XYLENE POWER LTD.

ONTARIO ELECTRICITY SYSTEM

By C. Rhodes

DEFINITION:
The term "Electricity System" encompasses all the components of the means by which we obtain electicity. Without limiting the generality of the definition the electricity system includes energy sources, electricity generation, daily energy storage, transmission, seasonal energy storage, distribution, metering, construction, operation, maintenance, administration and regulation.

IMPORTANCE:
During the last 100 years electricity has become integral to our daily lives. The electricity system in Ontario has been so reliable that we tend to take it for granted. Today we depend on reliable grid supplied electricity for numerous critical functions, including but not limited to: pumping water, lighting, space heating, space cooling, ventilation, water heating, transportation, refrigeration, communication and power for industrial processes.

ENVIRONMENTAL, DEPRECIATION AND RESERVE ISSUES:
The reliability of the electricity system in Ontario is now threatened by consequences of the electricity industry and the related governmental regulatory bodies failing to pay sufficient attention to environmental, depreciation and reserve issues. As long as electricity was obtained from hydro-electric dams at remote locations, and the environmental effects were largely confined to fish habitat and fish migration, there was relatively small public opposition to electricity system development. Hydro-electric dams usually have sufficiently long service lives that equipment depreciation is not a major issue. However, by about 1970 most of the economic major hydro-electric potential in southern Ontario had been developed and other sources of electricity were constructed.

These other sources of electricity were primarily thermal-electric generating stations, where the source of heat was either combustion of a fossil fuel or a nuclear reaction. The fossil fuel generating stations emit toxic products of combustion, particulate matter and green house gases. The nuclear generating stations, if not carefully operated and maintained, have the potential of releasing dangerous radioactive isotopes. Both coal and nuclear generating stations have significant long term solid waste disposal issues.

All thermal-electric generating stations emit large amounts of waste heat. Efficient operation of a thermal-electric generating station dictates that it be located adjacent to a major river or a large body of cold water for cooling. In circumstances where the water supply is limited evaporative cooling can be used to reduce the water requirements. However, evaporative cooling results in a lower heat to electricity conversion efficiency than cold lake water cooling.

Thermal-electric generating stations generally depreciate faster than major hydraulic generation facilities. Ontario Hydro, Ontario Power Generation, the Ontario Energy Board (OEB) and the Ministry of Energy (MOE) of Ontario repeatedly failed to make adequate allowance in the Ontario electricity rate structure for costs of thermal-electric generation station depreciation and reserve generation. These parties also made insufficient allowance for costs related to permanent solid waste disposal, toxic emissions, particulate matter emissions and global warming. The province of Ontario is now facing replacing as much as 80% of its electricity generation capacity, but has no funds set aside for this purpose. In addition there is about $20 billion of unfunded electricity bond debt principal which is presently held by the Ontario Electricity Financial Corporation and which is guaranteed by the taxpayers of Ontario.

GLOBAL WARMING CONSIDERATIONS:
During the forty year period 1965 to 2005 the annual average temperature at the Toronto International Airport, as measured by Environment Canada, increased 2.44 degrees C. This temperature increase is due to a combination of an increase in the non-aqueous atmospheric greenhouse gas concentration (principally carbon dioxide) which causes some warming and a corresponding increase in the average atmospheric partial pressure of water vapor (water vapor concentration), which causes further warming. If mankind's present pattern of use of fossil fuels for primary energy generation continues, the annual average temperature at the Toronto International Airport is projected to increase about another 5 degrees C by the year 2085. The corresponding world wide temperature increase will lead to wide spread starvation due to increased moisture evaportation from farm land with no corresponding increase in average rainfall. This problem is amplified by loss of mountain snow packs that contribute to summer crop irrigation. There are also problems with increasing ocean surface temperature causing an increase in sea level, increasing frequency of violent storms and major changes in rainfall patterns.

ADDRESSING GLOBAL WARMING:
In order to prevent mass starvation from global warming mankind must collectively reduce its population and cease use of fossil fuels for primary heat and energy generation. Hence:
1. All electricity must be generated using non-fossil fuel energy sources;
2. Electricity generation and transmission must be expanded to displace fossil fuels in the transportation and heating sectors;
3. Electricity generation and load profiles must be matched using a combination of generation constraint, energy storage and load management;
4. Electricity rates must reflect the full costs of generation via non-fossil fuel means and related transmission/distribution.

