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 2nd 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 2nd  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 3rd 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.“

Investigative Reporting by a Toronto Star Journalist is Disinformation

Recently invited to be a guest on Zoomer Radio, I agreed, and was informed I would be joined by Bryan Purcell, VP of Policy and Programs at The Atmospheric Fund. TAF is a “not-for-profit” company with almost $100 million of “restricted funds” that have been provided by the City of Toronto, the Province of Ontario and the Government of Canada and appears to have 30 employees.  They use the revenue generated from the funds ($7.1 million in their 2020 and $1.2 million in 2021 financial reports) and other revenue (minimal) to provide grants described as: “has the potential to generate large-scale carbon reduction in the GTHA“ (Greater Toronto Hamilton Area).

The planned discussion/debate was to be in respect to a Toronto Star article posted November 30, 2022 titled “Ontario’s new gas plants will cause your hydro rates to rise, report says” and presumably for Zoomer’s audience to hear competing views on the content in the article from yours truly.

Shortly before the program was to start the Auditor General of Ontario released her annual report so I, and presumably Bryan Purcell, were informed the discussion was cancelled as the host wanted to cover the AG report due to it’s significance in detailing how the AG viewed Premier Ford’s led financial management over the prior year.

The TorStar article was written by Marco Chown Oved* who identified himself as a “Climate Change Reporter” in the article heading! On his LinkedIn profile, he identifies himself as an “Investigative Reporter at Toronto Star”! The TAF representative, Bryan Purcell, also scheduled to be on the radio program, is quoted in the article and on his LinkedIn profile states he is a: “Environmental Professional focused on Climate Change mitigation“ but his qualifications suggest he is stretching the truth.

Below we will examine some of the claims made in the article based on the report prepared by Power Advisory, which we assume TAF paid for with our tax dollars!  The report’s author from Power Advisory was Travis Lusney, whose LinkedIn profile discloses he was the Senior Business Analyst at the OPA (Ontario Power Authority). In that former position he states he; “Managed analysis and implementation of procurement policy. Focused on the Feed-In Tariff Program with emphasis on pricing, connections and stakeholder engagement.“  Hmm, one should wonder if Mr. Lusney, was at least partially responsible for the cost of electricity in Ontario jumping by over 100% due to the FIT contracts to wind and solar proponents which paid them as much as 82 cents/kWh for rooftop solar. Perhaps we should take his recent report to TAF with the proverbial “grain of salt”, or should we simply shrug it off based on the “investigative journalism” claims of Marco Chown Oved, the Toronto Star reporter?

Claims from the article:

Rather than relying on natural-gas-fired generation to meet growing electricity demand, Ontario’s cheapest and most reliable options require new wind and solar,

It is unbelievable the “investigative journalist” didn’t bother to do a little research work on the foregoing claim as he would quickly discover wind and solar are not the “cheapest and most reliable”. Had the author simply bothered to look at the February 2022 report of the FAO (Finance Accountability Office of Ontario) he would have discovered they have driven up the cost of electricity to the point where taxpayers are forced to absorb a cost of “$38.6 billion (32.7 per cent) to move most of the cost of 33,000 renewable energy contracts with wind, solar and bioenergy generators from all electricity ratepayers to the Province.“  Had he also bothered to just examine a few days of IESO data he may also have discerned wind and solar’s bad habits of generating power when it’s unneeded and failing to deliver power during “peak hours” on cold winter days and hot summer ones. Recent examples of unneeded power generation occurred December 2nd and 3rd when IWT (industrial wind turbines) operated at 76% of their rated capacity whereas on December 7th and 8th they operated at a miserly 8.5% of their rated capacity. In the first instance the IESO were forced to sell off that power for pennies of it’s cost and in the latter case natural gas and hydro ramped up to prevent blackouts such as those that occur in California and elsewhere around the world where wind and solar are a large part of electricity grids.

People, governments and businesses are switching en masse to electricity as a power source for cars, heating and heavy industry in an effort to lower carbon emissions and avoid the worst effects of climate change.

Once again, the Toronto Star’s “investigative reporter” obviously did not do any research, or he would have discovered the “en masse” switch is not happening to any great extent without government grants, and they obviously must be higher or people won’t switch.  In the case of EV penetration a very recent article from mid November pointed out EV sales in Canada were low during the first 6 months of 2022 stating:  “Based on average new vehicle registrations, the EV total would have to grow from 55,600 to about 480,000 over six months to hit that 60 per cent target.” The 60 per cent target is for 2030 and the 2035 target is 100 per cent. The Federal government also hand out grants for heat pump conversions as well as interest-free loans of $40K but once again reviewing government statistics the conversion rate is not happening. A StatCan report notes heat pumps as a primary heat source have only grown from 3% in 2013 to 5% in 2019 and forced air furnaces have only declined by 1% from 53% in 2013 to 52% in 2019. Funnily enough, electric baseboard heaters over the same time frame fell from 28% to 26%. The actual data easily demonstrates the “en masse” switch the author suggests is a fallacy!

