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Criteria for Allocating Resources among Competing Renewable Energy Technologies:
What are the GHG Emissions Reductions Associated with Photovoltaic Projects in Ontario?

Michael M.D. Ross
RER Renewable Energy Research

Full Text Report
Peel Region Corporate Energy Group

Acknowledgements:

This investigation was conducted on behalf of The Regional Municipality of Peel, which kindly consented to its publication on this web site.

Citation:

Ross, Michael M. D. Criteria for Allocating Resources among Competing Renewable Energy Technologies: What are the GHG Emissions Reductions Associated with Photovoltaic Projects in Ontario?. Report to The Regional Municipality of Peel. Montréal, Qc.: RER Renewable Energy Research, 2007.

Summary:

The Regional Municipality of Peel, taking a leadership role in addressing climate change, is attempting to establish how best to allocate its efforts and resources among competing renewable energy technologies, particularly photovoltaic (PV) and solar hot water systems. One obvious choice of criterion is the greenhouse gas (GHG) emissions reductions that each engenders. This is difficult to establish in the case of PV, however.

This document begins by providing background information on the functioning of the electrical power system, and then surveys existing methodologies for determining the GHG emissions reductions of renewable energy projects. It is concluded that emissions reductions should not be based on the average emissions of all generators, but rather on the emissions of those generators whose output will be increased or decreased in response to an increment or decrement of demand—i.e., those generators that are on the margin.

Two studies have attempted to identify the type of generators on the margin in Ontario. The first, done for Environment Canada’s PERRL initiative, predicted that over 2004 to 2007, the margin would be nearly exclusively coal during the summer and imports during the winter, with a mix of these two in the seasons in between. Examining hourly generator data from 2004, a second study, by Gil and Joos, concluded that gas would be on the margin around 25% of the time. Indeed, more recent data show gas being at least partly at the margin, especially when total market demand exceeds 19 GW.

It appears that these studies are irrelevant, however. The Ontario Emissions Trading Code caps NOx emissions in the electricity sector; all coal and gas generators must have tradable allowances for the NOx emissions of their output. It is effectively this NOx cap that determines the mix of coal and gas generation employed over the course of the year (otherwise cheap coal would be used in place of gas, which has lower emissions). Consequently, the output of a PV project that displaces electricity produced by coal plants at a given point in time will not offset coal in the long run: the reduction will mean more of the allowance is available for increased coal generation at a later point in time.

PV generation offsets coal if and only if the PV generator obtains (and does not sell) a NOx allowance made available under a conservation and renewables set aside. In all other cases, emissions reductions are much lower—as low as 20% those of coal, depending on imports and exports. With the NOx cap, coal generation may actually increase due to PV.

PV projects under the Standard Offer cannot apply for a set-aside allowance, since this right resides with the OPA, the purchaser of the electricity. The OPA has indicated that it will not obtain NOx allowances for the renewable electricity it purchases.

Based on this, the cost of GHG emissions reductions is around $1,150 per tonne of CO2 equivalent for a PV project with NOx allowance, $650/tCO2 for PV under the Standard Offer, and $400/tCO2 for domestic solar hot water. It should be cautioned, however, that other criteria may be equally important when choosing among competing renewables.