Rising costs of electricity generation not stopping in Ontario

Ontario’s six-month electricity summary shows that the new government’s promise of cutting costs is going to be tough to achieve. Is it impossible?

IESO finally released their June “Monthly Summary Report” allowing one to determine if Ontario ratepayers consumed more or less electricity in the first six months of 2019 compared to 2018.  As it turns out, grid-connected (TX) consumption was down by 270,000 megawatt hours (MWh), dropping from 66,847 GWh (gigawatt hours) to 66,577 GWh.

Ontario’s gross exports also dropped nominally from 9,791 GWh to 9,718 GWh, but the cost to Ontario ratepayers (due to a higher GA [global adjustment])* in 2019 is approximately $1 billion, and in 2018 up to the end of June, the cost was less at approximately $920 million. The combined average as at June 30th of the HOEP and the GA jumped by $7.14 per MWh for Class B ratepayers from 2018, meaning it added about $346 million in additional costs in the six months.  While most of those increased costs won’t suddenly show up in November when rates are reset by the OEB, it will accumulate in the “Global Adjustment Modifier”** and will hit ratepayers and taxpayers in the future.

Hydro One’s six-month results:                                                                            Comparing the consumption drop IESO reported to Hydro One’s six-month report is interesting: they noted “Electricity distributed to Hydro One customers” actually increased by 294 GWh from 13,517 GWh to 13,811 GWh or 2.2%.  Revenue (net of purchased power) from Hydro One’s local distribution customers however was up by $134 million*** or an impressive 17.7% mainly due to rate increases granted by the OEB.  Transmission revenue was down $49 million (5.8%) as Hydro One stated: “due to cooler weather in the 2nd Quarter” and “lower peak demand”. Despite the overall $85 million revenue jump, Hydro One’s net income was down $96 million as they took the hit for the aborted Avista acquisition along with increases in financing charges and higher OMA costs.

The net income drop meant Hydro One paid out 84.2% ($282 million) of their net income via dividends to shareholders. This was in excess of their targeted payout rate of 70% – 80%. Ratepayers should hope the OEB takes this into account during present and future rate application reviews as, to the best of my knowledge, municipally owned LDC (local distribution companies) payout ratios are in the 50%-60% range! Toronto Hydro, as one example earned $167.3 million in 2018 and paid out $93.9 million in dividends to the City of Toronto for a 56.1% dividend rate. Retaining equity helps keep rates down!

OPG’s six-month results:

Ontario Power Generation just released their financial results for the first six months of 2019 and it looks like they are back in business, generating more electricity and big profits.  For the first six months of the current year they generated 39.3 TWh versus 36 TWh in 2018 increasing their percentage of TX generation consumed by Ontario ratepayers from 53.9% to 59%.  As well, “Income before interest and income taxes” for the “Electricity generating business segments” was up by 44.4%  to $715 million from $496 million.  While some of the increase was due to increased generation, most of it was due to the fact that the OEB granted substantial increases for both nuclear (increased to 8.1 cents/kWh from 7.5 cents/kWh [+8%]) and hydro (increased to 4.5 cents/kWh from 4.2 cents/kWh [+7.1%]) having sat on the rate application approvals**** for a considerable time.  Additionally, OPG were paid for 2.2 TWh of spilled hydro in 2019 versus 2 TWh in 2018 adding $15 million to revenue; however, the real shocker in the reported results was the fact they show OMA costs dropped $35 million.

Industrial wind turbines six-month results:   Thanks to Scott Luft’s data, wind power’s contribution (if one can call it that) for the six months for 2019 was up all-in (TX and DX [distribution connected] plus curtailed) slightly to 7.3 TWh versus 6.9 TWh in 2018. The overall cost however, was higher jumping from approximately $955 million to $1.079 billion.  Coincidently, the 7.3 TWh of 2019 is 83% of gross exports versus 80.9% of 2018’s gross exports.  That simply demonstrates the fact that wind turbines do nothing more than add to the costs of generating electricity in Ontario.  We could have easily done without their generation and their added costs!  Many people who have experienced health problems caused by the audible and inaudible noises produced by the turbines would also welcome their demise.

Conclusion:                                                                                                                                     One can determine from all this that the rising cost of electricity generation in Ontario has not slowed or stopped despite the change of government just over one year ago.

The damage caused through implementation of the Green Energy and Green Economy Act in 2009 continues and it is difficult to see how the current government will reverse the harm the GEA caused.