ELECTRICITY UTILITY PHILOSOPHY:
A major philosophical issue to be faced by electricity utilities in coming years is the present implicit assumption that grid customers (both generators and loads) need not be responsible for either their power factor or the shape of their generation/load profile. For many categories of grid customers the existing electricity rate does not effectively encourage efficient use of the transmission/distribution system. The present electricity rates in Ontario are a carry-over from a time when the generation and transmission functions were integrated in Ontario Hydro and fossil fueled generation could be used for load following. In that integrated system sophisticated technical issues such as provision of variable reactive power generation for optimizing transmission efficiency were internally addressed. However, now that the generation, transmission and system operation functions are the responsibilities of separate entities, the electricity rate should contain strong financial incentives for high generation capacity factor, high load factor, high power factor and voltage stabilization. Otherwise the costs per kWh of generation and transmission/distribution will increase.

Consider a rural wind farm that feeds an urban load via a long transmission line. A typical wind farm operates at a 30% capacity factor. A typical nuclear generator operates at a 90% capacity factor. Hence the cost of transmission for wind generated energy expressed in $ / km-kwh is about three times the corresponding cost of transmission for nuclear generated energy. However, suitable sites for wind farms tend to be about four times more distant from urban load centers as are suitable sites for nuclear generators. Hence the cost per kWh for transmission of wind generated energy is about 3 X 4 = 12 times the cost per kWh for transmission of nuclear energy. To put this matter in financial perspective, if the average cost of transmitting nuclear generated energy is $.015 / kWh, the corresponding cost of transmitting wind generated energy is about $.18 / kWh. The cost of transmitting wind energy can be approximately halved by use of behind the meter energy storage at the generator to increase the net generator capacity factor, but as of June 28, 2011 there has been no announcement by the OPA or the OEB of an electricity rate or incentive to encourage generators to use behind the meter energy storage.

The implicit assumption that "it is the responsibility of electricity utilities to provide generation and transmission/distribution to follow the uncontrolled load" has led to a large investment in central generation that can follow real and reactive load over a wide power range. However, much of this load following central generation relies on fossil fuels. In a low carbon world the assumption should be changed to: "It is the responsibility of the transmission/distribution utilities to provide for transmission of energy from generators to loads at a nearly uniform rate" and "each grid customer must accept responsibility for his/her generator capacity factor, load factor and power factor, as well as for the amount of energy exchanged". The driving issue is that conversion of transportation and heating from fossil fuels to electricity will require more than doubling the size of the present electricity generation and transmission/distribution system unless the average generator capacity factor and the average load factor are both substantially increased. In order to limit the increase in generation and transmission/distribution costs, the present assumption that a load customer is entitled to draw any amount of electricity from the grid at any power factor at any time with little or no cost penalty, will have to be discarded. A new electricity rate philosophy is required under which customers who draw energy from the grid at a constant power and at a high power factor pay much less per kWh than customers who draw energy from the grid at a variable power and/or at a low power factor or who otherwise use a disproportionate amount of the shared electricity system resources.

With the increasing use of intermittent wind generation there is also a requirement for a new class of electricity customers that can be dispatched off with no notice. Such customers reduce the amounts of expensive constrained generation and energy storage that are required for the total generation to track the total load.

ELECTRICITY RATE:
In order to financially enable non-fossil fuel Distributed Generation financed by the private sector it is necessary to implement a non-fossil fuel electricity generation incentive (feed-in tariff) or an electricity generation related fossil carbon emissions tax. This incentive or tax must value a kWh of constant output from any non-fossil fuel generator together with supporting transmission and energy storage at the full cost of a delivered base load kWh from new nuclear generation using the same private sector financing.

In order to implement Distributed Generation on a large scale with minimum increase in transmission/distribution it is necessary to implement energy storage near generation sites and load sites. For this energy storage to be economically viable for its owners there must be suitable net generation capacity factor and net load factor dependent electricity rates guaranteed by credible long term contracts.

In order to permit reasonable maintenance of distributed electricity generation and distributed energy storage equipment existing monthly peak kVA meters and monthly peak kW meters must be replaced by suitable directional interval kWh meters. The electricity rate must not overly penalize a facility owner for random equipment shutdowns that are required for normal repair and maintenance.

In order to put all parties on a level playing field all non-dispatched generators must be subject to the same metering and the same rate regime. Generators should earn a premium for being constrained in order to provide local voltage regulation and electricity system reliability.

The cost of load following generation should be reflected by introduction of congestion factors into electricity rates. Congestion factors financially reward high load factor and high generation capacity factor, which in turn minimize the required amounts of generation and transmission.

