Transcript Benefits of DG - Ontario Energy Board

Ontario Energy Board Consultation on
Efficiencies in the LDC Sector
Presented by Northland Power and Kitchener Wilmot Hydro
February 18, 2004
Background
• Joint submission of Northland Power and a number of
major LDCs
• In response to the OEB Discussion Paper: Review of
Further Efficiencies in the Electricity Distribution
Sector dated February 10/04
• Discussion Paper invited stakeholders to provide
views on additional issues that should be considered
when addressing the efficiency of Ontario’s electricity
distribution sector.
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Purpose and Definition
Purpose: Distributed generation represents an
opportunity that can improve the operational
efficiency of LDCs, reduce operating costs and
provide net electricity system supply benefits
Definition: Any generation that is located in relatively
close proximity to electrical load (ECSTF Task Force)
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Introduction to
Northland Power
Northland Power is an Ontario Based Independent
Power Producer established in 1987
• Operates three power plants in Ontario and one in the
Ukraine with a total capacity of 457 MW
• Developer of gas fired cogeneration/DG, wind power
and biomass projects
• Active participant in restructuring of Ontario’s
electricity sector
• Responsible for many technical and financial
innovations in the electric power sector
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Distributed Generation
Initiative
Northland Power working with a number of
major LDCs to:
• Identify candidate generation sites
• Jointly review the feasibility of installing
gas fired DG projects (simple cycle and
cogeneration)
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System Benefits of Distributed
Generation
Benefits Potentially Realized by LDCs
• Avoidance of capital costs for expansion of transmission,
transformation and distribution systems:
• Growing LDCs require additional municipal
transformer stations every 5-10 years
• Transmission costs can average about $2 million/km
• New transformer capacity for both Hydro One and
LDC can average $8-$12 million per 50 MVA of
capacity
• Injection of new capacity in lieu of transmission and
transformer capacity can defer/displace such
expansions
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System Benefits of Distributed
Generation
Benefits Potentially Realized by LDCs (Cont’d)
• Reduction of transmission and distribution system
losses
• Line losses amount to 3-4% depending on voltage
• Transformer losses are about 1.0%
• Improved voltage at point of connection during onpeak periods
• DG plants can be located closer to loads, thus
improving voltage and reducing losses from
transmission, transformation and distribution
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System Benefits of
Distributed Generation
Benefits Potentially Realized by LDCs (Cont’d)
• Increased reliability at the LDC level
• DG diversifies sources of power and reduces
amount of capacity of outage per incident (eg 40
MW vs 800 MW)
• Generation supplied locally can improve reliability
for LDCs on radial supply
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System Benefits of
Distributed Generation
Benefits Potentially Realized by LDCs (Cont’d)
•Other System Benefits
• Can be sited to supply locally defined “critical
loads”
• Additional revenue from land leases and/or other
sources
• Improves reactive power (power factor)
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System Benefits of
Distributed Generation
Benefits Potentially Realized by the Community
• Can supply waste heat to the community
(district energy) and industry (cogeneration)
• Attracts development to the community
• Provides local employment
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System Benefits of
Distributed Generation
Province Wide Benefits of Distributed Generation
• Provides environmental benefits over large coal
plants
• Displaces high priced imported on peak power
• Reduces IMO fees, transmission network charges
and market uplift charges ($5-$10.00/MWh)
• Enhanced market liquidity due to greater number of
participants
• Improves the load factor of the transmission and
transformation system
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System Benefits of
Distributed Generation
System Benefits Compared to Large Central Generating
Plants
• Shorter development and construction schedules
• Faster and easier to permit
• More flexible operating characteristics (faster start up
time – greater ancillary benefits)
• Less financial, development, construction and operating
risk for Ontario’s rate payers (smaller increments of
investment)
• Improved reliability of supply:
• Faster return to service after outages
• Diversification of supply
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Conclusions
• OEB should adopt a broad scope in reviewing
opportunities for LDC efficiency improvements and
should include measures that improve the operating
efficiency of the LDCs distribution system
• DG can increase the operational efficiency of LDCs,
reduce operating costs and provide net electricity
system supply benefits
• LDCs have an important role to play in facilitating DG
in Ontario
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Recommendations
• DG is an important component of Ontario’s power supply portfolio
and the OEB should revise market rules to recognize DG benefits
• The Board should develop appropriate regulatory incentives to
facilitate DG
• Generation alternatives should be considered by the Board when
reviewing transmission and transformation expansion applications
• LDC rate payers should benefit from LDC involvement in DG
• A portion of the system benefits provided by DG should be allocated
to the DG project since LDC rate payers will benefit from LDC
involvement in DG
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