PMLA FALL 2004 Conference

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PMLA FALL 2004 Conference Your Power Our
Priority
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The total electricity bill for the province is
almost 10 billion a year. For households,
Ontario's electricity rates are the third highest
in Canada and average almost 1,000 a year.
Electricity costs for some industries account
for more than five per cent of their total
spending and amount to tens of millions of
dollars each year.
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Ontario Demographics
Land Area (in square km) 1,076,395
km2 Population 12,238,300   
Texas Demographics
Land Area (in square km) 691,030
km2 Population 22,118,509
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Deregulation an evolution of the marketplace
Prior to the Market opening , Ontarios 4 million
plus distribution customers were serviced by 306
municipal owned utilities and a major
provincially owned integrated utility
(Generation, Transmission, Rural Distribution)
called Ontario Hydro which serviced the rural
parts of Ontario.
Under new legislative framework the landscape of
the once 306 municipal electric utilities is
changed through distribution consolidation and
municipal amalgamations to 95 privatized local
distribution companies and Hydro One which
services rural parts of Ontario. As a result of
restructuring Ontario Hydro the province is
stranded with 20 billion of debt.
Competition in the Province of Ontario becomes a
reality with the official launch of an open
electricity market. A surcharge of .7 per kWh is
added to the cost of power to help reduce the 20
billion debt.
Public pressure forces the then Premier, Ernie
Eves to close the open electricity market and
introduces Bill 210 - (Electricity Supply,
Pricing and Conservation Act, 2002) which places
a cap on electricity rates resulting in increases
to the stranded debt.
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Deregulation to Re-regulation
The market development and rule making took about
7 years before it was open and 7 months to close
it. November 2002 due to public pressure the
government re-introduced price setting and rate
freezes, increasing the provincial stranded dept.
Prices no longer reflected the true cost of
power.
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The New Provincial Government restructures
Ontarios Energy Sector ensuring a reliable and
diverse supply of power.

• By 2020, it is projected that 18,000 megawatts of
  Ontario's existing electricity generating
  capacity will need to be replaced or refurbished,
  and that another 7000 megawatts will need to be
  built or saved through demand side management.
  The Ontario government has also committed to
  eliminating all coal generation in the province
  by 2007, which generates one-third of the
  province's power, and has introduced one of the
  most aggressive renewable portfolio standards in
  North America. The expected 40 billion
  investment in Ontario energy infrastructure will
  be one of the largest peacetime investments in
  Canadian history.

Consumers need to pay for the true cost of power
in order to understand and embrace the culture of
conservation.
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The Ontario Minister of Energy the Objectives of
Bill 100

• Creating a "conservation culture" in Ontario
  Making conservation, demand management and demand
  response strategies a cornerstone of Ontario's
  long-term energy future
• Reliability, diversity and affordability A
  reliable, sustainable and diverse supply of
  competitively priced power energy
• Effective consumer protection Consumers,
  especially residential and small business
  consumers, will be protected from excessive price
  volatility
• A stronger investment climate The government
  will encourage new investment in conservation,
  generation and transmission
• Cleaner air The government will contribute to
  the clean up of our air by eliminating coal fired
  generation and replacing it with other cleaner
  sources of energy.

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The Ontario Supply Mix Trend
1997 Supply Mix (Energy in TWh)
2003 Supply Mix (Energy in TWh)
Note Other includes gas, wind, solar etc.
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Ontarios Energy Challenge
Ontario faces a looming energy supply
shortfall in the years ahead given the
governments commitment to take coal-fired
generation out of service by 2007 and existing
nuclear plants approach the end of their planned
operating lives.
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Proposals for over 30 future generating
facilities totaling more than 6000 MW have been
submitted to the Independent Market Operator

• Construction on only three of the proposed
  facilities has started .

