Quirky Ontario Electricity Pricing Creates Opportunity for Battery Storage
Battery developers have become the unintended beneficiaries of a strange quirk in Ontario energy policies that has a growing number of commercial and industrial power consumers turning to energy storage to help avoid costly peak power supplies.
Greentech Media says they’re doing their best to avoid the province’s Global Adjustment (GA) fee, introduced with the 2009 Green Energy Act, as a way to reduce their power bills.
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That’s how Ontario “became the site of the continent’s largest customer-sited battery, a 10-megawatt, 20-megawatt-hour [commercial and industrial] system that eclipsed most utility-scale projects,” Greentech reports. “That project, like a growing number of others across the province, came about because certain large energy users can avoid the GA fee if they dial down their electricity demand in the five hours of highest demand each year.”
To participate in the province’s Industrial Conservation Initiative, a company must have peak electricity demand of more than 500 kilowatts. “How they slash their demand during peak periods is up to them,” Greentech explains. “Some have introduced curtailment strategies, while others have installed alternative generation sources, such as diesel generators.” But “batteries are gaining in popularity because they can respond quickly and can also tap into additional value streams.”
The Greentech story explains some of the technical detail behind the GA fee and its relationship with energy storage. It also repeats two long-standing but controversial notions—that Ontarians are paying a premium to export cheap electricity to the United States, and that nuclear generation is (and will remain) a cheap source of power.
In a September 2018 fact sheet, the Ontario Clean Air Alliance points to nuclear costs, which increased 56 and 91% from the province’s two suppliers between 2002 and 2018, as the biggest single chunk of the Global Adjustment fee for 2017-18, at 40%. By comparison, the cost of wind and solar power accounted for 18 and 14% of the GA, respectively.
The fact sheet cites an Ontario Energy Board (OEB) that shows 60% of the province’s electricity supply coming from nuclear, 8% from wind, and 2% from solar. Natural gas delivers 6% of the province’s electricity supply and accounts for 15% of the GA fee.
The equivalent fact sheet for 2018-19 has nuclear’s share of electricity supply falling to 57% and its share of the GA increasing slightly to 41%. The Clean Air Alliance fact sheet notes that Ontario Power Generation, one of the province’s two nuclear generators, intends to double its production price to 16.5¢/kWh by 2025.The OEB charts for both years show solar, wind, and natural gas accounting for a higher proportion of the GA than their share of electricity supply, and the opposite for nuclear. But much of the recent advocacy from the Clean Air Alliance has pointed to the other renewable—hydroelectricity—which in the latest OEB report delivers 24% of electricity supply while accounting for only 12% of the adjustment charge. Ahead of the June, 2018 provincial election, the Alliance urged Ontario political parties to commit to a least-cost energy strategy by maximizing energy efficiency, importing hydropower from existing dams in Quebec, and shutting down the province’s costly nuclear generators.