When the electricity rate structure fully reflects actual costs for load following, load customers may find that it is less expensive for them to utilize their own local generation, energy storage and load management than it is to pay the electricity utility for load following services.

EQUIPMENT SERVICE LIFE AND RESERVE ISSUES:
The service life of generation and transmission equipment is the time interval between major prolonged shutdowns. For example, over time hydraulic dams accumulate silt and may need to be drained for a season to allow dredging. Over time turbine components erode and need major service or replacement. Over time the fuel channels of nuclear reactors degrade and need replacement. Over time lattice transmission towers and transmission lines corrode and need replacement. These and other long term deterioration mechanisms result in prolonged equipment shutdowns for major service or replacement. The electricity system must have sufficient reserve capacity in generation, transmission and distribution that the system can accomodate prolonged equipment shutdowns without significant interruption of electricity supply to consumers.

Generally the service life of major utility equipment is in the range of 20 to 60 years. The more complex the equipment the shorter its service life. Frequently the service life is constrained by availability of critical replacement parts. For this reason, during prolonged equipment shutdowns electronic control and monitoring systems are often completely replaced. In the case of electronics the spare parts problem is compounded by ongoing evolution of hardware, firmware and software.

URBAN POWER TRANSMISSION:
In urban areas most of the green house gas emissions come from combustion of fossil fuels in vehicles, heating plant and electricity generation. The technologies that can displace fossil fuel energy with non-fossil fuel energy in urban applications generally require that additional electricity be generated in rural areas and delivered via transmission/distribution to urban loads. The existing urban municipal plans often do not provide sufficient energy transmission corridors to allow electricity to displace fossil fuels. Hence, in order to reduce urban greenhouse gas emissions, substantial amounts of urban property must be purchased or expropriated to form the required additional energy transmission corridors.

RURAL POWER TRANSMISSION:
Electricity transmission equipment in rural areas is primarily used to guide electromagnetic energy from energy sources in rural areas to loads in urban areas. The unconstrained outputs of renewable energy sources are variable both with respect to time of the day (in the case of wind turbines and solar) and are variable with respect to the time of the year (in the case of wind turbines, run-of-river hydraulic generation and solar). The average annual output of a wind farm is typically only 30% of its peak output. Since the transmission line connected to a wind farm without adjacent energy storage must be sized to handle the wind farm's peak output, on average only 30% of that transmission line's capacity is effectively used. This problem is compounded by the fact that a wind farm requires balancing generation that is usually located elsewhere. The transmission line connected to that balancing generation is also inefficiently used. In simple terms, renewable energy generators without nearby energy storage generally require many times as much transmission per kWh of electricity delivered to the load as do nuclear generators. The net result is that, without energy storage, as the fraction of total energy supply from renewable generation increases, the required amount of rural transmission increases several times faster.

The required amount of rural transmission can be mitigated through the use of daily energy storage located close to the generators and the loads. Seasonal energy storage, involving large hydroelectric projects and major transmission system enhancements, is also required for seasonal balancing of renewable generation. The combined cost of daily and seasonal energy storage may exceed the cost of the generation. Constructing rural transmission requires purchase or expropriation of lengthy corridors of land. The Ontario Power Authority, the electricity system planning agency for the government of Ontario, has yet to address the full costs of energy storage and rural transmission required to support large amounts of renewable generation.

GENERATION AND LOAD CONSTRAINT:
Electricity system voltage regulation requires that the total instantaneous generation continuously matches the total instantaneous load. Part of the potentially available generation and/or load must be constrained in order to have a reserve that is immediately available to balance uncontrolled generation and load fluctuations. The electricity rates should fairly compensate equipment owners for the financial costs of maintaining this reserve.

VOLTAGE AND POWER CONTROL:
Distributed system power and voltage stability requires the use of a negative slope proportional output power versus voltage controller at every distributed generator and at every energy storage unit. These controllers attempt to keep the line voltage within +/- 6% of its nominal value. During normal operation the distributed generator power output fed to a distribution feeder is controlled by the line voltage. The line voltage is controlled via the tap setting on the substation distribution transformer secondary to which the distribution feeder is connected. This tap setting is controlled by a proportional-integral line voltage controller. Note that the distributed generator power controllers must not have voltage error integrating control algorithms, because a multiplicity of such error integrating controllers leads to a phenomena known as "hogging", which causes instability and which reduces overall system efficiently.

For distribution connected distributed generators the output power contollers are set so that if the line voltage sags 6% below nominal the distributed generator output power is maximum and if the line voltage rises 6% above nominal the distributed generator output power is zero.

