Smart Grid
| In June, 2011, the ECO released volume 1 of its 2010 Annual Report on the progress of activities in Ontario to reduce or make more efficient use of electricity, natural gas, propane, oil and transportation fuels. Click here for more information on this report, including videos and communications materials. | |||||
According to Ontario’s LTEP, provincial electricity demand will grow by 15 per cent between 2010 and 2030. This means that Ontario’s electricity system will need to provide 165 TWh of total generation by 2030. The increase in demand for electricity will strain the existing power grid, requiring increased investment in both additional power generation and infrastructure to maintain system reliability. With this anticipated growth, a shift towards a more efficient use of the electricity system is being made. This will transform the existing grid into the “smart” grid. In order to recognize its full potential, it is important to first understand the concept of the smart grid.
Contents |
What is the Smart Grid?
Smart grid is the term used to describe the next generation of the electricity delivery system. It does not refer to just one technology, but instead refers to different technologies working together and managing electricity in a novel way. It includes customer control aspects, such as smart meters, TOU rates and load control capabilities. It also includes the idea of utility flexibility, where smart grid technologies will enable micro-generation and distributed generation, and reduce the need for transmission investment through a more efficient use of the existing transmission system. Additionally, it includes the idea of adaptive infrastructure, such as charging infrastructure for electric vehicles and distributed energy storage, which can make use of energy produced during off-peak times.
Fundamental to this initiative is the overlaying of a two-way communication network on top of the existing transmission and distribution system. Instead of the grid remaining limited to top-down electricity flow, there will be two-way power flow capabilities across the transmission and distribution networks, allowing for an increase in the number of smaller electricity storage and generation opportunities across the system.
Figure 5: Today’s Distribution System
Through the installation of sensing, monitoring, protection, and control technologies, the ability of the grid to incorporate demand response and distributed renewable energy generation will increase. This allows consumers to interact with and manage or modify their electricity usage more effectively than ever before. The smart grid even has the potential to extend down to the appliance level, with new appliances being developed to communicate with the electrical grid and to shut off during times of high energy demand and prices. This communication system can also enable LDCs to recognize and identify electrical problems as they occur. LDCs will be better able to locate and manage power outages through sensors along the grid, reducing fault impacts and minimizing grid disruption.
The smart grid can also improve the system economics by reducing electricity losses[1] during delivery and therefore allowing generated electricity to be used more efficiently. This also reduces the environmental impact of generation. For example, in Ontario it is estimated that about 4 per cent of electricity is lost at the distribution level.[2] At the transmission level, losses are typically between 2 to 3 per cent, although incremental losses can be as high as 30 to 40 per cent depending on the system configuration, the location of generators, demand and weather patterns.[3] This means that typical electricity losses between the point of generation and end user are around 6 per cent. By reducing inefficiencies, more electricity is available to end-users instead of lost during delivery.
A focused and methodological approach to implementing the smart grid is necessary to ensure its success. Key elements of the smart grid include smart meters, distributed storage, and distributed generation. The following is a summary of these components.
Figure 6: Tomorrow's Smart Network
Smart Meters
As described in the ECO’s Annual Energy Conservation Progress Report – 2009 (Volume Two), smart meters are replacing traditional analog meters in Ontario. Unlike their analog counterparts, they digitally record and measure electricity usage on an hourly basis. Automated meter readings are sent remotely to a central data management centre, which is used to generate customer invoices. If utilities provide consumers access to their electricity consumption data in a timely and user-friendly fashion, this can be an important energy conservation tool. Consumers can monitor their electricity loads to identify sources of electricity waste and to respond to price signals by shifting some of their electricity use to off-peak times. Several Ontario utilities have taken the lead by providing Internet applications that show users their metered electricity consumption data.
With the implementation of smart meters in Ontario, the data exists for Ontarians to understand how they use their electricity. The challenge now is to manage the available data and make the most of this new information.
Distributed Generation
Distributed generation refers to a non-centralized energy generation model, where generation projects exist across the province. These generators can connect to the low-voltage distribution lines, rather than the high-voltage transmission lines, in order to supply power to the electricity grid.
