The good old days of electricity prices in Ontario

… when supply and demand meant something, and electricity costs weren’t skewed by overpriced FIT contracts and “first-to-the-grid” rights

October 21, 2018

The good old days… just 11 years ago

My friend and energy analyst Scott Luft posted some interesting charts on his twitter account about generation on October 16, 2018, noting the wind was blowing and also that we used very little fossil fuel for power generation — the gas plants were basically all idling!

As is often the case in our fall and spring months, Ontario’s demand for power was low and IWTs (industrial wind turbines) were spinning. In fact the TX (transmission-connected) IWT delivered about 44,850 MWh and had another 26,760 MWh curtailed.  The corporate wind power operators were paid for potentially operating at 66% of their capacity — well above their annual average of 29 or 30%.  The cost of the generation they delivered, along with the curtailed (wasted) generation, put $9,265,000 into the pockets of the developers and all but approximately $84,000 found its way into the GA (Global Adjustment) account, as did the cost of hydro spills and those idling gas plants.

On a fall day when Ontario demand was only 343,680 MWh, as noted by IESO in their “Daily Market Summary”, we had net exports (exports less imports) of just under 50,000 MWh for which we received the market price (HOEP) of $1.88/MWH.  Those exports returned about $94,000 for generation that cost Ontario ratepayers north of $5.6 million.  As IESO reported, the total value of our consumption and exported electricity had a market value (HOEP) of only $749,000, but a cost of about $45 million.

Nostalgia about the good old days took me back to 2007 when the Global Adjustment Mechanism* was first introduced, so I looked at the IESO’s “Daily Market Summary” of October 16, 2007 to see what that day’s HOEP was.  On that day there were few wind and solar “renewables” in place and Ontario demand was higher at 393,000 MWh.  The HOEP for the day was $54.47/MWh or 5.5 cents per kWh. That is slightly higher than what IESO said the cost of electricity was in 2007 in the year-end report when they noted “The average weighted electricity price in 2007 was 5.05 cents per kilowatt hour (kWh)”.

The good old days of supply and demand

Compare that to the IESO Monthly Market Report for August 2018 which came in at $113.32 (HOEP + GA) or 11.32 cents/kWh — that’s 124% higher than 2007 just 11 years later! Put another way, before we added intermittent and unreliable wind and solar in large amounts to our generation sources, the market operated in a way that properly reflected supply and demand economics!

All this serves to demonstrate how intermittent renewable energy sources in the form of wind turbines and solar panels which have been granted guaranteed prices under FIT (Feed-in-Tariff) prices and “first to the grid”** rights, can distort Ontario’s electricity market.

A cost/benefit study, recommended by two Auditors General in the past, might have proved useful.

It is time for the incumbent government to cancel the acquisition of any more wind or solar power generation that have not commenced construction or are fighting actions before the ERT or the courts.

PARKER GALLANT

*The GA was originally called the “Provincial Benefit” but the name changed when the ruling Ontario Liberal Party introduced the “Ontario Clean Energy Benefit” reducing hydro bills by 10%.

**Wind and solar generation ranks at the same level as non-dispatchable nuclear power so when generated must be accepted or if not needed due to low demand will still be paid.

 

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Author: parkergallantenergyperspectivesblog

Retired international banker.

2 thoughts on “The good old days of electricity prices in Ontario”

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