Capacity and Energy are Not the Same Thing

Providing reliable electricity requires two fundamental things:  generation capacity, and energy supply.

These are very confusing terms for much of the general public, but it is really quite simple.

Generation capacity is the maximum amount of energy that can be supplied by a generator.  For example, the Pickering reactors are about 500 Megawatts.  So that is their capacity.  If a Pickering generator operates for an hour at 500 Megawatts, it will have produced 500 megawatt hours, or MWh.  That is 500,000 kWh, which is the measurement used on your power bill.

The system in Ontario requires between 13,000 and 27,000 Megawatts of capacity, depending on things like the weather, whether it is a work day, or a weekend, the time of day etc.  Cold weather causes extra demand because of heating load, and warm weather causes extra load for air conditioning.  Short days, like we have now, cause extra lighting load.  Weekdays have factories operating.  And load tends to peak around 6PM in the winter, when half the family is at home, dinner is being cooked, and some of the family is still at work.

Ontario has changed recently from a dual peaking jurisdiction to a summer peaking jurisdiction, as more people use air conditioners, and climate change results in warmer summers, and warmer winters.

Peaks require capacity.  In fact, for summer peaks, we have some plants that are used at their maximum for only a few hours a year.  That’s a lot of capital tied up that is infrequently used.

So we need enough capacity on the system to handle peaks.

Peaking plants tend to be very expensive.  For example, the least efficient natural gas plant, such as Ontario Power Generation’s Lennox plant near Kingston, uses about 8.2 cents/kWh for natural gas alone, at today’s natural gas price.  In addition, you need to pay for operations and maintenance, depreciation etc, which would amount to another 3-4 cents/kWh.  And that is for today’s gas price.  A year ago the cost of gas for that plant would have been over 15 cents.  And tomorrow, it is likely to go up again.  So not only is this source of power expensive, but it is highly volatile.

If the theories on Peak Natural Gas are correct, then this cost of gas will be very high in the future.  How much extra will we pay to heat our homes in the future, because we burned that gas to make electricity today?

Of course, if we only use the plant for a few hours a year, then it is no big deal.  We can afford expensive power if it gets blended in with some lower cost sources on average.
And that is where energy comes in.  In Ontario, we use about 155 Terawatt hours (TWh)/year.  That is 155,000,000 MWh, or 155,000,000,000 kWh/year.  A TW is 1000 GW is 1000 MW is 1000 kW.  So that is an average of 17,700 MW of generation.
It is energy use that causes our environmental problems.  The more energy we use, the more coal or natural gas we burn.  The more nuclear waste we accumlate.  We need to meet the capacity peaks that the system requires.  But we also need to supply the energy.

Wind is principally an energy play.  So is nuclear.  With wind, it may or may not be on when you need it.  With nuclear, it may be on when you don’t need it – you can’t shut it down without a time consuming restart.  Nuclear can never handle system peaks, as it takes too long to ramp.  Some types of hydraulic, such as run of river, are principally an energy play.  And we need energy.

Natural gas is principally a capacity play.  You can ramp it up fairly quickly.  The exception to this is combined heat and power installations, where the generation is occuring any time heat is required.  In this case, the natural gas is more of an energy play.  Coal is a bit of both – it doesn’t ramp real quickly, and its fuel cost is low, so it can supply cheap energy, and ramp if given sufficient advance notice.  Of course the achilles heel of all fossil fuel is carbon emissions.  The cost of electricity from coal could easily double or triple over the next decade, as the evidence of climate change continues to drive world wide policy on fossil use.

Waterpower with storage is both an energy and a capacity play.  The James Bay reservoirs, for example, have multi year water storage ability.  They have the ability to buffer a bad wind year, a high demand year, or a low rainfall year, by releasing more water.  And waterpower can buffer wind’s variability, as wind is variable over a relatively short time frame.  You don’t need multi year storage for wind – its variations are over days or weeks.

I know that I have simplified, in order to make the concepts understandable.  Things like ramp rates, black start capability, or voltage support are also needed to provide reliable power.  But capacity and energy underpin it all.

System Operators need both capacity – to supply system peaks – and energy.  So they ascribe capacity values to various generation sources.  For example, in Ontario, the IESO arbitrarily assigned a summer capacity value to wind of 10%.  Other System Operators have used different numbers.  And of course they can’t use 100% for other sources.  The rivers aren’t always full, and the nuclear plants and fossil plants need maintenance.  Their objective is to ensure we have sufficient capacity to meet peak requirements.  And that is good – we should be grateful they do these exercises.

Wind is principally an energy play.  But it does have some capacity value to the system.  And it has no fuel cost risk.  No carbon tax or carbon trading risk.  It has no rainfall risk.  It debt is not paid by the Debt Recovery Charge.  It pays its own insurance.  And decomissioning a wind turbine is a profitable enterprise, due to scrap value, unlike decomissioning toxic sites, that will need thousands of years of management.

So wind deserves to be in the mix as a major contributor of energy to the system.  It just makes sense.

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