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XYLENE POWER LTD.

ELECTRICITY SERVICES

By C. Rhodes, P.Eng., Ph.D.

INTRODUCTION:
Electricity services for load customers are of two types, Uninterruptible Electricity Service (UES) and Interruptible Electricity Service (IES). This web page identifies the differences between UES and IES.

In an electricity service, in order to realize voltage control total connected electricity generation is continuously adjusted to match the total connected electricity load. Generators and loads that are turned on or off in response to instructions issued by the Independent Electricity System Operator (IESO) to achieved this generation to load matching are known as dispatched resources.
 

UNINTERRUPTIBLE ELECTRICITY SERVICE:
In 2017 almost all of the Ontario electricity grid load is met by an Uninterruptible Electricity Service (UES). UES reliably provides as much power as a load customer reasonably needs instantly upon customer demand. Embedded in the UES rate are all the costs of reserve generation, redundant transmission, distribution, voltage control, regulation and administration necessary to keep the UES highly reliable.

The monetary value of electricity supplied via UES lies primarily in reliable supply of electrical power on demand. When a UES customer in Ontario turns on an electricity load there is about a 99.7% probability that sufficient power will be instantly available at the appropriate voltage to operate the load at the customer chosen power level.

UES loads are entirely controlled by customers. UES loads are not controlled by the Independent Electricity System Operator (IESO) and hence from the perspective of the IESO UES loads are uncontrolled. The IESO must always have sufficient reserve and dispatchable generation, transmission and dispatch controlled load instantly available to meet the requirements of the UES load. The UES load varies depending on the time of day, day of week, season, weather, etc. The introduction of rapidly varying non-dispatchable wind and solar generation has increased the IESO's challenges in ongoing matching of dispatchable generation to net load.

As fossil electricity generation is replaced by renewable and nuclear electricity generation the fixed costs of non-fossil electricity generation and delivery completely dominate the variable cost of fuel. The non-fossil generation, transmission and distribution costs are almost entirely capacity costs that are almost independent of the actual number of kWh consumed. Hence the cost of operating a non-fossil electricity supply system is approximately proportional to that system's KVA supply capacity. Thus, a UES customer's fair share of the total electricity system cost is approximately proportional to that customer's peak kVA requirement during a billing period. The price per kVA is set by the UES gross revenue requirement.

In cases where the available interval electricity meters are not capable of measuring peak kVA the next best parameter for fair allocation of UES electricity system costs is the peak kW demand during the billing period.

The only issues open to discussion with respect to the UES rate are the 90% step response time (~ 4 hours) of the peak kVA or peak kW measurement and the length of each billing period (~ 1 month).

The advantage of a 4 hour step response for peak kVA or peak kW computation is that this choice captures significant daily load variations while almost eliminating over billing due to load diversity and load transients. During an average year the cost of electricity generation is very high for about 50 hours per year or for about 4 hours per month. Hence, the average contribution of a particular customer's load to the grid peak load in any one month billing period can be obtained by finding the peak value of the customer's kW or kVA demand during a sliding 4 hour interval.

Historically the electricity billing period in Ontario was one month. Based on field experience in major buildings this author favors a one week billing period because it provides more incentive for load customer response than does a one month billing period. For administrative convenience four or five successive one week bills could be combined into a single monthly invoice.

One of the benefits of a peak kVA based UES rate is that a UES customer cannot obtain low cost electrical energy at times of energy supply deficiency unless that customer also purchases a corresponding amount of higher cost electricity. Hence, there is no transfer of costs between customer classes.

In order to prevent customers gaming the rate structure or otherwise tampering with the metering arrangement the price of a marginal UES kWh is set equal to the price of a marginal Interruptible Electricity Service (IES) kWh.

Under a peak kVA based UES electricity rate a load customer with a time varying power requirement is financially incented to install sufficient energy storage to convert his varying load into a nearly constant load.

A further advantage of a peak kVA based UES rate is that electrical energy that is not actually consumed by UES customers can be profitably sold at a discount to Interruptible Electricity Service (IES) customers.

The present Ontario UES electricity rates do not reflect actual electricity system marginal costs and provide no financial incentive to customers for energy storage, demand management or power factor correction which would contribute to overall network performance improvement.

In 2017 for small customers (< 50 kW) the UES rate has no kW or kVA demand component at all. The only incentive for improved customer behavior is a small time-of-use (TOU) rate change in the cost per kWh. This TOU rate change does not reflect actual network costs.

In 2017 for large commercial load customers (> 50 kW) the UES rate has two main cost components, an energy cost component and a monthly peak demand cost component. The energy cost component is proportional to the net energy absorbed by the customer from the grid during the billing period. The peak demand cost component is proportional to the customer's peak rate of energy usage during the billing period. This split billing arrangement has been in place in Ontario for more than 50 years. However, in part due to government misallocation of the global adjustment, the energy charge per kWh is far too large and the demand charge per kW or per kVA is far too small.

UES reliability comes at a significant price. Due to varying renewable generation, ongoing system load variations and requirements for reserve capacity the total connected generation capacity is more than twice the average UES load. Much of the time there is surplus non-fossil generation. In Ontario short term peak generation requirements are presently met using natural gas fuelled generation. However, there is an increasing amount of non-fossil electricity generation capacity that is intermittently available but is unused. At present this surplus non-fossil generation capacity is either constrained (completely wasted) or is exported at a very low price (~ $0.016 / kWh). This energy could potentially be sold at a higher price in Ontario via an Interruptible Electricity Service (IES) rate. The potential applications of IES energy are charging energy storage, fossil fuel displacement and electro-chemical processing. This IES rate, if offered, would reduce consumption of fossil fuels and would enable primary chemical and ore processing in Ontario that would otherwise be financially uncompetitive.
 

