OPA resources to meet capacity and flexibility needs: peaking resources

Resources are needed in the system to meet peak demand, which is a period of a significantly higher than average supply level. These resources, called peaking resources, are attractive for meeting load that is present for a relatively small portion of the time. Examples of resources that can meet these needs include natural gas power plants and demand response programs. Many of the peaking generation resources have the opposite characteristics of a baseload facility since, relative to baseload resources, they typically have fixed costs that are relatively low and variable costs that are typically high.

The table below provides a summary of the costs associated with the peaking generation and conservation resources procured and settled by the OPA. While generation and conservation resources differ in the way they are paid for and provide value to the electricity system, the methodology outlined below levelizes the costs of these different resource types, enabling them to be compared on a $/MW basis. While the OPA has two peaking gas generators under contract, it has legal obligations not to disclose commercially sensitive information and is not able to disclose the numbers for these facilities. 

Cost methodology for peaking resources ($/MW)

Generation resources costs ($/MW)
For the peak generation resources, the unit cost is the total cost of global adjustment plus market revenues for the OPA contacts, divided by the average capacity of these facilities in megawatts (MW). (Some market revenues may not have been captured here, such as congestion management settlement credits (CMSC) and operating reserve, which are recovered through wholesale market service charges.)

The average capacity is based on the average nameplate capacity over the period identified in the table.

Conservation resources costs ($/MW)
For demand response programs, payments made to program participants and/or aggregators are added to the administrative costs of the program. The total ratepayer cost is then divided by the average verified demand response savings under contract. Unlike energy efficiency programs, energy and demand savings from demand response programs only persist for one year. As a result, a net present value (NPV) of the lifetime savings is not required for peaking conservation resources.

Electricity resource costs to meet capacity needs (peaking resources)

Electricity Resource Costs to Meet Capacity Needs (Peaking Resources)
Fuel Type/Program
Technology  Procurement Years Average Unit Cost by Capacity
($/MW- month)
Peaking gas
Northern York Region Peaking Generation and Lennox GS contract
2009-2012 Cannot be disclosed due to confidentiality
Residential Demand Response (peaksaverPLUS)
Conservation
2009-2011 14,560
Commercial and Industrial Demand Response (DR-3)
Contractual Event-Based Demand Response
2009-2011 8,880
 
Commercial and Industrial Demand Response (DR-2)
Contractual Load Shifting Demand Response
2009-2011 20,110

Notes on conservation resources

  1. Costs for the residential demand response program include all program year administrative (design, marketing, aggregation and evaluation) and incentive costs for new participants, the amortized equipment costs of both new and existing participants over the estimated effective useful life of the load control device (estimated to be 13 years) and the maintenance costs of the existing equipment.
  2. Costs for the commercial and institutional demand response programs include all program year administrative costs (design, marketing, aggregation and evaluation) and all payments to program participants (both energy and capacity payments) for curtailment of their load.
  3. Demand savings (MW) for all demand response programs are based on ex ante estimates for a 1-in-10 August weather year (extreme year) at the generator level. Unlike energy efficiency programs, there is no persistence of the energy and/or demand savings past a given program year.