For this post I'll use data from my weekly reporting project to illustrate the value of the fossil fuel villain in electricity generation. The province of Ontario has been publicizing a desire to eliminate coal for over a decade, and actually looking at the role coal plays in the generation system is helpful in both demonstrating why it's been difficult to discard, and why recent reports are showing the expense involved with attempting to do so.
To illustrate a role played by coal, and natural gas, generation, I created a graph showing the most recent week's hourly Ontario demand (as defined by the IESO) on the right axis, along with the hourly net exported energy and the energy from dispatchable gas and coal generators.[1]
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This chart emphasizes a lot on the subjects I've written about it the past, including the systemic cost of introducing, on a must-take all production basis, generation with little capacity value[2].
The graph demonstrates that when power is demanded, the fossil fuel generators produce it.
In Ontario we claim to be replacing coal with generators that do no such thing - planning on building out 10700MW of wind and solar generation with the stated purpose of replacing ~7500MW of coal-fired capacity (in 2003, when the promise to phase out coal, by 2007, was promised, by the victor, during an election campaign).
The high cost of generation with little value was the topic of this week's Counting the Hidden costs of energy" Indicates Much Higher Cost of Wind and Solar, which noted studies comparing the systemic cost of a variety of generation sources.
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| Note the space between the orange line and grey area - that will be surplus generation |
Globally, there is a general refrain from proponents of sources with little capacity value that they are replacing coal. If we look at the same data set as above, presumably replacing the fossil fuel fired generation that coordinates with the demand spikes would be the task being attempted.
This particular week the output of renewable would eliminate the need for fossil fuel dispatching during the hours they saw peak use, but even adding the next planned 7500+ MW of renewable supply, three times the current 2500+ MW, wouldn't have eliminated the need for fossil fuel supply to match demand - producing very little at the peak gas/coal usage on 3 of the 7 days.
It doesn't take long to figure out if you are trying to eliminate the use of coal - and presumably natural gas after that - adding these renewables alone won't do it. [3]
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There has been a popular perception that Ontario's low-priced exports have been driven by an excess of baseload generation. That's not entirely wrong; during the low nighttime demand net exports do exceed the generation from dispatchable natural gas and coal generators.
It's clear generation from gas and coal are being driven higher by exporting more during higher demand periods. Encouraging local production of electricity with these plants contradicts a goal of reducing airshed pollutants in Ontario - not that I agree with the hysterical talk on the health impacts of either coal or, more notable this week, natural gas-fired generation (this week I also posted Comments on Gas Plant Scandal: Before and After).
The gas plant contracts directly relate to elevated net exports during daytime peaks in that they contain large "net revenue requirement" (NRR's) guarantees [4]. The NRRs, as do contingency payments for OPG's coal plants and the payments to Lennox generating station, move pricing the full cost of generation from the market price to the global adjustment. The reports from the legislature later in the week showed a great deal of bluster from the mayors of the large suburbs of Mississauga and Oakville, but the legislative committee is unlikely to dig into the structural issue of using net revenue requirements to acquire generation capacity necessitated by a need to supplement expensive renewable contracts.[5] and [6]
The most challenging document I referenced this week and, if economic intelligence was relevant in Ontario, the most important was the response from the European Network of Transmission System Operators for Electricity (ENTSO-E) to a call from the European Commission to consult on GENERATION ADEQUACY, CAPACITY MECHANISMS AND THE INTERNAL MARKET IN ELECTRICITY. P.F. Bach's summary of ENTSO-E's document recognized the impetus for, and cost implications of,capacity mechanisms as "the increasing share of renewables in the energy mix has increased the risk on conventional generation investment," and also noted the capacity mechanisms were simply one of the additional costs that may become necessary:
...there is clear evidence in systems with high penetration of RES-E [Renewable electricity standard for Europe] that security of supply threats are not necessarily in adequacy alone but rather flexibility, voltage control and transient stability. These issues are more complex and require thorough technical analysis. It is only on the basis of appropriate technical analysis that meaningful and effective enhanced market mechanisms can be developed.Technically, I can't comment on the issues - but data supports previous expert analysis demonstrating operational issues of replacing coal-fired generation extend beyond capacity. Since 2003, when Dalton McGuinty's government was elected on a promise to phase out coal by 2007; the target was abandoned due to concerns that extended beyond the replacement of the nameplate capacity. This from the system operator in 2006:
...the Nanticoke station provides voltage support necessary for power flows to the GTA. Not only is replacement generation required on-line, but substantial transmission changes are also required to facilitate the shut-down of Nanticoke.
The IESO is continuing to assess the need and timing for some Nanticoke units to be converted to operate as synchronous condensers, which provide reactive power without burning coal to operate.
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| Grid-level system costs at differing penetration levels (from the Conversation) |
Notably, in Europe, where increasing generation from renewables is specified as the challenge, coal is growing it's share of generation as residential energy costs rise.
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NOTES
[2] Also known as capacity credit, the reference is to the amount of generation the system can rely on the unit to provide when needed (ie. a 400MW gas turbine would be expected to produce 400MW when demanded while a 400MW wind installation might be expected to be producing 1/10th of that).
[3]Thus, aside from the 10700MW of renewables being identified as replacing coal, Ontario also added 5600MW of natural-gas fired capacity, plans another ~1200MW, refurbished 4000MW of nuclear capacity, and continues to spend on reducing demand beyond the 1100MW average reduction already seen
[4] I explored this topic in Ontario's Billion dollar subsidies of Gas-fired Electricity Generation, where I argued generators awarded net revenue guarantees sell into the spot market at price levels that exclude capital cost recovery provisions - the price therefore only reflecting the cost of fuel, these generators must be bidding into spot markets at cheaper rates than the generators in adjacent markets that need to recover capital costs from spot market revenues.
[5] I estimated the cost of these various capacity payments at ~$1.7 billion in 2012 - that's about 17% of the total value of Ontario's market, but the suppliers with capacity contracts only provide ~12% of our supply. The less utilized the plants are the more expensive the cost, as when the plants do generate electricity the incremental cost is only the cost of the fuel.
The policy on renewables is a policy to use the plants less.
That's why the generation only gets built if it has a capacity payment - and that's one more reason why the cost of expensive contracts with generators lacking capacity value has an enormous system cost.
[6] Also referenced on Cold Air Currents this week, MESA energy has claimed the local content provisions of Ontario's procurement rules for industrial wind generators, would hae added $100 million to the cost of it's Ontario projects.
