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Nodal pricing in Ontario, Canada: Implications for solar PV electricity

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  • Brown, Sarah J.
  • Rowlands, Ian H.

Abstract

This article investigates the extent to which the value of solar electricity (that is, electricity generated by photovoltaics), a form of distributed generation, would be higher under a nodal pricing system as compared to a uniform pricing system. More specifically, solar radiation and electricity market data for the period 1 January 2005–31 December 2006 are examined for locations near Mississauga, Ontario and Kingston, Ontario. The hybrid optimization model for electric renewables (HOMER) program is used for the simulation of solar electricity output. For Mississauga, the average monthly value of the solar electricity based on Ontario's uniform pricing system (the hourly Ontario energy price, or HOEP) was C$20.62. Based on nodal pricing, the average monthly value was C$27.20 per month (32% higher). For Kingston, the average monthly value of the solar electricity based on HOEP was C$23.78 per month. Based on nodal pricing, the average monthly value was C$36.03 (52% higher). Over the two-year period, the monthly differences were greatest during the summer, with a 53% spread in June in Mississauga and a 106% spread in May in Kingston. As debates regarding electricity futures progress, the importance of proper valuation of alternative generation sources continues to be critical. This research aims to contribute to discussions regarding the extent to which a nodal pricing system could facilitate the contribution of solar electricity to a sustainable electricity system in Ontario.

Suggested Citation

  • Brown, Sarah J. & Rowlands, Ian H., 2009. "Nodal pricing in Ontario, Canada: Implications for solar PV electricity," Renewable Energy, Elsevier, vol. 34(1), pages 170-178.
    • Handle: RePEc:eee:renene:v:34:y:2009:i:1:p:170-178
    DOI: 10.1016/j.renene.2008.02.029
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    References listed on IDEAS

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    1. Richard Green, 2004. "Electricity Transmission Pricing: How much does it cost to get it wrong?," Working Papers EP63, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
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    1. Rowlands, Ian H. & Kemery, Briana Paige & Beausoleil-Morrison, Ian, 2014. "Managing solar-PV variability with geographical dispersion: An Ontario (Canada) case-study," Renewable Energy, Elsevier, vol. 68(C), pages 171-180.
    2. Hirth, Lion, 2013. "The market value of variable renewables," Energy Economics, Elsevier, vol. 38(C), pages 218-236.
    3. Miri Larimi, S.M. & Haghifam, M.R. & Ghadiri, A., 2016. "Determining the guaranteed energy purchase price for Distributed Generation in electricity distribution networks," Utilities Policy, Elsevier, vol. 41(C), pages 118-127.
    4. Bernath, Christiane & Deac, Gerda & Sensfuß, Frank, 2021. "Impact of sector coupling on the market value of renewable energies – A model-based scenario analysis," Applied Energy, Elsevier, vol. 281(C).
    5. Lion Hirth, Falko Ueckerdt, and Ottmar Edenhofer, 2016. "Why Wind Is Not Coal: On the Economics of Electricity Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    6. Lewis, Geoffrey McD., 2010. "Estimating the value of wind energy using electricity locational marginal price," Energy Policy, Elsevier, vol. 38(7), pages 3221-3231, July.
    7. Hirth, Lion & Müller, Simon, 2016. "System-friendly wind power," Energy Economics, Elsevier, vol. 56(C), pages 51-63.
    8. Joseph Nyangon & John Byrne & Job Taminiau, 2017. "An assessment of price convergence between natural gas and solar photovoltaic in the U.S. electricity market," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 6(3), May.
    9. Hirth, Lion & Ueckerdt, Falko & Edenhofer, Ottmar, 2015. "Integration costs revisited – An economic framework for wind and solar variability," Renewable Energy, Elsevier, vol. 74(C), pages 925-939.
    10. Clò, Stefano & D'Adamo, Gaetano, 2015. "The dark side of the sun: How solar power production affects the market value of solar and gas sources," Energy Economics, Elsevier, vol. 49(C), pages 523-530.
    11. Winkler, Jenny & Pudlik, Martin & Ragwitz, Mario & Pfluger, Benjamin, 2016. "The market value of renewable electricity – Which factors really matter?," Applied Energy, Elsevier, vol. 184(C), pages 464-481.
    12. Khan, Jibran & Arsalan, Mudassar Hassan, 2016. "Estimation of rooftop solar photovoltaic potential using geo-spatial techniques: A perspective from planned neighborhood of Karachi – Pakistan," Renewable Energy, Elsevier, vol. 90(C), pages 188-203.
    13. Stefano Cló & Gaetano D’Adamo, 2014. "The Impact of Solar Penetration on Solar and Gas Market Value: an application to the Italian Power Market," Working Papers 1405, Department of Applied Economics II, Universidad de Valencia.
    14. Kirkerud, Jon Gustav & Bolkesjø, Torjus Folsland & Trømborg, Erik, 2017. "Power-to-heat as a flexibility measure for integration of renewable energy," Energy, Elsevier, vol. 128(C), pages 776-784.
    15. Rowlands, Ian H. & Kemery, Briana Paige & Beausoleil-Morrison, Ian, 2011. "Optimal solar-PV tilt angle and azimuth: An Ontario (Canada) case-study," Energy Policy, Elsevier, vol. 39(3), pages 1397-1409, March.

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