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Idle Generators an Overlooked Blackout Stopgap Red Tape Frustrates Peak Demand Response
April, 2007
By Barbara Carss
A potential supply of electricity within Ontario's municipalities is inaccessible due to an obstacle in the Electricity Act. Municipalities are required to set up a separate company under the Business Corporations Act in order to generate and sell electricity - an administrative encumbrance that keeps many of them on the sidelines when soaring demand creates the threat of blackouts.
The provincial government is considering waiving the requirement for a proposed pilot project in York Region so that the largely idle emergency backup generators at a regional sewage pumping station could be pressed into service when high demand strains the electricity system. PowerStream - the local distribution company (LDC) that serves Markham, Vaughan, Richmond Hill and Aurora - has already enlisted a private sector company to provide 1 megawatt (MW) of similar supply during times of peak demand. The proposal for the Aurora pumping station would tap into another 3.9 MW of generating capacity.
This type of power supply is called distributed generation because it is located amid the customers consuming it, thus easing the logistics of distribution and transmission. Distributed generation is a component of PowerStream's conservation and demand management (CDM) program, and utility officials are looking for the backup contingency it could provide in the northeast area of York Region where the existing electricity transmission network is overburdened.
Various conservation and demand management strategies are part of the plan for avoiding brownouts and/or rolling blackouts in Aurora, Newmarket, East Gwillimbury and Whitchurch Stoufffville, where peak demand has been projected to exceed the capacity of the Armitage Transformer Station that serves the communities. Emergency generators at the Aurora pumping station are well placed to help carry that peak load.
"The Province needs to take a look at this as a special case. Otherwise, it makes it very difficult to encourage this type of distributed generation," suggests Patrick Guran, PowerStream's Chief Energy Conservation Officer.
ENVIRONMENTAL, ECONOMIC & OPERATIONAL IMPACT
As proposed, the emergency generators would feed electricity into the grid for a maximum of 250 hours per year. PowerStream plans to invest $524,000 in upgrades at the pumping station to install emission controls, sound attenuation measures, and a synchronous switch that will make it easier to activate the generators while preventing the dimming of the lights and power sags when emergency power goes on line.
With these upgrades, resultant sulphur dioxide (SO2), nitrogen oxide (NOx), carbon monoxide (CO), particulate matter and total hydrocarbon emissions from 250 hours of diesel generator operation are projected to drop to less than the level currently produced during the 30 hours of equipment tests that safety regulations mandate for the emergency generators every year. A selective catalytic reduction emissions control system and stack scrubber has yielded comparable results on the 1-MW privately owned diesel generator that has been participating in PowerStream's CDM program since 2005. "The readings are lower than for a natural gas unit," Guran reports.
Ontario's Chief Energy Conservation Officer, Peter Love, has called for more distributed generation throughout the province, but his 2005 and 2006 annual reports have placed more emphasis on opportunities to supply emergency generators via gas lines, rather than diesel that is stored on-site, to ensure a cleaner supply of power. Nevertheless, Guran argues that exploiting existing sources of diesel-based distributed generation during the relatively few hours of peak demand in a year makes more economic and environmental sense than building larger power plants and/or more transmission infrastructure.
"Then you've got something idling for 365 days a year waiting for those peak demand hours," he says. "Distributed energy at the site is far less damaging to the environment because it is sized correctly."
In addition to the upgrades at the Aurora pumping stations, PowerStream has promised York Region a 50% share of the net revenue earned from the Independent Electricity System Operator's (IESO) emergency load reduction program. It offers rates ranging from $400 per megawatt-hour (MWh) for two consecutives hours of participation to $600 per MWh for four consecutive hours when the IESO calls on enrollees to help reduce the electricity demand load. There will be simultaneous electricity cost savings since the pumping station will not be consuming electricity from the grid during the time the generators are operating.
Regional officials also foresee benefits from a more regular service schedule for the emergency generators. "This equipment was designed for operating more than 30 hours per year, so this kind of initiative greatly improves the reliability of the generators as well," notes Subhash Bhatia, Program Manager with York's Corporate Energy Services.
York Regional Council has approved the pilot project, but it remains contingent on an amendment to Section 144 of Ontario's Electricity Act. Without the amendment, the Region would have to incorporate a company under the Business Corporations Act and establish a Board of Directors to oversee an enterprise that would operate for no more than of 250 hours per year, and that's not considered worth the expenditure of municipal resources that would be required.
A CALL FOR MORE FLEXIBLE RULES
Private sector companies and other institutional players such as colleges/universities and health care facilities face no such constraints in generating and selling electricity. The red tape for municipalities is a legacy of the restructuring that split the former Ontario Hydro into separate generation and transmission companies (Ontario Power Generation and Hydro One) and created a for-profit electricity market.
The same legislation confirmed that municipalities owned the distribution assets - commonly called the lines and wires - within their jurisdictions, but they were required to either convert their non-profit municipal hydro commissions into corporations or sell the assets to another corporation. The legislation also dictated that competitive aspects of the electricity business would have to function separately from the regulated services that local distribution companies provide.
"It was meant to restructure a sector. There was a real debate at the time about who actually owned assets. In essence, the government confirmed the ownership of all assets to be municipal, and that was a big decision," recalls David McFadden, a Partner and Chair of the national energy and infrastructure practice group with Gowling Lafleur Henderson LLP.
"If they want to get into generation, big or small, they have to set up a competitive affiliate separate from their wires business, but there is nothing to stop the LDC from setting up a competitive affiliate."
In York Region's case, it has no shareholder stake in an LDC. PowerStream, which serves four of the Region's nine lower tier municipalities, is a jointly owned subsidiary of the Town of Markham and the City of Vaughan. Ontario's upper tier municipalities and the lower tier municipalities that have sold their hydro assets are all in the same situation.
Proponents see the Aurora pumping station scheme as a test case for distributed generation in an area with electricity transmission constraints, and also for relaxing rules that discourage municipalities from bringing distributed generation on line. "It's being called a pilot for more than one reason," Bhatia observes. "Municipalities have not been able to sell electricity to the grid unless they set up an OBCA company, and there are so many municipal assets available with generators that generally are only used for emergency purposes."
Some additional environmental approvals would also be required before the practice could become more widespread. "The approvals don't start until after you've aggregated about 5 MW of load, but as soon as the number goes above 5 MW, it triggers a longer environmental assessment process," Guran explains.
The existing 1 MW of distributed generation and the proposed 3.9 MW at the Aurora pumping station keeps PowerStream's aggregate load under that threshold for now. However, the utility wants to be in a position to secure approvals when it is ready to expand its distributed generation base still further. The Ministry of the Environment currently allows diesel generators to operate in emergencies and for a limited period of testing every year, but Certificate of Approvals must be amended if the generators are to be used for peak demand response rather than strictly for emergency use.
"The Ministry doesn't consider the threat of going into a blackout as an emergency situation," Guran notes. "Ironically, though, if a blackout occurs, the diesel generators will have to go on anyway, because it will be an emergency."
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