Quebec Electrification may Prove Costly and Create Blackouts

An article from March 2022 cited a Hydro Quebec strategic plan they had just released and it forecast they would need 100 TWh (terawatt hours) annually of additional energy in order to meet Quebec’s net-zero emissions target by 2050.

To put context on that 100 TWh; it currently represents about 50% of generation Quebec Hydro annually distributes to Quebec ratepayers and grid connected export markets! If one does the math the annual generation of 100 TWh would require about 11,500 MW of new generation (baseload) capacity running at 100% and that is, coincidentally, more than double the capacity of Churchill Falls (5,428 MW) which is owned by Newfoundland & Labrador (N/L). The existing contract between the two provinces for the power generated at Churchill Falls expires in 2041 and currently costs Hydro Quebec a very low $2.00 per MWh or $2 million per TWh. The $113 million Hydro Quebec paid N/L in 2021 suggests Churchill Falls supplied them with 56.5 TWh hours or about 25% of what Hydro Quebec distributed in 2021 and around 30% of Quebec ratepayers total demand!

We should guess N/L will be looking for much higher rates for any future contracts come 2041 or instead will run transmission lines to Nova Scotia, New Brunswick and/or to New England to achieve a much better return and perhaps help pay those cost overruns for the Muskrat Falls project. The foregoing would raise Quebec’s needs to over 150 TWh by 2050 or at the very least drive up their energy costs!

Hydro Quebec’s 2021 annual report indicated they sold 210.8 TWh of which 35.6 TWh (63% of Churchill Falls generation) were exported to New England, New York, Ontario and New Brunswick.

In respect to the Ontario/Quebec relationship; Ontario will try to supply power to Quebec in the winter (Quebec’s peak demand period) whereas Quebec will try to supply Ontario in the Summer which is generally when peak demand occurs. The agreement between Ontario and Quebec is referenced as the “Seasonal Capacity Sharing Agreement.“ As an example, Ontario, using natural gas generation, recently supplied Quebec with power during the cold snap. We should wonder how importing generation from natural gas plants will help Quebec meet its “net-zero” target or Ontario’s by generating fossil fuel power to supply Quebec?

Hydro Quebec issued a press release in November 2022 forecasting by 2032 they will require an additional 25 TWh principally to support the transition to electrification for transportation, building conversion, green hydrogen production, battery production, etc. etc. The press release suggests: “The anticipated growth takes into account significant energy efficiency efforts that will make it possible to curtail 8.9 TWh by 2032. Hydro-Québec programs such as the Efficient Heat Pump Program for residential customers and the Efficient Solutions Program for business customers will help optimize electricity use.“ They will also seek a “demand response” of 3,000 MW during the coldest winter days from those labeled as “various customer segments”. The release also indicated they have put out a call for tenders including; “one for 300 MW of wind power and the other for 480 MW of renewable energy—are already underway“, and “Two more, for 1,000 MW of wind power and 1,300 MW of renewable energy, respectively, will be launched in the next few months, and others will follow in the coming years to meet the needs“.

We should find it odd Hydro Quebec would believe 1,300 MW of wind and 1,780 MW of renewables (solar?) will be sufficient to provide them with the 25 TWh they forecast needing by 2032 due to their intermittency and unreliable nature but perhaps they are really counting on the 3,000 MW of “demand response” to keep the lights on and households warm during cold winter days. We should also wonder where the other 75 TWh they will need by 2050, will come from?

They shouldn’t count on Ontario being able to supply them as the Ford led government here in Ontario is on the path to also achieve the same “net-zero” target our Energy Minister, Todd Smith, asked IESO to achieve via his October 7, 2021, letter to them. While he has subsequently backtracked somewhat on the foregoing in his October 6, 2022, directive it nevertheless may detract from attracting new generation as the following sentence from his directive implies: “New build gas facilities will be required to submit emissions abatement plans to IESO as part of their future contractual obligations, including considerations for operating in special circumstances such as emergency events, if applicable.“

Ontarians and Quebecers should wonder; in the future, will those emergency events include us sending our natural gas generation to help them keep the lights on and their households warm during winter cold snaps in Quebec and will they be able to supply Ontario with power on those very warm summer days when our peak demands occur?

No doubt by the time the foregoing potential problems become a regular occurrence our current group of politicians will have retired from politics and be living on nice taxpayer funded pensions so will not care about the consequences of their failed policies.

We voters should find a way to make elected politicians responsible for their ineptitude but perhaps that is far too much to hope for, just as “net-zero” is simply “wishful thinking” if we want reliable and competitive power prices!

Quebeckers are Hopefully Grateful for Ontario’s Natural Gas Plants

The past couple of days in Ontario have demonstrated the ups and downs of energy demand both from those of us in Ontario and our neighbours tied to us via the intertie grids.

