Ontario residents were bemused to discover that on New Year’s Day 2011, on average, they were paid to use electricity.

If that seemed unusual – and it is – it’s only the start.

Within the next two years, the conditions that produced the bonus New Year’s power could crop up about one day in every seven, according to an analysis by the agency that runs Ontario’s power market.

A big reason: about 5,000 megawatts of wind powered generation is due to be connected to the Ontario grid in the next few years, producing surges of power that are more than the province needs.

The power surplus may be a head-scratcher for consumers, who saw blackouts and power shortages only a few years ago.

But energy bureaucrats are now hard at work trying to head off the impending surpluses, which force the province to give away power not just to customers in Ontario, but also to the U.S.

The focus of their efforts is a report prepared by the Independent Electricity System Operator (IESO), which operates the provincial power grid.

The report notes that 5,000 megawatts of wind generation capacity will come on stream by 2013. (This is roughly the amount of power Toronto uses on a hot day.)

That flood of new wind power changes the balance of energy, says the report.

“The IESO would experience surplus conditions roughly 14.5% of the time based on average wind output,” it predicts.

Under normal market conditions that would cause the price to fall to zero or below and some generators would shut down.

But the new wind farms, operating under current contracts that pay the operator 13.5 cents a kilowatt hour, would see all of their power flow onto the grid at the contract price.

Customers shouldn’t start anticipating lower bills. Although the market price might show up as zero, customers are still on the hook for the contractual prices awarded to wind producers. That’s collected through the “provincial benefit” payment that shows up as a separate line on the bills of customers who buy from retailers. Other customers also pay, but it’s buried in their energy charge.

Most generators don’t suffer, despite the zero price. The majority sell their power at prices fixed by the Ontario Energy Board, or contracts through the Ontario Power Authority, all of which are funded through the provincial benefit payments.

There’s one other, counter-intuitive problem with increased wind generation. At the moment, more wind power means more gas-fired power.

Because wind power is variable, it has to be backed up by natural gas-fired generators, kept idling to be switched in if the wind dips.

The reserve generators also have to be paid for, and they boost carbon emissions that wind power is supposed to prevent.

Bruce Campbell, vice president of the IESO, is working on the issues raised by the wind power increase.

Part of the solution: Start treating wind like other generators and shut them out of the system if their power isn’t needed, and call them in when it is.

Energy bureaucrats, who never use a straightforward word when they can invent a technical term, call that “dispatching” power.

At the moment, all wind power automatically flows into the system. Rules may be needed to limit the flow when there’s too much.

“We need to integrate the wind generation,” says Campbell. “We want to be able to dispatch wind just as we do other generation.”

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Potentially, that means having to tell a wind farm operator that we only need two-thirds of the power it is likely to produce today or tomorrow.

One of the issues Campbell is now discussing with the power industry is how to do that. If someone gets shut out, who is it to be, and what, if anything, should they get paid?

That’s a crucial question for wind farms, says Robert Hornung, president of the Canadian Wind Energy Association (CanWEA).

Hornung acknowledges that as wind power increases, the rules will change.

“There’s always been a strong desire among system operators to ensure that wind ultimately will be treated like other forms of generation.”

But he says his members have to know what the new rules are if their output is put on hold.

“Is there any compensation? If there is, what formula is that based on? Those details really matter,” he said.

Better weather forecasting is also essential to better wind management, says Campbell. The more lead time the system has to anticipate wind quantities, the better, and the IESO is looking for ways to get precise forecasting.

When wind is going to be strong, it may be a good time for a nuclear plant to schedule some short-term maintenance work, or for water-powered generators to collect water behind dams for use when the wind slackens, he says.

In addition, power users can be invited to take advantage of markets when demand is slack. Some industries can plan a short-term production speed-up if they know there’s going to be lots of power and low prices the next day.

Better forecasting should also decrease the need for keeping back-up generation running, says Campbell.

But the details of who gets to produce, and how much they’ll be paid, when there’s a power surplus, remain to be decided. The IESO is now gathering opinions.

Hornung says CanWEA has yet to make its submission, but will do so.

“It’s a discussion we all need to have.”