INTERRUPTIBLE ELECTRICITY SERVICE:
An Interruptible Electricity Service (IES) is an inexpensive but unreliable electricity service which is randomly available to load customers about half the time. An IES delivers energy at an uncertain rate but does not provide power on demand.

The purpose of an Interruptible Electricity Service (IES) is to realize tangible benefits from Ontario's surplus non-fossil electricity generation capacity that is otherwise constrained off or is exported at an extremely low price.

From a climate change perspective an IES rate would enable sale of otherwise wasted non-fossil electricity generation capacity for displacement of fossil fuel consumption. The IES energy price is effectively set by the marginal cost of the fossil fuel being displaced. In a practical electricity system the IES energy price equals the UES marginal energy price. Then the UES price per kVA is set by the electricity system gross revenue requirement.

In 2017 there is no Interruptible Electricity Service in Ontario. This is a major missed opportunity for mitigating blended electricity rates, for reducing fossil CO2 emissions, for incenting customer owned behind-the-meter energy storage, for incenting electro-chemical processing in Ontario and for grid power balancing via real time control of the IES load by the IESO and LDCs.

An IES provides unreliable but economical electrical energy from the moment by moment difference between the total available non-fossil generation capacity connected to the Ontario grid and the total UES load. In essence, interruptible electricity comes from non-fossil electricity generation capacity that is otherwise constrained or exported at a low price.

In order to provide UES customers with a high degree of reliability electricity systems operate with at least a 15% generation surplus at times of peak load. Then if a major generator such as a nuclear reactor trips off there is sufficient reserve generation capacity immediately available to meet the UES load. This reserve generation capacity, if non-fossil, can also serve the IES load.

However, IES electricity can be provided to load customers only to the extent that there is non-fossil generation that is surplus to the moment by moment UES power requirements.

In the province of Ontario there are presently many periods when low price non-fossil power exports and constraint on non-fossil generation capacity are used to match total generation to the UES load. The contemplated IES would provide the IESO revenue producing dispatchable load. The concept is to sell surplus Ontario generated non-fossil electricity at a discount to parties in Ontario that can effectively use it when it is available.

IES loads should not be energized while fossil fueled generation is dispatched "on". However, for a large fraction of a year fossil fueled generation is "off" and non-fossil generation is either constrained to varying degrees or is exported at a very low price.

Approximately 25% of the existing non-fossil electricity generation capacity in Ontario is presently going to waste for lack of an IES rate offering that enables sale of IES energy in Ontario without impacting the UES. The loss of revenue to the Ontario electricity system arising from lack of an IES rate is currently over $1 billion per year. The extra expenditure by Ontario consumers on fossil fuels due to lack of an IES rate is another $2 billion per year. This over $3 billion per year financial loss will increase going forward due to ongoing construction of additional renewable generation.

Financially enabling behind the meter energy storage at generators and load customers would lead to further electricity system cost reductions via load factor improvement.

The IESO and LDCs will directly control, via the Internet, the enable/disable control function of all IES loads. The plan is for the IESO to use IES loads in place of dispatched generation to match total grid connected non-fossil generation to total grid connected load.

In the event of a sudden unanticipated non-fossil generation failure such as a nuclear generator trip the IESO can immediately dump some or all of the IES load to maintain grid voltage. At low UES load times reducing the IES load can take the place of turning on fossil fueled reserve generation.

The appeal of IES electricity to end users is its very low cost per kWh. However, due to its interruptible nature IES electricity can only be effectively used by customers that own energy storage, use electrolytic chemical processing or have hybrid electricity-fossil fuel heating/cooling systems. In this respect a major long term opportunity is for electrolytic hydrogen production as a feedstock for production of: compressed and liquified hydrogen fuel, ammonia, methanol, synthetic gasoline, and synthetic fuel oil. In these applications the cost of electricity per delivered kWh is paramount and the intermittent availability of IES power is tolerable.

The contemplated IES rate could potentially be offered at any location in Ontario where there is both grid supplied electricity and a high speed internet service to allow ongoing communication with the local LDC.
 

NATURAL GAS UTILITY OPPOSITION TO AN INTERRUPTIBLE ELECTRICITY SERVICE:
There will be opposition to an Interruptible Electricity Service (IES) from the natural gas industry. The natural gas industry will argue before the Ontario Energy Board (OEB) that implementation of an IES will cause the delivered price of natural gas to consumers to increase. The cost of natural gas to a consumer has two main components, a commodity charge and a delivery charge. The delivery charge is a fraction of the entire natural gas network operating cost that is allocated to consumers in proportion to the consumer's natural gas consumption. Implementation of IES electricity rates will reduce the network wide natural gas consumption without reducing the natural gas distribution network operating cost. Hence the delivery cost per GJ of natural gas will increase.

There is no magic solution to this natural gas delivery cost issue. Rapid amortization of the natural gas piping network and increased maintenance costs per GJ are costs that must be borne by natural gas investors. The problem of increasing atmospheric CO2 concentration due to combustion of fossil fuels has been well known since the 1970s. Natural gas investors will just have to accept that the value of the natural gas distribution infrastructure will rapidly decline over the coming years.
 

This web page last updated July 9, 2017.

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