February 2, 2023

Starting with February 2, 2023, examining IESO data, clearly demonstrates the ups and downs of demand for electricity coupled with the market price variation (HOEP) of overproduction of IWT (industrial wind turbines). The wind was blowing hard all through the day but with baseload nuclear and hydro providing most of the demand what wasn’t needed was most of the power being generated by IWT. IESO forecast IWT would generate 94,503 MW over the full day (80.3% of capacity) but it wasn’t needed. Recorded output was 72,115 MW (61.3% of capacity) meaning IESO instructed IWT owners to curtail almost 22,400 MW. As most Ontario ratepayers know the IWT contracts provides them with “first-to-the-grid” rights and also pays for curtailed power at the rate of $120/MWh and $135/MWh for the accepted power. For the full 24 hours on the day the price allocated for accepted and curtailed IWT generation amounted to over $12.4 million in costs to Ontario’s ratepayers/taxpayers and about $172/MWh in costs for the accepted power.

Coupled with the foregoing; as demand was low for most of the day, the market price (HOEP) averaged $3.12/MWh so IESO were busy disposing of unneeded power for pennies of its costs. Even at the daily peak hour (Hour 19) the HOEP was only $5.18/MWh. For the full day exported power was 41,911 MW representing 58.1% of the generation IESO accepted from IWT. If one assumes the unneeded power from IWT represented all of the exported power or caused it, the cost added to the 30,200 MW of IWT generation consumed by Ontario ratepayers is another $7.1 million bringing the cost of the 30,200 MWh, added to the grid, to $11.2 million or $370/MWh (.37cents/kWh).

The happenings on February 2^nd once again demonstrate how we Ontarians continue to provide cheap power to our neighbours. We do that by absorbing the costs of those intermittent and unreliable IWT sprinkled throughout the province allowing our neighbours to buy our surplus energy for pennies on the dollar while we eat the costs.

February 3, 2023

February 3, 2023, turned out to be a “Top 10” Ontario peak demand day reaching 21,388 MW and 24,821 MW for the “market peak” at Hour 19! The result was the HOEP for the full day averaged about $41.70/MWh. While that represents a large jump from the prior day those IWT were still costing us a lot more then the aforementioned HOEP average.

To put the foregoing in context, IESO data in the first 5 hours forecast IWT generation would be 18,795 MW but they only accepted 13,838 MW meaning about 5,150 MW were curtailed and the HOEP over those 5 hours was a piddly 0.62 cents/MWh. If one, then calculates the HOEP for the remaining 19 hours in the day it becomes $56.60/MWh so, much higher than the first 5 hours! Continuing to look at those 5 hours it becomes apparent we Ontarians absorbed the costs of almost $2.5 million to generate those 13,715 MW. Hopefully our neighbours in NY, Michigan and Quebec appreciate our generosity for those MW which was very close to the IESO accepted IWT generation.

Looking at the full day, IWT were forecast by IESO to generate 69,174 MW but their output was 62,940 MW meaning we paid for around 6,200 MW of curtailed generation but as noted in the preceding paragraph only about 1,000 MW more were curtailed in the following nineteen hours. Over the day IESO were busy selling off approximately 87,000 MW to our neighbours in Michigan, NY and Quebec with the latter taking well over a third of them. The last point should be no surprise as Quebec is a winter peaking province and on February 2^nd Hydro Quebec asked their customers to reduce their electricity consumption due to the anticipated cold starting late Thursday night.

The other interesting happening related to generation on February 3^rd was how much gas generation there was over the day. Ontario’s natural gas plants produced 88,172 MW which coincidently was only slightly higher than our total exports. It is worth pointing out when a MWh of natural gas is generated ratepayers are only paying the raw costs of the natural gas plus a small markup as the capital costs and the approved ROA (return on assets) have been included in the price of electricity since those plants were originally commissioned. In other words once a gas plant is operating it generates power that is very much cheaper compared to both wind and solar.

Quebec Support

About 60% of households in Quebec heat with electric furnaces or electric baseboards so are dependent on electricity to stay warm during cold winter days. For that reason we should suspect Ontario’s natural gas plants may have played a key role in ensuring those Quebecers were able to avoid a blackout on the recent very cold days we have just experienced.

The other thing Ontario’s natural gas plants may well be doing is allowing Quebec EV owners to recharge their EV batteries. Approximately 10% of all new cars registered in Quebec* are EV possibly due to the large $8,000. grant the province provides to purchase them. Interestingly, while Hydro Quebec tells households to turn down their heat and avoid using certain appliances during peak hours, they say nothing about when you should or shouldn’t charge your EV.

The generosity of Ontarians is astounding due to the treatment of IWT and the contracts in place providing those “first-to-the-grid” rights. On top of that, if we are subsidizing the sales of our IWT surplus power to other markets where it may be used to charge EV it just doesn’t seem quite right!

Maybe the Ford Government should ask Quebec to provide Ontario with carbon credits to offset the “emissions” of our natural gas plants that keep their people warm in the winter!

