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The whole issue of “grid parity” can only be discussed in the context of a specific geographical/legal entity for any particular Province or State. Any general discussion is meaningless so beware of any such general conclusions.
The Main Street Media (MSM) and green movement always point to Germany as a renewable energy success story when in fact it has been an abject failure. I point out in the video the costs of hydro for Germany, Canada and Australia etc. The fact is that France (which is mainly nuclear) has hydro rates that are .16 Euros vs .30 Euros per kWh for Germany. Moreover, had Germany spent 580 billion on nuclear instead of renewables they would be producing 100% of their energy electricity and transportation with zero emissions.
The “Spark Spread” is simply the cost of buying direct from the grid vs producing hydro onsite via a natural gas generator. In Ontario the average medium to large size Commerical/Industrial users pays between 19 to 22 cents per kWh vs 7.5 to 8 cents per kWh hour via a generator. (Which Includes fuel,carbon taxes, O & M, capital replacement etc all. Due to low interest rates and the wide spark spread I can offer a purchase, lease , lease to own or a shared savings model for both Class “A” and Class “B” end users.

My message is simple. If your firm faced high hydro costs before COVID 19 you will face the same costs when this pandemic ends. In fact, hydro costs will further increase as the Province is simply delaying Global Adjustment (GA) costs now. You need to take a proactive approach to these costs.

The Ford Government cancelled the Feed in Tariff (FIT) and also withdrew form the carbon trading agreement between itself, Quebec and California. The problem is that there is no viable way to monetize the value of the carbon credits produced by reneweables. The sad part is that the Province owns almost all of these credits due to the FIT program and they could be used to create billions of dollar in value for the Province to help the tax payer and reduce hydro rates in Ontario.
I would say to people -be very careful. The “Green Energy” space reminds me of the dot.com boom and bust. In the end, when it was all over more companies failed than survived (Amazon, Apple, Google, MicroSoft, Facebook was later) etc. so be careful. Most of thse firms’ are offering pie in the sky solutions with underlying economic value. So again, be very careful.

Hydro Market in Ontario

As of 2017 the Province of Ontario eliminated both the microFIT (homeowners up to 10k (AC)) and FIT up to 500K (AC)) and now only offer a Net Metering Program. While the generous FIT rates have been eliminated there is a 10MW cap on new projects. (As of now there is no an effective manner to monetize the carbon credits via an energy renewable certificate etc). Given these changes I still offer solar for large projects but do not recommend nor will install any solar systems for homeowners’ now.

The Province of Ontario has the highest rate(s) of hydro in continental North America. The fact is that the total cost of hydro for most jurisdictions in the USA is lower than the Global Adjustment in Ontario. The simple law of economics is that if a price of a good or service becomes too high you have to find a replacement for that good/service. For hydro the issue is “Is it is cheaper to produce your own hydro onsite or buy it from the grid”? The rest of this home page is a discussion of that fact.

VERY IMPORTANT: While the commodity price of hydro is the same (i.e. OHEP + Global Adjustment) for all users (within the same Classification), the local transmission/connection and distribution charges vary widely among the different LDC’S (i.e. Hydro Companies) in Ontario. Thus, even within the same company, different locations will have different solutions, payback(s) and of course different ROI’s etc. There are 89 LDC’s in Ontario, all again with varying demand charges with different scheduled rate increases through the Ontario Energy Board (OEB) application process. Thus, you have to review both your current terms/conditions of service with an eye to any pending rate application increases at the OEB.

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 Economics of Self Generation

I encourage every business to take advantage of all the Save on Energy Programs. It just makes sense to upgrade to LED lightning, VFD motors etc. However, these conservation and energy saving will only get you so far. The basic fact is that the while economics of self generation for Power (electrical) and Combined Heat & Power (electrical and thermal) haven’t changed that much in the past ten (10) years, the price of hydro in Ontario has. The simple fact is that the Province of Ontario has gone from one of the lowest hydro cost jurisdictions in North America to the highest in the continental North America. The Province can give you all the bs they want but facts are facts. I am enclosing here a link to the monthly hydro prices for the USA per state, per industry group from the EIA which give you a per kwh price based on total usage/total cost. (I would also suggest that you check out the Quebec Hydro Yearly survey of hydro prices per Province and US State by state, city and size of end user. You will come to the same conclusion).

The fact is that the total cost of hydro for most jurisdictions in the USA is lower than the Global Adjustment in Ontario.

The fact is that in Ontario, right now, it will cost you approx 10 cents per Kwh to produce electricity from a generator. This figure (10 cents per kwh) covers all fuel costs, CCA, replacement of capital and operating and maintenance charges). For a Combine Heat and Power System it could go as low as 7 to 7.5 cents per Kwh depending on your ability to fully recapture the value of the thermal load.