The report says Ontario needs to start making significant investments in its grid, especially considering the lengthy timelines required to build the transmission, generation and storage required to simultaneously meet demand and reduce emissions.

Hydro One just received approval from the OEB (Ontario Energy Board) for a rate increase for planned capital spending on their transmission system.  The spending appears to represent about $7.5 billion over the next five years.  Spending of that amounts suggests the investment is “significant” and a little research by the article’s author would have disclosed that!  No investigative integrity is apparent!  

“It’s very clear that if we’re going to go to net-zero, renewables are going to be part of the mix,” said Travis Lusney, the report’s author and director of power systems at Power Advisory. “How far you go is dependent on a lot of factors, even outside of the electricity sector.”

Well, it is apparent Lusney has a love affair with renewables as his prior role at the OPA (Ontario Power Authority), created by the McGuinty Government handed him the power to construct the mess of the electricity sector in Ontario that (as noted above) the FAO stated in his February 2022 report will cost taxpayers $38.6 billion.

“The report finds that a 97 per cent non-emitting grid can be achieved by building new transmission lines, solar and wind generation as well as energy storage facilities. This would allow the grid to reduce its dependence on natural gas to a few peak demand days in mid summer.”

It is worth noting the report fails to mention Ontario’s electricity grid is already over 92% “non-emitting” and fails to include a cost/benefit analysis to achieve the additional 5% emissions reduction it seeks. The report in the three scenario’s recommends adding as much as 12,700 MW of wind capacity, 5,500 MW of solar capacity and 3,900 MW of storage capacity. The report goes on to suggest those wind turbines, solar panels and the storage capacity be spread throughout the province. The report then forecasts due to the spreading it would require as much as an $8.4 billion spend on the transmission system in order to get the power to where its needed. In summary the Power Advisory report recommends  spending billions of dollars to achieve a 5% reduction in emissions in Ontario’s electricity system.  As outlined above it is very unlikely those new facilities coupled with the additional wind, solar and storage capacity and their associated costs would reduce electricity prices! Instead those costs would drive up prices much as they did in the past with a much smaller capacity addition of renewables. Nevertheless, we should be pretty sure Power Advisory would love the foregoing to happen and Travis Lusney would surely rise in the ranks of his employer, Boston Advisory, who would stand to benefit from the money stream generated by assisting applicants seeking contracts from IESO. 

“In each scenario, hydro prices will be lower than they would be if the province goes through with its plan to build new gas plants, the report concludes, mostly because gas is expected to get more expensive, a rise that will be exacerbated by the increase in carbon tax. Meanwhile, prices for wind and solar, which are already cheaper than natural gas, are expected to fall.”

First off, one should wonder how each scenario will cause “hydro prices” to be lower but perhaps they were actually suggesting “electricity prices” will be lower? Past and current experience in Ontario due to wind and solar generation have actually caused “hydro spills” meaning OPG are paid to simply spill water over dams without running them through the turbines. Ratepayers, however pick up the costs of those spills and for the past several years their costs have been substantial. The spills by OPG are almost always caused by unneeded wind generation as their contracts give them “first-to-the-grid” rights . On the statement, “prices for wind and solar” are expected to fall” is also far from the truth.  As one example an article last month about Vestas, the world’s largest wind turbine manufacturer, stated: “Vestas has raised prices more than 30% in the past year to help stem losses.“  It should also be recognized gas prices would fall if our abundant supplies in Saskatchewan and Alberta had more pipelines available but the Federal government has done everything in its power to prevent that from happening.

As the foregoing once again suggests; the Toronto Star, their reporters, and other MSM companies simply accept what they are told or read and fail to do any research to determine if they are providing facts or fiction. In this case it seems obvious it is the latter and reporter Marco Chown Oved should immediately rewrite his LinkedIn memes as it doesn’t suggest he is a “investigative reporter”!

* Marco Chown Oved’s LinkedIn biography brags about how the CAJ (Canadian Association of Journalists) were so enthralled with an article he wrote about “climate change” they blessed him for writing it. Perhaps they will do so again for this diatribe of BS as the MSM seems to have abandoned publishing the truth and the CAJ has endorsed their abandonment!  This is what Marco Chown Oved has on his LinkedIn site: ”Awarded the inaugural Environmental and Climate Change Award from the CAJ for my feature on heat waves in Montreal, a part of the Toronto Star’s Undeniable series on climate change.”

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 1st and ends December 31st, 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 “firstof-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.

Winds Absence is a Good Thing as October 4, 2022, Demonstrates

Anyone who read the short article about the output of those IWT (industrial wind turbines) on October 2nd when they operated at 52% of their capacity for the first 16 hours and cost us Ontario ratepayers/taxayers several million dollars for unneeded generation will be pleased with what happened yesterday!

Over the full 24 hours yesterday IWT were basically useless generating only 2,322 MW which was less than 2% of their capacity and averaged less than 100 MW per hour!  Who knows, they may have been consuming more power than they produced?

The good news for Ontarians was the HOEP (hourly Ontario energy price) market price was fairly robust and over the 24 hours averaged $57.32/MWh versus the $1.57/MWh they averaged over the first 16 hours on the 2nd meaning our losses on exported power (which was much less) was tiny in comparison.

