XYLENE POWER LTD.

ELECTRICITY GENERATION

By C. Rhodes

BACKGROUND:
The Ontario Power Authority (OPA), in its 2005 Supply Mix Report, identified that Ontario needs to build more than 24,000 megawatts of electricity generation capacity by the year 2025. The Supply Mix Report implicitly assumed continued use of fossil fuels for peaking electricity generation, transportation and general heating applications. However, when the constraints imposed by greenhouse gas (GHG) warming are taken into account, these implicit assumptions are wrong.

In order to significantly reduce Green House Gas (GHG) emissions fossil fuelled electricity generation must be eliminated from the supply mix, except for emergency reserve generation. Furthermore, the total required electricity generation capacity will be much larger than is contemplated in the 2005 OPA Supply Mix Report because of the requirement to use non-fossil fuel electricity to displace fossil fuels that are presently used for transportation and general heating.

ACTUAL ELECTRICITY LOAD:
There is an increasing annual peak electricity load in Ontario that on August 1, 2006 reached 27,005 megawatts. This annual peak electricity load is anticipated to continue increasing over the long term due to:
a) An increasing population;
b) An increasing use of mechanical cooling due to CO2 and other GHG atmospheric warming;
c) An increasing use of electricity to displace fossil fuels in industrial, transportation and heating applications.

The OPA has completely failed to take these issues into account in preparing its long term electricity load forecast. The only certain way to meet and contain the load growth is to adopt an electricity rate structure that is sufficient to fund the full cost of environmentally acceptable new generation and its related transmission and distribution. Since the cost of new transmission and distribution is comparable to the cost of new generation, to minimize overall costs it is highly desirable to remove obstacles to implementation of non-fossil fuel distributed generation.

GENERATION CATEGORIES:
All generators and loads can be divided into three categories.

Category I consists of generators and loads that are controlled by their owners in order to maximize each owner's profitability under a published rate schedule. The rate schedule must take into account the ability of each generator to supply power when needed (generator reliability) and to efficiently use the transmission/distribution system. Presently most load customers and most new small generators are in category I. The category I rate schedule should be carefully designed to minimize the required amount of more expensive category II generation and load. The advantage of category I is that it provides rate stability that allows building owners and other investors to make simple investment decisions relating to electricity generation, energy storage, energy conservation and load management.

A generator can improve its reliability and its efficiency of use of the transmission/distribution system by employing energy storage to make its net output more uniform. This issue is of particular importance for wind and solar generators.

Changes in the electricity rate with time should be smooth to avoid sudden changes in electricity supply or demand that may be triggered by discrete time-of-generation or time-of-use rate blocks. At every instant in time the total power generated must be carefully controlled to exactly equal the total power consumed plus transmission/distribution loss. The control system must also keep the local voltage supplied to all load customers at its nominal value +/- 6%. Efficient achievement of this voltage control requires some constraint of the net output from almost all generators. A generator control system that adjusts local generator output power in proportion to (nominal voltage - local grid voltage) is required to prevent some generators hogging the load at the expense of other generators. The whole issue of category I generator constraint for voltage regulation has yet to be addressed by the Ontario Power Authority and the Ontario Energy Board. There is also an analogous issue relating to constrained loads.

It is important to note that optimum generator and optimum load electricity rate schedules are different. A generator's capacity factor is its average output divided by its peak output. Load Factor is the average load divided by the peak load. The transmission/distribution utilization is optimum when both the generator capacity factor and the load factor are high. The generator compensation rate per kWh should increase with increasing capacity factor. However, a generator's capacity factor is capped by the need for constraint of generation surplus to meet system reliability and voltage control requirements. The electricity price per kWh to a load customer should decrease with increasing load factor until the load factor is unity.

In order to financially enable energy storage the cost of electricity per kWh to the load customer needs to be about three times lower at the time when the energy is stored as compared to the time when the energy is used.

Monthly peak demand metering is counter-productive because it heavily penalizes the equipment owner during normal maintenance periods, thus reducuing the financial incentive for use of energy storage.

Daily peak demand metering is only effective in conjunction with a time dependent energy rate. Otherwise there is little incentive for marginal energy saving by low load factor customers.