*A September 22, 2022 New York Times article stated the following about EV in Quebec: “Quebec has 150,000 electric vehicles on the road, compared with 113,000 in New York State, an indication of how ubiquitous charging can encourage ownership.“

Michigan, New York and Quebec Ratepayers Should Thank Ontario Ratepayers and Taxpayers for their Early Christmas Present

As frequently happens during the Spring and Fall those IWT (industrial wind turbines) were spinning, decimating migrating birds and bats, and causing Ontario’s households and businesses to dig into their pockets to pay for their intermittent and unreliable power over the past few days.

Looking at IESO (Independent Electricity System Operator) Data for December 2^nd and 3^rd one should be shocked at how much power those IWT generated and why it wasn’t needed. If one also includes the 2,000 MW, they curtailed, they operated at about 76%* of their capacity burdening the ratepayers and taxpayers of the province. In total 176,330 MWh were grid accepted by IESO and 55% of that was exported to our neighbours in Michigan, New York, and Quebec over those two days.

To put the IWT generation in perspective their grid accepted generation was approximately what 2.9 million Ontario households (56% of all households) would consume over two days!

If one reviews the electricity sectors of Michigan and New York, you note, for both states; carbon emissions from their electricity generation greatly exceed those of Ontario. That being the case, why are Ontario’s ratepayers burdened with absorbing the costs of those IWT producing unneeded power for export. Handing New York and Michigan our clean power for pennies of their costs is an expense passed on to all residential households and businesses in Ontario, yet New York and Michigan reap the benefits!

In the case of Quebec their electricity system is relatively emissions free, but they export much of their clean hydro power to New England states under lucrative long-term contracts! Oddly enough Hydro Quebec ask their residential customers to reduce their electricity usage during winter months because 60% of their households heat their homes with electricity. Because Hydro Quebec are committed to supply power to US states under the contract terms they ask their households to use less.

Using less in Ontario when those IWT are spinning works to the benefit of our neighbours and simply raises the costs for Ontarians. Strange outcomes: but seemingly we are told we must endure the costly pain reputedly (?) due to the contracts the McGuinty/Wynne led government(s) blessed under the Green Energy and Green Economy Act (GEA).

The market price or HOEP (hourly Ontario energy price) for December 2^nd averaged only $29.73/MWh (3.0 cents/kWh) over 24 hours and for December 3^rd over 24 hours averaged $26.04/MWh (2.6 cents/kWh), yet Ontario ratepayers were burdened with the contracted “first-to-the-grid” payments embedded in those long-term contracts. Those 176,330 MWh plus the 2,000 MWh curtailed collectively cost Ontarians about $23.8 million over the two days before accounting for what we were paid by Michigan, New York, and Quebec for their purchases.

The exported power of 96,989 MWh (net of cost recoveries from the HOEP sale price) came to $10.559 million. The latter represented a cost for each household of over $2.00 for just those two days.

The cost of the exported power coupled with the IESO grid accepted 79,441 MWh and the 2,000 MWh of curtailed generation, adds an additional $10.960 million ratepayer cost to what IWT owners received for those two days. What that reflects is the total cost to Ontario ratepayers/taxpayers for the two days of IWT generation was $21.279 million or $266.60 per MWh (26.6 cents/kWh) and a multiple of all other generation sources costs with the exception of solar power.

The time to stop the continued bleeding of Ontario ratepayers should be recognized by the Ford government and regulations enacted by them to end the largesse being passed on to those IWT owners!

*IWT in Ontario and elsewhere consistently operate at an average of 29/30% of capacity annually but fall far short of that average on a consistent basis during Ontario’s peak demand days on the hot summer and cold winter days

Industrial Wind Turbine Owners Love the “Gales of November”

Having looked at IESO data for November 30^th, 2022 and several other days in the month, Gordon Lightfoot’s great song; “The Wreck of the Edmund Fitzgerald” came to mind as it references the “Gales of November” several times in the lyrics. A “gale” is reputedly when winds reach at least 34 knots or almost 63 kilometres/hour and we have had quite a few days this November when they reached those levels. Yesterday was no exception as they were over 90 kilometres/hour on several occasions in many parts of the province spinning those IWT and generating unneeded power while extracting ratepayer dollars. No doubt they probably also killed lots of birds and some bats too who were heading south during the migratory season.

To put context on the preceding paragraph about the “gales of November”; IESO data for the first 12 hours of the day forecast IWT would generate 52,228 MW or 88.8% of their rated capacity but they had them curtail about 6,700 MW which meant they operated at 77.4% of capacity. Over those 12 hours the market price (HOEP) averaged a miserly $4.12/MWh and IESO were busy selling surplus power to Michigan, New York and Quebec. Exports over the 12 hours were 22,366 MW or almost 50% of what those IWT delivered to the grid. As a result, the export sales returned only $92,371 of their costs which (including the curtailed power at $120/MW) was just over $3.8 million meaning Ontario ratepayers and taxpayers picked up the missing $3.7 million of the contracted costs over those 12 hours. The costs may have been more, as an example, if OPG was forced to spill water but data doesn’t allow us to determine those additional costs.

