Demand Response Market Barriers: Canada

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Demand ResponseMarket BarriersCanada

• Ian H. Rowlands
• presentation to IEA DSM Task XIII
• 5th Experts Workshop
• 9-10 November 2005, Melbourne, Australia

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Purposes

• to offer an overview of the electricity systems
  in Canada
• to provide a more detailed summary of recent and
  current developments in the province of Ontario
• to highlight some key market barriers to
  increased demand response in Ontario

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Electricity systems in Canada

•                         

Canada total 528 TWhr
North 1 TWhr
B.C. 60 TWhr
Sask./Man. 36 TWhr
Quebec 194 TWhr
Alberta 54 TWhr
Atlantic 38 TWhr
Ontario 145 TWhr
Electricity demand, 2003 source National Energy
Board, 2005
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Electricity systems in Canada
Canada total (generation by energy source),
2003 hydro 58.9 coal 18.5 nuclear
12.4 natural gas 5.9

•                         

North 57 oil
B.C. 84 hydro
Sask. 47 coal
Quebec 93 hydro
Man. 93 hydro
Alberta 54 coal
Atlantic 56 hydro
Ontario 32 nuclear
Electricity generating capacity, 2003 source
National Energy Board, 2005
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Electricity systems in Canada
Canadian Electricity Demand by Sector,
2001 source Canadian Electricity Association
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Electricity systems in Canada

• governance of the electricity systems
• under the terms of the Canadian constitution,
  primarily a provincial responsibility
• ownership structures
• some private (e.g,, Alberta, Nova Scotia)
• presence of markets
• some open (Alberta, Ontario, in particular)

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A focus on Ontario

• largest province in Canada
• 39 per cent of countrys population
• 40 per cent of economic activity
• second largest electricity system in Canada
• 2003 generating capacity of 30,457 MW
• 2003 electricity demand of 144,967 GWhr
• involvement in Task XIII
• representatives of the Ontario Power Authority
  and the Ontario Energy Board as Task XIII
  experts.

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Ontarios electricity system
Electricity demand, 2003 commercial
36.8 residential 34.4 industrial 28.8
Key statistics
Electricity generation, 2003 nuclear 41.3 hydro
24.0 coal 23.9 natural gas 9.0
source Natural Resources Canada
photo credit OPG
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Ontarios electricity system

• remained relatively unchanged for almost a
  century
• monopoly, somewhat vertically-integrated
• pace of change accelerated during mid-1990s
• after some delays, market opening in May 2002
• partial closing of the market in December 2002
• new government elected in October 2003

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Ontarios electricity system

• driving forces for change
• aging physical plant
• C4 billion, for example, needed in upgrades and
  reinforcements for the provinces transmission
  system over the next ten years (source ECSTF,
  2004)
• relatively little investment during recent period
  of uncertainty
• increasing demand, particularly summer peaks
• 1996-2004 average annual growth in total energy
  consumption of 1.4
• 1996-2005 average annual growth in summer peak
  demand of 2.2 (source IESO)
• environmental concerns
• commitment to close coal-fired power stations by
  2009

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Ontarios electricity system

• Power use sets record Blackout hits downtown
  (28 June 2005)
• Shortages aren't over, Energy Minister Duncan
  says (22 July 2005)
• Power dims in Ontario brownout (4
  August 2005)

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Ontarios electricity system
9 of 10 peak demand periods recorded in Ontario
occurred during summer 2005
source Independent Electricity System Operator
(Ontario)
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Ontarios electricity system
source Independent Electricity System Operator
(Ontario)
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Ontarios electricity system

• current activities
• development of a conservation culture
• target for 5 reduction in peak load (1,350 MW)
  by 2007
• renewable energy target 5 of electricity supply
  by 2007, and 10 by 2010
• pilot programs of the Independent Electricity
  System Operator

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Ontarios electricity system

• activities of the Ontario Power Authority
• is responsible for ensuring an adequate,
  long-term supply of electricity in Ontario
  (www.powerauthority.on.ca)
• deliberations currently proceeding regarding
  supply mix advice
• requested by the Minister of Energy in May 2005
• report due back to the Minister by 1 December

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Ontarios electricity system

• some indication as to what lies ahead
• Energy Conservation Responsibility Act, 2005
• introduced on 3 November 2005
• provides the framework for the commitment to
  install 800,000 smart meters in Ontario homes and
  businesses by 2007, and to have them installed in
  all homes and businesses by 2010
• capital cost for all consumers estimated at C1
  billion (to be recovered through the rate base)

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Ontarios electricity system
Red Peak pricing 9.3 Blue Mid-peak pricing
6.4 White Off-peak pricing 2.9 All
weekends Off peak pricing
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Market barriers

• Low electricity prices, generally

source Natural Resources Canada
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Market barriers

• Low electricity prices, generally

Residential (retail) price of electricity, 2005,
US cents per kWhr
Wisconsin 9.96 /kWh
Minnesota 8.96 /kWh
Ontario 8.12 /kWh
Michigan 9.11 /kWh
New York 15.59 /kWh
Ohio 8.99 /kWh
Pennsylvania 10.51 /kWh
source Energy Information Administration
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Market barriers

• presently little incentive to act
• like a Tragedy of the Commons, the savings are
  spread across all users
• within communities
• within buildings (e.g., multi-unit complexes)

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Market barriers

• low understanding of electricity issues among
  consumers
• ignorance regarding resources used to generate
  electricity
  in the first place

What is the largest contributor to Ontarios
electricity supply at present? (n1,056)
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Market barriers

• low understanding of electricity issues among
  consumers
• bewilderment regarding electricity bills
• business owners, for example, do not understand
  the difference between commodity (electricity)
  charges and demand (delivery) charges

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Market barriers

• low understanding of how consumers will react to
  different incentives
• what are their decision-making processes all
  about?
• businesses focus only on bottom line?
• what is valued?
• citizens also interested in social good?
• what is valued?

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Market barriers

• potential market participants on the supply-side
  are not given sufficient financial incentive
• not all benefits are explicitly valued
• tangible, financial benefits that are created are
  not passed on to the project proponent

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Market barriers

• significant transaction costs on the supply-side
• RFP process can be expensive in terms of time and
  money
• different layers of administrative demands
• dealing with more than 90 local distribution
  companies across the province
• discussions now underway on the development of
  standard contracts

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Market barriers

• confidence in the future of the rules
• previous delays in market opening
• changes to the coal phase-out date

photo credits www.arisetech.com
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Summary and conclusions

• speakers contact details
• Ian Rowlands
• University of Waterloo
• irowland_at_fes.uwaterloo.ca
• 1-519-888-4567, ext. 2574