Should the Pickering nuclear plant be closed? Not based on cost and performance…

Pickering: working at 95% capacity during the heat wave [Photo: OPG]
July 6, 2018

Wind power a failure during recent high demand during heat wave; dependable power needed

I got a call at 11 a.m. on June 25th from the producer of the Scott Thompson show on CHML 900 AM to appear on the show to discuss the suggestion by NDP leader Andrea Horwath about closing the Pickering Nuclear plant.

Essentially it was about her statement during the election campaign indicating the NDP’s position on Pickering:  “we will begin the decommissioning process immediately, which will bring more jobs to the area — as opposed to the Liberal plan, which is to mothball that facility for 30 years and allow the next generation to figure out the decommissioning”.

Doug Ford, leader of the Ontario Progressive Conservatives, on the other hand stated: “The Pickering plant can continue to safely operate until at least 2024. We can generate 14 per cent of Ontario’s power needs right here”.

The producer suggested Scott wanted to explore the opposing issues with me.

Aware I was scheduled to be on his show at 12:35 p.m., and remembering that a Brady Yauch article a few months earlier in the Financial Post had suggested closing Pickering, I felt I should do more research before the call back.  Brady’s principal point was Pickering was a poor performer and the estimated costs ($300 million) of the extension would prove to be negative for ratepayers.

OPG’s website describes Pickering as follows: “Pickering Nuclear has six operating CANDU® (CANadian Deuterium Uranium) reactors. The station has a total output of 3,100 megawatts (MW) which is enough to serve a city of one and a half million people, and about 14 per cent of Ontario’s electricity needs.”.

Pickering Nuclear traces its roots back to 1971 when it first commenced operation with four units and expanded to eight units in 1983.  Two of the first four units have been in voluntary lay-up since 1997.  The CNSC (Canadian Nuclear Safety Commission) awarded OPG’s Pickering and Darlington nuclear stations its highest safety rating in 2017.

Combined, the Pickering and Darlington nuclear stations generated 10.4 TWh (terawatts) of power for the 1st Quarter of 2018 at a combined cost of 7.2 cents/kWh (up from 5.8 cents/kWh in the comparable quarter).  The 10.4 TWh was sufficient to supply the 4.6 million average residential households in the province.

Directing my research to IESO’s hourly Generator Report I was able to discern Pickering at hour 10 of June 25th had just generated 2,308 MWh out of 10,457 MWh produced by all the nuclear plants in the province.  Pickering nuclear represented 22% of nuclear generation at that hour, 15.6% of Ontario demand and 14% of total demand (including exports).   At hour 10, wind turbines were generating 452 MWh or 10% of their capacity versus Pickering nuclear which was operating at about 74.5% of its capacity.

Both nuclear and wind are classified as “base-load” generation!

As it turned out, when I was on Scott’s show the bulk of our chat was related to his prior guest’s discussions about Premier Ford’s cancellation of the “cap and trade” tax.  Only a couple of questions were raised about Pickering which I responded to.

Interestingly enough, now that the Ontario July heat wave has passed, I felt the urge to look at the performance of Pickering and IWT over the seven days when peak demand was high.  Pickering nuclear performed well generating close to 3,000 MWh each and every hour over the period meaning it was operating at over 95% of capacity.  Wind power generation, however was all over the map reaching a high of 2,769 MWh (62% of capacity) at midnight July 1st and a low of 5 MWh (0.11% of capacity) at 10AM on July 4th!

It is obvious that wind fails miserably as “base-load” generation when needed and the relative cost of generating power (sans back-up costs) is over 17 cents/kWh.

It sure looks like we should keep Pickering nuclear operating, as Premier Ford suggested.

Parker Gallant

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Should we rip Ontario’s wind turbines out of the ground?

During the Ontario Progressive Conservative leadership race, candidate Tanya Granic Allen declared “I’m going to rip those turbines out of the ground!”  Many folks in rural communities suffering from health effects caused by those industrial wind turbines (IWT), and people who have trouble paying their electricity bills probably cheered that statement. They might have wondered what doing that would cost.

Let’s ponder that question and try to put a dollar figure on it!