An important difference between distributed generation and centralized generation connected to the transmission grid is that the IESO is unable to monitor and control power flows within distribution networks. As distributed generation becomes a larger part of Ontario’s generation mix, a more robust flow of information may be needed to ensure that the IESO can continue to perform its role of matching electricity supply and demand in real time.
Balancing Supply and Demand – An Old Challenge for a New Grid |
| A constant balance between supply and demand is required to maintain the integrity of the electricity grid. In order to ensure
continued reliability as the grid is modernized, a challenge will be demand forecasting. It will need to be modified to account for consumers responding to price signals. |
| Electricity prices will likely be the main motivator for consumers adopting new energy management technologies.[4] A key driver of prices is electricity demand. Power system operators have established demand (or load) forecasting models and are able to accurately forecast future demand. As consumer patterns become altered based on price signals, the demand curve will evolve away from that predicted by current models. This response is expected to have an impact on price formation, which is important because these prices are used by market participants (e.g., generators and distributors) to determine operating and planning activities. |
| As noted earlier, the amount of renewable and distributed generation on Ontario’s grid is expected to increase significantly, and this may significantly affect the characteristics of the grid. For example, the error in a 12-hour forecast for wind generation can range from 20 to 100 per cent.[5] The variability of the wind energy forecast directly contrasts with the accuracy of demand forecasting, and requires the Independent Electricity System Operator (IESO) to adapt its operation of the electricity system to accommodate variable generation. The IESO is exploring how to integrate renewable energy without compromising reliability, safety and efficiency in its operations. For this, it is engaging stakeholders until September 2011 to discuss integration, particularly focusing on forecasting, dispatch, and visibility (i.e., the ability of the system operator to monitor power production) for wind and solar generation.[6] |
| The IESO’s Alternative Technologies for Regulation Demonstration Project |
| Ontario’s electricity Market Rules[7] were recently amended to allow non-generation resources to offer grid-balancing regulation of the electricity system. This will assist Ontario’s electricity system with incorporating higher levels of variable generation that will be a direct result of renewable energy generation. A pilot project was initiated with two companies in late 2010 allowing these large consumers to respond to IESO signals and adjust consumption in response to variable generation. Traditionally, this service was supplied by generators through their automatic generation control capability, which provides a second-by-second balancing of supply and demand on the grid. The pilot project is intended to demonstrate that electricity consumers, and not just electricity generators, can offer this service.[8] |
Energy Storage
The smart grid will make the entire electricity grid a more dynamic system. Part of this will come from increased flexibility for distribution utilities. As discussed above, distributed generation is a key aspect of the smart grid and its optimization goes handin- hand with energy storage.
Ontario is increasing the amount of renewable, variable generation which could occasionally result in the generation of surplus baseload energy at times of low demand and high renewable output. If there is a distributed energy storage system available for utilities to use, the system can capture the excess baseload energy while it is being generated and deploy this energy once the demand increases.
When considering the variability of wind on a daily basis, the importance of storage becomes clear. In terms of installed system capacity, wind accounts for 3.6 per cent of Ontario’s total supply mix, but will increase to 10 per cent by 2030.[9], [10] The IESO estimates that only 13 per cent of the installed wind capacity can be considered to be available during summer peak and 32 per cent during winter peak.[11] This is an average. In any given hour, output can vary from near zero to 100 per cent of capacity.[12] Storage of variable generation can help moderate electricity prices because off-peak energy can be used during mid- and on-peak times. Distributed energy storage can help the grid remain stable, with the potential to make it a more efficient and reliable system that leads to lower operating costs in the long term. Overall, distributed storage has many benefits, including enhanced power quality, frequency, load-following, spinning reserve, and load-levelling.
In the longer term, several technologies have the potential to be viable in Ontario, including: advanced batteries; flow batteries; flywheels; pumped hydroelectric storage (site specific); compressed air storage; superconducting magnetic energy storage; and thermal storage. Due to high capital costs and the relative immaturity (including limited operating experience) of these technologies, Ontario is still in the process of investigating the potential for storage technologies.
