By: Tiffany Richmond

Ontario is at the forefront of wind power in Canada with almost 1,200 megawatts of installed capacity on the transmission system. With eight large-scaled wind farms spread out across Ontario, and many projects currently under development, Ontario is well positioned to double its capacity by 2012 and again by 2015 as forecasted.

However, some skeptics may say otherwise. Unlike some other generation resources, wind farms cannot be called upon to generate specific amounts of megawatts on demand. Wind power generation is dependent on weather conditions, temperature and even the season. This unpredictable behavior in generation is concerning and may not be useful for Ontario’s electricity system.

During Ontario’s record breaking summer, wind generation did not keep up with demand when needed and produced power when it was least required. To further explain, on August 30th – one of the hottest days of the year – demand surged, however winds did not. Wind turbines only produced about 100 megawatts of power or about 0.4% of total demand that day. On August 28th, wind generators powered an average of 1,000 megawatts onto the grid, amounting to 7% of total demand that day. However August 28th was a cool day with demand levels low.

The latter example means that a surplus of electricity was produced that day. When a surplus is produced, Ontario either has to pay to sell it to neighbouring jurisdictions or the end consumer will have to pay for the excess supply.

Ontario is currently paying on-shore wind producers that have access to transmission lines 13.5 cents a kilowatt hour and off-shore producers 19 cents a kilowatt hour. To put this into perspective, our friends south of border, Texas to be specific, pay wind producer 7.4 cents (US) a kilowatt hour. With more wind capacity than any other jurisdiction in North America Texas producers get paid a little more than half of the Ontario price.

Wind turbines also aren’t the cheapest. The average cost of installing one megawatt of wind capacity on land is $2.5 million. If Ontario plans to quadruple its capacity by 2015 it’s going to cost up to $14 billion. These numbers are significant when considering the patchy performance of wind generators.

It’s known that ‘green power’ will costs end consumer more money than conventional power producers. With transmission constraints and an aging electricity infrastructure any new form of generation isn’t going to come cheap.

The question the Province of Ontario has to ask itself is its infrastructure ready to handle off-peak supply demands from wind generation? And is it ready to pay more than the contract price for the power?

If wind performances continue to be unpredictable, like in August, then off-peak supply and the cost to handle wind power will both increase.

On July 2nd, 2010 the Ontario Power Authority (OPA) quietly lowered the rates paid to ground mounted solar projects from 80.2 cents to 58.8 cents per kilowatt hour under the Provincial’s microFIT Program.

The OPA stated that they adjusted the price due to a glitch in the program. With unexpected popularity of ground mounted solar projects the power authority dropped the rates in order for ground mounted solar installers to get a comparable return on investment than those that rooftop generators receive.

Installation rates for ground mounted solar, compared to solar panels are much lower, which the OPA believes allows for a greater return on investment. Under the 80.2 cents per kilowatt program profit margins are forecasted in the 25-30% range. By dropping the rate the return on investment is in the 10-11% range.

Since the start of the program the OPA has received over 16,000 applications, with roughly 10,000 of those being for ground mounted solar projects.

So why the sudden drop in price? Did the implementation of the harmonized sales tax have an impact? Rising electricity prices? The large volume of applications for solar projects? Or did the OPA simply renege on its promise to pay out at 80.2 cents per kilowatt?

Under the 80.2 cents per kilowatt program, panels with tracking (panels that turn to follow the sun) costs approximately $90,000 to install and can produce 16,600 kWh annually. This would generate approximately $13,300 in revenue annually for installers. Under the 58.8 cents per kilowatt program, panels with tracking cost the same, produce the same, but the return is $9,800 annually. A difference of $3,500. When multiplied by 10,000 applications, it’s a fair amount. But compared to the billions spent on electricity per year, its peanuts.

The microFIT Program is designed to encourage homeowners, farmers, small businesses and institutions to develop small renewable energy generation projects of 10 kilowatts or less. Project owners are paid a fixed price for the electricity they produce, with prices set to recover costs as well as earn a reasonable return over the 20-year term of the contract.

The OPA says applicants who have already executed a contract or received a conditional contract with the OPA will receive the original amount of 80.2 cents per kilowatt hour.

