The wholesale price of electricity

The wholesale price of electricity 

IESO - The Independent Electricity System Operator -  is the Crown corporation responsible for operating the electricity market and directing the operation of the bulk electrical system in the province of Ontario, Canada. It is one of seven Independent System Operators in North America.

Here's a step-by-step explanation of how Ontario's IESO (http://www.ieso.ca/en/learn/about-the-ieso/user-guide) maintains a reliable supply of electricity and, at the same time, determines the wholesale price of electricity.

Step 1 - How much electricity do we need?
Each day, the IESO issues forecasts of how much energy will be needed throughout the following day and up to the month ahead - including an "energy reserve," of roughly 1400 MW above what is actually consumed. This is the extra supply that is on standby and called upon in emergencies. These forecasts are continually updated as new information comes in such as changes in weather. Typically, the IESO's day-ahead forecasts are highly accurate, with less than a two percent variance from the actual demand figures.

Step 2 - Let the bidding begin.
Generators and importers of electricity review the forecast information and determine how much electricity they can supply and at what price. They send these "offers" to supply electricity into the IESO. Similarly, large-volume consumers of electricity that have the ability to change their consumption patterns on very short notice decide whether there are times of the day when they can cut back on energy use, and offer that into the market as well.

Step 3 - Matching Supply with Demand.
The IESO then matches the offers to supply electricity against the forecasted demand. It first accepts the lowest priced offers and then "stacks" up the higher priced offers until enough have been accepted to meet customer demands. All suppliers are paid the same price - the market-clearing price. This is based on the last offer accepted.
This "stacked" price approach encourages generators to keep their offer prices low in expectation of selling all or most of their potential energy output at the prevailing market price. Without the stacked market-clearing price, the overall result could be a much more
volatile marketplace. The Market Clearing Price approach ensures the lowest possible price while maintaining the reliability of the system.

Step 4 - The Price is Set.
The IESO collects bids and offers until two hours before the energy is needed, so "pre-dispatch" prices or the price of electricity before the bidding window has closed, can fluctuate as new bids come in. The IESO will issue its instructions to power suppliers based on the winning bids, who then provide electricity into the power system for transmission and distribution to customers. The IESO runs a real-time market, meaning purchases of electricity are made as they are needed.
There are occasions, when the best-priced energy may not be available due to limitations on the transmission lines. In this case, that generator's offer is still used to help set the price, but another generator may be asked to provide the electricity.
You can watch market information throughout the day on the Demand and Price Information page which features price and demand graphs that continually update.

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Monitoring and Targeting (M&T)

Energy management is the use of technology to improve the energy performance of an organization. To be fully effective it needs to be an integral part of an organization’s wider management processes - and any corporate social responsibility (CSR) policy.

An energy policy

An energy policy is a written statement of senior management's commitment to managing energy and its environmental impacts. Often it forms part of a wider corporate social responsibility (CSR) policy. For large organizations an energy policy should be no more than two pages long; a few paragraphs may be sufficient for smaller organizations.

An energy strategy

An energy strategy is a working document setting out how energy will be managed in an organization. It should contain an action plan of tasks, which will initially involve understanding the organization’s current position and establishing the management framework. As the processes are established, the tasks should address the identification and implementation of specific energy-saving projects.

A complete and effective energy strategy will address the following aspects:

·        Organizing roles and responsibilities and ensuring there are sufficient resources available.

·        Compliance with energy and climate change regulations is required of businesses and the public sector.

·        Investment in projects will be needed to take full advantage of cost-effective energy efficiency opportunities.

·        Procurement of buildings, equipment, and services should take due account of the implications for energy efficiency and energy-related costs.

Monitoring and Targeting (M&T)

The purpose of monitoring and targeting (M&T) is to relate your energy consumption data to the weather, production figures or other measures in such a way that you get a better understanding of how energy is being used. It will identify if there are signs of avoidable waste or other opportunities to reduce consumption.

Data collection may be manual, automated, or a mixture of the two. Once an M&T scheme has been set up, its routine operation should be neither time-consuming nor complex. An M&T scheme will provide the essential underpinning for your energy management activities.

