XYLENE POWER LTD.

CAPACITY FACTOR

By C. Rhodes

IMPLICATION OF CLIMATE CHANGE:
One of the implications of reducing carbon dioxide emissions to the atmosphere is that much of the transportation energy and comfort heat presently provided by combustion of fossil fuels must instead have to be provided via electricity. It is reasonably anticipated that in Ontario the required amount of delivered electrical energy per capita per annum will increase at least 5 fold.

Delivering this energy through the electricity transmission/distribution system will require both increasing the transmission/distribution system size and increasing the effectiveness of transmission/distribution system utilization. The electricity rate payers of Ontario are facing a potentially enormous increase in both generation and transmission/distribution costs.
 

CAPACITY FACTOR DEFINITION:
Generator capacity factor CF is defined by:
CF = (average output power) / (maximum output power)
Capacity factor is calculated monthly to minimize the financial impact of occasional random equipment shutdowns that affect the power transferred from the generator to the grid.
 

BENEFITS OF A HIGH GENERATION CAPACITY FACTOR:
Transmission/distribution costs are mitigated by increasing the generation capacity factor.

A high capacity factor generator is more reliable and uses transmission much more efficiently than a low capacity factor generator. Hence the value per kWh of electricity from a high capacity factor generator is much higher than the value per kWh of electricity from a low capacity factor generator both because the ability to supply power-on-demand is higher and because the transmission cost per kWh-km is lower.
 

The function of compensating generators based on capacity factor is to financially reward parties that maintain high generator capacity factors. Capacity factors operate by causing the average generator revenue per kWh from net generated energy to increase as the generator capacity factor increases. Incorporation of capacity factor into generation compensation rates encourages wind generators to build energy storage behind their meters to reduce variations in the rate of power transfer from the generator to the grid.
 

INCENTING GENERATOR BEHIND-THE-METER ENERGY STORAGE:
Capacity factor is used to increase the average per kWh compensation rate for high capacity factor generators as compared to low capacity factor generators. The purpose of Capacity Factor based generator compensation is to cause an increase in the generator's capacity factor by financially enabling behind the meter energy storage. The capacity factor incentive should encourage distributed generators to level their outputs.

Capacity factor measurements can be used to reward efficient grid utilization by generators. The capacity factor increases generator compensation if the pattern of electricity generation improves the efficiency of use of the transmission/distribution system.

Capacity factor based generator compensation is applicable to generators that are not dispatched by the Independent Electricity System Operator(IESO).

The present renewable generator compensation rate structure does not convey the appropriate signal as to the equipment and operational changes that generators should adopt to reduce both their own costs and overall electricity system costs.

The message that should be communicated via the generation compensation rate structure is that generators not subject to IESO dispatch should operate at high capacity factors. Usually behind the meter energy storage is required to increase wind and solar generator capacity factor.
 

GENERATOR CAPACITY FACTOR:
The IESO purchases generation capacity. When the IESO requests that a generator run in theory the generator should run at its rated capacity. However due to energy supply and maintenance issues when commanded to run in general a generator will only produce a fraction of its rated output capacity. The fraction of the generator's peak rated output that is available in a billing period to immediately meet requests for power-on-demand is the generator capacity factor for that billing period.CF.

If there is a large fleet of statistically independent generators then the capacity factor for the fleet is given by:
CF = (average fleet power output) / (peak fleet rated power output)
In this case due to statistical independence if one generator is not performing there is a high probability that the other generators are performing so that available power on demand remains high at all times.

However, for real renewable generators there is little statistical independence. For example, none of the solar panels produce power at night. When wind is low in one part of the province it is frequently low in other parts of the province. In the spring there is lots of run-of-river generation whereas in the fall there is little run-of-river generation. The problem with a fleet of statistically dependent renewable generation is that the minimum fleet output is much less than the average power output. Hence for renewable generation the CF in a particular billing period is given by:
CF = (minimum fleet output power) / (maximum fleet output power).

For renewable energy the difference between (average fleet output power) and (minimum fleet output power) is power that is only saleable via an Interruptible Electricity Service (IES). The market value of IES energy is typically only a small fraction of the market value of Firm Electricity Service (FES) supplied energy.

Today most dispatched generators are primarily compensated for capacity instead of for energy. The payments that dispatched generators receive net of fuel costs are nearly constant and are nearly independent of the amount of electricity actually generated. For renewable generation the amount of electricity actually generated depends on the available IES load. The free market value of IES electricity is much less than the present wind generator compensation rate.
 