Category II consists of generators and loads that may be dispatched off by the IESO on a minute by minute basis in order to match the total generation to the total load while preventing localized transmission overloads. Much of the existing hydraulic generation and fossil fuelled generation falls into category II. Since category II generators and loads are typically dispatched off by the Independent Electricity System operator (IESO) for much of the time, the cost per kWh of electricity from new category II generators is higher than the cost per kWh of electricity from new category I generators. Similarly the price paid per kWh by category II loads is less than the price paid by category I loads.

The category I rate structures should be chosen to minimize the required amount of category II generation and load. If at a particular time of the year category II generation has to run a lot or if large amounts of category II loads must be shed, it is an indication that the seasonal component of the category I rate structure is incorrect for that time of the year. Thus operational experience with category II generation and loads should be used to semi-annually fine tune the category I rate structure.

Category III consists of generators and loads that are normally in category I but are shifted into category II under pressing circumstances when there is insufficient category II generation or load to maintain the grid voltage within acceptable limits. An example of category III is a demand response program that sheds air conditioning load at the peak load time on extremely hot summer days. Usually the generation or load owner receives some form of benefit for allowing his generation or load to be temporarily recategorized to meet pressing circumstances.

GENERATION TYPES:
The total electricity supply can be viewed as a linear sum of the following generation types:

1. Run-Of-River Generation:
This distributed generation type includes run of river hydraulic generators with little or no storage reservoir capacity. This generation type has a high output in the early spring and a low output in the late summer. The annual variation in the output is typically about 4:1. This generation type normally operates at full available capacity 24 hours per day, unless constrained to a lower value by the IESO. The major drawback of this generation type is that for efficient use of both the generation and the transmission/distribution energy storage at the load is required to match the load profile to the nearly flat generation output. To address this problem the load customer's rate schedule must effectively value electricity much more during the day than during the night and more during the summer than during the winter. The economics of run-of-river generation improve if part of the electricity load is winter heating, so that the seasonal electricity generation profile more closely matches the seasonal electricity load profile. Run-Of-River generators typically have working lives of about 90 years.

2. Wind Generation With Nearby Energy Storage:
This generation type includes wind turbines together with nearby energy storage.

The main problem with wind turbines without nearby energy storage is that their outputs are highly variable over a day, over successive weeks and over a year. Wind turbines require some form of energy storage to level their outputs. Environmentally acceptable forms of energy storage include river fed hydro-electric reservoirs, pumped hydraulic energy storage and electrochemical energy storage.

On average a wind turbine without nearby energy storage needs about three times as much transmission per kWh delivered to the load as does a nuclear reactor located equally far from the load. The extra transmission requirements of wind generation may be a small cost component in Europe, where the average transmission distance is relatively small, but are a significant cost component in Canada where the average transmission distance is large. The cost of transmission per kWh in Ontario will increase unless all generators bear their fair share of the transmission costs and the generator compensation rate strongly encourages use of nearby energy storage.

The advantage of nearby energy storage to wind turbine owners is that it allows them to level their net energy output profile to efficiently use the transmission/distribution system and to supply power when needed, increasing the inherent value of wind generation. To encourage wind turbine owners and others to adopt energy storage, all new generators should be paid for the electricity energy that they generate in accordance with a rate structure in which the generator compensation rate per kWh increases as the net generator capacity factor increases. Such a rate structure would encourage wind turbine owners to build sufficient energy storage close to wind turbine locations to substantially reduce the net daily output power fluctuations and hence reduce the related required transmission/distribution cost. Existing wind turbine owners should be offered a contract amendment to upgrade to use of energy storage under the new rate.

Another problem with wind turbines in Ontario is that their outputs are seasonal with the monthly average output in the winter typically being about two times the monthly average output in the summer. To reflect this issue the electricity rate should pay more for a kWh generated during the summer than for a kWh generated during the winter. The economics of wind energy improve if part of the electricity load is winter heating, so that the seasonal generation profile approximately matches the seasonal load profile. Present wind generators are financed assuming a working life of at least 20 years.