One of the issues also impacting the price was total consumption was higher as was the peak Ontario demand hour which was Hour 19 reaching 16,753 MW versus the 15,320 MW at Hour 20 on October 2nd.  This latter point drives up demand for surplus generation when those intermittent and unreliable IWT fall flat meaning our neighbours in NY, Michigan and Quebec pay much higher prices for any power including that which may be surplus to our demand. The other good part of the foregoing is related to the cost paid for any exported natural gas generation as the price we pay is only fuel costs plus a small additional price per kWh (kilowatt hour). The latter is well below the average cost we pay daily per kWh!

We need more days like yesterday to stop the accumulation of taxpayer debt under the Ontario Electricity Rebate (OER) program which the Ford government launched.  The FAO (Financial Accountability Office) estimated the OER will cost taxpayers $38.6 billion over the full remaining term of the renewable energy (wind, solar and biomass) contracts.

Perhaps the Ford government via the creation of the OER believes an electricity consumer and a taxpayer are two different individuals, but they are generally one and the same. 

One would hope they will soon recognize the foregoing fact and rethink the push for net-zero due to its impact on current and future taxpayers and ratepayers.

Ontario Expanding Energy Efficiency to Help Families and Businesses Keep Costs Down

The following is a copy of the e-mail I sent to Ontario Minister of Energy, Todd Smith October 4, 2022, seeking information related to the captioned press release. If, and when I receive a response, I will post it!

“Minister Smith,

Your recent press release starts with:  

The Ontario government is increasing funding for the province’s energy-efficiency programs by $342 million, bringing the total investment to more than $1 billion over the current four-year electricity conservation framework.

I have read this over several times and fail to find anything other than the following that suggests rates will decline:  

This funding will support a new voluntary Residential Demand Response Program with an incentive for homes with an existing central air conditioning or heat pump unit and smart thermostat to help lower energy use at peak times and lower bills.

So turning up our air conditioners and turning down our electric furnaces (etc.) along with walking around in the dark will reputedly deliver these savings ($650 million) according to the following  in your press release!  

“By 2025, this expansion of energy-efficiency programs will help deliver enough annual electricity savings to power approximately 130,000 homes every year and reduce costs for consumers by over $650 million

The release also says:  

Our government’s success in driving electrification of industry and transportation and strong economic growth is increasing electricity demand

So demand will supposedly increase with the foregoing “electrification of industry and transportation” but by using less we Households “reputedly” will see a reduction in costs!  

Am I missing something or will this annual “$650 million” of “reduced costs” be allocated to taxpayers or has your ministry suddenly discovered some cheap source of electricity generation via new technology or some “net-zero” imports from our neighbours for a cheap price?

As my local MPP and a taxpayer I sure would appreciate a little clarification!

Yours truly,

Parker Gallant,

A concerned resident of your constituency”

Response from Ontario Ministry of Energy:

“Dodsworth, Michael (ENERGY) <Michael.Dodsworth@ontario.ca>   
to me, Todd

Good morning Parker,

Minister Smith forwarded me your message which I am pleased to respond to on his behalf.

Energy efficiency programming is a fast and cost effective measure that can save families money and reduce demand for electricity from the grid. These programs, which include supports for energy efficiency retrofits, Distributed Energy Resources and the Residential Demand Response Program you referenced, all will mean reductions in demand for electricity.

These programs are a complement to the government’s comprehensive plan for addressing increased demand for power due to economic growth and electrification, including ongoing capacity resource procurements, rather than an alternative.

By reducing demand and in particular peak demand, we can offset the need for some new electricity generation resources. This will mean a cost reduction for ratepayers and a net system benefit of ~$300 million (the cost reduction of $650 million less the increased investment of $342 million).

I hope this addresses your question satisfactorily.

Best,

My response to the Ministry:

Michael,

Thank you for your response but I fail to see how it will, as you state: “mean a cost reduction for ratepayers and a net system benefit of ~$300 million”!

Let’s examine your response bit by bit!

Energy efficiency (1.) programming is a fast and cost effective measure that can save families money and reduce demand for electricity from the grid. These programs, which include supports for energy efficiency retrofits, (1.) Distributed Energy Resources (2.) and the Residential Demand Response Program (3.) you referenced, all will mean reductions in demand for electricity.

1.Your claim on how “energy efficiency” will save families money ignores the fact “supports” for the programs are provided by taxpayer funds.  I would guess ratepayers without the ability to provide the additional funds from those taxpayers will be unable to afford their portion of the costs.  I would point out most ratepayers are also taxpayers so those unable to come up with the additional funds will be unable to invest in those “energy efficiency retrofits”

2.Distributed Energy Resources are those such as: “rooftop” or “ground mounted” solar, “wind turbines” “battery storage”, “small hydro” etc. and are contracted at rates well in excess of those of the likes of OPG, Bruce Power, etc. as they exist outside the purview of the OEB!

