Ontario’s cyclonic wind costs keep heading higher

Compare power output from wind and the cost to consumers between 2010 and 2016 and we learn this: we’re paying more for intermittent wind power, produced out-of-phase with demand

More wind=more cost [Photo: Dorothea Larsen]

In 2010, industrial wind turbines (IWT) in Ontario represented total installed capacity of approximately 1,200 megawatts (MW); they generated 2.95 terawatt hours (TWh*) of transmission (TX) and distributed (DX) connected electricity.  The power from wind cost Ontario’s ratepayers about $413 million for those 2.95 TWh, about 2.1% of total 2010 consumption.  The cost of IWT generation in 2010 was 3.1% of total generation costs (Global Adjustment [GA] + Hourly Ontario Energy Price [HOEP]) and represented 33.5% of “net exports”** of electricity to our neighbours in Michigan, New York, and others.

Wind was over 90% of exported power

Jump to 2016: wind turbines represented installed capacity of almost 4,500 MW, and generated and curtailed*** TX and DX connected electricity totaling 13.15 TWh.  The cost to Ontario’s ratepayers jumped to $1,894.3 million — about 12.2 % of total generation costs.  The 13.15 TWh of generation was 7.9% of Ontario’s total consumption but 94.9% of net exports.

The cost per kilowatt hour of electricity generated by wind in 2010 was 14 cents and in 2016 it had increased to 17.5 cents, despite downward adjustments to the contracted values between 2010 and 2016.   That cost doesn’t include the back-up costs of gas generation when the wind doesn’t blow and we need the power, nor does it include costs associated with spilled hydro or steamed off nuclear, but it does include the cost of curtailed wind, which was 2.33 TWh in 2016 and just shy of total wind generated electricity in 2010.

In the seven years from 2010 to 2016, Ontario’s electricity ratepayers picked up total costs of $7.746 billion for 56.9 TWh of grid-accepted and curtailed (4.9 TWh) wind-generated electricity.   The actual value given to those 56.9 TWh by the HOEP market was just shy of $570 million meaning ratepayers were forced to pick up the difference of $7.166 billion for power that wasn’t needed.  The foregoing is based on the fact we have continually exported our surplus generation since the passing of the Green Energy Act and contracted for IWT generation at above market prices.

During those same seven years, Ontario had “net exports” of 85.95 TWh while curtailing wind, spilling hydro and steaming off nuclear. And, at the same time, we were contracting for gas plant generators that are now only occasionally called on to generate electricity yet are paid considerable dollars for simply idling!

Refinancing wind payments

As noted above the cost of wind generation in 2016 was almost $1.9 billion and represented 15.3% of the Global Adjustment pot. That cost was close to what was inferred in an Energy Ministry press release headlined: “Refinancing the Global Adjustment” but suggesting it was taxpayer owned “infrastructure”:  “To relieve the current burden on ratepayers and share costs more fairly, a portion of the GA is being refinanced. Refinancing the GA would provide significant and immediate rate relief by spreading the cost of electricity investments over the expected lifecycle of the infrastructure that has been built.”

What’s really being refinanced is a portion of the guaranteed payments to the wind and solar developers who were contracted at above market rates! So, what is being touted as a 25% reduction includes the 8% provincial portion of the HST and a portion of annual payments being made to wind and solar developers for their intermittent (and unreliable) power.

Premier Wynne’s shell game continues!

(C) Parker Gallant

May 22, 2017

Note: Special thanks to Scott Luft for his recent chart outlining the data enabling the writer to complete the math associated with this Liberal shell game!

*    One  TWh equals 1 million MWh and the average household in Ontario reputedly consumes 9 MWh annually, meaning 1 TWh could power 111,000 average household for one year.

**   Net exports are total exports less total imports.

*** Ontario commenced paying for “curtailed” wind generation in September 2013.

Free power for a month for 4,000 Ontario families? Here’s how we missed that

How many homes could have benefitted from the excess power Ontario wastes, or sells off cheap?

Recently reading comments on an article related to the cost of wind power generation in Ontario, I was struck by a simple message.