For substations the output power contollers are set to maintain the IESO specified nominal line voltage. Increasing this nominal line voltage setpoint reduces the amount of distributed power generation and increases the load power consumption. Decreasing this nominal line voltage setpoint increases the amount of distributed power generation and reduces the load power consumption. Hence the IESO can achieve system power balancing by making small changes to the nominal distribution voltage setpoints. Each substation line voltage controller must have a sufficient dead band to prevent short cycling of the substation transformer tap changer.

Energy storage devices require two control algorithms, one for charging and the other for discharging. In the charging mode an energy storage device behaves as a load. In the discharging mode an energy storage device behaves as a generator. A behind the meter energy storage system normally uses power control to achieve a very high load factor for its owner.

Load control systems are normally programmed to achieve a high load factor for the facility owner. Step controlled load shedding systems must have a control deadband equal to the largest single power step to prevent short cycling. Subject to suitable contract arrangements the Independent Electricity System Operator (IESO) could remotely adjust the nominal power setpoints of load control systems to meet unusually high or unusually low total grid load conditions.

This control methodology results in a stable power system that is highly resistant to software attacks by hackers because most of the power control algorithms are imbedded in firmware that cannot be changed via the communication links. This control system can still potentially be compromised by hackers shutting down generators, switching isolation breakers or adjusting the nominal power or voltage setpoints. However, since only a small amount of control data is involved this data can be highly encrypted. Furthermore, most voltage control is achieved locally rather than through the communication network. Thus the system can tolerate most network communication failures.

GENERATOR DESIGN:
Stable operation of a distributed generator with a negative slope output power versus line voltage controller imposes certain mechanical constraints on the generator system. For an engine-generator these requirements include a minimum flywheel size, a maximum time delay between a step change in line voltage and the engine output power response and a minimum load. These issues are well known to engineers who specialize in design of load following generators. However, many present wind turbines are not fitted with output power control systems that are capable of stable line voltage regulation. Such control systems should be required by all new OPA Feed-In Tariff contracts. These contracts should also provide for the distributed generator output power constraint that will result from use of line voltage regulating power control systems.

SYSTEM DETERIORATION:
Problems with the environment, equipment depreciation, rural transmission and urban transmission have led to the electricity industry being subject to intense public scrutiny. Fear of public reaction to electricity system development has made elected politicians unwilling to make timely decisions related to important new generation and transmission projects. As a result the electricity system has deteriorated to such an extent that Ontario presently relies on both large amounts of fossil fueled electricity generation and electricity imports for meeting the Ontario peak electricity load. Most of the existing electricity utility staff are devoted to operating and maintenance. There is an infrastructure replacement backlog. There are insufficient human resources and there is no viable financial mechanism for undertaking major new integrated generation and transmission projects. There are multiple layers of required approvals that collectively act to discourage private sector investment.

DEPENDENCE ON FOSSIL FUELS:
Successive delays by politicians have caused the Ontario electricity system to become dependent on fossil fuels for load following generation. The problem has been compounded by implementation of the Hourly Ontario Electricity Price (HOEP) which is strongly influenced by the low prices of fossil fuels without a fossil carbon emissions tax. The HOEP causes more expensive emission free generation technologies to be rejected in favour of low cost fossil fuels. Both federal and provincial politicians have been unwilling to directly face the issue of implementing a fossil carbon emissions tax in order to correct the HOEP problem. The HOEP is further distorted by the failure of successive Ontario governments to require existing central generation to pay down the accumulated electricity debt.

DISTRIBUTED GENERATION AND ENERGY STORAGE:
In order to provide electricity without a severe environmental impact, much effort in recent years has gone into investigating generating electricity from wind, run-of-river hydro, solar and co-generation distributed energy sources. However, all of these distributed energy sources have the common problem that the time profile of their unconstrained electricity outputs does not match the time profile of the provincial electricity load and that the average electricity outputs are substantially higher in the winter than in the summer. In order to effectively utilize these distributed energy sources, part of the total electrical energy generated during the winter must be stored in some form of potential energy and then converted back into electrical energy during the following summer. Seasonal storage of excess energy can be achieved via Pumped Hydraulic Energy Storage Between Lake Erie and Lake Ontario. Daily storage of excess energy can be achieved via Na-S-NiCl2 Electro-Chemical Energy Storage. Other means of energy storage are discussed under the heading Energy Storage.

