Post: How to save on Global Adjustment in Ontario

How to save on Global Adjustment in Ontario

When it comes to the price of electricity in Ontario, large energy users face two components: the Hourly Ontario Energy Price (HOEP) and Global Adjustment (GA).

The Global Adjustment is used to fill the gap between the price as determined in the wholesale market (HOEP) and the price necessary to cover contracted generation. If GA goes up, then HOEP goes down and vice versa. The wholesale price of electricity changes hourly based on its demand and the availability of supply.

What is Global Adjustment? 

All energy users in Ontario pay a Global Adjustment fee. It covers the cost of: 

• building new electricity infrastructure 
• maintaining existing resources 
• providing conservation and demand management programs  

Global Adjustment (GA) fees can add up to 40%-60% of a business’ electricity bill. To encourage large electricity users to shift their consumption the government introduced the Industrial Conservation Initiative (ICI).

What is the Industrial Conservation Initiative?

The Industrial Conservation Initiative (ICI) is a government program introduced by the IESO to reduce the costs of managing Ontario’s electricity infrastructure. In exchange for reducing electricity usage during the top five peak hours each year.

Larger businesses who are eligible to participate in the ICI program are categorized as ‘Class A’ and their monthly Global Adjustment charges are based on their electricity demand during the top five hours of system peak from the previous base period (May 1 to April 30).

Class A customers are:

• those with an average monthly peak demand of 5 MW or higher
• businesses with an average monthly peak demand between 1 MW and 5 MW, but these customers need to opt-in to participate
• manufacturing facilities and certain agricultural businesses with an average monthly peak demand of 500 kW or higher are also eligible, and need to opt-in to participate

Under the ICI program, GA charges are measured by energy use during coincident peaks. Coincident peaks are the five hours of the year when the demand for electricity in Ontario is at its highest. The charges are calculated by looking at a business’ share of the total energy use (i.e. 1% of total use means you pay 1% of total GA costs). 

What are the benefits of the ICI?

The ICI program aims to reduce pressures on the province’s electricity system by empowering large electricity consumers to lower their electricity demand during peak periods to reduce electricity bills. ICI has the added benefit of deferring the need to build new peaking generation facilities in the longer term.

Cost impact across sectors and industries varies. But five hours of peak demand per year represents up to 60% of a Class A electricity bill, this means large volume consumers have an opportunity to reduce their Global Adjustment costs.

How to save?

As more and more users begin to participate in the ICI program, it is becoming more difficult to predict and curtail during the top five peak hours each year. Most coincident peaks take place in the summer, when energy use is at its highest. The better that an ICI participant can forecast the top five hours of peak demand and shift their electricity usage accordingly, the more they will be able to benefit from the ICI program.

At GridBeyond As part of our AI-driven solution we monitor your energy usage on a sub-second basis and can even automate the turn down or turn off of your site demand when prices are forecast to reach the peak. Our trading and optimization platform can predict energy prices with up to 48 hours advanced notice with 90%+ accuracy giving you the time needed to plan accordingly.

There are also a number of other ways that you can reduce your GA costs that don’t necessarily involve curtailing production or shutting down altogether during peaks. Alongside making investments in on-site generation capacity (using backup generators or co-generation capabilities) and battery storage, changes in company activity can also play a significant role. For instance, scheduling maintenance during peaks helps avoid unnecessary downtime, and changes to shift and production schedules can help businesses stagger large increases in energy use or spread them out more over the course of the week.

From hardware to leasing, to software and proactive management solutions, businesses have many options to reduce GA fees, if they choose to take advantage of them. Through a deep understanding of your energy demand, budget, flexible assets including energy storage and demand load and your appetite for risk, GridBeyond’s experts will draw upon our forecasts, volatility analysis, and trading models to help you to best monetize your position and deliver cost savings under the Industrial Conservation Initiative.