Winds Whips Hydro in Ontario or So It Appears

As December 1, 2021 drew to a close at Hour 22 on the IESO “Generators Output and Capability Report” wind generation suddenly passed hydro generation and stayed ahead of it for the following 20 hours, pausing at Hour 19 on December 2nd but passing hydro again for hours 20 and 21.  Over those 23 hours wind (as reported by IESO) reputedly out-produced Ontario’s hydro generation by almost 21,000 MWh.  Based on IESO data it appears about 2,700 MWh of wind generation was also curtailed. What IESO data doesn’t disclose is how much hydro was spilled over those 23 hours.

For wind and solar data IESO report it on three lines by hour; “Available Capacity, Forecast and Output”.  When hydro is “spilled” or nuclear is “steamed off” we won’t see that reported by IESO and are uninformed until financial reports from OPG or Bruce Power are released.  OPG’s 9-month financial report for September 30, 2021 indicates they spilled 1.7 TWh (terawatt hours) due to SBG (surplus baseload generation) to that point in the year.  Hydro spillage is paid for by ratepayers and so far, has added over $100 million to this year’s electricity bill. The 1.7 TWh is equivalent to (approximately) what 250,000 average households would have consumed over those 9 months.

The reasoning by IESO as to whether they will spill hydro or curtail wind (which we also pay for) is reputedly determined by the HOEP (hourly Ontario electricity price). Most contracted IWT (industrial wind turbines) are paid $135/MWh and $120/MWh if curtailed.  IESO in situations that create SBG will sell off the surplus (if the HOEP is high enough) before they spill hydro or steam off nuclear.  It has never been clear to many why the contracts awarded for either IWT or solar panels were granted “first to the grid” rights but both of those intermittent and unreliable generation sources were, so we must pay them even if the generation is unneeded!

A quick look at the costs for those 23 hours  

The 2,700 MWh (approximately) of curtailed wind meant generators were paid $120/MWh costing $324,000. Those same IWT generators were paid $135/MWh for the 98,800 MWh of accepted wind amounting to $13,338,000.  To top off the costs for the 23 hours favouring wind generation, OPG was paid $60/MWh for spilling hydro (minimally estimated at 21,000 MWh) adding $1,260.000 and bringing total costs to $14,922,000 for the 23 hours!                                        

The $14,922,000 represents a cost of $151/MWh for the 98,800 MWh of accepted wind generation but doesn’t include costs associated with the gas plant backups for wind and solar which would add another $3 million or so for the 23 hours nor does it include losses from selling power to our neighbours.

On the latter, IESO were selling off approximately 2,500 MW hourly to our neighbours in Michigan, NY etc. for the HOEP average price of about $30/MWh. Those 60,000 MWh therefore generated about $1.8 million reducing the total cost above to $13,122,000.  If we accept the fact those exports were IWT generated the remaining 38,800 MWh supplying local ratepayers cost $340/MWh.

Had OPG provided those 38,800 MWh the cost would have been $60/MWh ($2.3 million) saving Ontario ratepayers over $12 Million!

One should wonder why the McGuinty/Wynne government blessed those contracts and why the Ford led government has done nothing to fix it?

Events like those 23 hours clearly show wind whips Ontario’s ratepayers not it’s hydro generation!

NB: Over the days of December 1st and 2nd during one of the hours wind was generating almost 93% of its capacity and on another hour was generating only 15% demonstrating its intermittent and unreliable habit!

Norway’s Virtue Signal is Shallow Whereas Canada’s is Harmful

A press release from the Ontario Ministry of Energy, Todd Smith on December 1, 2021 bragged about the province’s support for the “Ivy Charging Network” (a joint venture between OPG and Hydro One).  The press release stated: “The deployment of charging infrastructure will see ONroute locations along highways 401 and 400 equipped with at least two EV chargers at each site, with busier sites equipped with more.“ The press release went on to quote Minister Smith saying; “This deployment will reduce barriers to EV ownership, supporting Ontario’s growing EV manufacturing market.“ Hopefully, the message was simply meant to augment the agreement by the Ford and Trudeau led governments to provide Ford Automotive with $295 million each to save the 5,000 jobs at their Oakville plant by converting it to manufacture EV!