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Energy Management Concepts

ENERGY MANAGEMENT

Energy costs are often treated as a fixed overhead by organizations. But, by taking the right approach to energy management it is possible to make considerable savings. Successful energy management must combine an effective strategy with the right practical interventions. Many organizations would like to save energy, but they need to make energy management an integral part of running the organization to ensure success.

Energy management is a continuous process that develops over time. You are unlikely to tackle everything at once, so it’s vital to priorities. Dealing with the fundamentals first will provide the

foundations for longer-term success:

1. Understand your organization’s energy use, costs, and legal obligations

2. Gain senior management support and allocation of resources

3. Develop an energy policy and initial strategy

4. Work to formalize energy management and integrate it throughout the organization.

What do we mean by energy management?

Energy efficiency

Energy efficiency aims to gain the maximum results or effects from each unit of energy used; it’s about achieving the same outcomes through less energy.

Renewable energy

Renewable energy refers to energy that occurs naturally and repeatedly in the environment. This can be energy from waves, wind, the sun and geothermal heat from the ground. Renewable energy can also be produced from plant sources such as wood or crops are grown specifically as a fuel. Renewable energy will not run out, unlike energy from fossil fuels.

Energy management

Energy management is the systematic use of management and technology to improve an organization’s energy performance. It needs to be integrated, proactive, and incorporate energy procurement, energy efficiency and renewable energy to be fully effective. Energy management is essential if you want to control costs, be fully compliant with legislation and enhance the organization’s reputation.

Energy Manager

The term Energy Manager is widely used, and we use it here as shorthand for the person responsible for implementing the organization’s energy programmed or

strategy. In practice, most organizations do not have or need a full-time Energy Manager; there are many part-time Energy Managers

Why is good energy management?

Saving energy makes business sense. A structured, coordinated and integrated approach to managing energy will maximize the benefits. Evidence shows that effective energy management works, and its techniques are easily available and applicable to all types of organization.

Source: Carbon Trust

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Source Energy

Source Energy

Commercial buildings use different mixes of energy including electricity, natural gas, fuel oil, district steam, and many others. To evaluate energy performance for these buildings, we must express these different energy types in a single common unit. Source energy is the most equitable unit of evaluation and enables a complete assessment of energy efficiency.

Site energy may be delivered to a facility in one of two forms. Primary energy is the raw fuel that is burned to create heat and electricity, such as natural gas or fuel oil. Secondary energy is the energy product created from a raw fuel, such as electricity purchased from the grid or heat received from a district steam system. A unit of primary energy and a unit of secondary energy consumed at the site are not directly comparable because one represents a raw fuel while the other represents a converted fuel. Ultimately, buildings require heat and electricity to operate, and there are always losses associated with generating and delivering this heat and electricity. Source energy traces the heat and electricity requirements of the building back to the raw fuel input, thereby accounting for any losses and enabling a complete thermodynamic assessment.

Ultimately, the goal of the conversion to source energy is to account for the total primary fuel needed to deliver heat and electricity to the site. Generally, this means the methodology should perform the following adjustments for energy consumed on site:

Primary Energy. Account for losses that occur in the distribution, storage and dispensing of the primary fuel (e.g., natural gas, fuel oil).

Secondary Energy. Account for conversion losses at the plant in addition to losses incurred during transmission and distribution of secondary energy to the building (e.g., electricity, district steam).

The Benefits of Source Energy

·       Allows for a whole-building assessment that combines all fuels

·       Evaluates all buildings fairly, regardless of heating system

·       Fairly evaluates electric heating in relation to natural gas and steam systems

o   Identifies geothermal heating as most efficient

o   Evaluates air source heat pump systems as efficient, on par with natural gas

o   boilers and district steam systems

o   Identifies electric resistance heating as least efficient

·       Provides the equitable comparison of steam systems with natural gas-fired systems

·       Fairly compares natural gas boilers with different on-site efficiency levels

Source: Energy Star - U.S. Environmental Protection Agency

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