Expensive Renewables get Priority over Cheap Renewables-Why?

March 31, 2022 demonstrates how Ontario’s Spring weather frequently treats us ratepayers badly, irrespective of “climate change” or that net-zero 2050 target!

As it turns out the wind was blowing as it frequently does when Spring arrives in Ontario and it proved hurtful due to the favoured treatment granted to IWT (industrial wind turbines) for their generation.  For ten (10) hours IWT delivered more generation to Ontario’s electricity grid than our hydro capacity did. That seems odd as during the Spring the water is flowing as the snow melts and supplies our creeks, rivers and lakes with lots of water to run the many hydro dams evident throughout the province.  

On examination of the daily IESO generation output one notes for 5 of the 10 hours wind out-generated hydro in the middle of the night. During the same hours it appears that wind’s generation was also being curtailed (about 3,100 MWh) and it sure appears hydro was being spilled.  During those 5 hours the HOEP (hourly Ontario energy price) averaged $4.80* a MWh or 0.48 cents/kWh and our neighours in Michigan were scooping it up.

Collectively we sold Michigan net exports (exports minus imports) of 35,524 MW over the full 24 hours for the bargain basement price of $16.46/MWh or 1.65cents/kWh so we earned $584,725 which sure didn’t come close to its cost.  If what was sold was all generated by those IWT it would have cost ratepayers $4,796,000 and if one included curtailed wind the total cost would have been almost $5,168,000 or $145.48/MWh without including any costs for spilled hydro*. So, the net result of March 31st generation was an additional cost of $4,583,000 for those exports without including associated costs of the spilled hydro.  

So, during Spring while those IWT are chopping up migrating birds and bats, creating noises harming people and animals living close to them they are also adding costs to our daily living! 

We are doing the harm with technology eco-warriors tell us is cheap, abundant and beneficial but what we experienced in Ontario yesterday is atypical of our Spring and Fall seasons and is anything but cheap or beneficial and most often abundant when unneeded.

Unfortunately, the eco-warriors have convinced our Federal and Provincial politicians doing this will save the world from climate change! 

How dumb do they think we are and why are the politicians allowing IWT generation to take precedence over low-cost hydro?

*IESO fails to tell us when hydro is spilled or it’s associated cost nor do they disclose how much wind generation is curtailed and paid for. It’s time for full disclosure by IESO!

Wind and Solar forecast to Cost Taxpayers a tiny bit Less

The Province of Ontario just released the Third Quarter Finances report and seem happy as their press release noted they are “now projecting a deficit of $13.1 billion in 2021-22 – an improvement of $8.4 billion from the deficit forecast in the Fall Economic Statement.”

Revenue Surprise

In looking over the highlights from the report it appears one of the reasons for the improvement is they note revenue from OPG and Hydro One is now forecast to be $1,535 million versus the original forecast of $670 million so that alone produced $865 million or slightly more than 10% of the “improvement”!  Hmm, that presumably came from us ratepayers and the 129% contributed to the improvement was made without any appreciable increase in consumption!

Expense Shortfall

The other issue one should note is the costs contributed by taxpayers is forecast to come in at $112.3 million less or 1.7% below their forecast.  The original forecast for this expense suggested it would cost taxpayers $6,493.6 million but the revised forecast is now $6,381.3 million.  As most readers know the Ford government transferred responsibility for absorption of much of the costs of renewable energy (principally wind and solar) contracts to taxpayers. That move’s intent was to reduce the burden on ratepayers and presumably to also make Ontario’s electricity rates somewhat competitive with our neighbours!  The fact that the past year has seen slightly less output from wind and solar while some nuclear reactors were down for maintenance resulted in less curtailed wind generation and less hydro spillage saving taxpayers those costs.

The ups and downs of generation by IWT (industrial wind turbines) play a major role in the cost shifts from ratepayers to taxpayers and that is evident by simply comparing just two recent hours of IESO data.

Hour 9 on February 15, 2022 as the first example has IESO reporting IWT generated 384 MWh and the HOEP (hourly Ontario energy price or market price) which is what IESO sold our surplus power to our neighbours (NY, Michigan and Quebec) at that hour, was $111.64/MWh whereas at the same hour on February 16, 2022 the price we were selling surplus power dropped to  $43.23/MWh.  On February 16th those IWT were generating 4,387 MWh and we were exporting considerably more at that hour than we were the prior day!

If we then compare hour 12 those IWT on the 15th were generating a miserly 56 MWh and the HOEP price was $46.12 but on the 16th that price was only $14.36/MWh when those IWT were generating 3,566 MWh and another 400 MWh were curtailed.

Obviously, the hour of the day, if it’s a workday along with outside temperatures play a significant role in demand but IWT are insensitive and deliver power ONLY when the wind is blowing and also ignore seasonal swings which significantly affects demand.

Gas plants must be at the ready for our variably demand and they were; as at hour 9 on the 15th they were generating 6,610 MWh and at hour 12 they produced 5,606 MWh.    At hour 9 on the 16th, they delivered 3,108 MWh and by hour 12 only 1,733 MWh were needed.

What the foregoing points out is that without gas plants being at the ready on hour 9, as one example, we may been close to experiencing a rolling blackout or a brownout experience with low voltage power. 

Not only are Ontarians paying above market prices for contracted wind and solar generators but we are also obliged to pay for their penchant to fail.  What the latter means is, we pay for gas plants regardless of whether they are simply sitting at the ready or actually generating power due to the failure of IWT or solar to provide needed power!

Gas plants ensure we can keep the lights on.

Ontario Ratepayers Blinked, and Nothing Happened

In a little over four months from today Ontarians will find ourselves having to decide who to vote for in the forthcoming election?  After four years of the Doug Ford led government, we will, no doubt, look back and wonder, do they deserve another term?