3.From my personal observation point this is the only one not supported by other ratepayers or taxpayers however the “installed cost” of a “smart meter” is a higher cost than an analog meter and the costs of those are spread throughout all ratepayers. It is also a fact smart meters have a shorter lifespan than an analog meter meaning they must be replaced sooner adding to the costs of this endeavour.

These programs are a complement to the government’s comprehensive plan for addressing increased demand for power due to economic growth and electrification( 4.), including ongoing capacity resource procurements, rather than an alternative.

4.While you and Minister Smith reference “electrification” and the OCP’s full support of the concept it appears the cost of that objective and the new capacity required by Ontario to meet that target have not had any serious focus.  To look at just one study; NREL, a national laboratory of the US Department of Energy, in their study stated “Widespread electrification increases 2050 U.S. electricity consumption by 20% and 38% in the medium and high adoption scenarios, respectively and relative to the reference.” For Ontario let’s focus on the “medium” scenario!  At the end of 2021 IESO reported total grid connected capacity in Ontario was 38,079 MW. If we assume Pickering Nuclear gets approval to extend its life that reflects the need to add 7,600 MW of NEW capacity (20% of 2021 capacity) or 10,600 MW (28%) should Pickering renewal not receive the green light! Please note the study states “consumption” which means both wind and solar plus storage would need to be at least triple that capacity level!

By reducing demand and in particular peak demand (5.), we can offset the need for some new electricity generation resources. This will mean a cost reduction (5.) for ratepayers and a net system benefit of ~$300 million (the cost reduction of $650 million less the increased investment of $342 million).

5.Should we assume a cost study has not been done based on the claim there will be a “cost reduction for ratepayers” or is this a false claim?  Many of us ratepayers lived through the McGuinty/Wynne days and constantly were fed similar stories from them related to the GEA. Under pressure from the largest manufacturing companies in the province they reacted to the false message and came up with the ICI (Industrial Conservation Initiative) which allowed those companies to benefit from significant cost reductions by reducing demand during just five (5) annual “peak demand” periods which still exists today. The incentive was so great those companies invested heavily in a variety of gas generators to take advantage of the incentive.  It should come as no surprise, due to this push by Ontario and many other jurisdictions around the world opining for “net-zero” that manufacturers of those generators have benefited greatly as a quote from a recent article suggests: “The global gas generator sets market is expected to grow from $7.82 billion in 2021 to $8.3 billion in 2022 at a compound annual growth rate (CAGR) of 6.48%. The gas generator sets market is expected to grow to $11.15 billion in 2026 at a compound annual growth rate (CAGR) of 7.57%.”  It is equally important that you and Minister Smith should be aware that many stand alone administered “public sector” corporations such as colleges, universities, etc. are now ICI beneficiaries which equates to an indirect and hidden form of taxation. 

In summary, I and my blog followers, would love to see some proof the recent moves by the Ministry of Energy (reputedly endorsed by IESO) will achieve that “net system benefit of $300 million” you allude to in your response!

Looking forward to your response,

Regards,

Parker Gallant,

Parker Gallant Energy Perspectives

Generating Less Electricity Benefits Ontario Ratepayers

The OEB (Ontario Energy Board) on September 12, 2022 finally posted “Ontario’s System-Wide Electricity Supply Mix: 2021 Data” and it was the latest posting ever from them in the last seven years!  The OEB takes the TX (transmission connected) generation, ie; IESO data* they provide (usually within two weeks of the prior year-end) and add the DX (distribution connected) generation provided by the local distribution companies in the province. We assume it is a slower process to obtain the latter info from the 58 distribution companies but 8 ½ months seems longer than needed!

The foregoing combined data from the OEB report indicates generation from TX and DX generators fell from 154.7 TWh (terawatt hours) in 2020 to 150 TWh in 2021 or 3%.  The 4.7 TW drop equals the annual consumption of about 525,000 Ontario households!

As one would suspect some generation sources fell while some increased but not enough to offset the drop.  The biggest drop was from our nuclear plants which generated 4.8 TW less and our hydro plants also fell generating 2.8 TW less. Combined the 7.6 TW is about what 850,000 average Ontario households (16% of all Ontario households) would consume in a year.  The only generation source to significantly increase generation was Ontario’s grid connected natural gas plants who supplied 12.2 TW an increase of 2.5 TW from 2020 (up 25.7%) and about what 290,000 average households annually consume. The only other categories to show increases were wind; up 100 GW (gigawatts) or about what 10,000 households consume annually and “Non-Contracted” which increased by 500 GW or what 50,000 households would consume annually.  The OEB states the latter “represents a variety of fuel types that the IESO is unable to categorize”! We should suspect those “Non-Contracted” sources are mainly small gas plants operated by manufacturers and sub-contracted to supply generation when the local grid is potentially short of demand!  

The only bright star shining out from the report is related to Ontario’s “net exports” (exports minus imports) which declined by 6.6 TW and had the positive effect of pushing up the market price ie: HOEP (hourly Ontario energy price) from an average of 1.39 cents/kWh in 2020 to 2.85 cents/kWh in 2021. While that doesn’t sound like much it did decrease our costs by $118 million on our Net Exports in 2020 of 8.5 TWh. The increase in the HOEP would also decrease the taxpayer liability amount for those intermittent and unreliable non-hydro “renewable energy contract costs” (wind and solar) as referenced by IESO* and slightly reduce the GA (Global Adjustment) component!