METERING SYSTEM:
The metering methodology must allow any party connected to the grid to be a generator, load or alternately both. The metering system and the related electricity rate must not impose a financial barrier to energy storage, which is essential to achieve reliability and voltage regulation with random intermittent distributed electricity generation.

SHORT CIRCUIT FAULT CLEARANCE:
A significant constraint on adding distributed generation to an existing local distribution circuit is the short circuit fault clearance capacity of the existing switchgear used to isolate branches off that circuit. This switchgear was originally sized assuming that the only energy source to the circuit was the utility substation transformer. Addition of distributed generation along the circuit lowers the source impedance and hence increases the available short circuit fault current. Usually there are no inexpensive solutions to this problem. The short circuit fault clearance capacity of every branch isolation switch may need to be doubled in order to safely accommodate maximum distributed generation. If the branch isolation switches are privately owned by parties that are not involved in distributed generation there is no clarity as to who is responsible for the switchgear upgrade costs.

Often the amount of distributed generation that can be safely added to an existing distribution circuit is limited to the minimum amount of operating load connected to that circuit. This requirement can be met by forcing all distributed generators to operate "in-fence" behind load meters so that net energy is not exported to the distribution circuit. This constraining condition is safe, but severely limits use of distributed generation.

FOSSIL CARBON EMISSIONS TAX OR NON-FOSSIL CARBON GENERATION INCENTIVE:
The government of Ontario has indicated that it plans to close coal fueled electricity generation to reduce both toxic and CO2 emissions to the atmosphere. In order to financially enable construction of replacement non-fossil fuel generation ahead of coal generation closure it is necessary for the OEB to approve a fossil carbon emissions tax or for the OPA to offer a non-fossil fuel electricity feed-in tariff. This tax or feed-in tariff must reflect the reality that the practical alternative to distributed generation is new nuclear generation. The last major new nuclear project in Ontario, commenced about 33 years ago (1978) and including construction financing cost more than $4000 / (base load kW). Any new nuclear project will require training an entire new army of design, construction, operating and maintenance personnel, and purchase of materials at current prices, so it is unrealistic to contemplate a full cost of less than $8000 /(base load kW) and an eventual cost of $10,000 / (base load kW) is likely. Hence any alternative non-fossil fuel electricity generation fitted with sufficient energy storage and transmission to provide a nearly constant electricity output co-incident with the electricity system load peak is realistically worth about $10,000 /(base load kW) to the electricity ratepayer, and a fossil carbon emissions tax or an electricity feed-in tariff should reflect this reality.

PRIVATE SECTOR CAPITAL:
The Ontario Power Authority (OPA) seeks to purchase kWh rather than fixed assets from private sector distributed generation. Consequently the generation facilities must be funded by the private sector without government guarantees. Absent government guarantees the blended cost of capital increases from approximately 7% / annum to approximately 20% / annum. Few who have not been personally involved in funding power system construction, operation and maintenance fully appreciate this issue. A consequence of abandoning government financing guarantees is to approximately double the cost per kWh of electricity from new generators. Presently major new generation construction in Ontario is stalled on this issue. The existing executives of the OPA have insufficient appreciation of the full cost of capital in the private sector.

The Ontario Energy Board (OEB) will have to have to face and deal with this issue. There is no magic solution. The government of Ontario is sitting on $20 billion of stranded electricity debt. There is presently no provision in the electricity rates for paying down the principal of this debt. The existing debt repayment charge of $.007 / kWh barely meets the ongoing cost of bond interest on this debt. This debt makes it difficult or impossible for the government of Ontario to guarantee further debt financing for major electricity projects. In order to mitigate the cost of new generation and new transmission the OEB should implement a substantial electricity rate increase that is dedicated to rapidly paying down the stranded electricity debt principal. In order to enable new non-fossil fuel generation the revenue from this rate increase will have to be drawn primarily from existing fossil fuel generation. This rate increase could be in the form of a fossil carbon emissions tax applied to fossil fueled generation. This author suggests a fossil carbon emissions tax on electricity generation of $200 per CO2 tonne emitted. This tax would make the cost of electricity from combustion of fossil fuels comparable to the cost of electricity from new nuclear generation and would go a long way to correcting the problems inherent in the Hourly Ontario Electricity Price (HOEP). At some future time the Canadian government may become involved in a fossil carbon emissions tax or a carbon cap and trade system that achieves the same net effect. However, in the interim Ontario should impose its own fossil carbon emissions tax on electricity generation to reduce the Ontario electricity debt. Alternatively the provincial HST revenue from electricity sales should be dedicated to reduction of the electricity debt.

This web page last updated June 29, 2011.