The announcement brought to mind a recent article, with a related video, about Norway and their claim to be “the world’s top market for electric and plug-in hybrid vehicles by market share“!  The article was about testing 20 different models of EVs and hybrid vehicles to determine their loss of “performance” in cold weather (defined as from a high of 3°Cto -6°C). The short video in the article indicated the average loss of performance in that “cold weather” was in the order of about 20%.  Most Canadians would consider that to be classified as; mild winter weather! We should expect our colder winter temperatures would result in a much higher loss of performance should we push for more EVs to replace our dependable and winter reliable ICE automobiles.

Presently about 15% of all registered vehicles in Norway are EVs or hybrids and recent monthly sales of those are now over 80% of all vehicles.  That is seemingly causing some concern as EV and hybrid buyers receive lots of generous tax breaks (ie; the VAT of 25%, free parking, no toll road charges, etc. etc.) which led to a study which “estimated that the popularity of EVs was creating a 19.2 billion Norwegian krone ($2.32 billion) hole in the country’s annual revenue.“  They are suddenly noticing their tax revenues are falling.

Curiosity piqued, if one looks at Norway’s electricity generation one finds it is emissions free with 98% from hydro and 1.7% from other renewables and slightly better than Ontario’s. Annual consumption is 123 TWh (terawatt hours).  On a per capita basis (population of 5.4 million) that means each Norwegian consumes about 23 MWh (megawatt hours).  If one looks at Ontario with a population of 14.6 million, per capita consumption is only 9 MWh for the 132.2 TWh we consumed in 2020 which means the average Ontarian consumes only 39% of the average Norwegian!

I point out the foregoing merely to show if EV sales in Ontario achieve what they are in Norway, Ontario may need a lot more electricity generation at a time when the Pickering Nuclear Station is slated to be shutdown. The Energy Minister’s press release noted as of October 2021 “there are 66,757 EVs registered in Ontario. By 2030, one out of every three automobiles sold will be electric.“ Those current EV registrations are less than 1% of vehicle registrations in Ontario so let us all hope his forecast is wrong!

If we look at Norway and compare it to Canada, we should note they are a major generator of oil and gas with the bulk of it sold to other European countries. In respect to oil and gas production the similarities are striking but while Norway increases their generation of oil and gas to sell to other countries Canada’s current government hamstrings our fossil fuel sector in a variety of ways. Norway’s exports of oil and gas represent about one third of all exports and in Canada’s case it was just north of 14% in 2019.

Interestingly, Canada was among 20 countries that signed on to the COP26 agreement to no longer finance fossil fuel projects abroad but it’s not clear if Norway was one of those countries.  Another article does however note; Norway has lobbied the World Bank to “stop all financing of natural gas projects in Africa and elsewhere as soon as 2025 — and until then only in “exceptional circumstances “ The article’s summary highlights the hypocrisy of Norway by summing up with the closing sentence: “It is antithetical to say you support energy development abroad — but only when it is green — while admitting green energy cannot be the only source. Norway can’t have its cake and eat it too, not when it comes to energy development.”

While Norway’s position is shallow it protects their economic wellbeing as a benefit to their citizens whereas, Canada under PM Justin Trudeau, seems determined to destroy our economy to the detriment of all Canadians!

Wind Generation in the middle of the night wastes ratepayer and taxpayer dollars

Today, November 26, 2021 at 3 AM the wind was blowing and those IWT (industrial wind turbines) generated 3,677 MWh or 81.2% of their rated capacity of 4519 MW at that hour. Ontario’s demand was low though at 12,941 MW so IESO were busy selling our surplus as total generation was 15,361 MWh.

IESO exported 1,375 MWh to Michigan, 658 MWh to New York and 578 MWh to Quebec. Those 2,611 MWh we sold went for pennies on the dollar as the HOEP (hourly Ontario electricity price) was a miserly 1.33 cents/kWh.  At the same time, one should surmise IESO instructed OPG to also spill hydro.

It is obvious Ontario didn’t need the IWT generation at that hour but they have a bad habit of generating power when it’s unneeded and fail to deliver it when demand is high during hot summer days.

