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Windsor Policy & Solutions Forum Energy Costs - How to Address Higher Power Costs

Windsor Policy & Solutions Forum Energy Costs - How to Address Higher Power Costs. Bruce Sharp, P. Eng. Director, Electricity Aegent Energy Advisors Inc. bsharp@aegent.ca , 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

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  1. Windsor Policy & Solutions ForumEnergy Costs - How to Address Higher Power Costs Bruce Sharp, P. Eng. Director, Electricity Aegent Energy Advisors Inc. bsharp@aegent.ca, 416.622.9449.112 May 15, 2014

  2. In a nutshell • Getting it all wrong • Picture is not pretty • Costs largely fixed • Lowering = transferring

  3. 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

  4. 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:

  5. Commodity forecast • Total commodity cost = HOEP + GA Class B • (assumes zero load growth)

  6. Costs largely fixed • Capital-intensive • Chunky • Inertia • Overbuild • Bias

  7. 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

  8. Conserve – or else • See “costs largely fixed” • If costs 95% fixed:

  9. 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

  10. 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

  11. “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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