RENEWABLE GENERATION COMPENSATION ISSUES:
The first reality is that the outputs of renewable generators that are geographically close to each other and hence share the same transmission/distribution line are highly correlated. There is no statistical independence. Hence their transmission/distribution usage is proportional to the sum of the generator peak plate ratings, not the sum of the generator average outputs. This issue alone causes wind generation to use about three times as much transmission/distribution capacity per kWh per km as does a nuclear generator.

The second reality is that even renewable generators that are geographically far apart in Ontario are not statistically independent. On average total wind generation in the summer is only half of total wind generation in the winter. Similarly run-of-river generation is consistently much greater in the spring than in the fall. Hence renewable generators require balancing generation the cost of which is not reflected in the existing rate model except through the global adjustment.

The third reality is that renewable generation is generally located where renewable energy is readily available, which is usually geographically remote from major urban load centers. In Ontario the average transmission distance for a wind generated kWh is about four times the average transmission distance for a nuclear generated kWh.

The combination of these factors causes the cost per kWh for transmitting wind energy to be about 12 times the cost per kWh of transmitting nuclear energy. The lack of energy storage causes generation constraint at off-peak times which has the effect of approximately doubling the cost of wind energy generation. Due to the combination of these generation and transmission cost multipliers wind energy is almost always sold to load consumers at a price far below its combined cost of generation, balancing and transmission.

It is crucial that Ontario adopt a new generation compensation rate which has the effect of confining development of renewable generation to circumstances that make economic sense for electricity rate payers. For example, total wind generation connected to a distribution system should not exceed the load on that distribution system, so that the distribution connected wind generation does not impact transmission. Similarly direct connection of wind generation to transmission should only be permitted in circumstances where there is a comparable nearby dispatchable load, so that the cost impact of the wind generation on transmission can be minimized.

At present the IESO attempts to address some of these issues through a very complex set of rules and regulations that are expensive to administer and are difficult to enforce. Some generators game the system. It would be much more efficient to use a generator compensation rate which causes generators to make choices that lead to economies for all rate payers. Such a compensation rate would value non-fossil generation based on its value to end users. The amount paid to a generator per kWh would diminish as that generator's capacity factor decreases. This generator compensation rate would only give renewable generation preference over nuclear generation in circumstances where the choice of renewable generation leads to a net cost saving for electricity rate payers.

Reliable nuclear electricity generation is essential for meeting the grid load at times when the wind does not blow and the sun does not shine. There is no merit in wind generation or solar generation that makes essential nuclear generation less economic.
 

GENERATOR METERING:
One of the issues with generator metering is that many generators have significant parasitic loads that continue even when the generator is not producing electricity. The net power output of a generator is given by:
(Erb - Eib) - (Era - Eia) / (Tb - Ta)
where:
Tb = value of T at time b;
and
Ta = value of T at time a;
and
Tb > Ta
and
Erb = cumulative energy that has flowed from the generator to the grid at time T = Tb;
and
Era = cumulative energy that has flowed from the generator to the grid at time T = Ta;
and
Eib = cumulative energy that has flowed from the grid to the generator at time T = Tb;
and
Eia = cumulative energy that has flowed from the grid to the generator at time T = Ta;

When the generator is not producing net power:
(Eib - Eia) > (Erb - Era)

When a generator is producing net power:
(Erb - Era) > (Eib - Eia)
 

There is a a major problem with the electricity rate structure in Ontario because at present operating generators are not charged for transmission/distribution and the generator compensation rate does not reflect generator capacity factor or generator power factor.

Artificially removing generator obligations to meet transmission/distribution costs has caused price distortions throughout the electricity system. It is essential that generators pay their share of transmission/distribution costs, so that each generator becomes responsible for its capacity factor and power factor.

When Ontario Hydro was the dominant generator, Ontario Hydro looked after generator power factor issues because Ontario Hydro also had responsibility for transmission/distribution costs. However, now that Hydro One which is responsible for transmission is separate from Ontario Power Generation and is also separate from numerous other small and large independent generators, many of which are not under dispatch control, it is essential that every generator takes financial responsibility for maximizing its power factor in order to limit total system wide transmission/distribution costs. Thus, the generator compensation rate must be capacity factor and power factor dependent. In order for generator compensation to be properly capacity factor and power factor dependent the transmission and distribution rates must be the same for generators as for loads so that generators pay their share of transmission/distribution costs.

