

It does not allow consumers to save enough money to pay for load shifting equipment that would benefit the power system.



The industrial price plans have the following design flaws:

“Energy” price = Wholesale Market Price + GA, but ...

The wholesale market price is being suppressed due to excess capacity especially on windy or sunny days.

The GA moves in the opposite direction to the Wholesale Market Price in order to ensure all contract costs are recovered.

The GA weakens the electricity price signals in the marketplace.

The difference between the “energy” price during on-peak and off-peak periods is too low to incent industry to adopt load leveling strategies or invest in load shifting equipment.

The GA charge means industry cannot access energy at the same low price as their competitors in low cost power systems.



Low Load Factors

Let’s look at the power system load factor in more detail.

Ontario’s annual electricity load factor is only 63 to 70 %.

That means a significant amount of our generation and transmission capacity is built to supply the load only on the highest demand days.

The top 10% of our system demand is only needed for about 50 hours a year. The incremental cost to provide that generation is nearly $10/kWh. That energy is sold at a significant loss under all rate plans. The TOU rate plan charges 16.1 cents/kWh for that energy.

The low capacity factor creates 2 problems:

Costs are higher to operate the power system.

GHG emissions are higher as gas plants must cycle up/down each day.


CF= 0.19%, LCOE= 942 / 945 cents/kWh

CF= 1.57%, LCOE= 116 / 119 cents/kWh

CF= 12.99%, LCOE= 16.4 / 19.1 cents/kWh

Levelized Cost of Electricity (LCOE) data is shown for a

discount factor (DF) of 10% and a natural gas price of

$4/$8 per Million BTU at the burner face.

CF= 44.20%, LCOE= 6.7 / 9.4 cents/kWh

CF= 78.04%, LCOE= 5.0 / 7.7cents/kWh

CF= 96.79%, LCOE= 4.8 / 7.5 cents/kWh

CF= 100%, LCOE= 4.8 / 7.5 cents/kWh

CF = Load Capacity Factor

2011 annual CF = 63%

Cost of Energy Using

Gas Generation

Highest Daily Load

Lowest Daily Load

Low Load Factors



Let’s look at curtailment in more detail.

Curtailment is the deliberate reduction of output of the generating station under direction of the IESO operator. The process of directing a power plant to raise or lower output is called “dispatching”.

Curtailment occurs when there is not enough domestic or export demand for the electricity being produced. Plants must be dispatched down.

Curtailment of high emission generation like coal or natural gas generation is a good thing from an environmental point of view.

Curtailment of carbon-free generation like hydroelectric, nuclear, wind or solar is bad because we are paying for clean energy that is wasted.

Curtailment of clean generation is also a lost opportunity to reduce emissions by using that surplus carbon-free electricity to displace fossil fuels in other sectors like building heating, industrial, transportation, etc.


Abbreviations:

LCOE = the levelized cost of electricity = total lifetime costs divided by energy produced.

DF = discount factor

CCGT = Combined Cycle Gas Turbine

M.BTU = Million British Thermal Units

CF = Capacity Factor

Natural gas cost lines (blue lines) are flat because most of their cost is fuel and you don’t burn gas when the plant output is curtailed (reduced).

Intermittent renewables have steep cost lines because they have low design capacity factors. If you don’t use the energy you lose it and the cost per delivered kWh rises rapidly.



Data Courtesy of the Independent Electricity

System Operator: http://www.ieso.caDiagrams Courtesy of Market Intelligence

& Data Analysis Corporation

Low Demand Week Profile

(typically a spring week)

High Demand Week Profile

(typically a hot summer week)

This excess clean energy has to be

curtailed (wasted) or exported,

typically at low prices.



Curtailment of Clean electricity is growing.

Curtailed Source 2013 (1) 2014 (1)

Hydroelectric 1.7 TWh 3.2 TWh

Nuclear 1.7 TWh 1.7 TWh

Wind Nil 0.4 TWh

Solar Nil Nil

TOTAL 3.4 TWh 5.3 TWh (2)

Curtailment of Solar has begun in 2015.

Note (2): 5.3 TWh of electricity is

enough energy to power 530,000

homes for a year.

Note (1): Curtailment is estimated by

OSPE based on OPG annual reports

and IESO production data.



Estimated as:

Nuclear curtailment

estimated from IESO

Capability minus Output with

a 70 MW threshold per

station to account for minor

technical de-ratings.

Wind curtailment estimated

from Forecast minus Output

if Forecast > Output.

Hydroelectric curtailment

estimated from the annual

total as reported by OPG

and in the absence of hourly

data is assumed to align

hourly with nuclear

curtailment. This assumption

is not strictly correct.



In addition to curtailment in 2014 we also exported 5.3 TWh of clean electricity to adjoining power systems at 0.8 cents/kWh.

This occurs because when Ontario demand drops, the market price also drops. That encourages exports of electricity to adjoining power systems if they have higher electricity prices at that time.

Since the market is open for anyone to buy electricity at the market price, we assume that is a fair game.

Unfortunately, all Ontario consumers must pay a global adjustment charge that is not paid by adjoining power systems. Ontario consumers are therefore not able to access surplus, clean electricity at the same low price as adjoining power systems.

The result is a missed opportunity to use surplus carbon-free electricity in Ontario to displace fossil fuels used for thermal energy.



Conservation ProgramCreates Surplus Carbon-Free Energy

Ontario has a clean electrical power system that is capital intensive with high fixed costs.

That means that conservation programs have to be designed carefully so they contribute to energy efficiency and emission reduction but do not create more surplus carbon-free energy that will be curtailed and contribute to higher rates.

Our current conservation programs are not improving load factor nor reducing critical peak load sufficiently. In fact they are contributing to a reduction of base-load at night by subsidizing equipment purchases that reduce demand at night.

Our conservation programs are causing increased curtailment of carbon-free energy.


Conservation ProgramCreates Surplus Carbon-Free Energy

Minimum load is

not rising and

maximum load

is not dropping

enough.

Drop in 2014

max. demand

was due to a

cold summer.

2014 was the

first time in a

decade that

winter load

exceeded

summer load.


Adding Capacity During a Periodof Flat Demand

Ontario continues to add base-load and intermittent renewable generation capacity while the demand forecast is flat until 2019.

Adding capacity when demand is not rising will increase fixed costs.

That results in increased electricity rates and increased curtailment of carbon-free energy.

The higher rates will discourage demand growth which prolongs the time period when we have surplus carbon-free generation.


Next Seminar

Part 1 – How It Works

Part 2 – Achieving Low Greenhouse Gas Emissions

Part 3 – Current Challenges

Part 4 – Potential Solutions

The next seminar will cover Part 4 – Potential Solutions


Questions ?

OSPE seminars are available at:http://www.ospe.on.ca/?page=pres_lib#peo

Are you an engineer and would like to become a member of OSPE? Visit:http://www.ospe.on.ca/?page=JOIN

Engineering students can now join OSPE for free.

www.ospe.on.ca

4950 Yonge Street, Suite 502, Toronto ON M2N 6K1Tel: 416-223-9961 • Toll Free: 1-866-763-1654

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