How to Save $500k on Global Adjustment, a Peak Shaving  Road Map 

The Global Adjustment fee (GA) might be the number one cause of grey hair among CFOs and Energy Managers in Ontario, but fortunately there is a proven way to relieve the stress. In this blog, you will see step-by-step how peak shaving with generators will delete GA fees right off your monthly hydro bill. If you are not familiar with the basics of GA, you will want to get up to speed first.

 

What is Peak Shaving? 

Peak Shaving, sometimes called ‘GA Busting’ or ‘curtailing,’ is the practice of strategically reducing your facility’s electrical demand in anticipation of the top five demand peaks on the Ontario electrical system. Class A customers who execute their peak shaving strategies effectively can reduce their Peak Demand Factor (PDF) and therefore their global adjustment fees. 

 

What is at stake? 

One way to estimate how much you will save by peak shaving is to add up what you paid in Global Adjustment fees during the last twelve monthsYou can safely assume that at least that much is on the table for next year. 

There is also a ‘rule of thumb’ in the Ontario energy community that every megawatt (MW) in demand taken off-grid during the top five peaks is worth about $500k in annual savings: 

How to calculate Global Adjustment Peak Demand Factor for Class A customers participating in the Industrial Conservation Initiative

To apply this rule, simply multiply your facility’s typical electrical demand in MW by $500,000. The resulting amount is how much you could save every year by implementing a peak shaving strategy: 

1.8MW X $500,000 = $900,000 

If you do not know your facility’s electrical demand, look at a recent hydro bill and you will see your peak demand listed in kilowatts (kW). It might look like this: 

Example of Ontario Class A customer hydro bill for global adjustment and peak demand factor

Are you eligible? 

For peak shaving to have any impact on your hydro bill, you must opt-in to Class A and participate in the Industrial Conservation Initiative (ICI). This decision is made during the ‘opt-in’ period, occurring each Spring from May 1st to June 15th. Class A participation is restricted to customers that meet one of the following requirements: 

  1. Average monthly peak demand is greater than 500kW  
    1. IF your North American Industry Classification System code (NAICS) commences with the digits "31", "32", "33" or “1114”  
  2. Average monthly peak demand is greater than 1000kW 
    1. Regardless of NAICS code

For customers just below the eligibility threshold they can deploy a temporary load bank to raise average peak demand over 500kW. 

Customers with an average monthly peak demand greater than 5MW are automatically opted-in to Class A but may opt-out each Spring. 

Each customer receives a letter from their local electrical utility company each Spring with a cost-benefit analysis Class A participation for the coming year, and a reminder that customer must opt-in by June 15thThis analysis can also be completed by most energy consultants at any time of the year. 

 

Choose your peak shaving strategy 

There are three common strategies used to displace electrical demand from the grid during the top give peaks.  

The simplest method is to manually curtail your electrical load by turning off as many electricity consuming devices as possible. While this does not require installing any expensive equipment, you will have to endure significant interruption of your business operations 10-20 times per year and for many facilities this is simply not possible. 

GA Busting options (1)-1

While batteries can be used for peak shaving and provide some advantages with respect to maintenance, at more than $2,000/kW (US Dept. of Energy) they are the most expensive option to install and may come with added risk.

Early in the ICI’s history Class A customers could hit all five peaks by following the IESO’s online peak tracker and curtailing 8-9 times a year. More recently we have seen customers curtailing more than twenty times per year for 4 hours or more at a time, because the top five peaks have become more difficult to predict. The changes to Ontario’s demand profile due to COVID-19 have only added to this complexity. 

Battery arrays used for Peak shaving typically have a 2-hour deployment window, which slowly deteriorates over their lifetime.  

If a 2-hour battery is discharged in anticipation of a top five peak, there is not much room for error. If the peak is shifted significantly by the activity of other Class A customersor other factors beyond your control you may run out of juice prior to the actual peak occurring. 

Natural gas fuelled generators can be run continuously if needed, providing the greatest adaptability as the peaks become more difficult to predict and longer curtailment periods may be required Gas powered generators are also a lower capital expense vs. an equivalent battery array.  Add to that, the resiliency benefit of emergency backup power and the opportunity to capture heat (see Combined Heat & Power Systems, CHP) and it’s easy to see why generators remain the most popular choice for peak shaving applications. 

Understand a peak shaving project timeline 

Whether you choose to peak shave manually, with batteries, or with generators, your solution must be implemented in time for the ‘peak setting’ period beginning in June every year. In our experience, it takes at least 6-8 months to properly design, build, install, and commission a peak shaving system. If you are targeting 2021 to start mitigating your global adjustment costs, the summer of 2020 is the perfect time to begin the journey.  

 

Register today for a webinar on mitigating Ontario's Global Adjustment Fee

 

Posted by Tilo McAlister | May 19, 2020 | Categories: Power Generation