For the cost to provide a small portion of Ontario’s power, wind is no bargain
Most electricity ratepayers in Ontario are aware that contracts awarded to wind power developers following the Green Energy Act gave them 13.5 cents per kilowatt (kWh) for power generation, no matter when that power was delivered. Last year, the Ontario Auditor General’s report noted that renewable contracts (wind and solar) were handed out at above market prices; as a result, Ontario ratepayers overpaid by billions.
The Auditor General’s findings were vigorously disputed by the wind power lobbyist the Canadian Wind Energy Association or CanWEA, and the Energy Minister of the day, Bob Chiarelli.
Here are some cogent facts about wind power. The U.K. president for German energy giant E.ON stated wind power requires 90% backup from gas or coal plants due to its unreliable and intermittent nature. The average efficiency of onshore wind power generation, accepted by Ontario’s Independent Electricity System Operator (IESO) and other grid operators, is 30% of their rated capacity; the Ontario Society of Professional Engineers (OSPE) supports that claim. OSPE also note the actual value of a kWh of wind is 3 cents a kWh (fuel costs) as all it does is displace gas generators when it is generating during high demand periods. On occasion, wind turbines will generate power at levels over 90% and other times at 0% of capacity. When wind power is generated during low demand hours, the IESO is forced to spill hydro, steam off nuclear or curtail power from the wind turbines, in order to manage the grid. When wind turbines operate at lower capacity levels during peak demand times, other suppliers such as gas plants are called on for what is needed to meet demand.
Bearing all that in mind, it is worth looking at wind generation’s effect on costs in the first six months of 2016 and ask, are the costs are reflective of the $135/MWh (+ up to 20% COL [cost of living] increases) 20 year contracts IESO, and the Ontario Power Authority awarded?
As of June 30, 2016, Ontario had 3,823 MW grid-connected wind turbines and 515 MW distributor-connected. The Ontario Energy Reports for the 1st two quarters of 2016 indicate that wind turbines contributed 4.6 terawatts (TWh) of power, which represented 5.9% of Ontario’s consumption of 69.3 TWh.
Missing something important
Not mentioned in those reports is the “curtailed” wind. The cost of curtailed wind (estimated at $120 per/MWh) is part of the electricity line on our bills via the Global Adjustment, or GA. Estimates by energy analyst Scott Luft have curtailed wind in the first six months of 2016 at 1.228 TWh.
So, based on the foregoing, the GA cost of grid-accepted and curtailed IWT generation in the first six months of 2016 was $759.2 million, made up of a cost of $611.8 million for grid-delivered generation (estimated at $133 million per TWh) and $147.4 million for curtailed generation. Those two costs on their own mean the per kWh cost of wind was 16.5 cents/kWh (3.2 cents above the average of 13.3 cents/kWh). The $759.2 million was 12% of the GA costs ($6.3 billion) for the six months for 5.9% of the power contributed.
But hold on, that’s not all. We know that wind turbines need gas plant backup, so those costs should be included, too. Those costs (due to the peaking abilities of gas plants) currently are approximately $160/MWh (at 20% of capacity utilization) meaning payments to idling plants for the 4.6 TWh backup was about $662 million. That brings the overall cost of the wind power contribution to the GA to about $1.421 billion, for a per kWh rate of 30.9 cents. If you add in costs of spilled or wasted hydro power to make way for wind (3.4 TWh in the first six months) and steamed off nuclear generation at Bruce Power (unknown and unreported) the cost per/kWh would be higher still.
So when the moneyed corporate wind power lobbyist CanWEA claims that the latest procurement of IWT is priced at 8.59 cents per kWh, they are purposely ignoring the costs of curtailed wind and the costs of gas plant backup.
22% of the costs for 5.9% of the power
Effectively, for the first six months of 2016 the $1.421 billion in costs to deliver 4.6 TWh of wind-generated power represented 22.5% of the total GA of $6.3 billion but delivered only 5.9% of the power. Each of the kWh delivered by IWT, at a cost of 30.9 cents/kWh was 2.8 times the average cost set by the OEB and billed to the ratepayer. As more wind turbines are added to the grid (Ontario signed contracts for more in April 2016), the costs described here will grow and be billed to Ontario’s consumers.
CanWEA recently claimed “Ontario’s decision to nurture a clean energy economy was a smart investment and additional investments in wind energy will provide an increasingly good news story for the province’s electricity customers.”
There is plenty of evidence to counter the claim that wind power is “a smart investment.” But it is true that this is a “good news story” — for the wind power developers, that is. They rushed to Ontario to obtain the generous above-market rates handed out at the expense of Ontario’s residents and businesses. And we’re all paying for it.
17 thoughts on “How much is wind power really costing Ontario?”
How and why is this even possible in a time of fiscal restraints.
The wind generation for embedded is a product of Scott Luft as he is able to track it. It’s not the same for solar as most of it is of the embedded variety and below the IESO 10MW for tracking purposes. I might take a crack at looking at the 2015 output as I do have that information from a report the OEB put out in July which indicates it provided 1.9% of total generation (2.9 TWh). Link to the OEB release is here:
Click to access 2015_supply_mix_data.pdf
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Very valuable analysis. Parker, do you have comparable data for solar energy in Ontario?
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say it slowly so the liberals can understand……
Thank you again Parker.
Have you read this eulogy to the wind industry in Ontario? http://issues.nawindpower.com/article/eulogizing-ontarios-wind-industry#.WEHBlE8wztk.twitter
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Thanks Sommer: For some reason it doesn’t make me feel sad! It’s too bad it didn’t happen 6 years ago.
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“22% of the costs for 5.9% of the power”
Wow! Insanely stupid! Question though: How long do those contracts run? In other words how much have we saddled our children with our stupid decisions.
As for the eulogy, is wind for sure dead? Does anyone have a silver stake that could put to good use?
Ike ….. the wind companies have a first right of refusal on turbine contracts…. as long as wind company notifies leasehold 365 days prior to the lease expiration date the wind company has the right to stay for another 21 YEARS!!
When the government rewrites all those fat wind contracts to thier real market value the wind companies will have to stay the extra time…..
“When the government rewrites all those fat wind contracts to thier real market value”
Can that be done? Surely the wind companies have guaranteed prices for some pre-determined time period. Is that 21 years?
Yes the government will rewrite more realistic contracts Ike…. wind companies will be forced to stay for the full 2 terms just yo make thier $$$ back…. if you do business with the government. … prepare to take one in the kiester!!!!