The commenter had obviously visited the IESO “Data Directory”  and reviewed one item labeled Intertie Flows; he observed that IESO had exported 3,000 MWh (megawatt hours) in an hour.   He then observed that the exported power could have supplied 4,000 homes with free power for a month.  (Here’s the math: 3,000 MWh equals 3 million kWh; the “average” Ontario household consumes 750 kWh per month, so divide the 3 million by 750 and the answer is 4,000.)

This simple fact has not been picked up on by the media and yet, it is an easy way to shed more light on Premier Wynne’s “mistake” and our rising electricity rates.   The commenter also suggests going further and examining a full quarter to determine how many Ontario households would benefit from no exported power.

Excess wind and solar costs us

To be fair, while Ontario has frequently exported 3,000 MWh, we also import electricity generated elsewhere presumably at similar market prices. Those net exports or net imports (very infrequent for Ontario) are contained in the Intertie* hourly reports posted by IESO. Let’s look at the first three months of the current year.

To begin, IESO’s Monthly Market Reports for January, February and March of 2017 indicate Ontario’s “average net intertie schedule” for the first quarter of the current year totaled 2,909,000 MWh. While that was happening, industrial-scale wind turbines were generating over 3.9 million MWh in the same three months, and were also required (by IESO) to curtail (and be paid for) another 536,000 MWh.  So, the wind power developers picked up about $620 million for those three months.

To make matters worse, the average of the Hourly Ontario Electricity Price (HOEP) received (via the traded market) over those three months was only $22.72 per MWh or 2.27 cents per kWh.   That means Ontario received $66.1 million for the sale of the 2.9 million “intertie” MWh, while the average cost paid by ratepayers at 11.1 cents/kWh means the cost of those exports was almost $324 million.

Reducing power bills by 25% is peanuts—kill the contracts

Let’s go farther: if 1.3 million (28% of all residential households) of Ontario’s average ratepayers could have purchased those net exported kWh over the three months at the same price they were sold for, the 2250 kWh they consumed would have cost them $51 instead of the $250 they were billed. That would have reduced their cost of electricity by 390%. That makes Premier Wynne’s supposed 25% electricity bill reduction pale in comparison.

If the Premier really wants to lessen the burden on future ratepayer bills she should immediately cancel any wind and solar contracts that have not broken ground, and suspend any all future procurement of these unreliable and intermittent generation sources.

 

*Intertie is defined as an interconnection permitting passage of current between two or more utility systems.

Wynne spin and the Fair Hydro Plan, Part 3

The recent 2017/2018 budget speech from Finance Minister Sousa had this to say about the Fair Hydro Plan.

“People from across the province shared their concerns about rising electricity bills. We listened and we are responding. Recognizing that there needed to be a fairer way to share the costs of building a cleaner, more modern and reliable electricity generation system, we are taking action to reduce electricity costs. Through Ontario’s Fair Hydro Plan, starting this summer, household electricity costs would be lowered by an average of 25 per cent. We are also capping rate  increases to inflation for the next four years. Low‐income families, and those living in rural, remote or on-reserve First Nation communities, would receive additional relief as well.”

Impressive words signaling reallocation of charges to taxpayers previously paid by ratepayers as well as direct relief. The budget’s forecast however doesn’t jibe with the words contained in the speech from Premier Wynne when she announced the relief March 2, 2017 and said, “Although the refinancing occurs within the electricity system and is accounted for separately, the overall fiscal impact of this relief and restructuring will cost the province about $2.5 billion over the next three years.”

The Premier’s remarks suggest relief will cost about $833 million annually but the budget notes the “Electricity Rate Relief Programs” are forecast to cost $1.438 billion.

The budget estimate(s) presumably include the costs associated with the OESP (Ontario Electricity Support Program) for low-income families. Those “heat or eat” households were driven to that situation by climbing electricity rates caused by lucrative contracts handed out by the current and past energy ministers.  As well, free delivery costs for First Nations communities will become standard and taxpayer supported as will the RRRP (Rural or Remote Rate Protection) in low-density regions.  Also added to the pot is an “Affordability Fund” for households who can’t afford energy efficiency upgrades.  Finance Minister Sousa’s budget obviously forecasts those costs to taxpayers at over $600 million more than the Premier!  So what are Ontario’s taxpayers/ratepayers to believe?