Province of Ontario initiates two RFPs
2,500 megawatts (MW) of new clean generation
(including co-generation and distributed
generation), demand response, and demand-side
management to be developed as early as 2005
300 MW of renewable capacity to be in service
as soon as possible.
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The RFP for 2500 MW of CES
Project Types To Fill Capacity Target

• New Clean Generation
• Project does not use coal or oil as a primary
  fuel, includes co-generation and distributed
  generation
• Demand Response
• Project that allows reduction in electricity
  demand when directed by the Independent Market
  Operator
• Demand Side Management
• Project that reduces electricity consumption
  through energy efficiency improvements

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Eligibility for Demand-Side Projects

• Located in Ontario
• Affect demand in Ontario
• Were not operating prior to submission, and can
  achieve commercial operation no later than
  December 31, 2007
• Can remain in operation at least 5 years

DR
DSM

• Minimum 5 MW
• Can verifiably curtail
• Require new capital investment in equipment,
  software and associated services

• Have verifiable electricity savings equivalent to
  5 MW of capacity
• Require new capital improvements or equipment
  having a simple payback period of more than three
  years

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Eligibility for New Generation

• Minimum capacity of 5 MW
• Primary fuel is not coal or oil
• Located in Ontario
• Not an upgrade or expansion
• Will
• Be connected to the IMO-Controlled Grid and be a
  participant in the IMO Administered Markets or
• Be connected to a Local Distribution Company and
  be a participant in the IMO Administered Markets
  or
• Supply electricity directly to an end-user.
• Construction has started, or has been completed,
  provided that the facility, prior to June 25,
  2004
• did not have a unit transformer that was
  connected to the IMO-Controlled Grid or to a
  Local Distribution Company
• had not achieved Commercial Operation or
• did not have generating equipment in place.
• Will commence commercial operation by June 1,
  2009.

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Essex Power Demand Response Pilot Project
The concept emanated from the August 14, 2004
black out. Immediately following the blackout a
Province wide request was made to customers to
reduce power by 25 Our area was able to achieve
30 to 40 load reduction due to the availability
of distributed standby by emergency generators.
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The Demand Response Pilot

• Business Concept
• Aggregate the standby generation assets in our
  area and bid, dispatch and control the total
  capacity as a single market participant into the
  wholesale electricity market.
• Selected Comverge as our DG bid, dispatch, and
  control partner.

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Demand Response Pilot
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Using DR to alleviate transmission congestion
Recognized a transmission Constraint.
Assessed the impact of the proposed DR capacity
on the transmission constraint
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Challenges to Demand Response Project

• The market design and the rules around the market
  make it challenging for small operators to
  participate in the wholesale market.
• Often aggregators are an important element to
  bring these type of assets to the market
• The capital required to participate in the
  Wholesale Market like facility registrations,
  meter services, connection costs and agreements,
  market data management can create impediments
  which does not make small scale generation
  feasible.
• The current market rules do not appear to fully
  recognize the secondary values that strategically
  located new supply may offer in relation to
  transmission / distribution constraints.
• e.g. Distributed Cogeneration will not only
  supply new supply to the market but will also
  relieve a peak overload condition on a radial 115
  line to the Kingsville TS area. The current
  transmitter Hydro One has identified a 10 to 15
  million cost to relieve the overload yet cannot
  identify the immediate value that the DG capacity
  would offer

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CES opportunity using Distributed Tri-Generation
The growing of agricultural products in large
greenhouses is prospering and expanding in
Southwestern Ontario. Essex Power has introduced
Tri-Generation a new dimension to the production
of the heat and carbon dioxide needed in this
industry and at the same time producing clean
electric power. The greenhouse industry
currently has approximately 1500 acres under
cultivation in glass or plastic grow houses and
is expanding at a rate of 10 per year. Each
greenhouse operation has an approximate
generation capacity of 1 to 4 MW per 10
acres. We anticipate the Tri-Gen project to
could produce an estimated 100 to 300 MW of clean
new energy for Ontario. Another significant
benefit of Tri-Gen as a technology is the
additional advantage of distributed generation,
the Tri-Gen's are located at major load sites
which reduces the significant electricity line
losses we currently experience. The Tri-Gen
project will focus on creating a sustainable
Tri-Generation model that will be scaleable to
the individual needs of each greenhouse grower
benefiting both their operation and the
environment.
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Thank You
Essex Power Corporation360 Fairview Ave.
W.Essex, ON CanadaN8M 3G4 519-776-8900
www.essexpower.ca