The amendment to the Supply Mix Directive, issued in September 2008 by the then Minister of Energy and Infrastructure to the OPA, requested that the OPA review the potential for pumped hydroelectric storage for providing energy during times of peak demand. The LTEP, issued after the 2008 directive, notes that energy storage is an “important part of the move to a Smart Grid,”[13] yet it does not provide a comprehensive overview or proposal requiring energy storage and pumped storage to be incorporated into Ontario’s supply mix. In short, the LTEP does not follow-up and advance the earlier directive with respect to energy storage.
Storage is discussed in the new Supply Mix Directive. This directive supersedes any previous directives and indicates that potential electricity storage must be considered, without providing substantial detail.
A New Planning Paradigm – How the Smart Grid Unites Transmission and Distribution
To realize the full benefits of distributed energy storage, generation, and smart meters, the transmission and distribution networks must become better integrated so that all parts can work together effectively.
electricity is generated at a particular power plant and transported away from the power plant through a series of high voltage transmission wires. Ontario has about 30,000 km of transmission lines, which are mostly owned and operated by Hydro One. The transmission system consists predominantly of 500 kilovolt (kV), 230 kV and 115 kV transmission networks. Distribution companies take the high-voltage electricity from the transmission lines and “step-down” the electricity to a low-voltage level, making it safer and usable in appliances and equipment. Distributors own and operate the distribution system and serve customers within a particular geographic region and deliver the majority of electricity consumed in Ontario to individual customers, with the exception of large industries which are usually directly connected to the transmission network. There are currently about 80 distribution companies in Ontario. Ontario’s grid interconnects with neighbouring jurisdictions, including Michigan, Minnesota, New York, Manitoba and Quebec.
The design described above meant that physical separation between the transmission and distribution systems was ingrained in the system from the beginning – they were considered separate functions with responsibility divided between the operators. This separation can be detrimental to the smart grid because it needs to function as a single unit, with distributed generation and storage being incorporated at both the transmission and distribution levels.
Some aspects of the smart grid are already incorporated into the design of Ontario’s transmission network. For example, the transmission system permits two-way power flow and includes monitoring of equipment and power flow. Transmission line equipment also enables remote control. Embedded automation in the system helps maintain reliability in the case of an emergency.
Ontario’s Smart Grid – the Regulatory and Policy Framework
Enabling Legislation
With the passage of the GEGEA, Ontario introduced enabling legislation to implement a smart grid design. As a result of GEGEA amendments to the Electricity Act, 1998, the following broad definition of the smart grid was introduced; this definition demonstrates both the centrality of the smart grid to the GEGEA’s policy direction, as well as the complexity of transforming the transmission and distribution systems:
For the purposes of this Act, the smart grid means the advanced information exchange systems and equipment that when utilized together improve the flexibility, security, reliability, efficiency and safety of the integrated power system and distribution systems, particularly for the purposes of,
(a) enabling the increased use of renewable energy sources and technology, including generation facilities connected to the distribution system; (b) expanding opportunities to provide demand response, price information and load control to electricity customers; (c) accommodating the use of emerging, innovative and energy-saving technologies and system control applications; or (d) supporting other objectives that may be prescribed by regulation.
The GEGEA also expanded the Ontario Energy Board Act, 1998 so that the OEB is responsible for promoting conservation and the timely expansion or reinforcement of transmission and distribution systems to connect renewable energy generation facilities, while facilitating the implementation of a smart grid in Ontario. The Ontario Energy Board Act, 1998 was also amended to allow the Minister of Energy to issue directives to the OEB for establishing, implementing, or promoting the smart grid. Other changes include the requirement that licences for transmitters and distributors describe plans, as specified by the OEB or by regulation, for the development and implementation of the smart grid.
