Open letter to the Honourable Todd Smith, Ontario Minister of Energy

Dear Minister Smith,

Re:  Oneida Battery Park Project

I recently note you sent a letter dated August 27, 2021, to Ms. Lesley Gallinger, President and CEO of the Independent Electricity System Operator (IESO) in respect to the captioned.  The letter instructed IESO to negotiate a “draft” contract with the parties proposing the 250 MW battery storage project.

I was pleased to observe you couched your directive with the following instructions:

I will not consider a directive to the IESO asking it to execute the drafted final contract until:

• National Resources Canada’s determination regarding the $50 million in funding under the Smart Renewables and Electrification Pathways Program is known; and

• The ownership of the project is fully clarified, including the equity participation of both NRStor and Six Nations of the Grand River Development Corp.”

Along the lines of your directive I sincerely hope you are aware of an article I penned January 23, 2021 partially analyzing the project when it was first announced in a press release from the Federal taxpayer owned Canada Infrastructure Bank (CIB).  The press release indicated the CIB would invest $170 million of our hard-earned tax dollars. My article attempted to point out the negative impact the project would have on Ontario ratepayers despite our tax dollars being thrown at the project.  It now appears another $50 million of our tax dollars may be slated to join the $170 million already committed!

The other issue which I would point out is in respect to what recently occurred to a similar project in Southeast Australia.  An article on August 5, 2021 on the CNBC website was headlined: “Tesla Megapack fire highlights issues to be solved for utility ‘big batteries”.  The article noted: “There have been around 40 known fires that have occurred within large-scale, lithium-ion battery energy storage systems,” which should be considered; if this project is allowed to proceed.

What I wish to reiterate to you and IESO is; you must recall the Green Energy and Green Economy Act caused Ontario’s electricity rates to spike by well over 100%.  Projects such as this will add further costs to the system and negatively impact ratepayers including small and medium sized companies.  The effects will be a reduction in employment, drive manufacturers and other businesses elsewhere and create further energy poverty.

The possibility of fires on large-scale lithium-ion battery energy storage systems also cannot be ignored.  A fire such as happened in 40 cases would simply serve to increase emissions as would the mega batteries relatively short life span and their eventual disposal.

I sincerely hope the Ontario Ministry of Energy and IESO will bear the foregoing in mind before any approval is granted to proceed!

Your very truly,

Parker Gallant,

Parker Gallant Energy Perspectives

Comparing Ontario Covid-19 Lockdowns in Reducing Electricity Demand

Earlier this year IESO released their 2020 stats and noted Ontario’s electricity demand fell 2.1% (down 2.9 terawatt hours [TWh]) from 2019 or about what 325,000 average households would consume in a year.

In 2020 the first full lockdowns in Ontario started in late March and basically stayed in place until late June/early July when some relief was allowed.  The current year’s lockdown looks very similar!  So, did the 2021 lockdowns result in further consumption reductions compared to the same quarter in 2020?

As it turns out consumption in the current April, May, June quarter saw a jump of 1.4 TWh compared to the same three months of 2020. That 1.4 TWh increase (up 4.7%) represents what 625.000 average Ontario households would consume in three months.  Ontario’s ratepayers consumed 29.724 TWh in the three months of 2020 and in 2021 consumption jumped to 31.130 TWh.

The GA (global adjustment) for 2021 totaled $2.687 billion and adding the average of the HOEP (hourly Ontario energy price) of $15.50/MWh for the three months brings the total cost to Ontario’s ratepayers and taxpayers (taxpayers are now picking up a large portion of the electricity costs) to $3.169,5 billion! The latter total indicates an average cost of approximately 10.2 cents/kWh (kilowatt hour) with the math simply being: $3.169,5 billion divided by consumption of 31.130 TWh.

The GA for 2020 was considerably higher as the Ford government capped the GA at $115/MWh (megawatt hour) due to the concern it would spike, so it totaled $3.825,7 billion and coupled with the average HOEP (average $8.10/MWh for the three months) brought the total cost to $4.066,4 billion.  That means the cost per kWh in 2020 for the same three months looks to be about 13.7 cents/kWh.

So, one should wonder, why the drop in average costs if consumption increased 4.7%?  

Well as it turns out our net exports (exports minus imports) declined 2.9 TWh so in 2021 that decline saved Ontarians about $425 million for those three months as we didn’t have to eat the GA of $115/MWh and the average HOEP (the sale price) was higher (up $7.40/MWh) so in 2021 we got a little more for each MWh we sold.  Additionally, curtailed wind declined by 183K MWh* saving us another $22 million.  I suspect we also didn’t spill as much hydro or steam-off nuclear which would also have reduced 2021 costs but that information is not disclosed as yet.  Less solar generation in 2021 may also have played a role at reducing costs.

