Battery Storage will Save Ontario Ratepayers as Much as $760 million and Hell is about to Freeze Over

It appears, those who monetarily benefited from the GEA imposed on Ontario’s ratepayers by the McGuinty led Ontario Liberal Party in 2009 are back seeking more ratepayer dollars. 

NRStor and Six Nations of the Grand River Development Corporation (SNGRDC) have teamed up in an effort to obtain a contract from IESO. The latter, SNGRDC already have a significant portfolio of investments in 13 wind and solar projects including the 230 MW Niagara Regional Wind Farm. NRStor was founded by Annette Verschuren, former CEO of Home Depot and NRStor’s claim to fame is “energy storage” and as such they received several contracts from the OPA (absorbed by IESO) under the GEA. A former senior executive of IESO, Kim Warren is one of the three members of their Board of Directors and he presumably still has some pull within IESO.

It should be obvious that both SNGRDC and NRStor have benefited greatly from the contracts they received from the IESO to the detriment of Ontario’s households and businesses of all sizes and sectors—but they want more!

NRStor appear to be a Tesla agent in Canada and it is probable the project currently in the planning stages will use Tesla’s “Megapack” battery storage for the jointly owned “Oneida Energy Storage Project” (OES) which is a proposed 250MW/1000MWh storage facility.

Driving up Electricity Costs with our Tax Dollars

The OES is not the only “energy storage” project in the early stages as TC Energy, who sold their Ontario gas plants to OPG last year are also in the process of seeking a contract to create a “pumped storage” 1000 MW unit in Meaford, Ontario using water from Georgian Bay. Needless to say, the locals in and around the chosen site are fighting hard to preserve the local landscape and the affected area of Georgian Bay! In TC Energy’s case one should suspect they are trying desperately to obtain “carbon credits” to help offset the upcoming rising costs of both the “carbon tax” and the “clean fuel standard” (another tax) the Justin Trudeau Government has undertaken.  Those taxes may make TC uncompetitive with other global energy companies.

The opportunity to make money in the “OES” case is twofold in that they will purchase power when the HOEP (hourly Ontario energy price) is low and sell it back either at a contracted price or when the HOEP is higher during high demand hours. One assumes they also want “carbon credits” they can sell to others for additional revenue.

Insofar as the two partners of the OES are concerned it looks to be simply a means to obtain more ratepayer dollars! In NRStor’s case the benefit will accrue to their new New York owners, Blackstone Energy Partners who purchased them in the spring of 2020 and is itself a subsidiary of Blackstone with $571 billion in assets under management.

 Examining the Project Overview suggests in addition to the promise to save us ratepayers $760 million the energy storage project will also result in a “4.1 Million tonne reduction in CO2”.  Not sure how buying surplus energy in Ontario that is basically emissions free will save those 4.1 million tonnes but if they say it’s a perfect solution, we should suspect both politicians and public bureaucrats will be swayed by those claims.  One wonders if the politicians and bureaucrats recall the words of George Smitherman, former Ontario Minister of Energy when he told us the GEA would only raise electricity rates by 1% and it would create 50,000 jobs! His claims were praised by many ENGO at that time.  Ontario’s ratepayers are well aware neither promise came to pass!

It is evident already that politicians and bureaucrats are excited about the OES project. Catherine McKenna, Minister of Infrastructure and Communities had the CIB (Canada Infrastructure Bank) sign an MOU with OES and shouted out:   “Renewable energy projects in partnership with Indigenous communities – like the Oneida Energy Storage project with the CIB, Six Nations of the Grand River Development Corporation and NRStor – are a great example of how our economy will grow in the future and how forward-looking investments can help Canadians achieve their economic and environmental goals,” One should assume the Minister and the bureaucrats at the CIB did not bother to determine the emissions required to manufacture the batteries nor the cost of recycling them!

It also appears from the “Project Review” that perhaps some politicians and bureaucrats in Ontario have also endorsed the project as Greg Rickford, Minister of Energy, Northern Development and Mines, Minister of Indigenous Affairs issued the following statement: “Ontario is uniquely positioned to take advantage of energy storage solutions and I congratulate the Six Nations of the Grand River Development Corporation, NRStor and the Canadian Infrastructure Bank on this important project milestone today.” To top that off IESO receives many laudatory mentions in the OES review suggesting their plan to secure a contract will be an easy one with the help of Kim Warren’s inside knowledge. 

