Sky high electricity prices causing businesses to suffer in Ontario
June 8, 2016
In Ontario, Canada the price of operating your building can mean the difference between a budget in the red or in the black and people are starting to pay attention. Ontario has been receiving a lot of publicity lately for its dramatically rising electricity costs over the last decade, leading many to wonder what can be done to reduce energy costs in a significant way.
Ontario's prices are sky high
Of the roughly 35 million citizens of Canada, just about 14 million of them reside in the province of Ontario. The province's global adjustment (GA), a variable electric rate, has grown substantially over the past decade to cover the cost of added generating capacity. According to a recent auditor general report, the Fraser Institute highlighted the fact that generation costs have increased nearly 74 percent from 2004 to 2014 - an increase of around $5 billion. Ontario's generating costs are so high, that the 5.1 million megawatts per hour exported in from 2009 to 2014 put the province in the hole by about $3.1 billion, the auditor general's report concluded. And energy consumers are expected to recover these costs.
As the GA is adjusted to compensate for generation capacity, the GA too has grown with the surge. The report estimated fees have increased from a modest $650 million in 2006, to a staggering $7.03 billion in 2014. All of this equates to consumers in Ontario overpaying nearly $37 billion above market rates for electricity since 2008, according to the Fraser Institute.
According to Forbes, the sky high electricity prices are a major part of the reason why Ontario has lost 300,000 manufacturing sector jobs over the past 10 years. Employers simply can't afford to operate headquarters there. Businesses can't catch a break as electricity prices have risen nearly 16 percent over the last three years with no immediate sign of slowing down, according to the Cornwall and Area Chamber of Commerce.
How exactly did Ontario get to this point? First, it's important to understand that commercial energy consumers are charged demand charges based off their peak energy usage to offset the loss of coal fired power plants. The coal plants were paid for and now a new generation of cleaner plants must be built and paid for meaning the fixed costs are going to increase and those costs will be recovered through the demand charges.
Secondly, new wind plants have been prioritized in Ontario. In addition to the expense of adding these new plants, the wind is out of sync with electricity consumption patterns. The result is surplus wind energy going to markets outside Ontario. Forbes reported that just 4 percent of the province's energy comes from wind, yet that particular source accounts for 20 percent of the cost of electricity. Similarly in Texas, U.S., wind generating plants have so much surplus at night that some utilities are giving away power.
In order that businesses benefit financially from the loss of coal plants and the new wind plants, energy must be used when it's most readily available—at night. Commercial building managers can do this by utilizing thermal energy storage. Thermal energy storage is a proven technology that allows consumers to store energy at night which takes advantage of the abundant wind power that mainly blows at night. The technology reduces peak demand and the associated demand charges. In this way, commercial energy users can save on their electricity costs by reducing demand charges and help keep energy prices down for all. More wind plants won't be needed if the ones currently available are efficiently utilized
Energy storage in action
Yardmen Arena, home to the Ontario Hockey League's Bellville Bulls, was shelling out nearly $300,000 annually in energy costs. As it needs to keep the ice rink cold continuously throughout the day, it turned to thermal energy storage as a solution to reduce peak demand kW costs and shift cooling demands to off-peak hours.
"Yardmen Arena saw an ROI of just 3 years."
The arena decided to install a CALMAC thermal energy storage system and downsize the chiller. This decision reduced the peak demand by shifting the peak cooling load to night-time. Ice was stored at night when wind mainly blows and used the next day to supply cooling.
The building manager expected a return on investment that would take four years, but the system's building automation and controls allowed the thermal storage to generate income from Ontario Power Authority demand response program, delivering those savings in just three years.
As demand charges remain high for business in Ontario and renewable energy synchronization become a greater issue, energy storage will play a dramatic role in making more efficient use of renewable energy while keeping energy costs lower.