We shouldn’t believe what has finally shown a positive year over year result to continue however, due to the push by the Minister of Energy, Todd Smith’s August 23, 2022 “directive” to IESO containing the following instructions:  “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”.

Get prepared for the future which like many European countries will include orders to turn off your air conditioners in the summer and reduce your thermostat in the winter to avoid blackouts. Oh, and don’t charge your EV (electric vehicles) until we tell you, you can!

Energy reliability is no longer a target our politicians promote! The word “reliability” is being replaced by the word “transition” and the OEB is front and center in executing the change with their just released “Energy Transition” post containing a poll we must all take!

*Note on IESO data release: As of January 1, 2021, Global Adjustment costs for all electricity consumers are being reduced because approximately 85 per cent of non-hydro renewable energy contract costs are being shifted from the rate base to the tax base. Savings will vary, depending on consumers’ electricity consumption, ICI participation, and location.

June 4th; Just Another day of Generosity by Ontario ratepayers and taxpayers

Well, once again, Ontario’s electricity generators were producing power we didn’t need. Nevertheless, the ratepayers and taxpayers of Ontario were obliged to give it away to our neighbours in Michigan, Quebec and New York.  This is a regular occurrence during the Spring and Fall seasons as demand is generally at the lowest levels for us but the GEA (Green Energy Act) imposed by the Liberal government during the McGuinty/Wynne years declared wind and solar generation were the future so they gave them contracts with very high rates and “first-to-the-grid” rights!

Ontarians have been paying the price for over a decade and despite the fact Liberals were found guilty of their stupidity on the electricity file and booted out of power, the current and recently reelected Ford led Conservative Party has done nothing to change things over their prior four years of power!

So, Saturday the fourth of June was simply another example of how the mess continues!

Peak demand in Ontario occurred during the 18th hour and peaked at 14,437 MW. Nuclear and hydro alone at that hour generated 14,631 MWh so wind and solar were not needed but those damn contracts stand in the way. At that hour wind was operating at 16.9% of their capacity and they could have peaked at 45% of their capacity at 1 AM but IESO (Independent Electricity System Operator) had them curtail 1,200 MW. 

IESO were busy selling off our surplus power throughout the day to our neighbours and did so with slightly over 24,000 MWh to Michigan, 22,300 MWh to Quebec and about 12,000 MWh to NY!  That power was sold at the astronomical (sarcasm intended) average HOEP (hourly Ontario energy price) of $6.34/MWh.

What the preceding tells us is we are giving Michigan and New York, clean green power to help then keep energy costs low and reduce their emissions. Quebec benefits by not using their hydro generation which they have presold to US States like NY under lucrative contracts.  No benefit for Ontario’s ratepayers or taxpayers as the following outlines!

If we simply assume the approximately 58,000 MWh, we exported earned us only $368,000 (58,000 MWh X $6.34/MWh), we should consider what it cost us!

The mix of electricity sold presumably included wind generation (26,000 MWh including curtailed), solar, hydro, nuclear and perhaps even a little natural gas. The minimum cost was approximately $116/MWh based on the GA (Global Adjustment) estimate by Scott Luft and the 2nd estimate by IESO for May and includes the $30/MWh taxpayer subsidy. Using the $116/MWh the cost of those exports becomes $6,728,000 and including the 4,900 MWh of curtailed wind total costs rise to over $7.3 million.  So, for what cost Ontario ratepayers/taxpayers $7.3 million we received less than $400K.

What the foregoing points out to the politicians in charge is that there is something inherently stupid with the way our electricity system is managed. We changed the political parties once because of the electricity file but the Ford government simply shifted a large part of the costs to the taxpayers so it was hidden from sight.

Perhaps the next election will be focused on the provincial debt and include the costs the Ford led government hid inside our Provincial debt.

If they actually do something to sort out the mess created by the Liberals it could reduce the provincial deficits by $6.9 billion as reported by the FAO of Ontario assuming they can keep electricity costs flat, perhaps by taxing the intermittent and unreliability of that expensive and harmful wind generation.

Only time will tell!

Four Years Later and I Repeat: “If I were Ontario’s new Minister of Energy …”

Back on May 30, 2018 an article I penned, just prior to the last provincial election, listed ways in which the incoming ruling party could reduce electricity costs by $2 billion annually.  Electricity costs had more than doubled in Ontario under the reign of the McGuinty/Wynne led Liberals due to their enactment of the GEA (Green Energy Act) when George Smitherman was the Minister of Energy.

Ontario’s voters were expected to respond when casting their vote in early June 2018 and they did!  The ruling OLP (Ontario Liberal Party) were decimated turning them into what many referred to as the “mini-van party”.

My prior advocacy work had focused on the “electricity sector” and the cost of wind and solar generation. My efforts included frequent dialogue with the Conservative appointed “energy critics” so, at that time, I and many Ontario ratepayers in rural and urban communities had hopes the Doug Ford led Ontario Conservative Party would deal with the mess the Liberals had created. Potentially the savings would have amounted to around $8 billion over the past four years.

