Toronto: APPrO and other industry groups have recommended that the Ontario Power Authority proceed with its Clean Energy Standard Offer Program (CESOP) on schedule, while making several important changes to maximize the program’s effectiveness. Officially announced in June 2007, release of the program has been delayed three times, once in December 2007, once in February 2008, and again this summer. It now appears that the OPA is having trouble meeting its most recent estimated timelines, announced on May 13.
APPrO, which recently led the development of industry input to the OPA on the rules for CESOP, is concerned that the OPA keep the CESOP program on schedule. “While a little more time may be needed to deal with some of the improvements the industry is looking for, we see no reason for any major delay in release of the program,” says APPrO Executive Director Jake Brooks.
The Canadian District Energy Association (CDEA) and APPrO submitted comments to the OPA in early July following a stakeholder meeting convened by the OPA. According to the draft timeline release on May 13, draft rules for CESOP were to be released in July. However, as of this printing, the rules had not been released and the OPA had provided only general advice that its expected timing would be delayed until “the fall.”
In addition to the timing concerns, industry organizations have expressed concerns about the formulas and rate structures being contemplated for CESOP. Proposed principles for the program put forward by the OPA suggest that rates paid for power under the CESOP program should be comparable to what would be paid for power from a typical new combined cycle gas turbine (CCGT) with adjustments to reflect the benefits of avoided marginal transmission losses, and of avoided or deferred investments in transmission capital costs. Industry organizations have generally differed with that approach. “To be eligible, CESOP projects will typically be combined heat and power projects, which are far more efficient than CCGT projects,” says Brooks.
To the dismay of several organizations, the OPA’s modeling for CESOP seems to assume projects can achieve the price structure associated with large-scale CCGTs, while also achieving the efficiency levels of some of the best cogeneration projects. “The fact is that if you want high efficiency, the capital costs per unit are going to be higher,” Brooks says. “There appears to be consensus between the various stakeholder groups that the CESOP structure is workable, but that the compensation details should be based on price and performance information obtained from CHP RFP1.”
The CDEA said, “A heat rate of 6,000 BTU/kWh is more representative of a potential Contract Facility and therefore should be used as the basis for calculating monthly settlement. The application of seasonal heat rates should be considered based on the data collected from the CHP RFP 1 projects.”
The OPA’s May 13 presentation contained the following timelines, under the heading of “Tentative CESOP Schedule”:
• Week of May 26: release draft program recommendations
• Week of June 16: Technical Meeting I
• Week of June 30: Technical Meeting II
• Week of July 14: release draft rules and draft contract
• July 14 to July 25: Q and As (web-based)
• Week of Aug 11: release final rules and final contract
Please see the Financial Technical supplement to this issue of IPPSO FACTO for more information on the CESOP submissions from APPrO, the CDEA and the World Wildlife Fund.