Time of Use was mentioned.
TOU was implemented, including here in Ontario, to encourage load-shifting. If consumers could be incentivized to consume less during the day and more in the evening when surplus power was available this avoided:
- Spillage at hydro dams
- Turning down baseload plants
- Steaming-off at nuclear plants
- Increased peaking capacity required during the day
This was all well before the talk about EV's. The idea was that if you could manipulate the consumer side of the demand curve by using different price tiers that you'd avoid having to invest in more peaking capacity as well as save money by avoiding wasted generation potential.
People started doing their laundry in the evening, letting their house get hotter during the day (AC running less) or colder (furnace running less) when they weren't home. They'd let their dishes run at night. Some people would go as far as moving dinner to off-peak so they weren't running their oven when it was expensive.
Then, many things happened:
- Financial collapse, which resulted in a loss of industry and thus some of the baseload consumption
- "Green Energy" push/recovery, which incentivized private investment via feed-in tariffs and large renewable procurement contracts, which drove-up rates
- The installation of intermittent wind, which produces out of phase with demand
- The installation of intermittent solar, which depresses daytime peaking requirements, but creates sharp morning and evening curves, requiring fast-ramp gas capacity
This has complicated things.
While solar has a, generally, pretty predictable impact on the demand curve, at high penetration levels it starts biting into baseload, which runs contrary to the whole premise of what was trying to be achieved with TOU. Having to shutdown baseload generators during the day is just as problematic as shutting them down over night. This is why utilities are looking at, and in some instances, implementing, the ability to curtail solar (residential and commercial), because no other generator has the privilege of being able to dump power on the grid and have the rest of the grid contort around it.
Wind doesn't provide peaking capacity. It's the windiest when demand is only moderate so it is displacing, in the best-case scenario, fossil baseload like gas or coal. However, when you get a heat wave or cold snap, it tends to collapse, so you still need to have maximum peak capacity available and that capacity will command a higher price to make up for its displacement. This is why the average rate has gone up, even as wind procurement price has come down. Wind has very little capacity value, so in a market system, when it bids in at $0.00 to receive the maximum share and benefit from the required rate set by the bids from fuelled generators and that day's peak demand is say 15,000MW, with wind making up 1/3rd of that, the wind farm owners make a profit. When you get a heat wave and wind disappears, gas capacity steps-in. Since wind is unable to bid-in super cheap, because it isn't available, the market rate gets run up very high, driven by generators which are only used during these events and since more capacity is required in these scenarios, say it's a 25,000MW peak demand day, the overall impact on rates is an upward shift. No market participant is going to keep a generator in play that can't make money, so this is a bit of a naturally balancing situation. Where things get a bit muddy here is renewable procurement subsides and other financial transfers that happen outside the market system, but that's outside the scope of this critique.
In non-market systems or pseudo-markets like we have here in Ontario where generators are on fixed-rate contracts, wind contract holders are rewarded for "potential" kWh, that is, that even though their capacity can push the market price negative, they are rewarded full contract price for output that is accepted and output that is avoided. This of course drives up consumer rates to cover those contract costs.
This totally screws with the TOU concept because now you aren't dealing with an organic generation/demand profile that can be easily manipulated with structured rate shifting. As you increase wind capacity you end up with massive amounts of generation showing up at odd times. As this starts to eat into baseload, that capacity gets replaced by more flexible peakers that command a higher rate. This will likely get very exciting as we see wind penetration levels increase and baseload generators become uneconomic and retired. We saw bits of this during the Texas blackout, had the generator freeze not happened, more capacity would have been available, but the impact it had on market price was tremendous. Generators that could participate commanded obscene rates, which will become more commonplace as wind penetration increases and the generation side of the curve becomes more sporadic.
We've got two things going on here:
- A push to electrify everything, including transport with EV's, which will drive up demand, requiring more capacity and will stress resource availability
- A push to increase the penetration of wind and solar, which by definition, particularly with wind, increase the variability of the generation side of things, requiring more moving parts and changing the overall makeup of the grid, moving it away from reliable baseload generation sources and toward fast-ramp gas to be able to juggle that variability. Storage, in small amounts is being explored to try and help with FCAS (in most cases) with this, keeping frequency in check, but at a cost of course.
I"m fascinated to see how this plays out as governments push the utilities to install more VRE and retire traditional capacity. I expect we'll see a pull-back from the eagerness to install wind at some point once a tipping point is reached as well as some sort of settling on a limit for solar capacity for a given system.
What we've learned here in Ontario is a very expensive lesson what not to do.