For the following 12 hours of the day the HOEP averaged $39.45/MWh and we continued to export power totaling 18,907 MW which amounted to 47.5% of IWT generation (39,755 MW or 78.2% of capacity) during those hours. If we rightly assume the exported MW were either caused by unneeded IWT generation or were all IWT generated power we ratepayers picked up the difference on what we paid ($135/MWh) for the power and what our neighbours gave us in return. That would represent an additional cost of $1.8 million meaning ($3.8 million for hours 1 AM to 12 PM + $1.8 Million for hours 1 PM to 12 PM) exports over the full 24 hours resulted in costs of $5.6 million without any benefit to Ontarians.

Putting aside what the cost to ratepayers was for the exported power it is important to note the IWT owners earned a total of $12,317,000 for the day including what they were paid for the curtailed power. The foregoing was a cost of $146.15/MWh to ratepayers and represented revenue to the IWT owners of about $2,514.00 per MW of capacity so a 100 MW wind farm would have generated $251,400 for just one day’s output. Not too shabby!

Perhaps Michigan and New York didn’t have to fire up their coal plants yesterday, so our contribution helped them reduce their emissions while increasing our inflation rate and adding costs to households and businesses experiencing energy poverty.

It appears our elected politicians are unable to see how they are destroying our economy and bringing harm to all Ontarians; much like the “gales of November” destroyed the Edmund Fitzgerald and their crew!

PS: Grid connected solar only generated 78 MW over the day!

Industrial Wind Turbines, Solar Combined with Battery Storage is the Path to Energy Poverty

Upcoming in our locale is a push by a renewable energy company (Capstone Infrastructure) to obtain the blessing of the municipality and its residents to accept a plan to erect a 300 MW battery storage facility. We residents and municipal politicians will reputedly be told how a lithium-ion Battery Energy Storage System (BESS) will benefit the local community at an upcoming presentation.

Driving this push in Ontario is the Ministry of Energy who has recently directed IESO (independent electricity system operator) to secure 1,500 MW of “stand alone” energy storage! The foregoing is presumably related to the push for more renewable energy (wind, solar and biofuels) as the province falls in line with the full electrification mandates being imposed by the Trudeau led Federal Government and his Minister of the Environment and Climate Change Canada, Steven Guilbeault.

If Ontario’s Minister of Energy, Todd Smith had wanted, he could have easily pushed back as based on IESO’s 2021 Year in Review it shows Ontario’s generation from the electricity system was 92.5% emissions free and included exports of 17.2 TWh exceeding our gas and biofuels generation by 7.1 TWh. In other words, Ontario ratepayers’ total consumption could be considered fossil free had those exports included all of the natural gas and biofuels generated in 2021.

As if to point out the obvious, one should simply look at IESO data for November 21^st, as an example and note grid connected IWT (industrial wind turbines) delivered 70,100 MW with another 7,900 MW curtailed meaning they could have averaged about 66% of their capacity throughout the day. Those grid accepted and curtailed MW cost us Ontario ratepayers $10.4 million or around $149/MWh (14.9cents/kWh) and we exported almost 40,000 MW to our neighbours. Exports in the first 20 hours of the day were at the price of $6.91/MWh as the market price or HOEP (hourly Ontario energy price) was as low as 0.00/MWh and peaked at hour 22 at $59.92/MWh. What this demonstrates is we basically are giving away our surplus (emission free) generation for mere pennies of what we pay for it.

The question minister Smith should ponder is will battery storage reduce our generation costs or simply create wealth for the BESS owners?

BESS can allow IWT owners to double up on revenue

Anyone who occasionally looks at IESO data will quickly ascertain renewable energy such as the intermittent and unreliable IWT generation is, more often than naught, the reason why HOEP prices are as flat as 0.00/MWh during low demand hours. If those BESS can scoop up enough of that cheap power to charge their batteries, they are sitting on a gold mine. When the HOEP goes up they can sell power acquired at higher prices such as the $59.92/MWh noted above or sometimes much higher. If those BESS are owned by the same people who own the IWT generating that excess power, they can make even more money due to the “first-to-the-grid” rights they have embedded in their contracts!

Should BESS contracts be awarded they will be doing what is commonly referred to as “energy arbitrage”. In other words, they simply buy and store energy when its cheap (frequently at night) and sell/discharge it during the day when it is much more valuable!

A prior article of an existing IWT company in Ontario, coupled with their plea to add “battery storage” went into more detail pointing out the specifics of how it would generate increased revenue without benefiting ratepayers. This project is similar as while the proposed owner is not planning on locating the BESS project next to the several; IWT developments they own in Ontario; they will still be able to purchase the low-priced power via the IESO controlled grid and resell it for higher prices during high demand hours when the prices spike.

