Ontario Moves Forward on Demand Response

The Ontario Power Authority is moving forward on its “Demand Response” program.  Basically the program pays large electricity users to cut their electricity consumption for a period of time.

The economics of such a program can be quite compelling.  If large users can shift demand from times of peak demand, then the system can avoid building generating stations that sit idle most of the time, and are only used a few hours per year.  The power from these facilities if extremely expensive, as the amortization of the capital cost of the plant is applied to just a few hours of production.

The OPA is working with aggregators who will sign contracts with large users to curtail their consumption when requested.  Atlas Cold Storage was one of the first companies to sign up, and this is an ideal customer, as freezers and refrigeration can certainly be shut off for a period of time, with no adverse impact on the contents.  Lighting could be dimmed in offices and retail establishments, air conditioning diminished, hot water heaters turned off, all with virtually no negative impact on a business.
The OPA is seeking 566 MW of demand response by 2010 – about 2% of Ontario’s peak demand.  They reportedly will pay $124,000/MW per year.  Compare this to the capital cost of a new natural gas plant, at $850,000/MW, plus staff, plus fuel, and you can see that this may well save substantial dollars.  The aggregator, EnerNOC, has signed 750 MW of contracts in New England, a jurisdiction with a similar peak demand to Ontario.
Interestingly, demand response also has potential to allow greater integration of renewables to supply electricity.  Utility planners and competitors of technologies like wind, or water, or solar electricity, always ask what do you do when the wind isn’t blowing, or there is a drought, or it is dark or cloudy.  With the proper demand response contracts in place, large users can temporarily curtail demand to not only accomodate system demand peaks, but also supply shortages from renewable sources.
After all, the wind will not stop forever, the rain will always return, and the sun will shine someday.

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