Sometimes it pays to use power
Submitted by OCAA on Wed, 04/15/2009 - 04:30.
The Welland Tribune
Sometimes it pays to use power
Local green power producers are being forced to pay the province to make electricity thanks to a bizarre, recession-fueled plunge in power prices.
Falling power demand usually translates into a drop in power prices on the open market, where big industrial and commercial customers buy electricity. (This doesn't apply to homeowners, who pay a fixed price for electricity.)
But demand has been extra low lately, repeatedly pushing the hourly Ontario energy price below zero.
During hours of "negative prices," big businesses actually get a credit for power consumed -- and small power sellers pay for the privilege of delivering energy into the grid.
"It doesn't happen very often," said Frank Perri, general manager of St. Catharines Hydro Generation, which runs the Heywood hydro plant in Port Dalhousie. "The first time I saw it, I thought it was an error."
Prices for electricity have rarely fallen into negative territory since the energy market opened in 2002 -- the first instance was in 2006, for a single hour.
But in the last three weeks, "it has happened quite frequently, and for hours at a time," Perri said. That includes a drop to negative-$51 per megawatt-hour in the wee hours of March 29, for example.
Heywood can generate up to six megawatts of electricity and is normally a moneymaker for its owner, the City of St. Catharines. But the average price for electricity in April so far is about 0.77 cents per kilowatt-hour, compared to about five cents at the same time last year, Perri said.
To avoid having to "send the province a cheque," Perri said Heywood is idling generators overnight if forecasts indicate negative prices. "But it's going have some effect on us, in terms of revenue."
Not all small power producers depend on the open market.
St. Catharines-based Rankin Renewable Power signed a fixed-price contract with the province last year to churn out green power from three hydro turbines on Locks 1, 2 and 3 on the Welland Canal.
But president Tom Rankin said the pricing phenomena will still hit his bottom line.
That's because Rankin depends on water from further up the canal, where the St. Lawrence Seaway runs its own six-megawatt power plant at the flight locks in Thorold.
The Seaway doesn't have a price guarantee, so it plans to adjust its power production to avoid having to pay the province during periods of low demand, said power man-a ger Scott Frick.
That's understandable, Rankin said.
"But i f they're not running at full capacity, I'm not getting all the water I need," he said.
It's a weird anomaly, he said, and "one that doesn't do much to encourage green power production, either."
The sudden frequency of negative energy prices is "quite unique," said Alexandra Campbell, spokeswoman for the Independent Electricity System Operator.
Part of the problem is low demand for energy from a sluggish economy, she said.
An energy exporting transmission line in Ontario is also down for maintenance, further cutting the need for generation.
At those times, Campbell said Ontario Power Generation will bid a negative price into the market to ensure its power is purchased.
That's still cheaper than shutting down and restarting a nuclear power plant.
Campbell said as energy exports rise again and the summer heat turns up, negative prices will disappear.