For a straight in line natural gas generator the payback and ROI are very straightforward and depend upon how much you want to use the generator. Installation is fairly simple. You have to see where the electrical room is, where the gas line is and configure it from there. It’s a bit more complicated for a CH & P System. Sometimes you have a situation in a large apartment complex or condo where the boiler(s) are on the top floors and the electrical panel is in the main floor or basement etc. The same is true for an Industrial building or process the thermal load (i.e. boiler etc)is on one side of the building and the electrical panel is on the other side etc. Thus sometimes you can’t take advantage of the full value of the combined electrical and thermal load.

The Spark Spread and Combined Heat & Power Spark Spread

The spark spread for a natural gas generator is simply the cost of producing hydro with a natural gas generator vs. the cost of buying from the grid. This is a straight up calculation which you can get from the website of any company that manufactures/sell(s) generators. They can/will provide you with the power information, fuel consumption etc. You still have to factor in the purchase price, installation and environmental costs, building permit etc but you can get a fairly good ideal right up front. Again, in Ontario it’s approx. 10 cents per Kwh via a generator vs. an average of 16.5 cents per kwh for high-rise apartment and condos, 18.5 + cents per Kwh for Industrial or manufactures and generally 20+ cent for cold storage/ Food companies etc. (Large apartment and condo got a break under the Ontario Fair Hydro Program but that will end soon).
Electrical Spark Spread= 18.5 to 22.5 cents per Kwh – 10 cents per Kwh = 8.5+ cents per Kwh savings
CH&P Speak Spread= 18.5 to 22.5 cents per Kwh-7.5 cents per Kwh = 11 cents per Kwh
In short, given the roughly same amount for natural gas but the much higher price of hydro in Ontario anyway you calculate it the spread is +35 $MMbtu at a minimum in Ontario.

I have enclosed here a few pdf’s which show the current spark spread in Ontario. (The difference between the upper and lower charts are the savings).

Electrical Spark & CHP Spread in the USA.

 This is a little more complicated as there are 48 states (i.e. jurisdictions) in the lower 48th. Moreover, it’s further broken down in commercial, Industrial, transportation and other sectors. The bottom line is that due to the low price of hydro CH & Power is the most prominent format and generator only systems mainly serve as backup power. For example, as per Sept 2017 the average price of Industrial hydro is/was 6.94 cents per Kwh (total usage/total cost) for the East North Central states (i.e., New Jersey, New York and Pennsylvania). At these prices the economics of direct generation are marginal, although CH &P my make sense in a commercial/hospital/school setting. I am also enclosing a copy of natural gas prices and the Combined Heat and Power Spark Spread for the USA.

Outlook for Hydro vs. Natural Gas

Now given the introduction of fracking etc you have noticed that the price of natural gas has been very steady for the past eight (8) years. Moreover, it is clear that there is an abundant supply of natural gas. In fact, we have so much gas that you are seeing the building of large multibillion dollar liquefied natural gas (LNG) plants in Texas, Louisiana etc. (They were considering LNG in Price Rupert in BC). Remember the regulatory framework for natural gas pricing is that Enbridge, Union Gas etc get paid the actual cost of natural gas which is set on global markets. These companies only make money and their profit through the distribution charges. As far as the outlook for hydro in Ontario the structure and composition of it can/will lead to higher prices which will outpace any increase in natural gas costs.

In essence you are substituting the cost of electricity with the cost of gas. Moreover, you can even hedge your natural gas position via the futures, options market(s) to further lock in the price differential between the two.

Moreover, people also have to consider the distribution efficiency of direct generation as with on site generation there is very little line loss. Look at your hydro bill and the line loss factor that you are paying. The fact is that in Ontario 8% of all total power is lost in the fact that the Province is delivering hydro over long transmission lines. That is not an issue with direct onsite generation.(Please also note that one could also save on demand transmission/connection charges with direct generation).

Markets are functions of prices and the current/projected higher prices for hydro in Ontario make these options more than financially viable. The fact is that throughout history as the cost of an cost input increases (i.e. hydro) the marketplace always finds a way to find substitute(s) that cost with a product/service to lower that cost input. That substitute is natural gas. No matter what the province says the simple fact is that the laws of economics’, physics’ and laws of thermodynamics favour direct generation via gas over the grid.

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Carbon Credits in Ontario

The lack of a carbon trading market (or product in Ontario) has prevented the ability to monetize the value of reduced carbon emissions from renewable(s) sources (i.e. Solar & Wind).  The simple fact is that the ability to create monetary value for any such credits would lower the cost of any such installation which unfortunately is not available (in Ontario). Ontario has a very favorable solar irradiation map given its latitude, temperature, humidity which is not being realized due to the lack of the monetizing of these carbon credits etc. With respect to the market for North America, many US states have renewable energy certificates in addition to the various tax credits (30% federal tax credit in 2020 ,26% after that etc)) for renewable(s).  Canada (and Ontario) have no such tax breaks or incentives. I have tried to communicate this to the Province the value of these credits to no avail and I am not optimistic going forward.  I would also point out that for Ontario that the use of a generator/CH & Power system actually leads to a slight decrease in carbon emissions (C02) due to the particular structure and overall energy mix/use in Ontario which I will soon post video and related information for.

I will soon post of my communications with the Province of Ontario soon.