The capital cost of IWT suggested by AWEA (American Wind Energy Association) was approximately US $1.3 million per megawatt (MW) which equates to about CDN $1.7 million/MW. IESO’s recently released 18th month Outlook Report (July 2018 to December 2019) indicates we have 4,400 MW (rounded) installed “grid connected” IWT and 600 MW of “embedded” IWT wind generation.  What that suggests is, the total capital cost of grid and embedded IWTs is in the neighbourhood of $6.5 billion.  In addition, there are outstanding contracts for another 375 MW.

Looking at the current installed capacity of 5,000 MW and a capacity factor of 30% those 5,000 MW should generate 13,140,000 MWh yearly. Now, assuming the average price paid for IWT-generated power is $135/MWh* (megawatt hour), those 5,000 MW would earn annual revenue of approximately $1.8 billion.  Over the 20-year term of the contracts they would result in revenue of about $36 billion.

Because of the unreliability of wind power** it must be backed up with natural gas plants. E.ON Netz Gmbh claimed in a 2005 Wind Report that a “back-up provision of 90% of the wind would be necessary”.  What that means is, the 5,000 MW of IWT require the back-up of 4,500 MW of natural gas plants.  Those gas contracts call for payment when idling in order to amortize the capital costs over the 20-year term of the contracts.  The approximate cost to ratepayers is $10,000/MW of capacity per month.  That back-up annual cost is approximately $600 million and over 20 years $12 billion.

That brings the annual cost of the 5,000 MW of IWT and its back-up of gas plants to about $2.4 billion. Not included in that $2.4 billion are costs for spilled hydro (6 TWh in 2017) or curtailed wind (3.3 TWh in 2017) which were spilled/curtailed due to wind generation presenting itself when unneeded. The latter two add another $650 million to the costs of IWT generation bringing the costs of the 9.2 TWh of IWT generation in 2017 to $3.050 billion. Grid accepted wind in 2017 was 9.2 TWh and gas generation was 5.9 TWh meaning collectively those 15.1 TWh cost ratepayers $202 million per/TWh or 20.2 cents/kWh (kilowatt hour)!

Based on the above, “ripping those turbines out of the ground” would mean spilled hydro alone could replace 65% of the grid accepted IWT generation. The remaining 9.1 TWh (wind + gas) could have been easily supplied by gas generation at a nominal cost of approximately $300 million.   The annual savings would be $1.5 billion without the IWT generation!  What that means is the IWT capital costs ($6.5 billion) could be repaid in under 4.5 years without considering the fact that many of them have depreciated in value since installation.

So, just maybe, this is an idea worth consideration. Rip the turbines out and pay the developers the capital costs, and refinance the monies over five years via our electricity bills.  I would suggest we call it the SDRC (Smitherman Debt Retirement Charge) to recognize the Ontario Minister of Energy who created the Green Energy Act.

The biggest obstacle to ripping the turbines out of the ground is the knowledge the contracts were written in favour of wind developers, not ratepayers. So, you could expect “ripping them out” would result in a myriad of lawsuits seeking full restitution for the remaining terms of the contracts, meaning the developers would seek to be paid the $36 billion noted above.

My recommendations are simple:

  1. Cancel the wind power projects in process (375 MW) awaiting the REA from the MOECC or those being fought before the ERT (Environment Review Tribunal) and the Ontario court system and
  2. Tax the hell out of those already up and running.

Parker Gallant

*The average cost is actually higher as all of the FIT contracts contain escalation clauses allowing for annual increases equal to the cost of living escalation to a maximum of 20% or $27.per MWh.

**IESO’s 18th Month Outlook report forecasts IWT capacity at peak demand periods at only 13.8% and a peer reviewed paper by Marc Brouillette indicates IWT only produce power of value to the grid 35% of the time they are generating power.

If I were Ontario’s new Minister of Energy …

 

One initiative: look at why an expensive expansion to hydro isn’t being used

On June 8, after the Ontario election, Ontario’s new premier – whoever that is – will be thinking of selecting a new Minister of Energy. With the challenges in that portfolio, the immediate question for anyone considering accepting the job would be, how can one fix the electricity side of the portfolio after the damage done over the previous 15 years by my predecessors?

