February 1, 2013 (Source: Toronto Star) Toronto —
Wind and solar power companies in Ontario say they’re about to be penalized $100 million by the agency that runs the province’s electricity market.
The renewable energy firms say that’s how much they’ll lose if the Independent Electricity System Operator (IESO) restricts the flow of wind and solar power onto the electricity grid when the demand for power is low, but winds are high.
The companies have filed an application with the Ontario Energy Board asking it to force the IESO’s to review its new rules, which they brand as discriminatory and “nothing less than a reversal of government policy.”
The new rules, they say “are designed to fundamentally change the bargain” for renewable energy firms.
The IESO, for its part, has estimated that there will be a general benefit to all electricity users of as much as $225 million a year if its new rules go into effect.
The dispute centres around the way most wind and solar power flows onto the grid.
Most electricity generators are “dispatchable,” which means they tell the IESO at what price they’re willing to sell power into the market.
As demand rises, the IESO calls for increasingly expensive generators. As demand dwindles, the IESO tells the most expensive generators to shut down.
Wind and solar firms, by contrast, are not dispatchable. Their power flows into the system whenever the wind blows or sun shines.
Increasingly, the province has faced times when demand is low but winds are blowing strongly. That can create surplus power, which may have to be exported at very low prices.
At times, the IESO has had to pay neighbouring provinces or states to take Ontario power, with the cost borne by all customers. At other times, it has had to shut down a nuclear unit, which then can’t be restarted for several days, even if demand rebounds sharply.
Meanwhile, encouraged by provincial policy, more renewable power is coming into service: An additional 3,000 megawatts of wind power alone is due to start up in the next 18 months.
“The new rules will allow the dispatch of wind,” said Terry Young, vice president of the IESO.
That’s a sharp change in direction, the companies argue.
“It is nothing less than a reversal of government policy with respect to encouraging the use of renewable power,” they say in their application to the energy board.
Having output reduced is one thing. The question is: If the output is scaled back, how much – if anything – should the energy firms get paid?
The companies say they’ll be heavily penalized if they’re simply cut back without compensation.
“The Renewable Energy Supply Generators estimate the potential cost of this change to them is in the order of $100 million over the next five years,” they argue.
They want the energy board to send the new rules sent back to the IESO for revision.
The question of compensation falls to the Ontario Power Authority, which holds the contracts with the renewable energy companies.
Compensation talks with the energy firms are under way, said Kristin Jenkins, vice president of the power authority.
“The approach is to say there’ll be a cap,” she said.
The wind and solar firms would be paid for lost output only up to a maximum amount.
Limits would be set both for compensation to be in a single year, and over the life of the 20-year contracts, but no agreement has yet been reached.