For some reason the review uses 2017 data which is now quite dated.  It also notes; “Ontario’s Auditor General has confirmed using forecast data from the IESO that the province is expected to continue to experience on average 2.8 TWh of Surplus Baseload Generation (SBG) per year from 2022-2032”. Bearing the foregoing in mind, one wonders why adding storage of that surplus, storing it for several hours and then selling it back at a price higher than purchased will somehow save us overburdened ratepayers $760 million? Buy low, sell high, appears to represent an additional cost to ratepayers while rewarding OES!

The OES appears to be simply another Trojan Horse* that will serve to further undermine the Ontario economy!

* The Trojan Horse is a story from the Trojan War about the subterfuge the Greeks used to enter the independent city of Troy and win the war.

Author: parkergallantenergyperspectivesblog

Retired international banker.

17 thoughts on “Battery Storage will Save Ontario Ratepayers as Much as $760 million and Hell is about to Freeze Over”

  1. The mind boggles at the foolishness of this. We would not need bulk energy storage at all if the electricity generation system in Ontario were completely dependent on nuclear, hydro and natural gas. But now, in order to provide a justification for building more intermittent electricity generation capacity that we do not need, the province is proposing to build more electricity storage that we do not need! What am I missing here?

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    1. Thank you, Parker and Bob, strongly agree. For the realistic sustainable energy future we have to plan now: order the best nuclear reactors available, thorium included. The existing ones will not last forever. I see no other practical solution.
      Smart people do not want to be politicians.

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  2. Just discovered the two partners are self-promoting themselves in the Toronto Star! My guess is they are trying to ensure the FORD government bless their project and IESO grant them a contract. This will then allow all those existing contracts to wind and solar developments to attach battery storage units and save curtailed energy (which they are paid for currently) and sell it back to remove even more money from ratepayer and taxpayer pockets. Wow, smart move on their part if the politicians are too dumb to notice. Star article link: https://www.thestar.com/business/opinion/2021/01/23/the-tech-is-finally-ready-and-a-big-energy-storage-project-is-set-to-unlock-benefits-for-all-ontarians.html

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  3. Bravo. I have been employed in the Ontario electricity field for over 30, primarily in the municipal distribution sector. It is my belief that the real failure started with the 2002 deregulation of the electricity market. I wish to quote a phrase from a Toronto Star article “The public lab that could have helped fight COVID-19 pandemic” by Linda McQuaig Wed., March 11, 2020. It reads “Still, our willingness to go along with the privatization cult in recent decades has left us weaker and less protected than we could be.” I would contend that while that process was a very much needed move, the Mike Harris government let the privatization cult lead the way. From directing incorporation of the utilities, to allowing retailers into the market, stripping utility activity in “third party markets “ (i.e. water heater rentals) and encouraging private ownership of generation. This whole misadventure is the true driver of the utterly broken electricity system we have today. We need the government to engage in a very comprehensive review of the system. But let’s go back and rethink deregulation and this time leave the privatization cult out. I call this the dis-incorporation or de-incorporation of the Ontario electricity market. Sadly, I shall never have grandkids, so I leave my portion of this abysmal failure to you with grandkids to pay on behalf.

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      1. While I agree that the liberals created the mess we are in, the overarching problem is systemic to the deregulation process. Stating with the simple fact that on deregulation the rate payer was put in the position of having to pay for the local utility all over again, pushing distribution rates up by layering debt and equity into the equation and giving huge amounts of money to municipalities. Then the retailers raped and pillaged consumers forcing the gov’t and OEB to layer in consumer protection. I could rant about the retailer mess all day, but I digress. One of the visions on dereg was to encourage private ownership of generation. To a large degree that did not happen on the scale that was looked for. The push for green and decarbonizing by killing coal created the renewable revolution but the only way that that got answered was to offer obscene contracts and this was done without economic oversight. And to top this the government cow towed generation construction to areas that made no sense in uneconomic placement requiring large investments by distributors to accommodate connection. Had the distribution companies been instructed to install that generation it could have been provided at a more logical price point using the OEB cost of capital parameters and in areas where it makes economical sense. The distributor is driven to maintain the system as a condition of licence and has lots of oversight to ensure consumer protection. Now many people might say the monopoly power that a local distribution company has the potential to create high costs in difference to private enterprise but I disagree. Private enterprise is taking advantage of customers and creating the higher costs that we experience today. And at the end of the contract they can just walk away. We are almost twenty years into the failed experiment. I say it is time to do another Macdonald commission and start over again. If the OEB can be renewed so can the market.

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  4. Quick question. Pretty sure the$760M is savings over project lifetime. I can’t find anything written but if the battery lasts 10 years, what is $76M out of $22Billion in c/kWh reduction I might see on my LDC bill?