At the very least selling it to our neighbours in Michigan, New York and Quebec is a small revenue source but does help somewhat; in reducing costs to Ontario ratepayers. Who knows, perhaps, in the future, we will negotiate with those neighbours to receive “carbon credits” that can be allocated collectively to Ontario ratepayers and then sold, with the revenue generated from their sale simply applied to reduce our electricity costs!

The foregoing sure beats having a BESS in our neighbourhood and having the possible concerns of a major high intensity fire as some BESS in other countries have experienced.

Ontario Ratepayers are Back Helping Michigan Keep their Electricity Bills Low

A recent article described how Ontario’s nuclear plants were slowly coming back online after having all of the Pickering units (3,100 MW capacity) out for VBO (vacuum building outage) and two others out for refurbishment! Yesterday, as an example IESO reported at Hour 1 our baseload nuclear power generated 7,333 MWh and by Hour 24 they had ramped up and generated 8002 MWh.

The good news about the foregoing is, as we approach those cold winter days when Ontario’s daily peak demand is higher than spring and fall days, we will have sufficient capacity to meet the needs of our households and businesses.

The bad news is those IWT (industrial wind turbines) are still humming as yesterday demonstrates even though peak demand at Hour 18 only reached 15,428 MW. IESO’s forecast over the 24 hours suggested IWT would generate about 71,400 MW (61% of their capacity) but they only accepted 54,700 MW to the grid meaning they curtailed approximately 16,700 MW. As a result, we ratepayers/taxpayers paid $135/MWh for grid accepted generation and $120/MWh for the curtailed generation. The combined cost of what IESO accepted therefore cost us $9,388,500 or $171.64/MWh (17.2 cents/kWh).

If one then examines our net exports (exports minus imports) we see that we were exporting our surplus power to Michigan, NY, and Quebec and for the full day those net exports were almost 42,100 MWh and Michigan were the beneficiary of most of them. It would be good if that unneeded IWT generation was in demand but that wasn’t the case as the market price or HOEP (hourly Ontario energy price) over the 24 hours averaged a piddly $3.94/MWh.

To put the foregoing in context, the average Ontario household consumes 9 MWh annually so if that price was the standard it would amount to $35.46 for a household’s yearly energy costs. Wouldn’t that be welcomed during this period of high inflation!

So, lets look at the benefits to our neighbours in Michigan, NY, and Quebec in respect to the low HOEP price caused by surplus intermittent generation from those IWT! We ratepayers are required to pay IWT generators under their contracts for both what is grid accepted as well as what is curtailed so the combined cost yesterday for both as noted above was $171.64 MWh. If all the net exported power (42,100 MWh) came from the grid accepted IWT the cost of that to Ontario ratepayers and taxpayers would amount to $7,226,044 (42,100 MW X $171.64/MWh) and generated only $165,874 (42,100 MWh X $3.94) from their sale meaning; we were forced to absorb over $7 million in costs for just one day!

While we did import some power from Michigan, NY, and Quebec during the approximately four weeks of the nuclear outage we were paying for it at prices over ten times what we sold our power to them for yesterday.

Stop the Bleeding

It seems hard to understand why the Premier Ford Ontario led Government hasn’t passed legislation to stop the bleeding of ratepayer dollars going to the owners of those unreliable and intermittent IWT generators. At the very least he should work to obtain “carbon credits” for those “emissions free” cheap generation we sell to our neighbours. We could then sell the “carbon credits” in the market to help reduce the costs of electricity to Ontario’s ratepayers.

PS: Today (November 7, 2022, looks to be even more costly based on the first 13 hours of IESO Data.

Hey, Minister of Energy Smith, Clean Energy Credits Should Benefit Ratepayers

Many Ontarians were pleased Premier Ford recognized (sort of) inflation was harming us and gave us short-term (6 months) relief from the sales tax on gasoline of 5.7 cents a litre. In the interim with high inflation driving everything up we should be pretty sure the foregone taxes were or will be fully recovered from sales taxes applied to everything else we consume. The tax relief started on July 1^st and ends December 31^st, 2022. Looking at the recently released 2021-2022 Public Accounts it is obvious why he did that. Sales tax revenue from April 1, 2021, jumped from $26.6 billion to $30.4 billion by March 31, 2022, an increase of $3.8 billion (14.3%) so, presumably, sales taxes played a role in driving up inflation while increasing the government’s coffers to allow them to achieve an unplanned surplus!

It is interesting the Ford led government chose just one of the many sources of energy we regularly use for the gesture and ignored “electricity” which is consumed daily by almost all businesses and residents in the province. Perhaps he was of the opinion the Ontario Electricity Rebate (OER) was more than we deserve as the Provincial sales taxes on our electricity bills represent only 76.5% of the OER but it only applies to residential users! If that’s the case, he ignores the fact; those who pay the costs of that rebate are present and future taxpayers who will have to pay the accumulated debt from the OER. Kind of “in one pocket but out of the other one” tax!