Personally, I have been scratching my head and searching for their accomplishments, particularly as it relates to the “electricity” sector where my critical analysis started about a dozen years ago with the assistance of individuals with much better electricity generation insight.  Back when the OPC party sat in opposition their “official critics” of the ministry would often call me seeking input. The current Minister of Energy, MPP Todd Smith occupied that position for about three years and would seek my views. His predecessor, Vic Fedeli, would do the same prior to becoming finance critic.   

When the Doug Ford led OPC party won the last election with a significant majority the Wynne led Ontario Liberal Party became the “minivan” party.   Many of us who supported Ford et al, looked forward to seeing real action from the Ford appointed Energy Minister.  We expected they would change things reversing the electricity price climb that had increased ratepayer costs by well over 100%.

Ford appointed Greg Rickford as Minister of Energy, Mines, Northern Development and Indigenous Affairs and while Rickford may be a competent individual it wasn’t clear he was familiar with the complexities of the energy portfolio! Rickford moved quickly to kill the GEA (Green Energy and Green Economy Act) immediately announcing cancellation of 758 contracts that had not started.  The cancellation would reputedly save ratepayers $790 million but failed to mention it was over the full term of the 20-year contracts. The future savings were less than $40 million annually or about 0.2% of the annual cost of electricity to ratepayers.

Water tax allocation etc,                                                                                             

Rickford could have simply reduced the “water fuel expense” ie: tax, from the $11.2 million per TWh (terawatt hour) paid by OPG to $10 million/TWh and actually saved ratepayers $40 million per annum, but he didn’t! Ratepayers even pay the water tax when OPG is forced to “spill” water because the wind is blowing and/or the sun is shining and the “first to the grid” rights are given to industrial wind turbines (IWT) and solar panels. He could have allocated that cost to the IWT contracts at the very least. Rickford may also have been involved in the retirement of the Hydro One Board along with the CEO Mayo Schmidt, although Premier Ford was seen to take credit for that! That event didn’t save us money.

In my humble opinion the foregoing basically represents the bulk of what Rickford accomplished while Minister of Energy unless one accord’s him the credit for increasing the cost transfer to taxpayers from the 31.2% of my May 29,2018 hydro bill when Wynne was the Premier to 38.5% on my most recent bill.  The foregoing of course only served to increase the future cost to taxpayers who are also ratepayers. The C.D. Howe Institute estimated in their June 15, 2021 report taxpayer subsidies climbed to $6.5 billion for the 2021/2022 fiscal year.  

A mere three days after release of the C. D. Howe report a cabinet shuffle occurred and Premier Ford appointed Todd Smith to what is now labelled simply; The Ministry of Energy.

We will look at Smith’s accomplishments and directions over his first 8 months in the next post so stayed tuned!

Did Jack Gibbons of the OCAA and Bruce Lourie Hijack the IESO via the Rural Ontario Municipal Association?

The IESO (Independent Electricity System of Ontario) on a weekly basis issue a Thursday afternoon bulletin and the latest came with a five (5) minute video executed by Carla Nell, VP of Corporate Relations.  It referenced the ROMA conference held on January 24th and 25th! Curious I wondered over to the ROMA site to view the agenda and postings related to the conference.  I found no postings and the agenda said nothing about what the video inferred.  I was able to find a January 17. 2022 post about plenary sessions and it specifically mentioned “timely issues such as climate change.“ as part of the upcoming conference. Reading further led to the discovery that: “Dr. Bruce Lourie, a best-selling author and environmental policy expert, will address delegates on Tuesday about mitigating climate risk and transitioning to a net-zero economy.”  Alarm bells rang!

Connecting the above mentioned video by Carla Nell of IESO with Bruce Lourie’s reputed “expert” policies immediately had me wondering; was Lourie’s address to the “delegates” related to the OCAA’s (Gibbons) success in getting approval from those 32 municipalities (including most of the largest ones) that Ontario should shut down all of the gas plants?  Those plants have been invaluable in keeping our lights on during the recent cold spells and 60% of Ontario households with natural gas furnaces warm?                      

Lourie and Gibbons go back a long, long way in their actions related to the energy sector. A hearing at the Legislative Assembly of Ontario in respect to the Power Corporation Amendment Act in 1992, has Gibbons delivering a preamble to his remarks saying: “I am Jack Gibbons, an economist with the Canadian Institute for Environmental Law and Policy, before I joined the Canadian institute, I was a staff member of the Ontario Energy Board. I have with me Mr Bruce Lourie

Back in 1992 Gibbons was in favor of natural gas stating to a question asked of him; Natural gas is so much cheaper than electricity. Look at space heating. If we just look at the financial costs — forget the environmental costs — the incremental cost of electricity for space heating is about six times that of natural gas.“ 

At some point Gibbons reversed his beliefs even though both he and Lourie were at that hearing!

So, was Lourie a substitute for Gibbons at the ROMA conference?  Unfortunately, ROMA’s website doesn’t seem to have posted what Lourie’s address was so we can’t really know what he said but with the “net-zero” mention we should be rightly concerned. The video, mentions several scary aspects including eliminating gas fired power plants mere months after IESO’s Study clearly reported: 

Completely phasing out natural gas generation by 2030 would lead to blackouts and the system changes that would be required would increase residential electricity bills by 60 per cent.

Has IESO and the Provincial Government under Ford suddenly conceded control of the electricity sector to the 32 municipalities who bought into Gibbons sales pitch?

We voters need immediate clarification from all parties running in the Provincial election in June as to exactly what their position is in respect to what the video suggests!

We should not let the eco-warriors hijack the energy sector once again!

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:

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

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: