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					7 January 2010




                 Industrial Transmission Connected Electricity
                            Efficiency Program (ITCEEP)

                          REVIEW OF DRAFT RULES
    AGENDA

    • Welcome
       – Purpose of Session
       – Background
    • ITCEEP Program Overview
       – Eligibility
       – Incentives
       – Application Process
    • ArcelorMittal Dofasco Comments
    • Questions from Participants
    • Next Steps



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    PURPOSE OF THIS SESSION

    • Introduce the proposed Industrial Transmission
      Connected Electricity Efficiency Program (ITCEEP)

    • Review program features

    • Provide clarification

    • Invite feedback in writing to the draft program rules




3
    BACKGROUND

    • Conservation is a cornerstone of the province’s new
      Green Energy Act.
    • Industrial activity in the province represents about
      30% of the total electricity usage. Of that, about a
      third is used by the entities that are directly
      connected to the IESO transmission system, making
      them an important target for savings.
    • This conservation program, targeted to deliver 300
      MW of savings by 2014, is designed to help make
      Ontario industry more globally competitive and
      environmentally sustainable and create jobs.



4
    THE CURRENT OPA SUITE OF PROGRAMS

    • Conservation programs and other initiatives developed by the
      OPA available to industrial energy consumers:
       – Demand Reduction (DR1, DR2 and DR3)
       – Electricity Retrofit Incentive Program (ERIP)
       – High Performance New Construction (HPNC)
       – Feed In Tariff (FIT)

    • Gap identified in capital intensive process improvement projects
       – Obtaining long term reliable energy use reduction through
         capital investment
       – Maintaining industrial competitive advantage
       – Enabling the expansion of the energy efficiency and
         renewable energy sector in the province



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    PROGRAM DEVELOPMENT

    • This program has been under development for the
      last year
    • Three industrial companies offered input to the
      development of the program rules
       – ArcelorMittal Dofasco
       – ValeInco
       – Xstrata
    • Draft program rules were posted on the OPA website
      on December 2
    • Draft contracts were posted on the OPA website on
      December 23



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    ITCEEP Program Overview

    • Eligibility

    • Program Incentives

    • Process




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    ELIGIBLE PARTICIPANTS



    • To participate in the program participants must be:
       – An industrial electricity user
       – Directly connected to the IESO controlled transmission
         system
       – Not insolvent




8
    ELIGIBLE PROJECTS

    • Located in Ontario
    • Must involve the installation of a savings measure
       – In a facility connected to the transmission system
       – Providing >100MWh annualized electricity savings
    • OR
    • Self Generation of electricity for own consumption not
      funded by other ratepayer contracts
       – Nameplate capacity less than 20 MW
       – Fuel source approved by OPA




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     ELIGIBLE PROJECT COSTS

     • For example:
        –   Feasibility and pre-feasibility studies
        –   Capital expenses
        –   Equipment and products
        –   Data collection services – processing, analysis and
            management
        –   Employee costs for those directly involved in project
            installation
        –   Professional services
        –   Environmental assessment
        –   Permits and license fees
     • As necessary OPA will consider other costs incurred
       by participants as part of project installation


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     INCENTIVES

     • For electricity savings coming from an approved
       application:
        –   Up to $230 per MWh of annualized savings
        –   Up to 70% of eligible project costs
        –   Up to $10 million per application
        –   Greater than or equal to one year payback


     • The incentive amount will be calculated as the lesser
       of the criteria above




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     INCENTIVE AGREEMENT

     • For a project to be approved:
        – Must deliver at least 350 MWh of annualized savings
          from an agreed baseline
        – Must have an approved feasibility study completed
        – Expected lifetime >5 years
        – Implementation within 2 years
        – Maximum 60 day review period by OPA


     • Contract with OPA must be signed prior to
       commencing work




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     ADDITIONAL PROJECT TYPES ALLOWED

     • Microproject providing at least 100 MWh and not
       more than 700 MWh of annualized savings
        –   No feasibility study required
        –   No performance security
        –   5 year contract period
        –   Faster project review (maximum 30 days)
     • Portfolio of projects
        –   Combine several projects into one bundle
        –   Combine the incentive rate for the entire bundle
        –   Calculate savings for entire portfolio
        –   Up to $320/MWh per project within the portfolio



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     PORTFOLIO

     •   Combine several projects in order to meet the 3,500 MWh threshold




     •   Individual Projects can achieve up to $320 per MWh Project Incentive.
     •   Overall Portfolio must hold to $230 per MWh (total Project Incentive divided by
         the total Electricity Savings of all Projects).
14   •   Performance measured at the Portfolio level.
     FEASIBILITY STUDY INCENTIVE

     • Up to 100% of feasibility study costs will be eligible
       for payment
     • Feasibility study scope must be approved up front
     • Study costs are deducted from the incentive payment
       for the final project




15
     INCENTIVE PAYMENT PROCESS

     • Payment schedule:
        –   25% up front
        –   25% after 25% cost incurred (and paid)
        –   25% after 50% cost incurred (and paid)
        –   25% after final report received and all costs incurred (and
            paid)

     • All payments have 10% holdback until 90% savings
       realized

     • All study funding netted out of the project incentive
       prior to payments being made

     • Payments may be adjusted for lower actual eligible
       costs

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     PROGRAM PROCESS OVERVIEW

     • Phase I – Pre-Feasibility Study [optional; max $10k]
         – Apply  Review  Contract

     • Phase II – Feasibility Study [mandatory – except for Micro-
       Projects]
         – Apply  Review  Contract

     • Phase III – Project (Micro/Portfolio) Application [mandatory]
         – Apply  Review  Contract

             • Between 10 and 30 days for each sub-step of each Phase.

