BTM storage is booming in Ontario
Ontario's Global Adjustment charge is the fuel behind a boom in BTM storage projects.
Ontario's Global Adjustment (GA) charge is creating a behind-the-meter energy storage boom.
Energy storage developers are flocking to Ontario offering large industrial customers tools to cut their demand, which is directly linked to the level of GA charge they have to pay. Industrial customers have had to pay a majority of their electricity bills to the GA charge, which the Ontario government established in 2005.
"We are very excited about the Ontario market," John Carrington, CEO of energy storage company Stem, told Utility Dive. He declined to disclose just how big it is, but Carrington said Stem has a "substantial" pipeline of storage projects lined up in Ontario, and other companies are announcing similar deals in the Canadian province.
"Based on some of these announcements, next year we could see upward of 100 MWh of energy storage project announced, with probably more to come."
Senior energy analyst, Navigant Research
Just last week, Convergent Energy + Power and IHI Inc. brought a 10 MW, 20 MWh behind-the-meter energy storage system online in Sarnia, Ontario, designed to reduce the GA charge that the customer, a petrochemical company, will have to pay. It is the largest project of its kind.
Earlier this month, Fluence, a joint venture of AES Corp. and Siemens, announced a deal for a 48 MW, 144 MWh energy storage system in Sault Ste Marie, Ontario. Under the deal, Fluence and the local distribution company, PUC Services, will offer energy management solutions to PUC's biggest customers that could help them cut their energy costs. And in February, Stem announced plans for a 2.5 MWh battery system for INOAC Interior Systems designed to reduce the GA charges for the automotive supplier.
Majority of a power bill goes to the GA charge
The GA was established as a way of making up the difference in prices between wholesale electricity prices and the contracted rates electricity suppliers pay for nuclear power, gas-fired power, renewables such as wind and solar power, and the cost of conservation program.
"The GA is the driving force" behind the boom in energy storage projects in Ontario, Alex Eller, senior energy analyst at Navigant Research, told Utility Dive. "Based on some of these announcements, next year we could see upward of 100 MWh of energy storage project announced, with probably more to come," he said.
For residential consumers and most commercial customers, the GA is bundled into their bills. For industrial customers, however, the GA is based on their usage during the five top peak demand days on the Independent Electricity System Operator (IESO), which acts as the ISO or RTO for Ontario's grid.
Wholesale prices are relatively low in Ontario, so the GA makes up the majority of an industrial customer's electricity bills, from 50% to 70%. That has resulted in an outcry from businesses who said the GA is either driving them out of business or making them uncompetitive with businesses in other provinces or in the United States.
"We have some customers with $5 million a month of GA charges in addition to their energy charges, which are usually pretty cheap," Dan Wishnick, managing director at Fluence, told Utility Dive.
One manufacturer, National Steel Car, even brought a lawsuit against Ontario's Minister of Energy and the IESO arguing that the GA was an unconstitutional tax, not a valid regulatory charge.
In 2017, Ontario electric customers paid a total of CA$11.85 billion (US$9.1 billion) in GA charges. In Ontario's two biggest cities, Toronto and Ottawa, electricity bills for large businesses rose by around 50% between 2010 and 2016 compared with an average of 14% for other Canadian cities, even though spot, or hourly, costs declined fivefold over that time, according to a report from the Fraser Institute.
In search for savings, storage works best
Seven years ago or so, there were not a lot of ways to mitigate the GA. Some large industrial customers built natural gas plants and generated their own power so they would not have to buy grid power during periods of peak demand. However, Canada is working toward stricter rules on greenhouse gas emissions that could include provisions for a carbon dioxide emissions fee. Other demand reduction programs, like shutting down a factory, or part of one, or timing the closure to coincide with peak periods on the grid, can be difficult and expensive for the manufacturer.
Over the past several years, however, declines in the cost of lithium-ion batteries have opened opportunities for energy storage in Ontario. "The cost of a gas plant is pretty close to the cost of an energy storage installation, until you factor in greenhouse gas reductions," Fluence's Wishnick said.
For PUC Services, Fluence's energy storage installation was a way to capturing GA savings without having to build a huge amount of solar power or a new gas plant, spokesman Giordan Zin told Utility Dive.
PUC Services plans to locate the batteries close to two of its transformer stations as a way to reduce its need for grid power during peak periods. The savings it realizes will be passed on to PUC's roughly 350 business customers after the utility takes out a little of the savings to pay for the storage project, Zin said. In total, its business customers could save CA$3 million (US$2.29 million) to CA$5 million a year and a total of CA$100 million over the 20 year life of the project.
Zin also noted that an added benefit of using energy storage to reduce GA charges is that the batteries also serve as backup power for the utility and the batteries fit well with the utility's recently-announced smart grid project.
"There are several places in U.S. where ISO's have similar peak pricing schemes, but they are not as lucrative as in Ontario," Johannes Rittershausen, CEO of Convergent Energy + Power, which just completed Sarnia storage installation, told Utility Dive. Rittershausen also said Convergent is looking at opportunities for using energy storage as a demand response tool for times other than peak demand periods.
Stem's Carrington also said his company is looking at the revenue stacking potential in Ontario. Most peaks occur in the winter, but there are occasional winter peaks and times when customers have supply problems. "We've been speaking to those customers about that," he said.
The IESO is, in fact, exploring potential obstacles to the broader deployment of energy storage and ways to mitigate those barriers. The grid operator's report and recommendations should be finalized by the end of the year, IESO spokesman Jordan Penic, told Utility Dive.
"Whatever opportunities come about, we will be there and be ready," Carrington said.
Meanwhile, there have been political ramifications from the high cost of energy in Ontario. The province's new Progressive Conservative government is canceling 758 renewable energy contracts, most of them in the early stages of development, in an effort to reduce consumer's electricity bills. But developers seem confident that the GA will survive those political winds. "If it is not the GA, it will be called something else. You still have to pay for everything in the ground," Wishnick said. "I don't think anything is going to happen in the near future.
CORRECTION: A previous version of this story misstated the total Global Adjustment charge for 2017. It was CA$11.85 billion.
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