3. Nuclear Generation:
Nuclear electricity generators are central in nature because their siting is constrained by their requirement for large amounts of cooling water. To minimize component thermal stress nuclear electricity generators generally operate at a nearly constant output. The major advantage of nuclear generation is that its output is reliable and does not significantly diminish during the summer at the time of the peak air conditioning load. The major drawback of nuclear generation is that its load following capability is poor, so that energy storage is required to efficiently achieve daily load following. Maintenance of nuclear generation is normally scheduled for seasons when the anticipated provincial electricity load is relatively small. An issue with nuclear electricity generation is that it needs to be complemented by Micro Fusion for economic production of bio-fuels. Nuclear generators have working lives in the range 40 to 60 years, but require major maintenance at about 20 year intervals.

4. Solar Generation:
Distributed solar generation produces electricity during the day but not at night. Solar generation is useful for helping to meet the normal increase in load during the day. Solar generation is uneconomic for supplying electricity at night because of the prohibitive cost of the required energy storage system for supplying low value off-peak electricity. Solar generation is also somewhat seasonal, although the peak daily output of a solar generator is often coincident with the peak daily electricity demand. The working life of a solar generation system is strongly dependent on the specific technology and materials used.

5. Load Following Hydraulic Generation:
This generation type consists of hydraulic generation from storage dams that hold back large lakes of water. Daily load following generation supplies the power difference between the low load in the middle of the night and the peak load during the day. The generation compensation rate must have an on-peak component sufficient to fund the extra costs of load following generation. Otherwise the daily load variation must be met by higher cost IESO constrained generation (Category II generation). There are constraints on hydraulic load following generation imposed by average river flow, reservoir area, permitted change in reservoir level and maximum and minimum limits on downstream river flow. The working life of large load following hydraulic generation installations is well over 100 years.

A variation on hydraulic load following generation is pumped hydraulic energy storage where water is pumped uphill during periods of low electricity demand and then runs downhill to generate more electricity during periods of high electricity demand.

6. Constrained Generation and Load:
Directly controlled constrained generation and constrained load are used by the Independent Electricity System Operator (IESO) in order to regulate the electricity system voltage and frequency. The preferred generation and load type for this purpose is hydraulic generation in combination with pumped hydraulic energy storage because of the good response rate, high turndown ratio and low GHG emissions. Hydraulic load following generation is subject to both daily energy storage constraints and seasonal energy storage constraints. If insufficient hydraulic generation is available to the IESO, chemical energy driven generation must be dispatched. A significant requirement for dispatchable generation or dispatchable load is a strong indication that the electricity rate structure is incorrect. Directly controlled generators and loads are the subject of complex and expensive contracts. If possible, it is better to resolve a projected generation or load shortfall via an adjustment to the electricity rate structure.

7. Reserve Generation:
This type of generation normally does not operate at all except for test purposes and for providing generation to replace other generation that is not available due to an unplanned equipment failure. Normally the capacity factor of reserve generation is zero. However, to ensure system reliability reserve generation must be ready to function immediately, with no advance notice, to make up for any failure of other generation to operate as planned. Reserve generation may be fueled by natural gas.

GENERATOR COMPENSATION RATES:
The importance of the above categories of generation and loads lies in the electricity rates / kWh. The compensation rate / kWh for category I generators is much lower than the compensation rate / kWh for category II generators. Similarly the energy cost / kWh for category I loads is much higher than the energy cost / kWh for category II loads. Category II equipment must be economic at about half the capacity factor or half the load factor of Category I equipment. Reserve generation is contractually constrained off almost all of the time, so constrained off generators must be paid to finance equipment that is seldom utilized.

COST:
There is some debate as to whether the principal future source of primary energy in Ontario should be nuclear or wind. The position of this author is that it is prudent for Ontario to invest in both types of generation so as to have protection against long term risks that could occur with either technology. As long as there is sufficient seasonal energy storage and electricity transmission capability, surplus non-fossil fuel electricity should not be wasted. A vast amount of new non-fossil fuel primary energy is required to displace fossil fuels in North America.

This web page last updated November 26, 2009.