PARKER GALLANT        

*The GA pot only affects Ontario ratepayers as the market price (HOEP) is the price surplus electricity is sold at in the export market.                                                                                                                                                **The Ontario Minister of Energy announced future rate increases would be held to the rate of inflation.                                                                                                                                             ***In the 6-month comparison Hydro One’s average “Delivery” charge increased from 5.59 cents/kWh to 6.44 cents/kWh or 15.3% for their 1.3 million customers.                                                                                                                                        ****This was noted by the Energy Minister when passing the “Fixing the Hydro Mess Act”.

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Ontario electricity records smashed in June

And no, that didn’t make your life better

The month of June came and went and while several records were set, the media paid no attention.

Let’s start with why it took IESO until early August to release their Monthly Market Summary for June with the rest to follow!

IESO reporting: The IESO webpage where one accesses the daily and monthly summaries states the following: “The monthly report follows the Settlement Calendar for the release of Preliminary statements, generally in the middle of the following month.” While this may not be a record for late reporting it certainly doesn’t live up to their claim. They might want to edit that statement.

Ontario ratepayers’ consumption: The IESO Monthly Market Summary disclosed Ontario’s consumption was less than 10.6 TWh (terawatt hours) and, looking back over the past ten years (since passage of the GEA) June 2019’s TX (transmission-connected), consumption was the lowest. Possibly a record low.

 Curtailed wind: While the amount of curtailed wind (paid for but not generated) wasn’t the highest ever, the percentage of curtailed wind was a new record according to my friend Scott Luft who does an excellent job every month at estimating it, and provides data well before it is made available by IESO.  In June, Scott estimated 390,567 MWh of DX connected wind was curtailed versus 381,946 MWh grid-accepted. The curtailed wind represented 50.6% of what they could have generated and cost ratepayers $46.868 million via the Global Adjustment (GA) pot.

Grid-accepted wind power’s value: Scott also keeps track of the HOEP rate when wind is added to the grid and for June, he noted the HOEP valued wind at 0.17 cents/MWh.  We ratepayers pay wind generation companies an average of $135.00/MWH while the electricity trading market, i.e., HOEP valued their generation for pennies.  This is a record since Scott commenced tracking IESO data. Grid-accepted wind was HOEP valued at $65,000.

Global Adjustment sets a record: On Page 22 of IESO’s Monthly Market Summary they provide the Arithmetic and Weighted Average of both the GA and the HOEP and as it turned out, the GA hit a new record high for both at $140.96/MWh and $142.11MWh respectively.  This record high GA signals a high transfer to the Fair Hydro Plan (FHP) instituted by the Wynne government to reduce residential ratepayer’s electricity bills.

Monthly transfer to the FHP sets a record: The FHP transfer is referred to as the “GA Modifier” and it set a record for June coming in at $329.8 million, or 32.3% of the June GA cost ($1,018.2 million) for Class B ratepayers. Both the amount of the transfer and the percentage established new records.

HOEP sets a new record low: IESO’s “Monthly Market Summary” page 22 also contains the monthly Arithmetic and Weighted Average of the month’s HOEP value and they were respectively $3.68/MWh and $4.83/MWh and both were new lows.

Contribution by ratepayers to net exports sets a record:  As sales of surplus electricity to our neighbours doesn’t include the GA costs our net exports (surplus grid generation) for the month were adversely affected by the low HOEP.  Net exports for the month were 1.7 TWh (enough to power 2.2 million average residential households for the month) and generated approximately $8.2 million at $4.83/MWh but cost ratepayers about $241.6 million at $137.28/MWh meaning the loss for the month of $233.4 million was added to the GA pot.

Conclusion                                                                                                                                      What all this demonstrates is that there is something severely wrong with our electricity system in Ontario.

While wind and solar clearly played a significant role in driving up our electricity costs as it turns out, for June, a large portion of the record costs came about as OEB approved rate riders for OPG. Some of those are related to OPG’s nuclear refurbishment whereas other increases are due to OPG rate applications that were before the OEB for several years.  The latter are related to variance accounts including pension and other post-employment benefits in the hundreds of millions of dollars.  The OEB said no to the original applications but legal action by OPG took the issue all the way to the Supreme Court of Canada and the OEB lost!  As a result, those rate applications were allowed and their effect is to add hundreds of millions annually to OPG’s revenue base at a cost to ratepayers.  Scott Luft lays out the impacts of the foregoing in a recent posting on his site.