Here are a few “fixes” I would take that to try to undo some of the bad decisions of the past, if I were the new energy minister.

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 and may be in the process of a challenge via either the Environmental Review Tribunal) or in the courts.                                 This would save ratepayers an estimated $200 million annually.

Wind turbine noise and environmental non-compliance

Work with the (new) 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 power generation comes at the wrong time of day 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 LDCs 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 .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 unused 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, the former coal plant converted to high-end biomass with a capacity of 165 MW. It would produce power at a reported cost of $1.50/kWh (Auditor General’s report). 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 U.S., 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 Minister’s 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.

Do a quick addition of the numbers and you will see the benefit to the ratepayers of the province would amount to in excess of $2 billion dollars.

Coincidentally, that is approximately even more than the previous government provided via the Fair Hydro Act. 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 could indeed handle the portfolio handed to me by the new Premier of the province.

Parker Gallant

Quarterly stats show wind power blowing Ontario electricity costs higher

A power project that began operating in 2017 … wind power causes waste of other, less expensive sources of clean power due to lucrative contracts

A cold, windy winter cost Ontario electricity consumers. And if the first quarter of 2018 is typical, we’ll pay even more…

The IESO (Independent Electricity System Operator) recently released the March Monthly Summary along with the Generator Output by Fuel Type Monthly Report, so that interested parties can see a year-to-year comparison for the first quarter of 2018 versus 2017.

What the “Generator Output” shows for the first three months of 2018 versus the same period in 2017 is, grid-connected generation output was up by over 600,000 MWh (+1.6%). That suggests the colder than normal winter created increased demand, which it did by just over 700,000 MWh.  As it turned out, gas generation increased year over year by about 750,000 MWh, while Hydro generation decreased by almost 200,000 MWh.

Grid-connected industrial-scale wind turbines (IWT) also generated almost 180,000 MWh* more in the first three months of 2018 versus 2017, and saw curtailed (paid for but not used) generation increase by over 50,000 MWh.

Both of those elements increased costs for ratepayers.

In 2017, the approximate cost of wind power generation in the first quarter, coupled with curtailed generation, was just shy of $532 million. In 2018 it was $30 million higher ($562 million). If the first quarter is typical, the cost to Ontario’s ratepayers for the full year could be over $2.2 billion — just for wind power! (Note the foregoing cost estimate does not include spilled water, steamed off nuclear or the high costs of back-up generation in the form of gas plants standing “at the ready” when the wind isn’t blowing.  On the latter issue a 2017 peer reviewed report by Marc Brouillette for the Council for Clean and Reliable Energy showed wind turbines produce power of value to the grid only 35% of the time.)

To reflect on what the IESO report suggests: even though winter months are considered high demand, the grid-accepted wind power presents 65% of the time when it’s not needed. Wind power, in addition to causing waste of other (clean) sources of power such as spilled hydro, steamed off nuclear, etc., results in the IESO selling surplus power to our neighbours at prices well below the cost of wind power production due to their lucrative contracts.  Proof? Look at the grid-accepted wind power versus Ontario’s net exports.   Grid-accepted wind in the first three months of 2017 was 3.46 terawatts (TWh) and net exports (exports less imports) were 2.92 TWh; the comparable period for 2018 saw grid-accepted wind generation of 3.64 TWh and net exports of 2.86 TWh.  In other words, the wind power, if all exported, was done with only partial recovery of its costs and was excess to actual demand.

That raises the question:

Why did Ontario contract for it in the first place and why was it given “first to the grid” rights? And, why don’t we cancel any outstanding contracts** that haven’t been started if what it generates is surplus?

Paying over $500 million per quarter and as much as $2 billion annually for wind power generation increases energy poverty and sends Ontario’s manufacturing jobs south.

Parker Gallant                                                                                                                                 May 1, 2018

*Thanks to Scott Luft for his data on wind generation and curtailment!

** The government awarded five contracts for almost 300 megawatts of new wind power in 2016, one of which has reached Renewable Energy Approval. The contracts will add $1.3B to Ontario’s electricity costs.

