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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
The Electrical Grid - Part 3 - Current Challenges3
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
The Electrical Grid - Part 3 - Current Challenges4
Government Energy Policy Goals
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.
The Electrical Grid - Part 3 - Current Challenges5
Government Energy Policy Goals
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.
The Electrical Grid - Part 3 - Current Challenges6
Government Energy Policy Goals
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.
The Electrical Grid - Part 3 - Current Challenges7
Government Energy Policy Goals
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.
The Electrical Grid - Part 3 - Current Challenges8
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.
The Electrical Grid - Part 3 - Current Challenges9
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.
Rising GHG Emissions
The Electrical Grid - Part 3 - Current Challenges10
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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
32.90 MTonnes in 2005
25.5 MTonnes in 1990
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 GHG Emissions
The Electrical Grid - Part 3 - Current Challenges11
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.
The Electrical Grid - Part 3 - Current Challenges12
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.
The Electrical Grid - Part 3 - Current Challenges13
Ineffective Retail Price Plans
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.
The Electrical Grid - Part 3 - Current Challenges14
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.
Ineffective Retail Price Plans
The Electrical Grid - Part 3 - Current Challenges15
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.
Ineffective Retail Price Plans
The Electrical Grid - Part 3 - Current Challenges16
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.
Ineffective Retail Price Plans
The Electrical Grid - Part 3 - Current Challenges17
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.
Ineffective Retail Price Plans
The Electrical Grid - Part 3 - Current Challenges18
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.
The Electrical Grid - Part 3 - Current Challenges19
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
The Electrical Grid - Part 3 - Current Challenges20
Curtailment (Waste) of Carbon-Free Energy
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.
The Electrical Grid - Part 3 - Current Challenges21
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.
Curtailment (Waste) of Carbon-Free Energy
The Electrical Grid - Part 3 - Current Challenges22
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 (Waste) of Carbon-Free Energy
The Electrical Grid - Part 3 - Current Challenges23
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.
Curtailment (Waste) of Carbon-Free Energy
The Electrical Grid - Part 3 - Current Challenges24
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.
Curtailment (Waste) of Carbon-Free Energy
The Electrical Grid - Part 3 - Current Challenges25
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.
Curtailment (Waste) of Carbon-Free Energy
The Electrical Grid - Part 3 - Current Challenges26
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.
The Electrical Grid - Part 3 - Current Challenges27
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.
The Electrical Grid - Part 3 - Current Challenges28
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.
The Electrical Grid - Part 3 - Current Challenges29
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
The Electrical Grid - Part 3 - Current Challenges30
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
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www.ospe.on.ca
4950 Yonge Street, Suite 502, Toronto ON M2N 6K1Tel: 416-223-9961 • Toll Free: 1-866-763-1654
31
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