Worth considering and related to the foregoing is the recent announcement by OPG stating they will be selling “clean energy credits” to Microsoft in a “first–of-its-kind deal”!

One should wonder, will Microsoft be charged sales taxes for something intangible that will serve to improve their ESG (environmental, social and governance) disclosure scores? Those will reputedly be OPG’s “carbon-free hydro and nuclear assets”. That seems quite strange as Ontario ratepayers (residential and businesses) already purchase the power that OPG hydro and nuclear provide in addition to: those contracted parties of unreliable and intermittent wind and solar generation also claiming to be “carbon-free”. We ratepayers pay for the power to keep lights on and our manufacturing base, offices, restaurants, etc. etc. operating. We are also burdened to pay the power bill for our hospitals, schools, etc. via our taxes and obliged to pay sales taxes on what we consume.

What is particularly annoying, as a ratepayer; was, what the article noted about the revenue generation from those “clean energy credits”: “OPG said revenue from the credits would also help OPG in its own commitment to achieving net zero as a company by 2040. The funds received will either go toward investments in new clean generation in Ontario, back to the ratepayer or back to the taxpayer through the province.”

From all perspectives the funds generated for the province by OPG are already substantial as OPG’s December 31, 2021 financial statements indicate. OPG’s water rental costs were $415 million (paid to the province) including $26 million for spilling water during SBG (surplus baseload generation) situations plus $239 million in pseudo income taxes. Collectively that was $654 million. What is missing from the foregoing however is the 7% sales taxes we ratepayers paid for the 77.6 TWh (terawatt hours) OPG generated and produced gross revenue of $6.877 billion. When that OPG generated power was delivered to us ratepayers we paid the sales taxes, and the province earned another $481.4 million giving the province $1.135 billion for our (taxpayers) investment in OPG.

It should be recognized the foregoing $1.135 billion doesn’t include OPG’s “Net Income Attributable to Shareholder” ie: the Province of Ontario; which was $1.325 billion. That means the “Province” claimed $2.460 billion for the 77.6 TWh OPG generated and delivered. The combined revenue added 3.2 cents/kWh to what we ratepayers consumed. The $2.460 billion is about six (6) times more than the savings of 5.7 cents a litre (approximately $400 million) we will save for the six months of a slight reduction in costs when filling our ICE vehicles with gasoline.

The return on OPG’s equity (December 31, 2021 was $15.532 billion) and the RoE (return on equity) is set by the OEB (Ontario Energy Board) at 8.4% so at $1.325 billion it is very close to the setting, however, if one adds the additional revenue the Province generated it becomes a collective RoE of 15.9% and above what most private sector power companies would hope to achieve! Unfortunately, no one sets the allowed “return on equity” for the province and there is no competition to keep rates down!

One should hope the Ford led ruling party will finally recognize their role in the gouging of ratepayers and ensure any revenues generated by the sale of those “clean energy credits” by OPG finds its way to reducing ratepayer bills rather than further spending by OPG or the province.

Conservative Conflicts Begets Confusion

Plato is credited with saying, “Strange times are these in which we live when old and young are taught falsehoods in school. And the person that dares to tell the truth is called at once a lunatic and fool.”

A couple of recent events occurred that when viewed, should strike us all as “strange” but depending on one’s perspective who is telling the truth and who is the “lunatic and fool” may well differ.

Joe Oliver, former Federal Minister of Natural Resources and Minister of Finance under the Harper led Federal Conservative Party penned an article in the Financial Post on September 1, 2022 and it castigates the Justin Trudeau led Federal Liberal Party about the damaging consequences of its green policies.

The opening two sentences of Oliver’s article were words of wisdom and common sense as he stated: “Prime Minister Justin Trudeau should be feeling isolated in his campaign against fossil fuels, especially Liquefied Natural Gas (LNG), as leaders around the world reduce their countries’ reliance on inadequate renewable energy and tone down their own rhetoric about lowering GHG emissions. But for political and ideological reasons his government cannot admit to the terribly damaging consequences of its green policies and the urgent need to fundamentally change course.”

When Greg Rickford was the Ontario Minister of Energy, Northern Development and Mines he appointed Mr. Oliver to the Board of Directors of IESO (Independent Electricity System Operator) and a couple of months later he was elected as Chair of the IESO Board of Directors. IESO is responsible for managing Ontario’s power system and defines their responsibilities as: “The IESO is the coordinator and integrator of Ontario’s electricity system. Our system operators monitor the energy needs of the province in real time – 24 hours a day, 7 days a week – balancing supply and demand and directing the flow of electricity across Ontario’s transmission lines.”

Ontario’s current Energy Minister, Todd Smith, (appointed June 18, 2021) and formerly the critic on the “energy” portfolio when the Ontario Conservative Party were in opposition) on August 23, 2022 issued a directive to IESO which contained some surprising instructions to the President. Needless to say, the directive was also copied to the Hon. Joe Oliver, P.C., Board Chair!