 

Legal action taken on wind turbine noise

It has finally happened!
Using a “private prosecution,” Wind Concerns Ontario has served the Honourable Chris Ballard, Minister of MOECC with a summons for violating the EPA (Environment Protection Act).
The issue is related to the lack of proper follow-up on the thousands of noise complaints filed by individuals throughout the province in locations where industrial wind turbines have been erected.
The complaints date back to 2006 and have continued without any significant attention from the Ministry and have even caused families to abandon their homes in order to seek relief from the noise effects.
Mr Ballard has been Environment Minister since August 2017, and complaints have continued, without resolution.
Read the press release on Wind Concerns website here:

Are the executives in Ontario’s electricity sector befuddled?

The light still comes on when we flick the switch, most of the time, but perhaps someone needs to flick the switch in respect to some of the people in charge of the system.

I say that after recent observations of Ontario government bureaucrats. I do not, however, mean to slight  the engineers and power workers who are keeping the lights on.

A few examples…

IESO, its strange contract awards and accounting for surplus generation – Recently, Terry Young, VP of IESO, (“responsibilities include stakeholder and community engagement, communications, regulatory affairs, Indigenous relations, conservation, and other programs necessary for the implementation of effective energy policy”) was called upon by the council for a southwestern Ontario municipality to explain why a huge multi-million-dollar wind power contract had been awarded. The local newspaper, the Chronicle, had an interesting article about his presentation and Q & A session with Dutton-Dunwich council. The municipality of Dutton-Dunwich had held a referendum on wind turbines and 84% of the residents opposed them.

Despite that, Invenergy of Chicago was awarded a contract by IESO; the company had enlisted the support of four First Nations communities from hundreds of kilometers away to boost them in the bid process. Mr. Young was asked why three local First Nations were not approached by Invenergy. When questioned by council on this contract award all Mr. Young would say was, “I’m not here specifically to talk about the project, but I do understand the concerns that you have had”. He did say he would try and get an answer to the question.

In his presentation he noted generating more electricity than needed “has garnered a lot of attention and mostly for the price that is being paid that we export it at less than what’s being paid in Ontario.” He said exporting electricity is one way to “recoup costs.” What he didn’t say was exporting a product that costs ratepayers $135 and receiving say $35 is simply a dumb exercise, but that is basically what IESO does by contracting for industrial wind generation that offers power out of phase with demand 65% of the time, according to a peer-reviewed study doneby Marc Brouillette for the Canadian Coalition for Renewable Energy.

So, the question is: Why hand out additional contracts for intermittent and unreliable power when Ontario is in surplus?

Mr. Young’s answer, as reported: “As of March 2018, the system has an installed capacity to generate 36,945 megawatts. Yet consumption on a normal day runs closer to 29,000 megawatts, Young said. This over-capacity is further complicated because Ontario doesn’t have an efficient way to store power.”

Ontario’s power use in an average day in Ontario and can be easily supplied by a combination of our existing nuclear and hydro capacity (21,481 MW), without any need for wind or solar generation.

Hydro One hands out rate credits in four U.S. states but tell Ontario farmers to conserve –   The planned acquisition of Avista Corporation has senior executives travelling to the western U.S. states speaking to regulators and promising electricity rate credits extending out 10 years. At the same time in Ontario, they are telling local farmers to conserve or get hit with higher rates according to the Farms.com Newsletter.

In the former case, when the acquisition was announced Hydro One’s CEO, Mayo Schmidt claimed the transaction “will be accretive to earnings per share in the mid-single digits in the first full year of operation.” The rate credits offered in Washington State, alone, to Avista’s ratepayers* amounts to $31 million and 3.1% of Avista’s annual revenue. That was obviously put on the table to persuade state regulators to allow the acquisition. (One has to wonder if the “accretive to earnings” claim made by Schmidt was the reason he was given the large increase in his compensation in 2017 by Hydro One’s Board of Directors.)

Meanwhile, were Hydro One staff attempting to reduce Hydro One’s revenue in Ontario? Why else would they contact farmers, telling one of them he had “one year to lower my usage or they will be raising my hydro rates by 35-40%. They were calling me to ‘warn me’ .” Two other farmers advised the Farms Newsletter they received similar calls.