At present generation and transmission/distribution are performed by independent entities. Developers of new generation have no effective means of obtaining the transmission that they need when and where they need it because they lack cash flow with which to influence transmission/distribution planning and construction decisions. This problem has led to serious delays in electricity system expansion. There has been no attempt to address this problem under the Green Energy Act.
 

DISTRIBUTED GENERATION METERING:
A problem that is particularly serious in many distributed generation systems is parasitic losses. Many distributed generation systems involve devices such as pumps, fans, transformers, etc. that cause continuous parasitic energy losses. The distributed generation system, when operating at 100% of its rated output capacity, may be 90% efficient at conversion of shaft mechanical energy into electrical energy. However at 33% of its rated output capacity, with the same parasitic losses, the same system is only 70% efficient. If the generator runs only 50% of the time at 33% of rated capacity but the parasitic losses continue 100% of the time, the system efficiency falls to 35%. Under some electricity rate structures the value per kWh of received energy is about twice the value per kWh of transmitted energy. Hence, a distributed generator operating at a low capacity factor can actually cause negative electricity cost savings. In these circumstances the issue of accurate directional electricity metering is of paramount importance.
 

FEATURES OF CAPACITY FACTOR WEIGHTED ELECTRICITY RATES IN COMBINATION WITH DIRECTIONAL kWh METERING:
1. Capacity Factor weighted electricity rates can be applied to non-dispatched generators, non-dispatched loads and distribution connections of all sizes for fair allocation of generation and transmission/distribution costs. The required input data is obtained from direction sensitive interval kWh meters.

2. Capacity factor weighted generator compensation allocates more revenue per kWh to high capacity factor generators than to low capacity factor generators.

3. The use of Capacity Factor weighted generation compensation rates allows simple meter reading and account administration. Generator bills can easily be settled to the nearest metering interval.

4. Capacity Factor weighted generation compensation rates mitigate the cost effect of brief generation peaks and valleys but capture the value of prolonged generation peaks and valleys.

5. Use of Capacity Factor Factor weighted generator compensation rates would have the overall effect of encouraging more energy storage and load management.

6. Capacity Factor weighted generator compensation in combination with data from directional kWh meters should encourage high power factor and low harmonic content.

7. Capacity Factor weighted electricity rates encourage high generator capacity factor.
 

GENERAL BENEFITS OF CAPACITY FACTOR WEIGHTED GENERATOR COMPENSATION IN COMBINATION WITH DIRECTIONAL kWh METERING:
1. Capacity Factor based generator compensation is fair. All non-dispatched non-fossil generators are subject to the same compensation formula.

2. Use of Capacity Factor weighted generator compensation would encourage wind generators to build energy storage at or near the generator site to reduce variations in net power output.

3. Capacity Factor weighted generator compensation is fair to behind the meter energy storage because it mitigates the cost effect of short equipment shutdowns for maintenance or repair.

4. Capacity Factor weighted generator compensation is applicable to non-dispatched generators of all sizes.

5. If a generator presents a constant resistive impedance to the grid, then the calculated daily net energy supplied is the same as the energy in kWh sensed by a kWh meter.

6. If a generator presents a reactive impedance or harmonic distortion to the grid then via power factor measurement that generator is allocated less compensation.

7. If a generator presents a low capacity factor to the grid, that generator will receive less compensation per kWh supplied than a generator that presents a high capacity factor to the grid.

8. The Capacity Factor weighted electricity charges are calculated from directional interval kWh values from interval meter data.

9. Directional kWh meters are able to respond to voltage and current harmonics up to at least the 30th harmonic of the power line frequency. Generally power transformers effectively absorb and filter out higher frequency harmonics.

10. The use of Capacity Factor weighted generator compensation in combination with interval kWh metering should encourage installation of behind the meter energy storage to minimize swings in the power transfer rate to and from the grid.

11. The use of Capacity Factor weighted generator compensation in combination with directional interval kWh metering allows transmission/distribution entities to fairly recover their costs.

12. The use of Capacity Factor weighted generator compensation in combination with interval kWh metering strongly encourages proper use of energy storage while elimiinating power instability problems that are caused by Time-Of-Use metering.

13. A further benefit of Capacity Factor weighted generator compensation is that the metering system is tolerant to loss of time synchronization between the meters and the central computer system. Hence the data traffic can be vastly reduced, which lowers the metering system operating cost and makes the metering system extremely resistant to computer hacking.
 

This web page last updated November 26, 2016.