So, Ontario sold the 2,611 MWh to our neighbours for the princely sum of $13.30/MWh which generated $34,726 but paid those IWT generators $135/MWh so they received $352,485 for those unneeded 2,611 MWh meaning Ontario’s ratepayers and taxpayers picked up the loss of $312,759 for just that one hour.

The full night for the 7 hours from midnight to 7 AM had those IWT generating 28,460 MWh so the likely cost to Ontario’s ratepayers and taxpayers was over $2 million for just those seven hours. 

We should all assume those IWT were also busy chopping up birds and bats and causing rural residents sleeping problems in addition to adding to the costs of our electricity bills.

Sure, would-be good news if the Ford government actually did something to reduce the costs of generating electricity other than simply transferring the costs to taxpayers and increasing our provincial debt!

Hydro One shareholders make bank as taxpayers get dinged

I was treated to another Marc Patrone radio interview on SAUGA 960 AM to discuss my recent article about Hydro One’s record profit in the 1st Quarter of the current year. We also looked at what the Ford led government has done to try to curb the rising costs of electricity as compared to his pre-election promise to lower rates. The big question is did he deliver or did those McGuinty/Wynne contracts for renewable energy cause him problems?

You can listen to the podcast starting at 1:24:02 of the May 25, 2021 show here:

Or, if you ae a subscriber to NEWSTALK RADIO you can listen here:

Hydro One Shareholders Should Thank Ontario’s Taxpayers and Premier Ford for Seemingly Embracing the Circular Economy

Hydro One earlier this month released their 1st Quarter 2021 report and EPS (earnings per share) were up from 0.38 cents per share to 0.45 cents for an 18.4% increase and the highest 1st Quarter earnings since becoming a publicly listed company.  The net profit after financing costs and taxes of $273 million also appears to be a record as far back as Hydro One post their first Quarter financials which appears to be 2015.

Hydro One’s report noted the reasons behind the increase as: “Revenues, net of purchased power, for the first quarter were $74 million higher than last year, mainly due to higher distribution and transmission revenues as a result of OEB-approved rates including the timing of the OEB decision on the 2020 rates received in the second quarter of the prior year, and higher energy demand and consumption driven by favourable weather.  The reference to “favourable weather”, I believe, suggests it was colder and due to the Covid-19 lockdown meant ratepayers (particularly residential) consumed more kWh (kilowatt hours) then the prior year.  The results noted distributed power increased from 7,484 GWh (gigawatt hours) to 8,156 GWh for an increase of 9%. Average transmission “60-minute peak demand” also increased by almost 6%.

The reference to “purchased power” signaled costs dropped dramatically due to the Ford government changing the former Wynne led government’s “Fair Hydro Plan” into the Ford government’s “Ontario Electricity Rebate” increasing the taxpayer subsidization. What that did was, decrease the cost of “purchased power” for Hydro One from $1,007 million in 2020 to $894 million in 2021 (despite the 9% consumption increase) dropping the cost per kWh (kilowatt hour) from 13.5 cents/kWh to 11 cents/kWh.  That represented a taxpayer subsidy of around $203 million for the quarter (Hydro One customers only) more than doubling the Wynne subsidy! 

It also meant Hydro One’s ROR (return on revenue) and ROA (return on assets) look much better then past returns which presumably helped drive up the share price.  As an indication Hydro One’s stock exchange price closed at $30.40/share on May 21, 2021 whereas back when Ford declared the March 12, 2020 lockdown the share price was $24.50. What the foregoing $5.90 per share increase suggests is the (approximately) 40% ownership the province holds in Hydro One is now worth about $1.44 billion more (up 24%) than it was worth just over a year ago and will presumably reflect itself favourably on the province’s financial statements when they are released. To make matters even better Hydro One’s quarterly dividend on their shares increased from the comparable quarter and resulted in an approximate $60 million dollar payment to the province.

Boiling it down   

By using taxpayer debt to subsidize electricity costs the Ontario government has increased the value of the assets held in the monopoly where we taxpayers own 40%.  Couple the additional taxpayer debt incurred (to subsidize the per kwh charge), plus the OEB granting rate increases for transmission and distribution of electricity and Hydro One’s profit should increase further! Logically that should drive up the market (share price) value even more in the future!

Is this really what our Federal and Provincial politicians had in mind when they referenced the “Circular Economy”?

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:

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:

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.

