Toronto: Paul Murphy, President and CEO of the Independent Electricity System Operator, delivered an important speech on January 10, alerting many in the industry to potential changes in the sector that may have implications for the way they do business.
“While we have seen a lot of change over the last 12 months, there is much more on the horizon and the impacts of that change will have to be carefully managed,” he said. There are some hopeful signs of increasing consumer engagement Murphy points out: “2011 saw a significant increase in the number of customers who are now on TOU pricing. More than 3.5 million Ontario customers now have TOU rates, more than twice as many as a year ago, and more than any other jurisdiction in North America.”
At the same time, usage patterns appear to be more challenging to work with than ever before. “While peak demand increased, annual energy declined slightly to just under 142 terawatt hours (TWh) in 2011, about 10 per cent less than it was five years ago. … The variability of the supply will increase substantially while at the same time our ability to follow load will decrease." Further explaining this challenge he said, "Over the next few years, nuclear capacity will increase with two nuclear units returning to service, flexible coal will be phased out and an additional 6,000 MW of wind and solar is expected to come on line by 2015."
One of the largest problems on the horizon is Surplus Baseload Generation or SBG. Murphy warns that, "The surplus baseload generation conditions we have experienced over the past three years are expected to continue to challenge us over the next few years. The two refurbished Bruce Power units are expected back soon and more variable renewable generation will be brought on line. We have largely been able to avoid nuclear shutdowns to deal with the SBG conditions but this may not be the case in the near future. We need to find alternative ways to address SBG to avoid using a multi-day nuclear shutdown to address surplus conditions that could last for only a few short hours. Given the potential of quick swings from surplus to shortage, those actions could have greater consequences in the future if the shutdown nuclear unit is not available by the time we need it again."
He also stressed the importance of the province’s interties. "Our reliance on interprovincial and international trade to balance the system will also increase. A few years ago we were reliant on our neighbours to help meet demands during peak days, now we count on the export market to help balance the system during surplus conditions." He tied this consideration to the value of imports and exports: "Exports don’t always cover the full costs of building and operating associated with the generators of that power but they do help to reduce the costs that Ontarians ultimately have to bear. So while we do see some reaction over the price of exports, particularly when they’re negative, we should be mindful of the benefits they provide today and the flexibility they can provide tomorrow to better manage system conditions."
Murphy suggested that operational planning appears to be more challenging than ever before: "… today with all of the change that is now upon us and continuing to occur, we are less able to rely on (previous) trends or patterns. We’ve never had the levels of variable generation we are experiencing now so history is not repeating itself. And rather than having lengthy periods of time where we are in a certain situation that we can plan for, for example an entire summer of shortages, we are moving into a period of time where we will go from surplus to shortage over a short period of time given the increase in variable and inflexible supply."
Reiterating the challenge, he said, “I see more adaptation happening. I see more innovation. And I see the industry having to work even more closely together to ensure that our efforts are integrated and efficient. This isn’t going to be easy. We are on the cusp of some tough decisions – around dispatch, around prices, around efficiency, and around reliability. All within the context of uncertain economic times.”
In terms of solutions, Mr. Murphy repeated some themes that are familiar to generators. He suggests looking closely at having the OPA offer adjustments to contracts and regulated prices that will encourage generator flexibility; investing in new grid infrastructure; smart grid development; and increasing options for consumer engagement, largely along the lines recommended by the Electricity Market Forum. (See "Market Forum targets efficiency through better price signals" elsewhere in this issue of IPPSO FACTO.)