It becomes obvious Ontario’s grid; supplied principally with nuclear and hydro supplemented by gas generation would produce lower costs. For all of 2020 nuclear and hydro supplied 94.3% of Ontario demand and cheap and reliable gas easily supplied the balance.  The intermittent and unreliable supply of wind and solar at the exorbitant contracted 20-year rates does nothing to reduce emissions while burdening ratepayers and taxpayers with much higher costs. 

The three-month comparison highlights the mess created by the previous Liberal Government(s) under the leadership of the McGuinty/Wynne terms as Premiers of the Province and their enactment of the Green Energy Act coupled with those contracts signed with wind and solar generators during their time in power.

*Thanks to Scott Luft for tracking industrial wind generation and curtailment monthly.

No Peaking Without Gas

As summer in Ontario finally arrived temperatures rose over the past few days and resulted in IESO reporting, so far in 2021, hour 18 of June 28, 2021 is the #1 peak hour with demand reaching 22,258 MW (megawatts).  While that is the highest demand hour so far in 2021 it is by no means the highest peak over the past three years with September 5, 2018 at hour 18 reaching 23,240 MW.

Nuclear was operating at close to 100% capacity at hour 18 generating just over 47% of peak demand and hydro 22% of demand and operating at almost 69% of capacity. Our gas plants thankfully were at the ready generating slightly more than 26.5% of our peak demand and operating at 63% of their capacity.

The remaining generation capacity consisting of wind (4,500 MW), solar (438 MW) and biomass (238 MW) managed to only produce 13.9% of their capacity (just over 3% of demand) or a miserly 716 MW during the peak hour. In other words, they weren’t performing when we actually needed them!  As a result, IESO imported power from Michigan and New York when prices hit their peak for the day of $232.79/MWh.  Those two states regularly buy Ontario’s surplus power and in 2020, on average, they purchased it for $13.90/MWH.  Interestingly according to the US IEA; “Natural gas accounted for 33% of the state’s (Michigan) net generation, while coal’s share declined to 27%.” What that means is we were importing fossil fuel generation.  That should upset the eco-warriors and the Federal Liberals under Trudeau who want to eliminate all usage of fossil fuels and reach net-zero emissions by 2050 or perhaps they think the pain should only be inflicted on Canadians?

Looking to the future one wonders what will happen should Ontario see those 27 municipalities; (who have signed on to the Ontario Clean Air Alliance’s [OCAA] push for all gas plants to be shut down) get what they asked for.  Where is the peaking power going to come from as it won’t come from intermittent and unreliable sources like wind and solar?  Perhaps all the Ontario EV drivers will agree to provide all the power that gas generation previously did as envisaged by the OCAA.  We can anticipate those same EV car owners will be told, as they were very recently in California, when they can’t charge their batteries or we will experience brownouts and/or blackouts.  

Also, what happens if a peak demand day comes on a cold winter day in January (one did on January 21, 2019) after the 67% of homes currently using natural gas as a heating source are forced to convert to electric heat?  Where will that additional electricity generation come from as EV lose a large percentage of their power in cold weather?

From all perspectives it seems the eco-warriors and our Federal government aim to punish all low and middle-income households in the province in their efforts to deliver on their religious beliefs.

Mankind cannot control the sun or Mother Nature so why is it so difficult for them to understand!

Ontario gifts Michigan cheap energy as US state threatens Line 5

I was on Sauga Radio 960 AM at the invitation of Marc Patrone for his morning show on May 19, 2021. Our discussion was related to the cheap power we have been exporting to Michigan and other locations and Michigan’s threat to shut down Line 5.

You can listen to our chat starting at 1:22.18 of his show on the podcast here:

Podcasts

You can also listen to our discussions at NEWSTALK CANADA if you are a subscriber here:

https://newstalkcanada.com/?page_id=2527

Hey, Premier Ford, did Michigan Governor Whitmer at least say “Thanks” for the Free Electricity we gave her April 30th?

Several days ago, a friendly contact alerted me to some facts about electricity generation on April 30th, 2021.  He noted wind exceeded hydro in 5 of the hours and as much as 81% of wind generation was curtailed in a single hour. He also pointed out the HOEP (hourly Ontario electricity price) market price was zero or less for 22 out of 24 hours and the two hours it was positive it climbed all the way up to 41 cents per MWh* (megawatt hour)!  The foregoing is a frequent occurrence in the Spring and Fall as Ontario demand is generally low and when the wind is blowing it must be both curtailed and exported.

