Ontario Power Generation: where more means less

Back in late 2013, I noted that Ontario Power Generation or OPG had become the whipping boy for the Ministry of Energy. Now, it’s almost six years later, and not much has changed.  Just before my article appeared on Energy Probe, OPG had applied for a change to their “unregulated hydro”. They wanted it changed to “regulated hydro” which they got approved.  What that meant was they no longer would be dependent on receiving just the HOEP (Hourly Ontario Energy Price) market price for unregulated hydro.  The HOEP by then, had fallen due to the Liberal Government’s creation of the GEA (Green Energy Act) and the climb of the Global Adjustment which fell outside of the HOEP market price.

OPG recently released their 1st Quarter 2019 results. Both revenue and generation were up, marginally, by $19 million (1.3%) and .3 TWh (1.6%) respectively.  Nuclear generation was down, but regulated hydro was up with the latter increasing from 7.7 TWh to 8.2 TWh.

Those 8.2 TWh were produced by OPG’s 7475 MW of hydroelectric capacity in service. If one looks back to their 2008 1st Quarter* it indicated OPG had 3,332 MW of regulated hydro and 3,640 MW of unregulated hydro. In 2008 they generated 9.1 TWh; that means the 6,972 MW in service operated at 59.9% of their capacity and in the 2019 comparable quarter they operated at only 50% of their capacity.

In 2008 there was no spilling of hydro reported, but in 2019 they reportedly spilled 0.3 TWh. Producing less hydroelectric generation with a higher capacity seems strange. OPG spent $2.6 billion increasing capacity on the Mattagami River system and another $1.5 billion to increase generation capacity via “Big Becky” on the Niagara River system.  So, an additional 500 plus MW of clean hydroelectric capacity costing $4.1 billion was added but resulted in less generation (0.9 TWh less) than 2008.

Why?

The higher generation of hydroelectric power in 2008 had nothing to do with water levels as peak levels that year reached 75.3 metres versus 75.9 metres in 2019. In other words, there was no shortage of “fuel” for OPG’s hydroelectric plants in either 2008 or 2019.

What really happened was back in late 2008 former Premier McGuinty bragging about how the Melancthon EcoPower Centre (199.5 MW of wind capacity) had vaulted Ontario up to the point where it had 617.5 MW of wind capacity in operation. The following year Energy Minister George Smitherman rammed through the GEA (Green Energy and Green Economy Act) which led to the 2010 Long Term Energy Plan (LTEP), released by then Energy Minister, Brad Duguid. The LTEP sought 10,500 MW of renewable energy (7,500 MW of wind plus 2,500 MW of solar and the balance in biomass). The LTEP promised utopia with the creation of 50,000 permanent jobs. Duguid also promised us electricity rates would increase by 3.5% per annum and to help defray that increase they gave residential ratepayers a 10% reduction referenced as the OCEB (Ontario Clean Energy Benefit) which has since ended and was sort of replaced with the Fair Hydro Plan. We now know how those plans and events turned out!

As an example if one looks at the May “off-peak”** rate in 2008 and compare it to 2019 you would note it jumped from 2.7 cents/kWh to 6.5 cents/kWh which is a 140.7% increase and almost five times what Duguid told us rates would increase.

The advent of wind and solar contracts granted “first to the grid” rights at astronomical prices drove up the costs of electricity and their intermittent and unreliable nature required excess generation (generally gas plants) to sit at the ready for when the wind wasn’t blowing or the sun wasn’t shining. Those changes drove up the costs of electricity and coupled with the requirement to grant those “first to the grid” rights to wind generation meant hydro was, and still is, treated as “less qualified” renewable energy.

Ontario could have considerably more clean hydroelectric generation if we were devoid of expensive, above market wind and solar contracts! Instead, because of the lack of a cost benefit analysis by the previous government, Ontario’s ratepayers are stuck with expensive electricity until those contracts expire. At the same time, the taxpayer owned entity OPG suffers from revenue shortfalls for the $4.1 billion it spent to increase their hydro capacity, yet we ratepayers must still pick up the costs of that spending without any of the benefits.

The time has come to let OPG use their full hydroelectric capacity!

PARKER GALLANT

 

*The year before the GEA was passed and the recession occurred.

**Off-peak averages approximately 66% of most residential bills.

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Author: parkergallantenergyperspectivesblog

Retired international banker.

2 thoughts on “Ontario Power Generation: where more means less”

  1. So how do we get the Ford government to do the cost benefit analysis? I’m thinking a blunt instrument may help. Can you conclude your posts with a simple calculation like:Generation Purchased less Billed to Ratepayers equals accumulated Debt? Maybe titled “Liberal Policy Legacy”. Thx, Mike

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  2. The HOEP for June dropped all the way to 0.00 cents/KWh Monday morning. Wind power dropped to almost nothing for the past 3 days, while on Saturday, the forecast amount was reaching 85% of capacity. Only it wasn’t realized because they were paying up to 89% of it to sit idle. This out-of-sync nature was presented in a presentation of three Wind Cocerns delegates to then minister of energy George Smitherman. Within a month, he brought in the Green Energy Act. He said he would listen to them, but he wasn’t changing his mind.

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