Using Batteries or Gas Generation for Global Adjustment Busting… is it worth it?
What is the Global Adjustment?
The Global Adjustment (GA) charge is critical in financing new electricity infrastructure in Ontario. GA also funds the maintenance of long term generation resources, conservation and demand management programs like Save On Energy. GA makes up 60% or more of a typical electricity bill in Ontario, and although the province has done a lot of work to gather feedback on ways to make GA better, we don’t think the program is going away anytime soon.
Every energy consumer in Ontario pays GA, however how much you pay depends on your load size and whether you opt-in as a Class A customer. There are two types of customers; Industrial Conservation Initiative (ICI) participants are referred to as “Class A” customers and pay a GA based on the annual determination of their coincident peak demand (i.e. top 5 peaks). The rest of Ontario consumers, referred to as “Class B” customers pay a per kWh rate.
The main difference between the two classes is that peak management allows Class A customers to receive savings by managing their coincident peaks during the Top 5 system peaks. In essence, larger consumers are incentivized to contribute less load to the Ontario grid during times of high grid stress. Class B customers do not have this opportunity.
Distributed Energy Resources can help reduce GA costs
The electricity grid is changing rapidly in most developed economies. Aging electricity infrastructure, the need to reduce emissions and the decreasing price of batteries, fuel cells and gas generation are creating new opportunities for energy consumers. Not only do these technologies help the aging grid and reduce prices, but they also improve resiliency for energy consumers. These systematic changes in electricity grids are speeding up the worldwide deployment of Distributed Energy Resources (DERs). They are called Distributed because instead of large central power-plants, the new energy sources are spread out throughout the grid. They could be placed in large factories (generators), on top of roofs (solar), inside houses (batteries) or anywhere else the energy is required.
This growth of DERs is exacerbated in Ontario due to the high cost of the GA. By producing energy onsite, or storing energy in a battery, customers are able to turn on this resource when a Coincident Peak occurs. Operating the resource at the right time reduces the customer’s electricity demand and therefore their consumption during a Coincident Peak, This can create significant savings for the end-user (About $530,000 per MW reduced during a peak).
Some DER’s installed by customers and some are installed by local distribution companies or system operators. In Ontario, all DER’s installed for GA savings are Behind the Meter because they are located behind the electricity meter on the customer’s side of the grid, not the utility’s side.
Now that we’ve defined what a DER is, let’s look into some of the options:
Battery Energy Storage Systems (BESS)
Battery Energy Storage Systems (BESS) can be installed in combination with solar panels or independently, for GA management a battery is usually used. The system is charged when the electricity rate is low and discharges when the price is high, reducing overall energy costs. It can also be used in periods of high demand on the grid when the utility pays customers to reduce their load, for example, Demand Response or Coincident Peak programs. In addition to cost savings, a BESS can be combined with a UPS to provide uninterruptible power to the customer’s site, increasing resilience in case of power outages or voltage sags from the grid.
The safety of battery storage is of great importance. Energy storage is still in its infancy and projected to continue its exponential growth into the 2030’s. Despite the conservative approach by most installers, serious accidents have occurred, with over twenty fires in South Korea and one in Arizona which caused injuries as well (read more about the fires from Bloomberg). Recent analysis shows that LFP (Lithium Iron Phosphate) is a safer alternative to Li-NMC (Nickel Manganese Cobalt) which is why many project developers are using this chemistry for BESS installations.
Other than safety, another issue with current BESS systems is the length of time for which they can store energy. In most installations for GA reduction, a 2 to 4 hour system is the most economical. However as peak periods get longer and more intermittent sources of energy are added on to the grid, longer term BESS storage becomes more important. One company who has made significant progress on long term storage is Toronto based e-ZN which uses molten zinc nuggets as a way to store energy!
Although batteries have their downsides, their growth in Energy Storage systems will not slow down. With batteries, there are no emissions, noise, or fuel storage issues. Furthermore, the ability to dispatch a Battery Energy storage in milli-seconds as opposed to minutes for a generator has significant advantages for the grid and the customer as well.
Natural Gas Generation
Natural gas generation systems provide similar benefits to batteries except they can run for much longer periods of time. During a peak, the gas generator off-sets demand from the grid. Additionally, the heat from the generator can provide hot water or space heating, allowing for an overall reduction in energy costs while increasing resiliency during power interruptions – this is called Combined Heat and Power (CHP) or Cogeneration. CHP can significantly reduce total emissions because the same gas used to produce electricity is also creating heat instead of going to waste.
Let’s be clear, achieving net-zero greenhouse gas emissions by the second half of this century is essential to the long-term health of our planet, and although distributed natural gas is cleaner than larger power plants in most cases, there are still local emissions, whereas batteries are emissions free.
On the other hand, Gas Generation can run for days on end, so for facilities where long term reliability is the highest priority (hospitals for example), a generator makes the most sense.
In many cases, a hybrid Battery+Generator solution might be the best option. Utilizing this method, both quick responding, and long lasting storage solutions are possible.
Fuel Cells are the newest technology combining the benefits of batteries and the benefits of natural gas generation. A major grocery store chain in Massachusetts and New York recently started using Fuel Cell to power 40 of its stores. Fuel Cells have a higher up-front cost, however for certain applications, they are the best option. Other solutions include Compressed-air energy which stores energy generated at one time for use at another time using compressed air. Gravity Energy Storage is being implemented for larger projects as well, where a heavy weight is lifted and lowered to store energy. Finally, the oldest method to store energy, Pumped Hydro, is still being used in many places. The obvious downside with pumped hydro is the space and water required – which is why it’s still reserved mostly for very large installations – however some new companies are trying to change that.
An example of “Gravity Energy Storage” by lifting and lowering heavy rocks in an underground chamber. https://www.advancedsciencenews.com/gigawatt-electricity-storage-using-water-and-rocks/
The issue with most of these “other solutions” is that they are either proof-of-concept and in their infancy, or they are designed for 10MW+ applications.
What about curtailment?
For many Class A consumers, curtailment by itself creates huge savings opportunities. Curtailment is defined as reducing energy load for a period of time, this can be achieved through shifting some production to different hours or another day altogether, or by reducing some loads temporarily. How much and how long to curtail depends on the nature of the operations. How easily the operations can be shut-down and re-started, the cost of labour and the opportunity cost of production are all major factors which play a huge role in whether it makes sense to curtail and if so, how much should be curtailed. In the majority of cases, a small but cost effective portion of the operations can be curtailed with minimal downside. The remaining portion of the load which cannot be curtailed easily should be shifted to auxiliary generation sources such as batteries or generator. This is why a combination of curtailment and hardware solutions has the best chance of creating the highest payout.
To sum up
The optimal option is the one that fits best with your facility, your financials and your business operations. There is no one size fits all solution when it comes to the ICI program. Any company selling a ‘black box’ or ‘one size fits all’ approach is not realizing the full potential of the DER solution and is leaving money on the table.
How Edgecom Energy helps
To optimize DER solutions the right software is required, the savings and efficiency of the system rely on the correct operation. Edgecom Energy’s pTrack™ DER software maximizes performance in the following ways:
- pTrack’s accurate prediction engine has been helping customers in Ontario maximize their GA savings since 2016, never missing an Industrial Conservation Initiative peak.
- pTrack’s algorithms model the grid in real time and predict demand, energy prices and other events on the grid. This data allows pTrack™ to optimize how the DER should be operated.
- pTrack™ NOC (Network Operation Center) monitors the system in real time via a secure connection and helps you dispatch your DER as required.