The directive from Minister Smith babbles on about how “Ontario is on track to acquire the electricity generation we need to power our government’s success in driving electrification and strong economic growth, including unprecedented investments that are creating new jobs in electric vehicle and battery manufacturing and green steel.”

Anyone who has followed the news about the foregoing investments in EV and battery manufacturing and green steel will be aware both the Ford led Provincial government and the Trudeau led Federal government joined hands and have handed out billions of our tax dollars to achieve those “unprecedented investments”. It is also worth noting those “new jobs” are not new as the handouts to the various companies were simply to “retain” the jobs associated with the automotive and steel manufacturers that were already here in the province.

The concept of a “net-zero” buy-in by Minister Smith seems evident with the push to both declare a moratorium on gas generation and “replacing natural gas with green fuels such as hydrogen and renewable natural gas, or the development of utility-scale carbon capture and storage” as a directive from October 27, 2021 via his “Pathway to Achieve Zero Emissions in Ontario’s Electricity System” suggests. The above seems to have been confirmed based on his comments in a recent CBC article where he clearly states:

“I’ve asked the IESO to speed up that report back to us so that we can get the information from them as to what the results would be for our grid here in Ontario and whether or not we actually need more natural gas,” Smith said Tuesday after question period.

“I don’t believe that we do.”

No estimation of the costs of the “Pathway” are noted and no castigation of the Trudeau government by Minister Smith would strongly suggest he is on the same page as Trudeau and those in the Trudeau cabinet such as Steven Guilbeault, the Federal Minister of the Environment and Climate Change. The comment above: “I don’t believe that we do” implies he is obviously conflicted with the Honourable Joe Oliver, Chair of the IESO Board.

As Plato suggests and we Ontarians should wonder; is Oliver “the person that dares to tell the truth” and Smith the one who is calling him “a lunatic and fool” or is it the other way around?

Wow, was Hour 20 a Look at the Future cost of electricity?

The market price, referenced as the HOEP (hourly Ontario energy price), at Hour 20 on August 29^th reached $571.93/MWh or 57.2 cents/kWh and that doesn’t include the GA (global adjustment) which would push the price to over 60 cents/kWh.

One should wonder have Ontario’s politicians bought into PM Trudeau’s commitments at COP 26 and are seeking to emulate what the UK and EU countries are experiencing with their push to reach “net-zero” emissions. As just one example energy price forecasts suggest in the UK they could top £7,000 per household from April 1^st, 2023 or about $10.5K in Canadian dollars.

It’s not entirely clear why the HOEP price reached the level it did at Hour 20 as it was a windy day in Ontario with storms in many areas meaning less sun generation but an exceptional day for the IWT (industrial wind turbines) owners.

Those IWT generated 64,130 MWh over the full day which meant they were operating at 54.5% of their capacity and well above their annual average generation of about 30%. What the IWT were generating in the middle of the night was unneeded power (17,484 MWh or 59.5% of capacity) and the HOEP for the first six hours averaged a piddly $14.20/MWh. The bulk of the surplus was purchased by Michigan and New York meaning Ontarians were picking up the difference between what we paid for those six hours of IWT generation and what we sold it for. It cost Ontarians $2,360,000 @ $135/MWh and we sold it for $248K @ $14.20/MWh meaning we lost $2.1 million in just six hours.

So, what happened at Hour 20 is a bit of a mystery as the peak Ontario demand hour occurred at Hour 17 reaching 21,871 MW and is now ranked as the third highest peak hour for the year. IESO were wrong in their wind forecast for Hour 20 overestimating by almost 20% as they suggested IWT would generate 2,453 MW but they fell short with only 1,993 MW actually generated so that may have caused some upward push to the HOEP. At the same hour however, natural gas generation ramped up from 4,055 MW in Hour 19 to 4,711 MW in Hour 20 so easily covered the drop in IWT generation. It may have been the variability of IWT generation over the hour as their generation bounces up and down based on wind speed and gusts causing the HOEP to reach higher levels in the 5 minute intervals of demand and trading volumes.

While the spike in the HOEP may have been an anomaly the concern should be what the upcoming future will be! The major concern should be due to the very recent IESO directive from Todd Smith, Minister of Energy wherein he “asked IESO to evaluate a moratorium on the procurement of new natural gas-fired generating stations in Ontario and to develop an achievable pathway to phase out natural gas generation and achieve zero emissions in the electricity system.”

With the planned shutdown of the Pickering Nuclear Plants by 2025 and their almost 3,000 MW of capacity coupled with the current 8,500 MW capacity of our natural gas plants we should all wonder how Ontario will avoid blackouts or restrictions on electricity use in the near future?

At the same time, we should also anticipate electricity rates will skyrocket in a similar fashion to what we are witnessing in the UK and the EU countries and drive out our businesses while creating “energy poverty” for all but an elite group of Ontarians.