The Ford led government based on a recent report from the Ontario Financial Accountability Office seems to have simply transferred $6.9 billion in electricity costs for the 2021-2022 year and $118 billion to taxpayers over 20 years, even though taxpayers are also ratepayers!  In quickly reviewing recently released platforms for the OLP, the NDP and the recent OPCP budget it sure appears they all have plans aimed at “global warming” and want to spend billions continuing the push to jump on board with “The Great Reset” advocated by the WEF and our Prime Minister, Justin Trudeau.

The only dissenting voice amongst the political parties seems to be the newly formed “New Blue Party” whose “BLUEPRINT” states they will take “down wind turbines to reduce electricity costs”!

Following are the recommendations put forward in the article four years ago and I will leave it to the reader to pontificate as to whether or not, any of them were acted on!

“Green Energy Act

Immediately start work on cancelling the Green Energy Act

Conservation

Knowing Ontario has a large surplus of generation we export for 10/15 per cent of its cost I would immediately cancel planned conservation spending. This would save ratepayers over $433 million annually

Wind and solar contracts

I would immediately cancel any contracts that are outstanding but haven’t been started but may be in the process of a challenge via either the ERT (environmental review tribunal) or the court system. This would save ratepayers an estimated $200 million annually

Wind turbine noise and environmental non-compliance

Work with the MOECC Minister to insure they effect compliance by industrial wind developers both for exceeding noise level standards and operations during bird and bat migration periods.  Failure to comply would elicit large fines. This would save ratepayers an estimated $200/400 million annually

Change the “baseload” designation of generation for wind and solar developments

Both wind and solar generation is unreliable and intermittent, dependent on weather, and as such should not be granted “first to the grid rights”.  They are backed up by gas or hydro generation with both paid, for either spilling water or idling when the wind blows or the sun shines.  The cost is phenomenal.  As an example, wind turbines annually generate at approximately 30 per cent of rated capacity but 65 per cent of the time its generation is at the wrong time and not needed. The estimated annual ratepayer savings if wind generation was replaced by hydro would be $400 million and if replaced by gas in excess of $600 million

Charge a fee (tax) for out of phase/need generation for wind and solar

Should the foregoing “baseload” re-designation be impossible based on legal issues I would direct the IESO to institute a fee that would apply to wind and solar generation delivered during mid-peak and off-peak times.  A higher fee would also apply when wind is curtailed and would suggest a fee of $10/per MWh delivered during off-peak and mid-peak hours and a $20/per MWh for curtailed generation. The estimated annual revenue generated would be a minimum of $150 million

Increase LEAP contributions from LDC’s to 1 per cent of distribution revenues

The OEB would be instructed to institute an increase in the LDC (local distribution companies) LEAP (low-income assistance program) from 0.12 per cent to 1 per cent and reduce the allowed ROI (return on investment) by the difference. This would deliver an estimated $60/80 million annually reducing the revenue requirement for the OESP (Ontario electricity support program) currently funded by taxpayers

Close unutilized OPG generation plants

OPG currently has two power plants that are only very, very, occasionally called on to generate electricity yet ratepayers pick up the costs for OMA (operations, maintenance and administration). One of these is the Thunder Bay, former coal plant, converted to high-end biomass with a capacity of 165 MW which would produce power at a reported cost of $1.50/kWh (Auditor General’s report) and the other unused plant is the Lennox oil/gas plant in Napanee/Bath with a capacity of 2,200 MW that is never used. The estimated annual savings from the closing of these two plants would be in the $200 million range.

Rejig time-of-use (TOU) pricing to allow opt-in or opt-out

TOU pricing is focused on flattening demand by reducing usage during “peak hours” without any consideration of households or businesses.  Allow households and small businesses a choice to either agree to TOU pricing or the average price (currently 8.21 cents/kWh after the 17% Fair Hydro Act reduction) over a week.  This would benefit households with shift workers, seniors, people with disabilities utilizing equipment drawing power and small businesses and would likely increase demand and reduce surplus exports thereby reducing our costs associated with those exports. The estimated annual savings could easily be in the range of $200/400 million annually

Other initiatives

Niagara water rights

I would conduct an investigation into why our Niagara Beck plants have not increased generation since the $1.5 Billion spent on “Big Becky” (150 MW capacity) which was touted to produce enough additional power to provide electricity to 160,000 homes or over 1.4 million MWh.  Are we constrained by water rights with the US or is it a lack of transmission capabilities to get the power to where demand resides?

MPAC’s wind turbine assessments

One of the previous Ministers of Finance instructed MPAC (Municipal Property Assessment Corp,) to assess industrial wind turbines (IWT) at a maximum of $40,000 per MW of capacity despite their value of $1.5/2 million each.   I would request whomever is appointed by the new Premier to the Finance Ministry portfolio to recall those instructions and allow MPAC to reassess IWT at their current values over the terms of their contracts.  This would immediately benefit municipalities (via higher realty taxes) that originally had no ability to accept or reject IWT.