To be clear, any rate increase would require approval by the Ontario Energy Board (OEB) and while Hydro One have several rate increase applications before the OEB, it is doubtful they would seek that kind of an increase, or that the OEB would approve it. The nature of the report resulted in an inquiry by the writer with Hydro One to determine the extent of their tactics to reduce consumption and if this was a pattern!   No response has been forthcoming as yet.

There is also the issue of differing reports on how big Hydro One’s service area is, from its executives, which I previously documented.

Confusion seems to be a current event within Hydro One and transparency has become a forgotten term since they have become a publicly traded company.

We should be concerned at what the executive of both IESO and Hydro One are saying, and doing.

Parker Gallant

April 23, 2018

 

*Jan 2018 all-in us state prices show Washington as 7th lowest with all-i rates at 9.51cents/kwh. https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a

Dicey math in ECO report on Ontario’s electricity costs

Appalling math supports agenda-laden report from the Environmental Commissioner of Ontario

How does a car in a driveway explain millions lost selling off surplus power? You have to read the ECO report to understand. Maybe. [Photo G Hills Law]
April 11, 2018

The 322-page report Making Connections Straight Talk About Electricity in Ontario is mind boggling in its attempt to redefine simple mathematics.

As one example, the Environmental Commissioner of Ontario or “ECO” deals with “energy poverty”: “According to 2015 data, Canada’s National Energy Board found 7% of Ontarians to be energy poor”.

Checking the Ontario Energy Board (OEB) annual Yearbook of Electricity Distributors for 2016, Ontario had 4,612,551 residential customers — so, 7% would represent 322,878 “energy poor” households in the province.

The OEB’s December 22, 2014 report noted: “Using LIM* as a measuring tool, and relying on Statistics Canada household data, Ontario has 713,300 low-income households. The OESP** is estimated to reach 571,000. This estimate recognizes that not all low-income households in the province pay their electricity bills directly (i.e., utilities included in rent).”  Those 713,300 low-income households represented about 15.5% of all households in the province.

So, in one simple sentence, the Commissioner’s reference to energy poverty makes almost 400,000 “energy poor” households simply disappear!

Yet another claim is made in the report where in large bold letters it states: “Ontario sells its surplus power to other jurisdictions for more than it costs to make that power.” Here is the analogy used to explain this claim in the commissioner’s report: if you lend your car to a friend to drive when you are not driving it and he pays you $20 it reduces your annual cost.  The reasoning related to the electricity sector is explained by the ECO:

“The surplus power that we export costs us little or nothing extra on top of the fixed costs, because: Our renewable power has extremely low operating costs; and Our nuclear plants cost virtually the same whether they are making power or not.”

What is deliberately omitted in the report is the unreliability and intermittency of renewable energy; favouritism towards industrial wind turbines is clearly visible in the text. ECO Dianne Saxe has demonstrated support for wind power development and even invested in one that stands at Exhibition Place in Toronto (which seldom generates power).  A plaque at the bottom bears her name.

The “how” we lose money on industrial wind is easily visible to most with a little effort. As an example, IESO rates the ability of wind to be counted on to produce power only 12.9% of the time when it will be needed.  What that means is, while average generation of wind power over one year may amount to 30% of capacity, IESO’s reliance on wind dependable for planning purposes is about one third of its probable annual output.

The foregoing has been borne out by others including a peer reviewed paper titled Ontario’s High-Cost Wind Millstone prepared for the Council for Clean and Reliable Energy. Author Marc Brouillette states: “Two-thirds (65 per cent) of wind generation is surplus to demand and must be wasted or dissipated either through forced curtailment of hydro and nuclear generation or by increased exports to Quebec and the United States, generally at low prices.”

Another recent report I wrote suggests forced curtailment of hydro, nuclear, wind, net exports, conservation and costs of backup for wind and solar generation, i.e., gas plants, were more than $6 billion in 2017 added to our electricity bills.

In other words, the ECO’s claims are not only incorrect, they are an insult to common sense and math literacy.

Parker Gallant

* Statistic’s Canada’s Low-Income Measure is simply defined as half of the median adjusted economic family income. Adjusted means family size has been factored in.”

**Ontario Electricity Support Program