Based on the foregoing we must assume the Premier’s $2.5 billion over three years are to only cover the programs moved to other ministries and will cost taxpayers about $4.5 billion if the relief ends three years hence.  Based on the record of this government we shouldn’t expect the relief programs to end in three years!

The other part of the Premier’s statement was: “In addition, this rate relief is designed to last. After we bring bills down by 25% we will hold them there with rates rising only with inflation — or roughly 2% — for at least four years.”  Once again the Premier avoids telling us the whole story. Other associated documents the general public have a difficult time locating tell another story.  One such document was the “Technical Briefing” appendix attached to a directive dated March 2, 2017 sent to the OEB by Energy Minister Glenn Thibeault.  Under a heading labeled “Refinancing the Global Adjustment” we find:  “Under current forecasts, the immediate reduction (i.e., the financed portion) in the GA would be about $2.5 billion per year on average over the first ten years,  with a maximum annual interest cost of $1.4 billion.”

What that means is, they are “kicking the can down the road” by refinancing $25 billion of contract and adding $14 billion in interest costs. At some point in the not too distant future (year 5?) electricity rates will need to jump to accommodate the $39 billion of accumulated debt within the portfolio.  What is being refinanced are those 20-year contracts for wind, solar and gas generation, yet the contracts will have expired and should, yet we don’t know if they will still be operational!

Interestingly enough, if we include the taxpayer-related relief costs of at least $4.314 billion ($1,438 million X 3 years) “kicking the can down the road” will labour taxpayers/ratepayers with $43.3 billion in costs. That $43.3 billion exceeds what was supposed invested in electricity generation ($35 billion) and is only $6.7 billion short of what they claim has been invested in the electricity system as this quote from the “Technical Briefing” notes:  Between 2005 and 2015, government invested more than $50 billion in the electricity system, including $35 billion in electricity generation to restore reliability, replace coal and meet environmental objectives.

So what are taxpayers and ratepayers seeing when they look ahead? First, a new debt associated with the electricity system will burden us with an additional $43.3 billion on top of the reputed $50 billion the Premier Wynne led government claims has been invested.  That accumulated debt will require payback which will drive rates and taxes higher.   Secondly many of the $35 billion investments in electricity generation and the $15 billion of investments in the electricity system will have reached their end of life and will require replacement.

The forecast for ratepayers is they should expect to see a new charge on their future hydro bills. Logic suggests the new charge should be referred to as the LDRC (Liberal Debt Retirement Charge)!

 

 

 

Wynne spin and the Fair Hydro Plan–Part 2

Part 1 in this series featured Premier Wynne’s assertion that “In the past few years we’ve invested more than $50 billion in electricity infrastructure — new dams in the south, new towers in the north, $13 billion to refurbish nuclear power plants alone and billions more to ensure new transmission and distribution lines everywhere.”

She is obviously spinning tales! Those “new dams in the south” are nowhere to be seen unless she is talking about “Big Becky” the tunnel under Niagara Falls at a cost of $1.5 billion ($600 million over budget) and the “new towers” in the north are presumably the industrial wind turbines (IWT) erected on the shores of Lake Superior where they despoil the landscape made famous by the Group of Seven.   And most of those “new transmission and distribution lines” were added to accommodate wind and solar developments, not to improve the existing electricity infrastructure!

The Premier’s spin about bringing bills down by 25% and her declaration “This is the largest cut to electricity rates in the history of Ontario” ignored the facts when she references “the elephant in the room” claiming it took “too long to come to grips with” how costs had increased.

The Premier claiming the “largest cut to electricity rates” should have admitted to how much rates have increased, but that admission would have failed to win back any of her former supporters. The “elephant” was the 138% increase Ontario’s average residential ratepayer has seen in time-of-use rates since May 1, 2008 in just the raw commodity (electricity) cost — that increased from $420 a year to $1,002.   The $582.00 increase is exclusive of the provincial portion (8%) of the HST!  The cost to small and medium-sized businesses was naturally a lot worse, as their consumption is much higher.

