Is it time for Ontario to use more power?

A warm summer meant  electricity use went up and costs went down. Is there a lesson here?

Photo © Norris Wilson

With Ontario experiencing a relatively warm summer, I thought it might be interesting to look at three recent months, starting with May 2018, to see if power consumption had increased compared to the same period in 2017.

As it turned out, May, June and July in 2018 versus the same three months in 2017 resulted in an increase in total demand (Ontario consumption plus net exports [exports less imports]) of 1,447,000 MWh or 3.9%.   With “net exports” dropping by 1,120,000 MWh, Ontario consumption actually increased by 2,567,000 or 7%.  This increase occurred despite the continued spending of approximately $400 million annually on conservation initiatives.

You might expect that an increase in power consumption by that much in Ontario would have resulted in a substantial increase in the cost of electricity, but as it happens, the amount was a meager $73 million for that extra 2,567,000 MWh. Based on the average cost (GA + HOEP) of electricity over those three months, the additional cost should have been around $313 million. The additional consumption cost only 2.8 cents per kWh (kilowatt hour).

The question is: why did that additional consumption (enough to power 1.1 million average households for the three months) cost so little?

There are several reasons why! First, curtailed wind (paid for but not added to the grid) in 2018 was 416,400 MWh* less than 2017. That means the savings from lower curtailment was approximately $50 million.

As well, Ontario’s net exports were thus lower by 1,120,000 MWh — that saved Ontario ratepayers the full cost of the GA (the GA averaged about $101/MWh in 2018) or approximately $113 million.

And, the 3.4 million MWh of net exports in 2017 generated only about $8/MWh versus $20/MWh in 2017 (the approximate GA for the three months in 2017 versus 2018) for the 2,280,000 MWh of net exports in 2018 for a net benefit in 2018 of about $18 million.

If one totes up the additional costs of $73 million plus the wind curtailed savings of $50 million, the $113 million saved due to reduced net exports, and the $18 million extra earned on export sales due to a higher GA in 2018, it comes to $254 million or $59 million short of the $313 million noted above.

I suspect the unexplained $59 million is related to: spilled hydro, steamed-off nuclear, and a reduction in the Class B to Class A subsidy resulting from the higher average GA. Most of those latter details are not yet publicly available.

Interestingly, wind power — generated and curtailed — was equal to 80% of net exports in 2017 and 112% of net exports in 2018. That suggests wind power was surplus to demand in both years.

It time to acknowledge again that wind, as an intermittent and unreliable source of power, tends to present itself when not needed. That, along with the multiple millions spent by the previous government encouraging electricity consumers to conserve has a simple effect!

Together, they simply drive up the cost of electricity.  Perhaps we should increase consumption to drive costs down.

© PARKER GALLANT

*Thanks to Scott Luft for his data related to wind generation and wind curtailment.

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Author: parkergallantenergyperspectivesblog

Retired international banker.

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