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    1. No savings, it will be a cost. We currently pay $120/MWh to curtail wind so it they buy the wind at a HOEP low price of say $15/MW (1.5cents/kWh) in the middle of the night and they sell it back at say $40/MW at higher demand times during the day that will increase the price of the curtailed wind (which they stored) to $145/MW. That’s an additional cost of $25/MW or 2.5 cents/kWh. The various wind and solar development companies could all decide to do the same thing and that would add more costs to the system. Additionally with more battery storage added the wind and solar development companies would push to add more capacity. The battery storage added in Southern Australia and California were added to the grid to help prevent rolling blackouts caused by wind and perhaps some solar failing to deliver power when it was needed. Ontario has a surplus of power and it is the reason we exported over 20 TWh in 2020 which cost us $1.8 billion. We don’t need the storage they are proposing. As a matter of interest the HOEP in 2020 averaged 1.39 cents/kWh and we probably sold it to NY, Michigan at an even lower price.

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      1. Hi Parker, and thx for reply. Seems I’ll be disappointed not finding the lower price/kWh on LDC bill. Now wondering if it can get worse as other things in life do.
        In your calculations, do you factor in system ‘shrinkage’ as in Tesla Megapack system efficiency “(AC) 89.5% round-trip (4 hour system)”? Meaford PS looks even worse as Savegeorgianbay.ca advises it will “consume 30% more than it generates”. It would seem a stretch that can lower costs.
        Also wondering if all the charges that appear on LDC bill apply to in-out of storage. Delivery, Regulatory, Loss Factor, HST etc.?
        It also appears claims of ‘replacing/preventing a gas plant’ or ‘compensating for Pickering’ go largely unchallenged. I guess I’d like to see the Rickfords & McKennas know we’re wise to them and the tax dollars going to ‘investments’ that lose money.
        I enjoy your chats with Marc Patrone as often as I can. Speaks to voters. Have do done storage?
        Thx, Mike

        Liked by 1 person

      2. Hi Parker, and thx for reply. Seems I’ll be disappointed not finding the lower price/kWh on LDC bill. Now wondering if it can get worse as other things in life do.
        In your calculations, do you factor in system ‘shrinkage’ as in Tesla Megapack system efficiency “(AC) 89.5% round-
        trip (4 hour system)”? Meaford PS looks even worse as Savegeorgianbay.ca advises it will “consume 30% more than it generates”. It would seem a stretch that can lower costs.
        Also wondering if all the charges that appear on LDC bill apply to in-out of storage. Delivery, Regulatory, Loss Factor, HST etc.?
        It also appears claims of ‘replacing/preventing a gas plant’ or ‘compensating for Pickering’ go largely unchallenged. I guess I’d like to see the Rickfords & McKennas know we’re wise to them and the tax dollars going to ‘investments’ that lose money.
        I enjoy your chats with Marc Patrone as often as I can. Speaks to voters. Have you done storage?
        Thx, Mike

        Liked by 1 person

  5. To be honest I find the whole concept of storage very perplexing, especially the economics of it. Storage cannot be a sustained simply as means of market arbitrage especially in Ontario with our current fractured pricing between HOEP and Global Adjustment. Small scale storage like in a residential home might make sense if you live in a rural region that is perpetually challenged by environmental events knocking out service. But in these cases a propane backup generator can be more a economical solution. Residential Tesla solar roof and powerwall battery to help live off the grid is still just a rich persons dream, not economically achievable for common citizens. Batteries for large scale industry to game ClassA ICI was a thoughtful idea by entrepreneurial consultants who convince installation but the batteries can only be used to shave peak load a couple of hours each month. This misadventure only ends up passing GA costs from big industry to little industry with no social benefit. Plus GA is only a government directive at risk of elimination by the stroke of a pen. Large scale storage at this time can only be justified through government funding or lucrative delivery contracts. Federal government agents are scrambling to give away our tax money to green the system in the name of climate change. The folly of metal based batteries is that they are nowhere near green in construction or in their end of life removal. The only real value of battery storage is in system reliability. And that responsibility lies with the licenced transmitters and distributors, not to private industry who only wish to profit from exercise. Is the Onieda project strategically located? I don’t have the answer to that. Will Hydro One need to install hardened infrastructure to secure delivery to a service territory and will that local service territory customers pay extra for that reliability? No john q public will do that. I am all for promotion of pilot concepts to further the development of innovation to the power grid, just not for the purposes of corporate greed. Public transmitters and distributors have reason, by means of licence, to show benefit, maintain an asset, deliver value to consumers and safely dispose of that asset when end if life. Private enterprise can walk away and leave a mess behind once their money has been made.

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