The Premier has already removed the provincial tax portion on out bills so the remaining reduction will reduce the average residential bill by 17% or $170 on the commodity cost for a monthly drop of $14. That’s almost the same amount as the Wynne government suggests the “cap and trade” tax will cost us!

How did we get to a 138% increase?

Let’s look at where that 138% increase came from. Based on the Ontario Energy Board’s Yearbook of Distributors for 2008* and 2015** the “cost of power” increased from $9.031 billion to $13.971 billion, an increase of $4.940 billion despite a reduction in consumption of 4.2 terawatts (enough to supply 465,000 average households).  As well, “average” consumption fell while the number of customers increased by 362,000!

That additional annual cost for less power of $4.940 billion was the product of the GEA passage in early 2009 which resulted in contracted developers being paid above market prices for intermittent, unreliable wind and solar generation requiring back-up from new gas plants.

A prior article dealing with 2016 costs for wind, solar, gas and conservation was based on information from IESO that allowed me to estimate an annual cost of $4.123 billion made up of: wind-$1.566 billion, solar-$1.493 billion, gas back-up-$734 million and conservation-$300 million.  Not included was an estimate for the low-income support program or OESP (Ontario Electricity Support Program) which was included in the recent budget for the 2016/2017 year as $400 million.  Also not included are the costs of spilled hydro and steamed-off nuclear (about 5 TWh or enough to power 550,000 average households) which would add another $300 million bringing the estimate to $4.823 billion and close to the 2008/2015 increase of $4.940 in the commodity cost***.

The next article, Part 3 in this series, will examine Finance Minister, Sousa’s recent budget. We will do our best to identify the budgeted costs of the “Fair Hydro Plan” as they make their appearance in the forecasts.   Just how much are the Premier Wynne led government kicking “down the road” for future generations to pay?

 

* Note that both the cost of power and the consumption information in the OEB’s Yearbook do not include: First Nation Distributors, Hydro One Remotes, and Direct Connections to the Transmission Grid

** The OEB has not yet posted the 2016 information.

*** The Yearbook for the 2008/2015 comparison indicates distribution costs increased $767 million in this time frame which was a 21.6% increase and slightly higher than the cost of living increases.

Wynne spin and the “Fair Hydro Plan”

Re-reading Premier Wynne’s statement of March 2, 2017 on her announcement of Ontario’s Fair Hydro Plan, one is struck by the avoidance of the truth, the sudden empathy displayed and her blatant claims.   As one example, she suddenly noticed “Electricity is not a frill — it’s an essential part of our daily lives.”

The Premier has obviously forgotten her party clearly treated it as a “frill” by taking advice from environmentalists who persuaded her (and predecessor Dalton McGuinty) that industrial wind turbines (IWT) and solar panels could easily replace the power generated by coal plants.  They were so taken by those claims the energy minister didn’t bother to do a cost-benefit analysis as noted by Ontario’s Auditor General (AG).  They also charged ahead installing “smart meters” at a cost of $2 billion (AG report) and instructed the OPA (Ontario Power Authority) to acquire 10,500 MW of renewable energy principally in the form of IWT and solar panels.

The year prior (2008) to the creation of the Green Energy Act, Ontario’s coal generation plants produced 23.2 TWh (terawatts) or enough electricity to supply 2.4 million (55%) average households .  In 2016 wind and solar* collectively and intermittently generated 14.2 TWh — 9 TWh less than coal plants generated in 2008.   The collective cost of wind and solar and their back-up (gas) in 2016 was approximately $3.8 billion or 27 cents per kilowatt (kWh,) whereas the cost per kWh of coal power generated in 2008 was 5.5 cents/kWh (OPG annual report).

Renewables: five times more costly

In short, the collective cost of electricity supplied by renewables and their back-up (gas) to replace coal generation turned out to be five times more which clearly raised the cost of the “frill,” but our Premier(s) and Energy Ministers were apparently unaware** costs were rising to that extent.

