Greenhouse growers have several ways to control and reduce energy costs. In all cases, it’s best to first understand the electricity market and the different rate options.
By turning out the lights at selective times, Ontario greenhouse growers can avoid significant electricity costs. But deciding to hit the switch is not a simple decision. Some market and rate factors need to be understood before growers can act with confidence.
The Hourly Ontario Energy Price (HOEP) is the wholesale spot price for electricity. It plays a big role in determining the cost of electricity. The Hourly Ontario Energy Price is established by averaging twelve Market Clearing Prices set every five minutes in each hour.[1]
When the provincial power demand is high and capacity is low, the HOEP can really spike – as high as $1,000/MW. On the other extreme, when the demand for power is very low and capacity is high, HOEP can even be negative! Customers can get paid to use electricity during those negative priced hours.
The graph shows HOEP for last two weeks of November 2020. While the average price was $11.83/MW, HOEP ranged from -$3.00/MW to +$941.85/MW.
Global Adjustment (GA) is another factor that determines the prices on utility bills. Global Adjustment covers the costs to build electricity infrastructure, maintain the system and provide demand management and conservation programs.[2] GA currently exceeds $1 Billion/month[3].
The graph shows the total energy charge on electricity bills. When HOEP is lower, GA is higher and when HOEP is higher, GA is lower.
A third key factor is the volume of electricity consumed by a greenhouse. The amount determines if that grower is a “Class A” or a “Class B” customer.
Midsize and large businesses with average peak demand between 50 KW and 500 KW pay the wholesale price for electricity. These businesses are referred as Class B customers. Customers with average demand of 500 KW or above can opt-in to become Class A customers. Their payments are based on how much their power use contributes to periods when electricity is in high demand in the province.
Ontario has decided it is in everyone’s best interest to reduce provincial peak power demand because that will postpone the need for expensive system capacity upgrades. Class A customers are given an incentive by the Ontario Independent Electric System Operator (IESO) to cut power use when electricity is in high demand.
Greenhouse growers that are Class A customers under the Industrial Conservation Initiative (ICI) program, have an option to cut their consumption during the provincial peaks. If they limit their electricity use at these critical times, greenhouses lower their Peak Demand Factor and pay less on their electricity bills.
As an example, assume a grower used 5000 MWh of electricity at a rate of $116.7/MWh.[5] As a Class B customer, they would have had to pay almost $583,000 in Global Adjustment costs. Had the greenhouse been a Class A customer with a Peak Demand Factor of 0.00001176, their portion of Global Adjustment would have been calculated at about $13,000. Switching to Class A and turning out the lights to lower their Peak Demand Factor, would have saved our imaginary greenhouse $570,000.
However, if turning out the lights had an adverse impact on crop quality, a greenhouse grower likely would not have considered this option.
The Ontario government has frozen Global Adjustment (GA) charges for two years. For companies participating in the ICI Program, Peak Demand Factors from the 2019-20 period will determine GA charges in 2021-22. The generic example is simply meant to illustrate how using the ICI program can save some growers money.
Greenhouses might also consider participating in the Demand Response (DR) auction program. This is a very competitive market. There are several DR aggregators that provide a variety of options, from which to choose.
DR program participants shift their electricity loads from high demand periods to low demand periods in exchange for payments from the IESO. Growers that cannot shift their loads by switching off lights might instead consider powering the lights from on-site energy sources such as a combined heat and power system or battery storage.
To use the competitive marketplace to good advantage, it is essential growers make choices based on their own needs, not based on what suppliers need. It’s always a good idea for a grower to check with an independent expert to determine if turning out the lights will turn on the savings.
[1] https://www.ieso.ca/en/Power-Data/Price-Overview/Hourly-Ontario-Energy-Price
[2] https://www.ieso.ca/en/Power-Data/Price-Overview/Global-Adjustment
[3] https://www.ieso.ca/en/Sector-Participants/Settlements/Global-Adjustment-Components-and-Costs
[4] https://www.ieso.ca/en/Power-Data/Price-Overview/Global-Adjustment
[5] https://www.ieso.ca/en/Sector-Participants/Settlements/Global-Adjustment-for-Class-B