If one does a quick addition of the foregoing one will see the benefit to the ratepayers of the province would amount to in excess of $2 billion dollars which co-incidentally is approximately even more than the previous government provided via the Fair Hydro Act.

Hmm, perhaps we didn’t need to push those costs off to the future for our children and grandchildren to pay!

Now that I have formulated a plan to reduce electricity costs by over $2 billion per annum I can relax, confident that I can indeed handle the portfolio handed to me by the new Premier of the province.”

Are Premier Ford and PM Trudeau Aware of the Big Stick they Hold to Stop Michigan Governor Whitmer Shutting down Line 5?

   

Lorrie Goldstein of the Toronto Sun wrote a great article about how Premier Doug Ford is sucking up to Trudeau’s “woke” followers in order to win their vote in the upcoming Ontario election. The article described ways Ford and Trudeau have agreed on several different issues. One of those was to fight the efforts of Michigan Governor, Gretchen Whitmer and her push “to shut down Enbridge’s Line 5 pipeline under Lake Michigan and Lake Huron, which carries light crude oil and natural gas liquids, the closure of which would damage both the Canadian and Ontario economies.”

The fight with Michigan has been going on since November 2020 when Governor Whitmer ordered it shut down.  Enbridge, supported by the Trudeau and Ford led governments successfully fought the order, pointing to a long-standing agreement between the US and Canada in respect to cross-border pipelines.  Despite the prior win by Enbridge, Governor Whitmer has recently decided to try again using a different tactic which on the surface looks wimpy.  We should all find it humorous that even our past and present “net-zero” advocates; Wilkinson and Guilbeault as Ministers of the Environment and Climate Change, support Enbridge, according to an interview reported by SARNIA News Today!

What is not understandable is why the Ontario Ford led government didn’t use the big stick at their disposal. If Doug Ford looked at IESO’s “Annual Imports and Exports by Destination” he would see that Ontario over the past ten (10) years has supplied Michigan with about 10% of their annual consumption according to the Michigan energy profile. That (approximately) 10% is supplied at prices that would make Ontario’s ratepayers and taxpayers jump for joy if they could keep it!  During those 10 years we have supplied Michigan with 87,174 GWh (gigawatt hours) at bargain basement prices. Over those 10 years in almost every hour we provide them with 1,000 MWh or more of our “non-emitting” electricity allowing them to both save money and reduce emissions while we Ontarians are forced to absorb the subsidy.

As an example the HOEP in 2021 reported in IESO’s Year in Review  was 2.85 cents/kWh and that year we exported 8,482 GWh to Michigan (49.3% of all exports). In 2020 we exported 9,835 GWh or 48.4% of all exports (about what 1.1 million average Ontario households annually consume) to Michigan when the HOEP was 1.39 cents/kWh. The cost to Michigan for 2019 was just under $137 million for our power resulting in Ontarians absorbing costs of approximately $1.026 billion.  

Another very recent example was April 30th and May 1st when Ontario demand was relatively low with demand on April 30th peaking at 14,446 MW and on May 1st peaking at 15,255 MW.  Nuclear and Hydro would have had no problem providing most of that power for either peak.  What happened on both those days was atypical of our Spring and Fall seasons when the wind blows. On the 30th IESO reported IWT (industrial wind turbines) grid connected generation of 40,185 MWh and on May 1st it was 31,115 MWh. Additionally, it appears IESO also curtailed about 8,300 MWh on April 30th and 28,700 MWh on May 1st!    

The combined cost of the two days for grid accepted IWT generation plus the cost of the curtailed IWT generation was approximately $14.065 million. Needless to say, with low demand we were busy exporting power and 68,890 MWh of it went to Michigan.  Michigan had to ante up $146,000 on April 30th paying 0.0425 cents/kwh and 0.0823 cents/kWh ($284,000) on May 1st resulting in us generous Ontario ratepayers/taxpayers picking up a subsidy of $13.9 million over the two days.

It is also worth noting that approximately 65% of Michigan’s electricity generation is produced with fossil fuels and coal generation represents almost half of that generating about 30% or 30,000 GWh annually!

So, the question is, do we blame it on the senseless IWT contracts the McGuinty/Wynne government signed with “first-to-the-grid” rights or the Ford government for doing absolutely nothing to amend those contracts since being elected? 

Without the latter Governor Whitmer’s Michigan ratepayers are simply enjoying the benefits so; why doesn’t the Ford Government instruct IESO to stop using the intertie lines with them until she agrees to stop pushing for closure of Line 5. Paying for all the unneeded wind and curtailing it might actually cost us Ontario ratepayers/taxpayers a little less! 

The time has come for Ford and Trudeau to use the Big Stick!

NB: It is worth pointing out that Michigan has 320,000 households who use propane for heating and other purposes and they laid out a plan that will ensure their supply is not impacted if and when the Line 5 pipeline is shut down.  The plan doesn’t mention how others like Ontario, Quebec and neighbouring states will handle the loss of propane however.  The plan is dated November 3, 2021 so it is obvious Whitmer is determined to shut Line 5 down.   Link to plan: https://www.michigan.gov/mpsc/-/media/Project/Websites/mpsc/consumer/propane/MI_Propane_Security_Plan_Overview.pdf?rev=90d4da17bbfb482a96fec64e2201b6c9

Bits and Pieces Related to the “Net-Zero” Push

There were a few recent announcements and events that should have caught the attention of the general population over the past couple of weeks so let’s look quickly at a few of them!

