Although the first iteration of the province’s Demand Response (DR) program is coming to a close in the coming weeks, its involvement with the forestry industry is being hailed as a success by at least one of the participants.
Having kicked off in July 2006, the program compensates companies for voluntarily reducing their load during periods of high demand, potentially reducing the overall market price.
“The program has contributed to a lot of great work, and we’re certainly very pleased to have been a dedicated participant,” says Paul Dottori, vice president, Energy, Environment and Technology, Tembec Inc.
“In effect, what it does is it forces us to be more efficient. We make a little bit more pulp at night, and we make a little bit less during the day, and we’ve invested in controls and we have adequate storage tanks. That way, if the demand response opportunity comes, we’re more capable of handling it.”
Up to seven companies, totaling 32 mills of various sizes throughout Ontario participated in the original DR program, as delivered through the Ontario Power Authority (OPA). With seven facilities throughout the province involved in the program, including locations in Kapuskasing and Marathon, Tembec was one of the largest participants.
“They’re mostly big players in the pulp and paper industry, and their capacity can range anywhere from 0.5 megawatt (MW) to 100 MW, “ says Simon Zhang, analyst of program delivery, Ontario Power Authority.
“When the price is high, the demand is high, but if we pay them to reduce their load at that time, the peak demand is lower, and the overall price should theoretically be lower. There is no accurate calculation to say the price will be reduced by a certain amount, but theoretically, it did.”
Though 2007 numbers were not available, the OPA calculates that the average curtailment of its participants over all eligible curtailment hours for 2006 was 93 MW. The highest amount delivered demand response in a single hour that year was 182 MW, which occurred on August 1.
The program is assisted by a non-profit entity known as the Independent Electricity System Operator (IESO) which publishes regular electricity cost forecasts throughout the day. If demand is anticipated to push prices past $90 dollars per megawatt hour in the summer or $80 dollars per megawatt hour in all other months, participants in the Demand Response program are asked to reduce their load on the system by shutting down certain processes. Companies then determine whether these shutdowns are feasible and act accordingly.
Independent analysts audit the participants’ energy usage to ensure the accuracy of their stated numbers. Companies are then compensated for the amount of megawatt hours they didn’t use, though the exact amount varies on capacity and the cost associated with that particular month.
“For example, if Tembec has a 50 MW plant, and in May they can shut down this capacity every hour for 10 hours, that means 500 MW hours,” Zhang says. “Each MW hour was $80 for May, so that would be the calculation for their total incentive.”
Dottori says this level of intermittent shut-down and start-up can add some wear and tear to the equipment, but is ultimately worth it as it institutes an in-house culture of conservation and helps to make the company more competitive.
“You pay your electricity bill and you get this incentive for something that benefits the grid. One is a negative, one is a positive, and you add it all up, and overall it brings down your cost of electricity so that you’re making slightly less tons but at a much better operating cost so therefore the net economics are better.”
Although the original Demand Response program is winding to a close, its success has spawned several follow-up programs. One is a revival of the initial voluntary program, with two others due to incorporate contractual obligations to ensure higher reliability for the market.
Demand Response 2 (DR2) will require the participants to sign a contract committing to a four-hour window every day, either for the winter and summer months or for the entire year. The Demand Response 3 (DR3) is more intensive, contractually requiring participants to commit to either 100 or 200 hours of load reduction during peak periods of demand.
DR3 is anticipated to be rolled out as early as July, with DR2 scheduled for later in the year.
“We’re definitely prepared to make this kind of contractual obligation,” Dottori says. “This is one measure that allows our net power rates to be a little more competitive.”