With curiosity piqued it led to a review of IESO data for actual wind generation, its curtailment and exports for the day.  As it turned out wind generation accepted into the grid by IESO was just shy of 56,000 MWh and curtailed wind was very close to 34,000 MWh. What that meant is owners of the approximately 4,800 MW of grid connected wind capacity will be paid $7.560 million ($135.00** per MWh) for the accepted wind generation and $4.080 million ($120.00 per MWh) for the curtailed wind.  That implies the cost per MW of grid accepted wind generation was almost $208/per MWh versus about $56/MWh for hydro and $80/MWh for nuclear.  It also appears nuclear was steamed off by Bruce Nuclear and we should suspect hydro was also spilled.  Both of those are paid for so their costs would clearly be caused by wind’s propensity to generate power when it’s not needed.

To make matters worse IESO were forced to offer surplus generation via the market and needless to say our neighbours were happy to get it for free.  We exported almost 68,000 MWh to our neighbours in New York, Quebec and Michigan presumably to avoid possible grid failure. The state of Michigan received 24,000 MWh for free.  We basically supplied about 800,000 average Michigan households (approximately 20% of Michigan households) with free electricity for the day!

Ontario has been selling Michigan our cheap electricity exports for years and since we added intermittent and unreliable wind and solar to our grid the amount, we sell to them for pennies of its cost (what Ontario’s ratepayers pay for it) has increased. 

Michigan should recognize what nice neighbours we are! Instead, Governor Whitmer wants to shut down the Enbridge Line 5 pipeline which supplies them, several neighbouring states, as well as Quebec and Ontario with oil for refineries, propane for winter heat, aircraft fuel, etc. etc.

Perhaps the time has come for Premier Ford to give Governor Whitmer a call and tell her if she shuts down Line 5, she will need to fire up more of those (current) 9,300 MW (approximate capacity) of coal plants Michigan has; versus Ontario’s zero coal plant capacity.  

The time has come for Governor Whitmer to recognize and admit Michigan ranked # 8 in 2018 by the US EIA (Energy Information Administration) in respect to CO2 emissions from coal generation and 10th overall for total CO2 emissions.  Once she solves that problem, she can consider shutting down Line 5!

*One MWh is equivalent to 1,000 kWh (kilowatt hours) or what an average Ontario household would consume in a month and a half.

**The contracts signed with those industrial wind generation companies also included a maximum COL (cost of living) allowance of 20% so were presumably paid more than the $135/MWh.

Some good news on electricity costs

The foregoing title is a little deceptive as when Marc Patrone and I were speaking this morning on his show at Sauga Radio 960 AM we also covered a fair amount of other ground. Some of the other topics discussed were short spurts about pipelines, China, Russia’s forests and even briefly about housing costs. You can listen to our full discussion on the podcast starting at 41:10 and ending at 58:00 here:

or if you are a subscriber to NEWSTALK CANADA you can listen here:

https://newstalkcanada.com/?page_id=2527

Tom and guest Parker Gallant discuss the economics of “green” energy

Tom Harris invited me on his Exploratory Journeys podcast on i Heart radio and we spent about 1/2 hour discussing the economics related to “green” energy. We cover a fair amount of ground related to the electricity sector in Ontario particularly on the costs of renewable energy.

You can listen to the podcast with Tom Harris here but please note there are a couple of commercials before our chat:

Wow! January and February 2021 show declining Ontario electricity costs!

For the first time in a decade Ontario experienced a reduction in the costs of grid generated electricity for two months in a row so the question should be; who should we thank?

As it turns out the Ontario demand for electricity in the first two months of 2021 were actually up slightly (1.3%) from 2020 or just under 300,000 MWh (megawatt hours) and about what 200,000 average households would have consumed in two months.  The costs of generation for January 2021 including both the HOEP (hourly Ontario energy price) plus the GA (Global Adjustment) dropped from $116.24/MWh to $99.83/MWh and for February it dropped from $127.31/MWh to $82.94/MWh.

So, why did costs decline?                                                                                                                                              

Was it because the Ford led Government took action and passed an Act to reduce the rates paid to wind or solar* generators or the OEB (Ontario Energy Board) decreed they would reduce rates or because IESO (Independent Electricity System Operator) suddenly contracted for low-cost generation?

The answer is none of the above!  As it turns out we can thank “Mother Nature” for a big part of the cost reduction as wind generation fell by 17.2% or almost 438,000 MWh (what almost 300,000 households would consume in two month). That drop in output by those IWT (industrial wind turbines) saved $60 million in costs alone and additionally the slight increase in consumption noted above coupled with the fact that one of the Darlington nuclear units was shut down for refurbishment meant we had much less surplus generation that had to be sold to our neighbours in NY or Michigan.  Our net exports (exports less imports) sold in 2021 were only 1.007 TWh (terawatt hours) versus 2.694 TWh in 2020. The drop in sales of the surplus power of 1.687 TWh was also sold for a higher price (less suplus generation results in higher prices) which resulted in a reduction in our loss on those sales of $221.2 million year over year.  In 2020 the cost of our exports added $289.8 million to the costs of electricity but that cost dropped to $68.6 million in 2021 for those two comparative months.