Regulator of its Own Policies? The Role of the OEB |
| The Ontario Energy Board (OEB) is responsible for regulating Ontario’s electricity and natural gas sectors in the public interest. It serves a necessary purpose to protect consumers from natural monopolies in the energy sector. |
| The objectives of the OEB’s regulation of the electricity sector are to promote conservation in a manner consistent with government policy and to protect the interests of consumers with respect to prices. These objectives could cause ambiguity in the OEB’s interpretation of its priorities. Its functions include setting transmission and distribution rates, setting generation rates for Ontario Power Generation’s nuclear and baseload hydroelectric facilities, and approving the budget and fees of electricity agencies. In addition, the OEB licences all market participants and approves construction of new electricity transmission lines that are longer than two kilometres. It monitors the electricity sector market and reports to the Minister of Energy on the efficiency, fairness, transparency, abuse or potential abuse of market power. The OEB may even be asked to review the Independent Electricity System Operator’s (IESO) market rules and consider appeals of IESO orders. It is clear that the OEB is involved with many facets of Ontario’s electricity system. |
| The OEB’s role in approving ratepayer funding for projects makes it a key gatekeeper in the implementation of energy policy in Ontario. While the regulatory model has served Ontario well for protecting consumer interests, there is some question as to whether the OEB is the appropriate choice to achieve the more innovative objectives that it was given through the Green Energy and Green Economy Act, 2009 – promoting renewable energy and conservation, and facilitating the implementation of the smart grid. There is a risk that the government has delegated too much responsibility to the OEB for making policy in these areas, which may conflict with the OEB’s traditional regulatory role. |
Minister's Directive
On November 23, 2010, the Minister of Energy issued a directive to the OEB requiring it to take steps to establish, implement and promote a smart grid. Customer control, power system flexibility and adaptive infrastructure were the three broad objectives provided to the OEB. The directive also included a list of ten policy objectives that the government has set for implementing a smart grid. One objective calls for the consideration of environmental benefits in promoting clean energy technologies, conservation and more efficient use of existing technologies. These policy objectives will be used by the OEB to develop direct guidance to LDCs and to evaluate smart grid plans submitted by LDCs.
The Ontario Energy Board’s Smart Grid Working Group
Pursuant to the November 2010 directive, the OEB is to provide guidance regarding its expectations in relation to the establishment and implementation of a smart grid. This guidance is to be provided to LDCs, transmitters, and all other regulated entities whose fees are reviewed by the OEB.
To accomplish this, the OEB established a Smart Grid Working Group (SGWG) to provide advice on the technical details for implementing a smart grid plan in Ontario. The group consists of 25 members including industry, the IESO, Measurement Canada, and LDCs. The SGWG is focusing on the directive’s policy objectives with a special emphasis on the Regional Smart Grid Plans, which are designed to achieve a co-ordinated approach for distributors. This will allow LDCs to share pilot project information and results, as well as engage in similar procurement processes. Through alignment of the procurement processes, LDCs can benefit from economies of scale.
An inaugural meeting of the SGWG took place on March 1, 2011 and the working group will meet bi-weekly for approximately four months. Through these meetings, the group is providing technical advice to the OEB, which will help the OEB prepare a discussion paper. This discussion paper will form the foundation for future OEB consultations concerning smart grid regulation and guidance documents.
The Ontario Energy Board’s Green Energy Act Plan for Distributors
The OEB released the document Distribution System Plans – Filing under Deemed Conditions of Licence (EB-2009-0397) on March 25, 2010. It provides the filing requirements based on the policy direction contained in the guideline Deemed Conditions of Licence: Distribution System Planning (G-2009-0087) issued by the OEB in June 2009 for filing distribution system plans with respect to connecting renewable generation and developing the smart grid.
Beginning in 2012, and for each subsequent year, cost of service rate applications for every LDC must contain a Green Energy Act Plan (GEA Plan) as part of each application.[14] There are two types of plans that can be submitted: a Basic GEA Plan or a Detailed GEA Plan. Both cover five-year horizons and discuss the distributor’s ability to connect renewable generation, as well as highlight any expansion or reinforcement needed to accommodate renewable generation. In addition, each LDC is required to submit its GEA Plan to the OPA for comment prior to filing, and the OPA’s comments must be included in the submission to the OEB.
To date, the OEB has not required distributors to file smart grid development plans in their GEA Plans since the OEB awaited additional ministerial direction, which has now been provided by the November 23, 2010 directive. The GEA Plan must include a description of activities and expenditures related to smart grid development if the distributor is seeking the recovery of those costs. Successful cost recovery is subject to the OEB’s review.