             • 60 days for a Project Application Review (30 for a Micro-
               Project).



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     PERFORMANCE SECURITY

     • Letter of credit required to secure savings
     • Amount of security required is based on credit rating
       of participant and size of incentive
        – Waived for higher credit rating
        – Waived for microprojects
     • Security stepped down by 50% after 2 years and
       released after 4 years of proven savings




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     ENVIRONMENTAL ATTRIBUTES

     • All environmental attributes related to electricity
       savings as a result of these projects are owned
       solely by the OPA
     • All other environmental attributes arising in relation to
       a participant’s facility are owned by the participant




19
     PARTICIPANT ROLE

     • Get in touch with OPA Key Account Manager contact
       Evelyn Lundhild (416) 969-6009
       evelyn.lundhild@powerauthority.on.ca
     • Complete and submit Feasibility Study
     • Allow/install metering as necessary and provide data
       to the OPA as required for M&V reporting periods
     • Prepare Incentive Application package – application
       form, project study and material - for submission
     • As necessary, respond to Information Requests
       regarding Study or Incentive Application




20
     LAUNCH PLAN – TO BE FINALIZED


                 2009                                        2010
      November           December                  January           February




           OPA Posts Draft
         program documents                                             Application
           for consultation                                         processing begins


                  Information session
                     for participants


                              Finalize Rules and
                                  Contracts




21
     COMMENTS FROM ARCELORMITTAL DOFASCO

     • EXPERIENCE WITH PROGRAM TO DATE:
     • As significant users of electricity in the province, ArcelorMittal
       Dofasco, ValeInco and Xstrata were invited in 2008 to help
       provide context as to how energy projects are managed within
       industry and give input into the development of the program
     • Discussion points included
        – understand the role and value of industry actively
          participating in demand management design
        – understanding the nature and extent of opportunities for
          energy conservation, including local generation through
          utilization of existing by-products
        – understanding the challenges to realizing such opportunities
          (technical and financial)
        – understanding of program design to quickly and effectively
          realize value for all stakeholders in the current economic
          context



22
     COMMENTS FROM ARCELORMITTAL DOFASCO

     •   Key aspects of the current draft program
          – recognition of need for technical study in order to validate all project
            estimates and incentives to fund such study without prejudging
            conclusions
          – recognition of both conservation and self-generation opportunities
          – recognition of the full nature of project costs (study, equipment,
            internal labour)
          – flexibility in organizing projects (bundling)
          – objectivity and flexibility in application of measurement and verification
            plan
          – incentives to achieve possible one year simple paybacks on projects
          – principle of providing performance security which reduces over time is
            understood; concern remains as to the specific use of letters of credit
            which create balance sheet liability and increase overall credit risk as
            assessed by the market
          – provides level of comfort to support internal allocation of resources to
            energy activities
          – provides platform for improving competitive position of Ontario industry
            (both within and between companies)
23
         COMMENTS FROM ARCELORMITTAL DOFASCO
     •   To date AMD is working on design of feasibility engineering studies
         towards investment grade project applications for 3 projects in Hamilton
           – reducing electrical use for existing 7000 hp motor and fan in
              Steelmaking shop
           – reducing electrical use for series of 50-500 hp motors in Ironmaking
              shop
           – reducing electrical use for series of 50-500 hp motors in Hot Rolling
              mill
           – potential benefit from these projects totals approximately 3 MW,
              simple payback of the order of one year with incentive, project
              completions between 6 and 18 months duration
     •    In addition, AMD is preparing both engineering study and full investment
         grade applications for several other projects in Hamilton
           – installation of turbo-generator equipment to capture existing waste
              gases which are currently flared, potential benefit approximately 4 MW,
              simple payback of the order of one year with incentive, project
              completion 12 to 14 months
           – other conservation and by-product self generation (waste gas and
              heat)
     •   Discussion with the OPA team has been very professional and productive.
         The spirit of the work to date has been to understand the opportunities and
         together find solutions within the framework of the proposed new program.

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     ANY QUESTIONS?

     • Please ask any questions to clarify what you heard
       today or any questions about what you read in the
       draft rules and contracts posted on the website.




25
     NEXT STEPS

     • Written comments will be accepted until January 29
        – On our website at www.powerauthority.on.ca
        – Via email to submissions@powerauthority.on.ca
        – In writing to address below


        – Mail to:
           Ontario Power Authority
           Attention: Claire Willison
           120 Adelaide Street West,
           Suite 1600
           Toronto, Ontario M5H 1T1




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