However, for electricity, the costs can change based on time of use as well as consumption for residential users8. Unfortunately, for large electricity consumers (like commercial and industrial businesses) the cost structure becomes more complex. In Ontario for example, the electricity system operator (IESO) offers attractive rates if large customers can reduce their demand on the provincial electricity system during the five (5) peak hours of the year. Customers are divided into two classes that pay for electricity using different cost structures. The mechanism is called Global Adjustment (GA), where large customers can opt in to Class A rate structure and can reduce their annual electricity bill by 40 to 50% if the electrical demand (as viewed by Ontario’s grid) can be fully curtailed during these peak five hours. The other class structure (Class B) pays for electrical costs based on electricity consumption9. These costs are in addition to applicable transmission, distribution, and demand charges.
The above-mentioned market dynamics and cost structure create a financial arbitrage opportunity for all utility customers. This can happen in different ways that vary from energy storage to electricity generation behind the meter. It is worth noting that the electricity rate structure can change from one province or state to another. For utility cost calculations using heat pumps, it is strongly recommended to consult with an engineer to analyze the available opportunities, as well as the feasibility of heat pump heating applications, especially in markets that have complex electricity cost structures.
It is noteworthy that carbon reduction from electrification of heating systems will also depend on the building location and how electricity is generated in the area where the building is located. In Canada, for example, using a heat pump for building heating in Quebec can result in lower GHG emissions than in Alberta, due to differences in the GHG intensity of electricity generation between the two provinces.