Smart grid development activities and expenditures are limited to demonstration projects, studies or planning exercises, and education and training. The OEB will keep an on-line repository of any studies and demonstration projects, including LDC evaluations discussing the performance, benefits and lessons learned. This will allow distributors to share best practices and avoid unnecessary duplication.
Other Smart Grid Activities in Ontario |
| The Ministry of Energy’s Smart Grid Fund |
| In the 2009 Ontario Budget, the government committed $50 million over a five-year period to “enable the research, capital and demonstration projects necessary for the development of a smart grid in Ontario.”[15] In January 2011, the Ministry of Energy issued a Request for Information to help it develop a new Smart Grid Fund. The ministry posted an Information Notice on the Environmental Registry and the fund was launched in the spring of 2011. It is anticipated that approved projects will receive funding as early as August.[16] |
| Hydro One |
| Hydro One has been working towards implementing a smart grid and has established five value drivers for its smart grid work. These drivers are increased reliability, increased operations effectiveness, faster restoration, customer enhancement using smart meter/analytical tools to effect conservation, and a lower carbon footprint.[17] |
| In its 2010 and 2011 distribution rates application in front of the Ontario Energy Board, Hydro One identified its plans to look at implementing the smart grid beyond the smart meter level. The company is conducting pilot studies of new systems, including an assessment of geographic information system mapping of its infrastructure, distributed generation technology trials, and an assessment of standards and operating procedures. The utility also intends to test plug-in hybrid electric vehicles in its “Smart Zone” pilot project. |
| The “Smart Zone” pilot project in the Owen Sound region will evaluate the effectiveness of different technology systems. The company is in the first phase of the project, with a focus on telecommunications integration. It is also examining different business processes, interfaces, and systems and security management tools needed for the smart grid’s success. The first phase is expected to last until 2013, after which Hydro One will begin implementing various smart grid components in other areas of its distribution territory and its transmission network across the province |
| General Electric Canada |
| In March 2011, General Electric Canada (GE) announced it would establish a $40 million project in Markham, Ontario. The project – GE Grid IQ Innovation Centre – will be responsible for developing and manufacturing smart grid products for Ontario and world markets. It will also include a demonstration and lab facility for GE’s products and services. The $40 million project is receiving $7.9 million from the Ontario government. The centre will focus on distribution automation, electrical system protection, micro-grid control and cyber security. |
ECO Comment
The smart grid has the potential to improve electricity grid operation while enabling the integration and adoption of renewable generation and other innovative electricity technologies. It can also serve as a platform to enhance conservation and energy efficiency. It is therefore commendable that the government has begun the process of implementing a smart grid policy.
If the smart grid is to succeed in Ontario, the ECO believes that one entity must be charged with establishing the vision and providing the overall leadership necessary to guide all players towards the common goal of modernizing the grid. The ECO urges the Ministry of Energy to engage the public in discussions on both the vision and the manner by which smart grid development should be led. To initiate this dialogue, a white paper should be posted on the Environmental Registry as a proposal notice for public comment.
In the ECO’s view, the critical element with respect to leading the implementation of the smart grid is that it be directed by an organization with a perspective of the electricity system as a whole and one that can guide all organizations with grid-related responsibilities toward a unified vision. Presently, various grid responsibilities are partitioned between the IESO, OEB, OPA, Hydro One, LDCs (and to a lesser extent generators) and reflect their individual roles and objectives. This division of responsibilities is suitable for the functioning of the current grid. However, none of these organizations control all physical assets of the grid, nor is there a sole organization with the mandate and latitude to make decisions on allocating resources to build a two-way informationbased smart grid. Moreover, the implementation of smart grid technology may require realigning or redefining the mandate of some of these organizations, possibly placing them in a position of conflict of interest were they to be the leader of smart grid development policy.
Finally, the ECO notes that a policy asymmetry exists between LDC initiatives to conserve energy on the customer versus the utility side of the meter. Previously, many LDCs used conservation funding to undertake infrastructure investment projects to reduce line losses.[18] Under section 3.1.5 of the new CDM Code, infrastructure investments of this nature cannot be classified as conservation measures. The Board’s rationale for including this in the Code is the lack of efficiency standards for distribution infrastructure, making it difficult to classify capital project investments as CDM tools.[19] Despite the difficulties of classification, this type of infrastructure investment is necessary for a more efficient electricity grid.