The revenue spurt OPG is now experiencing may well be the reason they suddenly announced the planned acquisition of 1,808 MW of gas plants from TransCanada and its affiliates for $2.87 billion. OPG suggested it was to replace the Pickering Nuclear generation capacity that will be winding down over the next several years, but it adds nothing to the province’s electricity capacity.

Ratepayers and taxpayers will continue to pay the price for political directions/interference and their exercise of control over the electricity sector.

The Green Energy Act passed by the McGuinty government is simply one example. It remains to be seen if the current government can untangle the mess.

PARKER GALLANT

 

Blame it on Mother Nature — 2

A small slice of the wetlands Plan 2014 has created in and around Lake Ontario

In the first part of this series I dealt with the implementation of Plan 2014 and its claimed non-causation by the IJC (International Joint Commission) and others as the genesis of the 2017 flooding on the shorelines of Lake Ontario costing residents, businesses and municipalities hundreds of millions of dollars.

Mother Nature was clearly the cause, was the message doled out!

Those with some knowledge of Plan 2014 or curiosity about its potential effects however wanted more information. Some of those seeking more information emanated in New York State and resulted in a “New York Senate Hearing” on October 10, 2017. It is a bit disconcerting when examining some of the testimony from those who played a role in developing the plan. As one example; Bill Werick, a member of the Great Lakes-St. Lawrence River Adaptive Management Committee was asked: “Do you believe the trigger level* is set too high, given what’s happened this past year?” His response included the following: “the fact is, is that, as Mr. Durrett said, our forecasts for one month out are really not very skilful.”

The real damning testimony in respect to Plan 2014 came from Frank Sciremammano, Jr., Ph.D., P.E. Professor (retired) of Engineering, Rochester Institute of Technology and International Lake Ontario-St. Lawrence River Board. Mr. Sciremammano after describing his involvement in the development of three alternate plans stated: “Plan 2014 is not one of the recommended plans from the IJC study, and, in fact, it violates three of the principal guidelines of that study.”

 

Later in his testimony he stated: “the IJC withdrew its proposal, and formed a new secret working group of representatives only. They worked in secret. Nobody knew who was on the committee. Nobody knew when they met. No minutes. No freedom of information. After a while they came out with a new version of Plan B+, which they recommended, which was termed “Bv7” for Plan B, ** Version 7.”

 

And he further testified: “After some further secret negotiations, the working group came up with Plan 2014, which is just Plan Bv7, but with a slight modification to add trigger levels.”

 

As noted in my first instalment, Plan 2014 was supposedly aimed at reversing “some of the harm” to shoreline wetlands by allowing higher water levels that would flood them and reverse the “harm”! Interestingly enough, the IISD (International Institute for Sustainable Development), self-described as an independent think tank championing sustainable solution to 21st century problems and funded via grants from the Federal Government ($7.8 million in 2018), UN agencies, etc. conducted a study to determine how flooding affected emissions of carbon dioxide and methane. Their conclusion: “We found that both carbon dioxide and methane, an especially potent greenhouse gas, were produced in higher levels after flooding, suggesting that reservoirs can be sources of GHGs.”

 

Their review also found “reservoirs should be designed to maximize flooding in areas with thin soils and little vegetation and to minimize flooding in areas with large stores of carbon, such as wetlands. “***

 

What the foregoing suggests is the issues and harm causing “climate change” are far from being settled despite the billions of tax dollars directed to and spent by those who profess to be experts. The question arising out of the conflict raised by the IISD report and Plan 2014 should be worrying as the latter has cost shoreline residents, businesses and municipalities of Lake Ontario shorelines hundreds of millions of dollars. It was done in an effort to reverse “harm” as defined by those who developed Plan “Bv7” identified by Mr. Sciremammano in his testimony to the Senate Hearing.

 

The flooding that occurred in 2017 and its repeat in 2019 raised the ire of city, town and community politicians in many shoreline communities in both New York and Ontario. They are demanding abandonment of Plan 2014 and compensation for costs incurred by their residents, businesses and communities. New York State Governor Cuomo wrote a June 8 2019 letter to the IJC and in it he states: “The IJC was put on notice in 2017 when the Lake set high-water level records and should have been aware of the present danger from the massive snowpack and likelihood of continued rains into the spring of this year. Yet, rather than acting, the IJC continued the status quo, resulting in more flooding and more property damage in New York. We demand that the IJC make New York whole for its millions in unreimbursed expenditures, and that the IJC modify its water management and planning to reduce the flooding and damage being done to New York’s shoreline communities.”