To account for the reduced wind and nuclear generation Ontario’s natural gas plants stepped up to meet our needs generating an additional 522,000 MWh at prices reflecting only fuel costs and a small margin.  Most of those gas plants were added to ensure our grid reliability after the Green Energy Act was legislated back in 2009 and the OPA (Ontario Power Authority), since merged with IESO; contracted wind and solar generation they knew required backup due to their intermittent and unreliable nature.

No doubt the eco-warriors will be up in arms when they notice natural gas generation increased in January and February 2021.  Those eco-warriors should take a few moments to reflect on the fact that without electricity from natural gas generators many Ontarians may have died from the cold.

This is just another demonstration of the wasted cost Ontarians are continually forced to pay due to the GEA (Green Energy Act) and the contracts granted to wind and solar generators.

*Solar produces little power during the Ontario winter months and 2021 saw generation of only 0.071 TWh in January and February 2021 but it’s cost added about $32 million for very little generation.

Ontario’s failure over subsidized wind, solar, biomass energy glut

Marc Patrone kindly had me on his show on Sauga 960 AM once again today (March 30, 2021) and we discussed the costs of the Ontario Liberal follies during the McGuinty/Wynne era! Our chat was about the amount of money it cost us in 2020 for renewables (both transmission and distribution connected) and we also touched on other issues such as the Line 5 pipeline and its possible shutdown. Along the way we had a few chuckles over the mess we still have and the Ford government’s inability to do anything about the electricity sector other than saddle taxpayers with a big chunk of the costs. Have a listen to the podcast starting at 43:50 here:

or if you are a member of NEWSTALK CANADA you can listen here:

https://newstalkcanada.com/?page_id=2365

Wind, Solar and Biomass Continue Soaking Ontarians

The OEB just released the “Ontario’s System-Wide Electricity Supply Mix: 2020 Data” report and it provides information beyond what the IESO had in their mid-January report: the 2020 Year in Review  and the subject of an earlier article.  The OEB report includes generation occurring within the DX (distributor connected) sector in addition to what is TX (transmission connected)* generated and the basis of the IESO report. 

The OEB reported DX generated electricity in 2020 was 7.3 TWh (terawatt hours) or about what 810,000 average Ontario households (approximately 18% of all Ontario households) would consume in one year. DX generation in 2020 was up by 5 GWh (Gigawatt hours) compared to 2019 but the increase came from what is described as “Non-contracted” generation defined in the report as “a variety of fuel types that the IESO is unable to categorize due to a lack of information from Local Distribution Companies (LDCs).”

As it happens the three renewables classified as wind, solar and biomass actually had a decline in DX generation falling from 5.1 TWh in 2019 to 4.9 TWh with solar producing an identical 3 TWh compared to 2019, while wind declined from 1.7 TWh to 1.6 TWh and biomass from 4 GWh to 3 GWh.  If one adds what IESO stated was curtailed wind of 2.6 TWh in 2020 to what those three renewables generated it comes to 20.6 TWh or 2 GWh more than our gross exports were! 

Those exports** of 20.4 TWh (sold at an average price of $13.9*** million per TW) generated about $284 million. That’s $3.8 billion less than we paid for them had they consisted of the three renewables.  The latter is derived from the individual costs of wind at $135 million/TWh accepted, plus $120 million/TWh for curtailed wind which collectively cost us $2.3 billion.  Adding solar’s 3.8 TWh at $449 million/TWh  ($1.7 billion) and biomass at $150 million/TWh ($100 million) brings the costs of all three renewables to $4.1 billion. If all of those renewables were exported, they would have returned the estimated $284 million as noted costing Ontario ratepayers $3.8 billion.

What that means is; as ratepayers pick up the loss of the $3.8 billion it would represent a cost of 2.72 cents/kWh or $244.80 to the average household consuming 9,000 kWh annually. The annual cost would be much higher for small and medium sized businesses.

In Ontario we continue to suffer from the perils of the McGuinty/Wynne push for renewable energy brought to us via the GEA. It appears we will continue to suffer the consequences until those outrageous 20 year contracts for wind and solar expire or the Ford led government is inspired to actually do something to correct the Liberal endowment!

*The OPG’s annual report disclosed they were instructed to spill 4.3 TWh of hydro due to surplus baseload generation (SBG) conditions over the 2020 year which IESO did not disclose.

**The actual makeup of exported generation is not available as it depends on many factors.

***The average market price referred to as the market price ie; HOEP (hourly Ontario energy price) averaged 1.39 cents/kWh in 2020.