Many solar industry producers say this change could have multiple negative effects, such as job losses, fewer ground mounted solar panels installed and stalled solar generation. Most solar installers have already ordered inventory, put down deposits and hired trained staff to meet expected demand. If people walk away from the program solar producers will feel the after effect.

So what’s really making the industry mad? It may be about price but it’s also about consistency. If the FIT and microFIT Programs were designed to assure installers by offering stability of policy and price, then this sudden price adjustment clearly undermines that objective.

Can we expect further price slashes? Only time will tell.

To steal a quote from the famous playwright William Shakespeare, “To be (a power generator) or not to be (a power generator) – that is the question.”

In my early career, I had some success with selling and installing advanced energy systems such as industrial heat recovery heat pumps, condensing heat exchangers, thermal storage and geothermal heat pumps. I also completed studies on low head hydro, biomass, cogeneration and district heating systems. Many good applications were found for these technologies and over the years there have been many government and utility incentive programs for them. These systems can create significant energy savings and reductions in greenhouse gas emission. However they are complex to design, build and operate, as well, are very expensive.

In many cases, these systems provide an alternative energy source for the end user. In essence, the end user becomes his own energy supplier or power generator. Before making the decision to move down this path the end user has to decide what business am I in? If my company is an industrial, commercial or institutional enterprise does it really want to become a power generator?

The US Department of Energy describes Distributed Energy Resources (DER) as energy generation and storage systems placed at or near the point of use. If implemented properly, these systems can provide the end user with greater reliability, adequate power quality, lower emissions and in combined heat and power (CHP) applications, improved efficiency. Beyond the direct benefits, DER can allow the end user to participate in competitive electric power markets. From a utility infrastructure perspective, DER has the potential to mitigate transmission congestion, control price fluctuations, strengthen security, and provide greater stability to the grid. This is why many utilities and governments support these projects as a means of resolving larger system problems.

Distributed energy encompasses a range of technologies including fuel cells, micro turbines, reciprocating engines, and energy storage systems. Renewable energy technologies—such as solar electricity, solar buildings, small-scale hydropower, geothermal, biopower, and wind turbines—also play an important role.

The non-renewable on-site generation technologies usually rely on natural gas as a fuel source. The costs to implement these systems range from $300 to $1,100/ kW for conventional engines and turbines up to $10,000/kW for fuel cells, which are still considered developmental. The cost of electricity produced by these systems is dependent on the cost of gas, system efficiency and operating and maintenance costs, but generally runs in the range of $0.10 to $0.15/kWh.

From the end users perspective, these technologies are good for peak shaving, emergency power generation or for offsetting electricity demand when purchased electricity rates exceed these levels. If waste heat can be recovered from these systems and used to produce usable heat for space or process needs, then the overall efficiency of the systems can improve to the point where it is economical to run them on a continuous basis to supply end-user energy demand. In these cases, there can be significant direct and indirect greenhouse gas emission reductions.

For renewable energy technologies, the implementation costs can be significantly higher in the range of $4000 to $10,000 per kW. When the Government of Ontario announced the launch of a Feed-in Tariff Program, renewable energy projects became a desirable subject. The FIT program offers incentives of up to $0.80/kWh and includes renewable energy sources, wind, waterpower, renewable biomass, bio-gas, landfill gas and solar. Implementing renewable energy technologies can displace non-renewable energy consumption and provide significant greenhouse gas emission reductions.

Regardless of which type of distributed energy system the end user selects, he will ultimately become his own energy supplier. Becoming your own energy supplier requires a level of operation knowledge and sophistication, which may be beyond most end users. Granted, many engineers dream about big power projects that will serve as a lasting monument to their technical abilities, however, the decision to embark on these projects has to be taken within the context of the company’s energy management plan.

A good energy management plan, as previously discussed will consider large capital projects only after other operational and retrofit opportunities have been implemented. This will help to avoid over sizing distributed energy system. If at this point, it is found that these systems still provide benefits to the end user, I would suggest partnering with a company that will share in the cost and benefits of designing, building and operating a system that meets the end users objectives. This will allow the end user to reap a portion of the benefits consistent with the energy management plan and not lose focus of what business they are in. As Theodore Roosevelt once said, “Keep your eyes on the stars and your feet on the ground.”

If you already have a distributed energy system in your facility, you may have the opportunity to participate in Demand Response programs. This is a topic, which I will discuss, in the next article.