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Distributed Energy Resources: Bringing

Energy Closer to Home

Presentation by the Industry Task Force on Distributed Generation

July 28, 2005

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Industry Task Force on Distributed Generation

Volunteer Ad Hoc group of industry participants with an interest in furthering the development of policies supporting distributed generation in Ontario.

Members include Owners, Manufacturers, Developers, LDC’s, and other industry experts

Projects represented include wind, high-efficiency cogeneration (natural gas & biogas), district energy and others

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Characteristics of Distributed Generation Distributed Generation

small -- typically embedded local -- close to load decentralized -- connected to

distribution, but not centrally planned smart -- complements, but will not

replace power stations and transmission grids

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Distributed Generation Based on our definition of DG,

approximately 300 MW is in-service in Ontario.

Many more good projects are developed enough to proceed quickly (200-300 MW estimated)

Projects have not proceeded due to: Market uncertainty Value not monetized and delivered to

proponents / hosts

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Procurement DG Task force members participated in RES I

and CES, some successful. Most potential DG sites were not represented.

Reasons included: Complexity Appeared to be designed for larger Combined Cycle

projects Limitations and additional risks faced by

cogeneration proponents (thermal host) No economic value attached to producing power

close to the load i.e.. “Delivered Power” Time frame too tight

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Procurement Positive features of the process:

Competitive nature A portion of fuel costs (and risks)

transferred into price of power Private investment

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Procurement Suggestions Simple process – smaller projects

smaller developers with fewer resources Timing – must be flexible:

allowing high efficiency cogen to be built on timing in synch with host .. i.e Toyota, Hospitals

Liabilities more consistent with smaller projects, LD’s and commitments – these are small projects, and if one does not

get built, or close the doors before the end of 20 years, it is not material to OPA

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Procurement Suggestions

Create a standard offer with uniform terms and conditions for any embedded generation

Remove the current stipulation that proponents must be IESO market participants.

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Procurement Suggestions When evaluating bids or setting a

standard offer price, these projects need to be valued based on “delivered power” Capital & Energy savings on

transmission and distribution networks DG value can exceed “base energy

rate” by $20 to $25 per MWh

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Procurement Suggestions

Standard offer should be set at a value that includes hidden benefits of DG, and available for a period that will recognize host’s approval and development times

Continue to work with OEB to make hidden benefits part of standard tariffs or have the OPA pay value to proponents

If RFP, make it an “RFP Lite” that is very simple

Power price indexed to fuel cost (natural gas projects)

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Procurement Suggestions Self-scheduling, or defined “on-peak”

operation DG should be treated similarly to demand

response and DSM projects … be able to avoid all upstream charges including DRC

If this cannot be done in practice, it still should be taken into account when evaluating DG vs. other options in OPA’s procurement decisions.

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Benefits of DG Delay or avoid need for capital expenditures to

upgrade congested transmission or distribution network, and offer local solutions to transmission constraints

Reduce T&D system losses and improve T&D load factors

Increase reliability at LDC level and provide support or ancillary services to LDC network

Help reduce peak prices and transmission charges Reduce financial, development, construction and

operating risk for ratepayers because of smaller increments of investment

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Benefits of DG Make more efficient use of fuel, particularly in

case of cogen Offset T&D charges – economic advantages to

ratepayers or to generators Environmental Capital Savings Peaking use of DG can be very effective

capacity Power Factor correction and voltage support

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Questions

For more information, please contact:

James Sidlofsky, Chair, DG Task ForceBorden Ladner Gervais LLP416-367-6277

Barry Chuddy, Vice-Chair, DG Task ForceEnersource Corporation905-283-4250