Ruminations on the Ontario Liberal Electricity Legacy and Premier Ford’s inactions to correct them

I was on the Marc Patrone Show at 960 AM March 23, 2021 to discuss the Ontario Liberal Party legacy in respect to the electricity sector in the province.  We pointed out the billions of dollars in costs of the OLP legacy and how they continue!  At the same time the discussion noted that after almost three years in power the Ford led Ontario Conservative Party has done hardly anything to change the system other than shifting billions of $$$ in costs from ratepayers to taxpayers.

You can listen to our conversation on Sauga 960 AM here on the March 23rd podcast starting at 46:1 ending at 1:02.

OPG’s on a roll and Ontario’s ratepayers and taxpayers are paying the price

OPG released their 2020 Annual Report about a week ago and despite profits increasing, during the pandemic, by $235 million (up 20.9%) from $1,126 million in 2019 to $1,361 million, the media didn’t seem to notice. Gross revenue, net of fuel costs, increased $1,118 million over 2019.  Based on total generation of 82.1 TWh, (up 5.5% over 2019) the cost to produce a MWh (net of fuel costs) jumped from $68.70 in 2019 to $78.72/MWh in 2020 for a 15.5% increase!

The increased gross revenue came from, nuclear, up $700 million, gas and other generation up $300 million and higher hydro costs of $40 million. The latter doesn’t include 4.3 TWh* of spilled hydro costing ratepayers about $220 million in 2020 nor does it include the “fuel costs” of water which were $347 million up slightly from 2019 despite a small drop (2 gigawatt hours [GWh]) of actual generation.

The increased revenue from nuclear and hydro came as a result of the OEB finally blessing rate increase applications submitted by OPG.  In the case of the nuclear rates the OEB took an inordinate amount of time to approve rate increases, so much of this jump was associated with some catching up by OPG as well as a slight increase (3 GWh) in actual generation. The jump in gas costs is due to the acquisition by OPG of the “portfolio of combined-cycle natural gas-fired plants in Ontario from TC Energy Corporation (TC Energy) for approximately $2.8 billion, inclusive of customary closing adjustments. The portfolio included the Napanee GS, the Halton Hills GS, and the remaining 50 percent interest in the Portlands Energy Centre.” As a result of the acquisition, OPG’s gas generation operations in 2020 represented 26.8% (2.6 TWh) of all grid connected gas generated (9.7 TWh) whereas in 2019 the 0.6 TWh they generated was only 6.3% of grid connected gas generation.  The acquisition didn’t close until the end of April 2020 so we should expect OPG will have an even larger percentage of gas generation in 2021.

It is worth noting OPG’s total generation of 82.1 TWh added to Bruce Nuclear’s generation of 44 TWh provided 95.4% of all grid connected Ontario demand in 2020. If one includes the 4.3 TWh of spilled hydro OPG was paid for and the 1 GWh of steamed off nuclear at Bruce the combination of the two could have provided 98.7% of Ontario’s grid demand.  The grid shortfall of 1.7 TWh could have been easily provided by OPG’s hydro units.  Without the costs of over $2 billion dollars for the 13 TWh generated by grid connected wind, solar and bio-mass generation, ratepayers and taxpayers would have been much better off.  Additionally as Scott Luft recently noted that surplus generation only served to reduce emissions for our neighbours in US states such as Michigan, Ohio, Indiana, etc.

Another point worth expounding on is, in addition to the water “fuel costs” of $347 million paid to the provincial government OPG is required to pay them what is referenced as PILT (payment in lieu of taxes). The PILT jumped up 103.9% from 2019 when they were $190 million to $387 million in 2020. So, the province received $734 million in 2020 from us ratepayers which should help to pay a good chunk of the estimated cost of $6.5 billion of the “Ontario Electricity Rebate” that now appears on our monthly hydro bills and is allocated to taxpayers.

While previous Ontario governments have made the electricity ministry as complex as possible the current Ford led government has gone on to exacerbate its complexity rather than trying to undo the mess!  It’s time they actually studied the sector and generate changes to simplify it and reduce the burden on ratepayers and taxpayers but perhaps that is too much to hope for!

*The 4.3 TWh of spilled hydro was equivalent to what almost 480,000 average households (over 10% of all Ontario households) consume annually.