EPS AB Energy Canada Ltd., an affiliate of the international cogeneration company Gruppo AB, is making the case that on-site power generation with natural gas engines has great potential to benefit commercial power consumers in Ontario, particularly for those who can opt in to become Class A customers and reduce their exposure to peaks in the Hourly Ontario Energy Price.
Jan Buijk of EPS AB Energy Canada Ltd. recently circulated a memo containing the results of extensive analysis performed by his company for Ontario power consumers considering operating generation as part of a Class A customer-based business strategy.
Ontario companies, for selected NAICS codes, with a demand greater than 500 kW can opt in to become a Class A customer and benefit from reduced electricity costs in Ontario, if they meet certain critical performance targets every year. As a result, it is estimated that today there are more than 2,500 companies, with a combined demand greater than 3,000 MW, that can attempt to lower their electricity costs by reducing their demand at the right moments, when Ontario experiences one of 5 peak events.
Class A customers can reduce their electricity rate exposure in several ways:
1. Reduce power demand during a peak event
2. Shut the company down until the peak event has passed
3. Run a rental generator during a peak event
4. Run a standby generator during a peak event
5. Draw power from a battery system during a peak event
6. Run a continuous duty natural gas generator during a peak event.
Mr. Buijk notes that, although the first 5 options are very attractive from a cost perspective, “they are not future proof and lack the flexibility required to respond to ever changing market conditions and regulations.” Circumstances have changed since the Class A option was first introduced. In 2010, when only companies with a demand greater than 5 MW were allowed to become class A customers, it was not uncommon to shut a company down whenever a peak was expected. “The peaks were easy to predict, always happened on the hottest and coldest days of the year and usually towards the end of the day. In those years several companies decided to close their doors and send people home a few hours early during a peak event in order to minimize their GA costs. This picture started to change when the bar was lowered to 3 MW and it is getting even more complicated now customers as small as 500 kW are choosing to opt in as a class A customer.”
Mr. Buijk offers some current advice on the implications of recent changes announced by the Ontario government: “Where in 2017 one could still be confident to ‘catch’ all 5 peaks with 15 notifications of 4 hours per notification, in 2018 this already is expected to increase to 20 notifications of up to 8 hours per notification. And this will get only worse as more and more companies are implementing load management measures. Those with generating capacity are starting their generator earlier and earlier in the day in order to be certain to catch a peak. Unfortunately those with battery capacity may find that the discharge capacity (often limited to only 2 hours) may soon be insufficient to reduce demand at the right moment.
“Those who used to rent a diesel generator in the summer months may miss the peaks as they are starting to happen throughout the year and even on weekend days. And those who invest in standby natural gas generators may find that increased running hours due to changing market conditions are not possible with the engines chosen.”
Under such conditions, Mr. Buijk contends, current CHP technology has some distinct advantages. “The only technology that is certain to catch all five peak events and is also future proof, is a continuous duty, low emission, natural gas generator.” He invites consumers to consider the following advice:
• When peaks are easy to predict, you can run the engine for only the hours that you need to.
• When peaks are becoming more difficult to predict, you can increase the running hours to make sure the engine starts before a peak happens and does not shut down until the peak event is over.
• If necessary one could even run 24/7 for 3 months without even once having to shut down.
• Through automated dispatching, users can dispatch the generator at any time the power price is higher than the cost of running, thereby generating significant additional revenues.
• Should the market change altogether, and GA costs can no longer be reduced through demand response technologies, users can continue to run a continuous duty gas engine around the clock.
Mr. Buijk says that customers who choose this last option need “never pay more for electricity than the cost of running your engine.” Further, “based on today’s cost of natural gas and including the cost of operation and maintenance you will not pay more than 8 ct/kWh. In addition, “should there be an opportunity to utilize the heat recovered from the gas engine, your electricity cost can be as low as 5 ct/kWh.”
Relying on his years of experience commissioning and running CHP plants in Ontario, he stresses that, “These installations have to run during the ‘worst days’ of the year: In winter, when it is extremely cold, or in the summer when it is extremely hot. If the power plant is not designed right, or the service organization does not have the people/tools/parts etc. as required to minimize engine downtime, the generator may fail to run and you will lose out on significant cost savings.”
Mr. Buijk’s company has published a brochure that they believe will be of interest to Ontario customers concerned with managing their exposure to the Global Adjustment. For a copy of the brochure readers may see this location or contact Mr. Buijk by email at