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Motivation for Smart Meters

Motivation for Smart Meters. Allen Stanbury Allen Stanbury & Associates Inc. Why Smart Meters?. The specter of insufficient supply looms Prospect of rolling blackouts Concern for clean air Phase out coal fired generation by 2009 Risk of mounting public debt

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Motivation for Smart Meters

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  1. Motivation for Smart Meters Allen Stanbury Allen Stanbury & Associates Inc.

  2. Why Smart Meters? • The specter of insufficient supply looms • Prospect of rolling blackouts • Concern for clean air • Phase out coal fired generation by 2009 • Risk of mounting public debt • Due to direct subsidization of retail electricity • Retail price cap can be lower than average market price

  3. Current Generation Mix Source: IESO

  4. Capacity vs. Energy Source: IESO

  5. Tight Supply on Horizon • Confluence of growing demand and aging generation • Demand: • Grows about 1.2% per year • Driven by temperature • Each degree above 16°C adds 380 MW

  6. Tight Supply on Horizon • Aging generation: • Nuclear reactors reach end of design life in 7 to 10 years • Average hydro facility is 60 years old • IESO forecasts half of installed capacity will exceed nominal service life by 2020 • Provincial government predicts 24,000 MW of new capacity required by 2025 • Includes planned phase out of 7500 MW of coal fired generation • And these assets are stretched thin

  7. Summer 2005 • Provincial demand: • Exceeded 25,000 MW on 53 occasions • IESO: • Issued public appeals to reduce consumption 12 different days • Two 5% voltage reductions reduced demand by500 MW • 4,199 MW of emergency purchases in one month • Price exceeded $150/MW (15¢/kWh) in 252 hours

  8. Meeting the Supply Challenge • Electricity Supply Act 2004 • Created the Ontario Power Authority • To establish long term contracts for new generation • Created a new conservation bureau • To reduce demand by 5%, energy by 10% • Early Targets • 2235 MW of new gas fired generation • 395 MW of renewable power • 650 MW of demand response

  9. Influences at the Time • Blackout of August 14, 2003 • Key base load (nuclear) generation took as long as 6 days to return to service • IESO implemented limited rolling black outs in limited areas • IESO appeals to conserve resulted in 20% reduction in demand almost all of which came from C&I consumers • Residential consumers failed to respond to repeated IESO appeals

  10. Influences at the Time • Mounting public debt • Wholesale & retail markets open May 1, 2002 • Retail rate is capped December 2002 • Cap turned out to be less than the average wholesale price • Provincial government undertook to fund the difference • Buy March of 2004 the debt amounted to $928 million • About the same cost as installing smart meters in every home

  11. Meeting the Supply/Clean Air Challenge • Build more generation • Encourage • Conservation in both energy and demand • Clean renewable power • Local micro-generation • Design more effective rate structures • Provide better consumption information to consumers • What was the government to do?

  12. IESO 10 Year Outlook Source: IESO 10-year Outlook Highlights

  13. OPA View Source: Ontario Power Authority, Supply Mix Advice and Recommendations

  14. Smart Meters • Goals • To provide feedback to consumers • Give consumers information needed to they can be in control if they want to be • Encourage a culture of conservation • To enable time & seasonal dependent rates • Shift load away from peak periods • Enable critical peak pricing • Response to EISO appeals will be rewarded • Provide a key element essential for a future residential demand/price response program

  15. Smart Metering • Will it work? • Market clearing price is set by the last 200 MW • 200 MW of demand responsive load could significantly reduce price volatility in the wholesale market • Strong response to critical calls could well reduce future generation capital costs • Prices in the future will depend on natural gas • Prices forecast to be volatile and high • The residential market is a large portion of total consumption and an untapped conservation resource • What do you think?

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