On the latter point the Premier in her statement claims: “But it’s not as if I’ve been unaware of the challenge. I have seen the rising rates. My family and I get a bill like anyone else.”  Premier Wynne’s salary in 2016 was $208,974.00 and in 2006 was $108,031.00 so she has seen a pay increase of 92% in 10 years.  It’s doubtful she was impacted by the $536,84 average annual increase she experienced in her cost of electricity as it represents less than one day’s pay at her current compensation level.

The Premier’s statement blames rate increases on past governments and claims since the Liberals regained power in 2003 they had to engage in “fixing a system that had been structured unwisely”.  Naturally, the 2003 blackout (caused by a fault in Northern Ohio) is blamed for the upgrade by the Premier to obscure their contracting of unreliable and intermittent wind and solar generation at above market prices.  The Premier now claims the “electricity grid” they created “is second to none.” And yet, the AG noted in  her December 2015 annual report that power outages increased 24% and lasted 30% longer!

Later in her statement the Premier notes “But the way we financed those investments was a mistake.”  The disturbing part of the statement about “those investments”, was Premier Wynne’s assertion “In the past few years we’ve invested more than $50 billion in electricity infrastructure — new dams in the south, new towers in the north, $13 billion to refurbish nuclear power plants alone and billions more to ensure new transmission and distribution lines everywhere.”

That part of the Premier’s spin will form the basis of Part 2, in this series, tomorrow.

 

* Wind and solar generation are classified as “base-load” generation whereas coal was strictly used for “peaking” (high demand periods) purposes.

** The writer has consistently sent Premier Wynne and her predecessor along with the various Energy Ministers a link to every article written no matter where it appeared.

April winds blow in high wind power costs

How badly were ratepayers hit? Millions upon millions for power produced out of phase with demand…

The Independent Electricity System Operator or IESO’s 18 month outlook report uses theirMethodology to Perform Long Term Assessments” to forecast what industrial wind turbines (IWT) are likely to generate as a percentage of their rated capacity.

The Methodology description follows.

“Monthly Wind Capacity Contribution (WCC) values are used to forecast the contribution from wind generators. WCC values in percentage of installed capacity are determined from actual historic median wind generator contribution over the last 10 years at the top 5 contiguous demand hours of the day for each winter and summer season, or shoulder period month. The top 5 contiguous demand hours are determined by the frequency of demand peak occurrences over the last 12 months.”

 The most recent 18-month outlook forecast wind production at an average (capacity 4,000 MW growing to 4,500 MW) over 12 months at 22.2%, which is well under the assumed 29-30 % capacity claimed by wind developers. For the month of April, IESO forecast wind generation at 33.2% of capacity.

April 2017 has now passed; my friend Scott Luft has posted the actual generation and estimated the curtailed generation produced by Ontario’s contracted IWT.   For April, IESO reported grid- and distribution-connected IWT generated almost 703,000 megawatt hours (MWh), or approximately 24% of their generation capacity. Scott also estimated they curtailed 521,000 MWh or 18 % of generation capacity.

So, actual generation could have been 42% of rated capacity as a result of Ontario’s very windy month of April 2017, but Ontario’s demand for power wasn’t sufficient to absorb it! April is typically a “shoulder” month with low demand, but at the same time it is a high generation month for wind turbines.

How badly did Ontario’s ratepayers get hit? In April, they paid the costs to pay wind developers – that doesn’t include the cost of back-up from gas plants or spilled or steamed off emissions-free hydro and nuclear or losses on exported surpluses.

Wind cost=22.9 cents per kWh

For the 703,000 MWh, the cost* of grid accepted generation at $140/MWh was $98.4 million and the cost of the “curtailed” generation at $120/MWh was $62.5 million making the total cost of wind for the month of April $160.9 million.   That translates to a cost per MWh of grid accepted wind of $229.50 or 22.9 cents per kWh.

Despite clear evidence that wind turbines fail to provide competitively priced electricity when it is actually needed, the Premier Wynne-led government continues to allow more capacity to be added instead of killing the Green Energy Act and cancelling contracts that have not commenced installation.

* Most wind contracts are priced at 13.5 cents/kilowatt (kWh) and the contracts include a cost of living (COL) annual increase to a maximum of 20% so the current cost is expected to be in the range of $140/MWh or 14cents/kWh.