One should ask, is that the game plan for the Ford led Provincial Government?

Lion Electric, King of the EV Jungle Grants?

A recent article in the Financial Post titled: “Lion Electric posts profit as sales and subsidies pick up speed” was eye-catching simply for it’s inference on how it was worded, and suggesting “subsidies” played a role in it posting a profit. The article went on to quote their chief executive as follows; “We delivered the highest quarterly number of vehicles ever with 105 deliveries in Q2,” said Marc Bédard, Lion’s chief executive. The article went on to state: “The good fortune is set to continue, at least for the next little while. As of Aug. 4, the Quebec company’s order book was flush, with 2,357 vehicles valued at $575 million and 226 charging stations representing $3 million.”

Curiosity piqued, a look at how Lion Electric’s stock has performed on the TSE was a must and as it turned out the price over the past year fell from $18.47 CAD a share on August 9, 2021 to a close of $6.95 CAD on August 5, 2022 for a drop of $11.52 (-62.4%) a share over the past year. Hmm, wonder why, as one would assume a company roaring to a profit would attract investors but that doesn’t seem to be the case for Lion Electric? Maybe it’s not the king of the school bus and truck EV jungle?

Taxpayer subsidies

An article two weeks before the above article appeared in the FP and headlined “Lion Electric CEO predicts Ottawa’s new EV-truck subsidy will boost demand”. The following quotes from the article might explain (partially) why Lion suddenly achieved profitability! The article stated:“Stacking the Quebec subsidy of $144,000 on top of the federal grant would result in a total rebate of nearly $250,000 on the Lion6 model, putting it on par, price-wise, with a comparable diesel-powered truck.” And a further sentence said: “Similarly, stacking the Quebec rebate of $200,000 on the federal grant for the Lion8T would result in a total rebate of $350,000, making it just slightly more expensive than its non-electric competitors.”

Yet another article appearing in e-magazine Sustainable Bus in March 2022 was about how the Quebec government was investing $18 million into 120 school buses and stated “The subsidy for each bus is worth $150,000. The government’s plan is to electrify 65 per cent of its school buses by 2030.” It also noted: “Quebec announced last year that the government will fund the majority of the $5 billion purchase of electric buses with $3.65 billion of the contract supplemented by the federal government”! If one goes back to examine the 2nd Quarter results for Lion you note the 105 deliveries consisted of 90 school buses and 15 trucks generating revenue of US $29.5 million and if we use the $150K per school bus grant and $300K per truck grant the government subsidies amount to approximately CAD $15 million representing approximately 40% of gross revenue in the quarter. Without those subsidies the “operating loss” would have amounted to CAD $43 million! With those kinds of subsidies, we shouldn’t be surprised Lion is receiving more orders.

Source of Grant Money

As noted above the grants to Lion are sourced principally from the Federal taxpayers with additional funds provided by Quebec taxpayers but in the latter case we should probably surmise it also is funded in large part via those same Federal taxpayers via the “equalization” payments the Federal government pass out. As noted in the undated letter from Finance Minister Freeland sent to the Quebec Minister of Finance, Eric Girard, Quebec will be handed $13.666 billion or 62.35% of the total equalization payments to the five provinces who receive them, for the 2022-23 year. Surely that kind of a handout goes a long way to allowing the Province of Quebec to be able to provide grants without tapping into their own tax revenues!

School Bus Orders

One of the largest orders received by Lion for those electric school buses came from First Student a company whose head office is in Cincinnati, Ohio with operations in the US and seven of Canada’s provinces. Back on May 17, 2021 a press release they issued announced the “largest zero-emission school bus order of 260 buses”. Assuming the Quebec government handed out the $150K per bus would suggest $39 million will go or has gone to Lion Electric for those buses.

Another order for Lion’s buses came from Transdev Canadaa public private transport company limited with a Board of Directors and jointly owned by the Caisse des Depots Group (66%) and the Rethmann Group (34%) a German family owned company. It should be noted CDPQ is the Quebec version of the Canada Pension Plan so they invest the contributions of all Quebec taxpayers to the plan. The order from Transdev Canada was made in early July for another 30 Lion electric school buses in addition to the 27 previously ordered and reputedly already in service. So, at the $150K per school bus handed out by the province another $8.6 million will find its way into the Lion Electric bank account and future recipients of CDPQ pension payments should cross their fingers those school buses will be as efficient as those fossil fueled ones or Transdev might turn out as a negative investment.

It seems obvious that Lion Electric has twigged the politicians into being convinced electrifying everything is the way to go and will create jobs and benefits to the Quebec economy (possibly via Quebec Hydro for charging those buses)? As a result Quebec politicians have somehow decided they need to hand out taxpayer funded grants to save the world from “climate change” while picking what they consider new technology and the companies that will benefit! As an observer over several decades, I am skeptical politicians have ever been able to pick winners but have often picked losers’!

My vote for “King of the EV Grants” goes to Lion Electric!