 

One wonders if Governor Cuomo was aware of Bill Werick’s answer to a question about the “trigger level” and his response was: “the fact is, is that, as Mr. Durrett said, our forecasts for one month out are really not very skilful.“

 

Perhaps it’s time to become more skilful and that applies to those appointed to manage the system. Governor Cuomo’s letter in the case of Canada was directed to our recently appointed Canadian Chair of the IJC, The Honorable Merrell-Ann Phare.   Ms. Phare holds a Master of Laws (LL.M.) Aboriginal Water Rights and International Trade Law and appears to reside in Winnipeg. While I am sure she is competent it seems strange that her skill sets don’t align with what one would expect as the Co-Chair of the IJC.

 

On the issue of the IJC and the 2019 floods, their Public Interest Advisory Group (PIAG) now have a survey available on their website (not in an obvious place) which asks questions about high and low water levels, damage to shorelines, recreational boating and the environment and wetlands. Personal encounters by the author with shoreline businesses, residential property owners and local politicians indicated (to the writer) they were unaware of the survey.

 

One has to wonder, was posting of the survey’s intent to seek feedback or to suggest they were actually concerned about the two 1-in-100-year flood events in the three years since “Plan 2014” was enacted?

 

Next in the series I will look at shoreline harm and expressions of dissent by those affected.

PARKER GALLANT

 

 

*The “trigger level” refers to when water should be allowed to flow or be retained.                                

**Plan B was the environmental plan aimed at maximizing the environmental benefits.

***A flavor of the IISD study? The 2017 floods killed 7 trees on our property–former carbon sinks.

 

Blame it on Mother Nature

Plan 2014 and flooding: first in a series

The flooding that occurred in Ontario and New York State in 2017 was claimed to be a “1-in-100-year event” by most conservation and government authorities. That message was carried by the media.  In many cases, environmental organizations blamed it on “climate change” as did Prime Minister Trudeau and Environment Minister Catherine McKenna stating: “This is something that is real. … We are seeing the impacts of climate change.”

Those directly involved however displayed saner thoughts as noted in a report about the event by the Ottawa River Regulation Planning Board* stating: “The main cause of the exceptional 2017 spring flooding can be described easily in just a few words: rain, rain and even more rain. Unusually heavy rainfall, coinciding with melting snow that had already saturated the ground and swollen waterways, generated exceptional volumes of water in the Ottawa River basin.”

What was principally ignored in the rhetoric emanating from so many was “Plan 2014” and the fact that 2017 was the very first year the plan was implemented. Those responsible for executing the plan in the form of the International Lake Ontario-St. Lawrence River Board (ILOSLRB) released a report June 21, 2018 stating:  “extreme weather and water supply conditions were the primary factors that caused Lake Ontario and St. Lawrence River water levels to rise to record breaking levels last year.”

The ILOSLRB however did make reference to the “plan” by claiming: “Plan 2014 did not cause or exacerbate the devastating floods and associated damages that occurred in 2017.”

So, what is Plan 2014?                                                                                                                                                          When the IJC (International Joint Commission) submitted “Plan 2014” to the Canadian and US governments in June 2014 it stated: “The International Joint Commission, after 14 years of scientific study and public engagement, advances Plan 2014 as the preferred option for regulating Lake Ontario-St. Lawrence River water levels and flows. Scientific studies reveal that the Commission’s 1956 Orders of Approval and regulation of the flows through the power project following Plan 1958D with deviations, have harmed ecosystem health primarily by substantially degrading 26,000 hectares (64,000 acres) of shoreline wetlands. After exhaustive consideration of alternative plans, the Commission concludes that Plan 2014 offers the best opportunity to reverse some of the harm while balancing upstream and downstream uses and minimizing possible increased damage to shoreline protection structures.”

Plan 2014 was blessed by US President Obama and Canadian Prime Minister Trudeau December 5, 2016 and the IJC announced they would move on the “Plan” on December 8, 2016!

Needless to say, the rhetoric started flowing soon after the announcement as both the U.S. and Canadian IJC officials issued statements. This from the US Section Chair, Lana Pollack: “Plan 2014 is a modern plan for managing water levels and flows that will restore the health and diversity of coastal wetlands, perform better under changing climate conditions and continue to protect against extreme high and low water levels”.