Largest private storage battery in North America’ to help Imperial Oil cut emissions in Sarnia

This one was in the Financial Post back on February 16, 2022 and stated an Italian company would build a 20 MW battery storage unit for Imperial Oil that would reputedly reduce “their energy expenditures by millions of dollars per year.” They would download cheap energy in the middle of the night to charge the battery storage unit and then use it during peak hours. Many of the “Class A” customers in Ontario already take advantage of this using gas generating units firing them up during peak hours saving millions.  Scott Luft noted in a post a couple of years ago; since the ICI (industrial conservation initiative) inception in late 2011 through to the end of 2019 the cost to Class B ratepayers was approximately $1.4 billion (average of about $170 million per annum) paid to reduce the GA for those large industrial ratepayers. One should assume the Ford government could have changed the way the burden is put on Class B ratepayers to subsidize Class A ratepayers but they have done nothing. The burden continues to fall on Class B ratepayers and part of that has been transferred to taxpayers first by the Wynne led government and then increased by the current Ford led government. Hmm, wondering, would it be cheaper for Imperial Oil to buy those Clean Energy Credits (CEC) Minister Smith is considering instead of using that battery storage unit?

Wind Turbine Setback Promises Not Kept

Before and during the last election campaign the Ford led Ontario Conservative Party promised if elected they would review the setbacks for industrial wind turbines (IWT) as well as the contaminated well water in the Chatham/Kent region.  In the almost four years they have been in power they have done nothing related to either of the two foregoing promises.  WCO (Wind Concerns Ontario) have recently (for the umpteenth time) pointed out the 7,000 complaints filed about IWT noise levels and also posted an article from four years ago about the Chatham Kent well water problems which have also been ignored.  Sure, looks to be almost one of those “Promise Made, Promise Missed” sayings which Premier Ford loves to cite except for that final word.

OPG Year-end 2021

OPG released their 2021 year-end results March 10, 2022 and despite a 4.5 TWh drop (5.5%) in generation they still managed to generate $1,325 million a slight (2.6%) fall from 2020.  Forgone generation due to SBG (surplus baseload generation) dropped from 4.3 TWh in 2020 to only 1.9 TWh in 2021 meaning “water rental payments” declined by $30 million. Currently two of the Darlington nuclear units are down for refurbishment with Unit 3 scheduled to be returned to service in the first quarter of 2024 and Unit 1 in the second quarter of 2025. With both those units undergoing refurbishment we should expect greater dependency on our gas generation plants meaning both OPG’s Napanee and Lennox plants should benefit by supplying more peak generation and maintain profitability for OPG without driving costs up.

Bitcoin mining data centre opens in Sarnia

It seems back in yesteryear, mining referenced; “the business or process of working mines” and extracting ore! In recent years it seems all about setting up an elaborate data centre with complicated math problems which when solved supposedly create a “bitcoin”!   One of those bitcoin mines has recently started operations in Sarnia.  Established by “Bitfury Group, an Amsterdam-based Bitcoin mining and crypto tech company” it will start with a 16 MW capacity and expand by 12 MW by May end. It may eventually expand to 200 MW.  To put the latter number in context; a plant capable of generating 200 MW per hour is about what 200,000 average Ontario households would consume annually. The power to support the “mine” will be provided by TransAlta’s Sarnia Cogeneration Plant, a 499 MW capacity natural gas-powered plant. The TASarnia plant is also under contract to IESO and several other Sarnia located companies. Curiosity piqued about how much energy “bitcoin” operations consume globally led to an almost one year old article in the Harvard Business Review. The article suggested, at that time, it was 110 TWh (terawatt hours) which is equivalent to about 80% of Ontario’s annual consumption.  One should assume all of that 110 TWh was/is provided by reliable fossil fuels or nuclear power as intermittent wind and solar could never be relied on to ensure those mining data centres continued to operate.

As one should assume from the foregoing “bits and pieces” the path to net-zero is full of pot-holes eco-warriors and inane politicians seem unable to visualize!

PS:  I was called out on the following “(Scott Luft noted in a post a couple of years ago; since the ICI (industrial conservation initiative) inception in late 2011 through to the end of 2019 the cost to Class B ratepayers was approximately $1.4 billion (average of about $170 million per annum) paid to reduce the GA for those large industrial ratepayers.)”.  I would point out I always have a lot of faith in what Scott posts so I must assume it related to something as simple as a misplaced period “.”!  It turns out the OEB, Market Surveillance Panel back in December 2018 evaluated the ICI and in their report stated:  “In 2017, the ICI shifted $1.2 billion in electricity costs to households and small businesses—nearly four times greater than the amount in 2011. In 2017, the ICI increased the cost of electricity for households and small businesses by 10%.”