A 2008 OEB study noted the majority of LDCs believed that the regulatory environment did not allow them to make investments to reduce distribution losses in an optimal fashion.[20] Therefore, incentives should be made available for such infrastructure investment to reduce line losses to overcome the barrier of the higher cost of efficient infrastructure and ensure that appropriate long-term system planning occurs. The ECO believes that the OEB’s power to regulate the implementation of the smart grid provides an opportunity to rectify this imbalance.
The ECO recommends that the Ontario Energy Board encourage and facilitate smart grid investments that reduce line losses, putting these investments on an equal footing with conservation investments.
References
- ↑ Energy is consumed (lost) in the transmission and distribution of electricity from generation to load, primarily from the conversion of electrical energy to heat energy due to line resistance. When electricity flows across transmission lines, the resistance in the wires causes them to heat up, consuming power in the same way as a filament in a light bulb.
- ↑ Ontario Energy Board, Ontario Electricity Distributor Practices Relating to Management of System Losses, Regulatory Audit Office, June 23, 2008, 6.
- ↑ Independent Electricity System Operator, Loss Penalty Factors (SE-40), April 10, 2007, 1.
- ↑ Independent Electricity System Operator, The Ontario Reliability Outlook, December 2009, 14.
- ↑ North American Electric Reliability Corporation, Special Report: Accommodating High Levels of Variable Generation, April 2009, 55.
- ↑ Independent Electricity System Operator, Stakeholder Engagement Plan SE-91 – Renewable Integration, November 4, 2010.
- ↑ The Market Rules are available from the IESO under ‘Rules, Manuals and Forms’, available from: ieso.ca/imoweb/manuals/marketdocs.asp (as of May 2, 2011).
- ↑ Independent Electricity System Operator, “IESO Selects Participants for Demonstration Project to Provide Regulation Services”, News Release, June 29, 2010.
- ↑ Independent Electricity System Operator, “Supply Overview,” [1] (accessed May 2, 2011).
- ↑ Government of Ontario, Ontario’s Long-Term Energy Plan, Building Our Clean Energy Future (Toronto, Queen’s Printer for Ontario: 2010), 19.
- ↑ Independent Electricity System Operator, Ontario Reserve Margin Requirements 2011-2014 Version 1.0 (IESO_ REP_0684 ), December 20, 2010, A-1.
- ↑ The addition of solar electricity will reduce the degree of variability in total renewable electricity output, because solar electricity output is maximized at different times than wind. The addition of more renewable energy sites dispersed across the province will also reduce variability.
- ↑ Government of Ontario, Ontario’s Long-Term Energy Plan, Building Our Clean Energy Future (Toronto, Queen’s Printer for Ontario: 2010), 17.
- ↑ Ontario Energy Board, EB-2009-0397 – Filing Requirements: Distribution System Plans – Filing Under Deemed Conditions of Licence, March 25, 2010, 5.
- ↑ Government of Ontario, 2009 Ontario Budget: Confronting the Challenge Building Our Economic Future (Toronto, Queen’s Printer for Ontario: 2009), 26.
- ↑ Ontario Smart Grid Forum, Modernizing Ontario’s Electricity System: Next Steps, May 3, 2011, 13.
- ↑ Hydro One Network Incorporated, Development Capital, EB-2009-0096, Exhibit D1, Tab 3 Schedule 3, July 13, 2009, 22.
- ↑ Ontario Energy Board, Ontario Electricity Distributor Practices Relating to Management of System Losses, June 2008, 2.
- ↑ Ontario Energy Board, Guidelines for Electricity Distributor Conservation and Demand Management EB- 2008-0037, March 2008, 5.
- ↑ Ontario Energy Board, Ontario Electricity Distributor Practices Relating to Management of System Losses, June 2008, 9.
Citing This Article:
Environmental Commissioner of Ontario. 2010. Annual Energy Conservation Progress Report, 2010 (Volume One): Managing a Complex Energy System. Toronto, ON : Environmental Commissioner of Ontario. pp. 43-52
