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Windsor Policy & Solutions Forum Energy Costs - How to Address Higher Power Costs. Bruce Sharp, P. Eng. Director, Electricity Aegent Energy Advisors Inc. [email protected] , 416.622.9449.112. May 15, 2014. In a nutshell. Getting it all wrong Picture is not pretty Costs largely fixed

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windsor policy solutions forum energy costs how to address higher power costs

Windsor Policy & Solutions ForumEnergy Costs - How to Address Higher Power Costs

Bruce Sharp, P. Eng.

Director, Electricity

Aegent Energy Advisors Inc.

[email protected], 416.622.9449.112

May 15, 2014

in a nutshell
In a nutshell
  • Getting it all wrong
  • Picture is not pretty
  • Costs largely fixed
  • Lowering = transferring
getting it all wrong
Getting it all wrong
  • Make electricity consumers – not taxpayers – pay for electricity
  • Make consumers pay the true cost of the electricity they use
  • Maintain culture of conservation
  • Depoliticize electricity policy
commodity non commodity costs
Commodity, non-commodity costs
  • Commodity = spot price + Global Adjustment (“GA”)
  • 2013:
    • Spot price (arithmetic average) = $ 24.98/MWh
    • GA, Class A (average) = $ 33.19/MWh
    • GA, Class B = $ 59.24/MWh
  • % of total costs:
commodity forecast
Commodity forecast
  • Total commodity cost = HOEP + GA Class B
  • (assumes zero load growth)
costs largely fixed
Costs largely fixed
  • Capital-intensive
  • Chunky
  • Inertia
  • Overbuild
  • Bias
lowering transferring
Lowering = transferring
  • Balloon effect
  • Shift to taxpayers
    • Ontario Clean Energy Benefit
    • Provincial portion of HST
  • Shift to other ratepayers
    • Debt Retirement Charge
    • Conservation
    • Cost allocation
conserve or else
Conserve – or else
  • See “costs largely fixed”
  • If costs 95% fixed:
cost allocation germany
Cost allocation - Germany
  • EEG is green-only version of Ontario Global Adjustment
  • 2014: € 62.4/MWh
  • Industrial policy decision
  • Significant avoidance (90%) at average load of ≳114 kW (also, electricity cost ≥ 14% of value added)
  • Intensity requirement can have unintended consequence
cost allocation ontario
Cost allocation - Ontario
  • GA avoidance
  • Class A/B
    • Since January 1, 2011
    • Demand-based allocation of GA costs
    • 5,000 kW threshold, moving down to 3,000 kW
    • 2013: Average 39% reduction in GA charge
    • In theory, avoids investment
    • Benefit can be derived by doing nothing
    • Price signal ≳ 2 x generation alternative
dos and don ts
“Dos” and Don’ts
  • Do:
    • Conserve - and more than the other guy
    • Ratepayer transfers: be transparent, recognize their impact
  • Don’t:
    • Transfer costs to taxpayers
    • Have price signals inconsistent with other options
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