CanWEA gets it wrong on energy costs: university professor

University professor in engineering and environment says CanWEA guilty of “willful blindness”; quotes him incorrectly in statement on energy costs

Just a few days ago, I wrote that the Canadian Wind Energy Association (the trade association for the wind power industry, also known as CanWEA) posted a statement by its Ontario representative that people who say wind power is adding to Ontario’s electricity bills are misleading the public. Ms Gianetta referred to University of Waterloo professor Natin Jathwani to support her views.

Professor Nathwani e-mailed me in response to the claims made by Ms. Giannetta’s in her recent post on CanWEA’s website, which I repeated in “Wind power lobby myth buster is busted”.

Professor Nathwani’s email:

Dear Mr Gallant:

In your Blog, you have cited Ms. Giannetta’s post on CanWEA’s website on April 24, 2017 as quoted below:

Her article points to two articles that purportedly support the “myth” she is “busting,” but both require closer examination. She cites Waterloo professor Natin Nathwani’s, (PhD in chemical engineering and a 2016 “Sunshine list” salary of $184,550) article of March 6, 2017, posted on the TVO website, which supports Premier Wynne’s dubious claims of “a massive investment, on the order of $50 billion, for the renewal of Ontario’s aging electricity infrastructure.” Professor Nathwani offers no breakdown of the investment which suggests he simply took Premier Wynne’s assertion from her “Fair Hydro Plan” statement as a fact! It would be easy to tear apart Professor Nathwani’s math calculations — for example, “The total electricity bill for Ontario consumers has increased at 3.2 per cent per year on average” — but anyone reading that blatant claim knows his math is flawed!

First and foremost, the record needs to be corrected since Ms Giannetta’s assertions are simply incorrect and should not be allowed to stand.

If she has better information on the $50 billion investment provided in the Ministry of Energy’s Technical Briefing, she should make that available.

The breakdown of the investment pattern in generation for the period 2008-2014 is as follows:

Wind Energy $6 Billion (Installed Capacity 2600 MW)

Solar Energy $5.8 Billion (Installed Capacity 1400 MW)

Bio-energy $1.3 Billion (Installed 325MW)

Natural Gas $5.8 Billion

Water Power $5 Billion (installed Capacity 1980 MW)

Nuclear $5.2 Billion

Total Installed Capacity Added to the Ontario Grid from 2008-2014 was 12,731 MW of which Renewable Power Capacity was 6298MW at a cost of $18.2 Billion.

For the complete investment pattern from 2005 to 2015, please see data available at the IESO Website.

In sum, generation additions (plus removal of coal costs) are in the order of $35 billion and additional investments relate to transmission and distribution assets.

I take strong exception to her last statement suggesting that the 3.2 percent per year (on average) increase in total electricity cost from 2006 to 2015 in real 2016$. The source for this information is a matter of public record and is available at the IESO website.

Ms Giannetta’s assertion is complete nonsense because she does not understand the difference between electricity bill and generation cost. Let Ms Gianetta identify the “blatant flaw.”

As for the electricity bill that the consumer sees, there is a wide variation across Ontario and this is primarily related to Distribution.

The Ontario Energy Board report on Electricity Rates in different cities provides a view across Ontario:

For example, the average bill for a for a typical 750kWh home Ontario comes is $130 per month.

In Toronto it is $142, Waterloo at $130 and Cornwall at $106. On the high side is Hydro One networks is $182 and this is primarily related to cost of service for low density, rural areas.

Your Table 2 Total Electricty Supply Cost is helpful and correctly highlights the cost differences of different generation supply.

Only wilful blindness on Ms Giannetta’s part would suggest that wind and solar are coming in at a low cost.

Warmest regards,

Jatin Nathwani, PhD, P.Eng

Professor and Ontario Research Chair in Public Policy for Sustainable Energy Executive Director, Waterloo Institute for Sustainable Energy (WISE)

Faculty of Engineering and Faculty of Environment Fellow, Balsillie School of International Affairs (BSIA)

University of Waterloo, Waterloo, ON