And this from Canadian Section Chair Gordon Walker: “We are pleased that Plan 2014 will bring system-wide improvements, with consideration of ecosystem health and recreational boating along with shoreline communities, commercial navigation and hydropower production”. In particular, this from the IJC announcement is noteworthy, now that we have experienced two out of three years of 1-in-one hundred year floods since Plan 2014 was implemented: “Allowing for more natural variations of water levels, the plan will foster the conditions needed to restore 26,000 hectares (64,000 acres) of coastal wetlands and improve habitat for fish and wildlife. The plan will also frequently extend the recreational boating season, better maintain system-wide levels for navigation and increase hydropower production.”

Sounds like Utopia!

Needless to say, the many environmental groups and townships that had supported Plan 2014 via a letter to President Obama and Prime Minister Trudeau were quick to exclaim their excitement after the IJC announcement, but presumably, politicians in places like Ogdensburg, Clayton and Alexandria in NY State must be upset as their support of Plan 2014 has resulted in major flooding in 2017 and again in 2019.

Other supporters of Plan 2014 included WWF-Canada (World Wildlife Fund) and CELA (Canadian Environmental Law Association).   David Miller, (former Mayor of Toronto) and then President of WWF-Canada was ecstatic and basically echoed the claims of the IJC announcement and included this observation; “restoring more than 260 sq. km of wetlands, boosting hydropower production, and increasing the resilience of hundreds of kilometres of shoreline in Canada and the United States.“

Prior to the December 8, 2016 IJC announcement the first Great Lakes and St. Lawrence Parliament Hill Days were held in Ottawa with many parliamentarians taking part including Canadian Environment Minister, Catherine McKenna as well as IJC officials and environmental groups that included WWF-Canada, CELA and Environmental Defence Canada. The event took place in late October 2016.

The “second” Great Lakes and St. Lawrence Parliament Hill Days gala in November 2017 didn’t celebrate “Plan 2014” or speak to the 1-in-100 year flood that had occurred earlier in the year. Instead it was about the Great Lakes restoration funding and Catherine McKenna, Minister of Environment and Climate Change, reminisced about “her childhood dream of being able to swim in Hamilton Harbour.”

Stay tuned for Chapter 2 in this series that will delve into some of the background of Plan 2014.

PARKER GALLANT

*The Board consists of seven members, each with an alternate, who represent Canada (3 members) Ontario (2 members and Quebec (2 members)

Wind power and reliability: 180 degrees apart

An article posted on my blog on February 17, 2019 was related to IESO’s release of grid-connected (TX) 2018 Electricity Data. It disclosed the cost of electricity for the average Class B ratepayer had fallen ever so slightly from 2017, reducing costs by about $5 annually.  The savings on the electricity portion of the average bill may have been eaten up by additional delivery and/or regulatory charges, so was probably not even noticed by most ratepayers.

As I noted then, what caused rates to drop was that we consumed more in 2018 than 2019, resulting in less wasted generation. In 2018, Ontario’s total demand was 137.4 TWh (terawatt hours) — up from 2017 when we consumed 130.3 TWh, for an increase of 7.1 TWh or 5.4%.  Nuclear and hydroelectric generation in 2018 generated 92.5% of total Ontario demand, not including spilled hydro or steamed-off nuclear which is paid for via the GA (Global Adjustment).

As an example of less wasted generation, OPG reported in 2018 that due to SBG (surplus baseload generation) they spilled 3.5 TWh, whereas in 2017 they spilled 5.9 TWh. That was 2.4 TWh less wasted hydroelectric generation we didn’t have to pay for!

Since IESO’s release of the grid-connected data, we are now able to see exactly where all Ontario generation came from, including both grid (TX) and distribution-connected (DX) due to the recent release of the OEB report “Ontario’s System-Wide Electricity Supply Mix: 2018 Data”. The OEB report indicates total Ontario generation of 154.4 TWh in 2018 up from 2017 when it was 150.75 TWh.

About the same time as the OEB released their report, the Ontario Energy Report was also released and it includes both TX and DX generation in detail. It also includes specific information on our exports and imports of electricity plus individual capacities of our generation sources.

