A competitive element has been proposed for the province’s program to procure small scale CHP (Combined Heat and Power). The Ontario Power Authority, responding to a directive from the Minister, consulted with stakeholders and prepared a set of recommendations on how it proposes to design the next phase of CHP procurement. The recommendations were contained in a report submitted to the Minister on February 28 and released publicly on March 17, 2014.
Although the OPA proposes that small scale CHP be procured under a standard offer program, with a standard base price, it is recommending introducing a new competitive procedure: Applicants will be encouraged to bid down or offer discounts relative to a standard price, and the OPA will priorize applications based on these discounted prices. All projects would have to meet standard requirements to ensure that they are achieving certain prescribed levels of fuel efficiency, a basic tenet of CHP.
“In general, we were pleased with the core recommendation that the OPA continue to use the CHPSOP program as the model for the next phase of CHP procurement,” said Jake Brooks, APPrO’s Executive Director who coordinated APPrO’s input to the OPA. “We didn’t see serious defects in the design of that program – our concern was primarily with the low level of procurement.”
Of interest, the OPA’s recommendations dealt with one of the challenges experienced by CHP developers – that of contention for connection capacity. The OPA said, “It is recommended that the Minister provide direction on the prioritization of new CHP opportunities relative to other procurement initiatives directed by the Minister. Clarity on prioritization will enable the OPA to evaluate and award contracts to CHP projects consistent with overall government policy objectives. Additionally, it will enable the OPA to provide clearer information to potential applicants prior to submitting applications, assisting them in their assessment of the opportunities that may exist for their projects under CHPSOP 2.0.”
The OPA’s recommendations on CHP procurement were as follows:
“With respect to CHP projects that are 20MW or smaller, the OPA recommends that the Minister of Energy provide direction to the OPA to develop CHPSOP 2.0, which would maintain the general structure of CHPSOP 1.0, but with the following adjustments:
1. Prioritize applications based on applicants’ bid-down relative to a standard price
2. Utilize periodic application windows with limited capacity targets to stimulate competition
• A first window in late 2014 (100MW to 130MW) and a second window in late 2015 (50MW)
• Use results of the 2014 window to inform decisions beyond 2015
3. Limit eligibility to natural gas-fired projects that are less than or equal to 20MW
• Permit both distribution- and transmission-connected projects
• Allow expansion projects, subject to appropriate pricing and metering
4. Allocate program capacity to Target Sectors in line with government policy
• Combine greenhouse and agri-food sectors into one category
• Provide definition of Target Sectors to ensure policy is implemented accurately
5. Exclude eligibility for projects with Behind-the-meter connection configuration
6. Include consideration for upgrades to the system in connection assessment.
“With respect to CHP projects larger than 20MW, the OPA suggests exploring alternative approaches for procuring projects as needs are identified in its Integrated Regional Resource Planning process and the OPA and IESO recommendations for siting large energy infrastructure are implemented.”
The OPA said it expects to be in a position to launch the program and begin accepting applications within six to eight months. The work required to achieve this milestone would include revising the CHPSOP 1.0 program documents to reflect the changes, soliciting stakeholder feedback and finalizing the documents. This timeline is, however, subject to the Minister accepting the OPA’s main recommendation of maintaining the structure of the CHPSOP 1.0 contract.
For a copy of APPrO’s comments on the design of CHP Procurement, please contact Jake Brooks at the APPrO office.
More information is available at http://www.powerauthority.on.ca/combined-heat-power-procurement.