Looking at some of the specifics causing our electricity rates to soar since the advent of the Green Energy Act (GEA) in 2009, it is relatively easy to see the principal causes. Wind and solar generation’s inability to deliver power when needed, despite its “baseload” designation, has factored in rising costs in two ways. The first is its detrimental effect on the HOEP and the second is its preponderance to create surplus generation that must be exported, curtailed, spilled or steamed off.

The HOEP in 2017 was the lowest ever, averaging 1.58 cents/kWh increasing to 2.43 cents/kWh in 2018. That means our exports of 18.591 TWh in 2018 generated revenue of approximately $451.8 million ($24.3 million per TWh) but cost ratepayers around $2.138 billion.

That means we lost almost $1.7 billion. The bulk of our exports (15.531 TWh) were sold to New York and Michigan so $1.4 billion of the $1.7 billion in ratepayer costs went to provide cheap power to those two US States.

The further driver to increased costs can be blamed on what we pay wind** and solar generators. For wind it averages $135/MWh and for solar $445/MWh. In 2018 TX plus DX wind generation was 12.3 TWh and curtailed wind was 1.9 TWh for which we pay $120/MWh. Total wind generation costs in 2018 therefore were about $1.888 billion. Solar generation in 2018 from DX and TX connected plants was 3.5 TWh and cost $1.55 billion bringing costs for the two intermittent sources of “baseload” generation to $3.438 billion or about 22 cents/kWh.

The combined cost of losses on exports plus the costs of wind and solar was $5.1 billion.   Is it any wonder our rates are so high?

Perhaps the time has come for all energy ministries to recognize wind and solar are not “baseload” power as defined due to their intermittent and unreliable nature.

Wind and solar power’s designation should logically be changed from “baseload” power to “abstract” or “symbolic” power! That change would better reflect their ability to deliver power when needed.

 

PARKER GALLANT

*Includes both the GA and the HOEP (hourly Ontario energy price).

**IESO suggests we can only count on wind to produce at a level of 13.6% of its capacity.  For solar it’s at about the same level suggesting solar is (in IESO’s view) actually more dependable!

The “great day for Canada”

The recent headline on the website North American Windpower read, “CanWEA Applauds New Carbon Pricing: ‘A Great Day For Canada’ “!

The article below the headline, as one would expect, had a cheering section from Robert Hornung, the President of CanWEA as follows:

“This measure sends a clear signal to investors,” comments Robert Hornung, president of CanWEA. “Ensuring that new natural gas-fired electricity generation will have all emissions exposed to the price on carbon by 2030 means that more carbon-free options like wind energy and solar energy will be deployed instead of fossil-fueled electricity generation, creating thousands of jobs and bringing investments into Canadian communities while protecting our climate. This is a great day for Canada.”

Instead of luring investors with the hope of riches in the wind, one might hope that Hornung’s diatribe sends a clear message to politicians and those responsible for managing the electricity grid (in the provinces affected) that they shouldn’t buy into the rhetoric! The reason most provinces have gas plants is to ensure there is power available when the wind doesn’t blow and those turbines sit idle (those forced to live close to the noisy machines love when that happens).

Ontario has seen high demand in recent days as temperatures rose and air conditioners were fired up to cool homes and businesses.   On July 2, total demand was 463,656 MWh and wind generation delivered to the grid from the approximately 4,500 MW of wind capacity in Ontario was 4,054 MWh over 24 hours or — that’s less than 1% of total demand.

While wind turbines were sleeping on that day, gas generators were required to fill in for them and supplied almost 34,000 MWh (7.3% of total demand).

In my view, all ratepayers (industrial, commercial and residential) should lobby the federal and (affected) provincial governments to alter regulations in respect to the “carbon tax” charge. The regulations should require both the wind and solar generators to produce power when required and if they are unable to do so, the applicable “carbon tax” should be charged to them during hours when producing power surplus to demand.

Presently that surplus generation is disposed of by either exporting it or curtailing it. Both of those actions currently come at a substantial cost to ratepayers. The regulation change would direct revenue from the charge applied to offset the additional cost ratepayers would be picking up from the carbon tax charge on gas generators when wind and solar are not generating needed power and they are called on to fill the gap.

To paraphrase CanWEA’s president, then a carbon pricing announcement wouldsend a clear signal” to the intermittent and unreliable wind and solar power generators that ratepayers are fed up with electricity rates that have soared in part due to costly and intermittent renewable wind.

That “carbon-free option” touted by Robert Hornung has cost ratepayers in Canada billions, to the benefit of mainly foreign owned companies.

It is time to reverse the trend!

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.