The waste of power in Ontario is a scandal

The Wynne government is selling off surplus power at bargain rates … and yet, has contracted for more power produced out-of-phase with demand. Time to reverse engines.

LRP I contracts awarded this year, the LRP II, and contracts for any unbuilt wind power projects should get the axe
LRP I contracts awarded this year, the LRP II, and contracts for any unbuilt wind power projects should get the axe

November 14, 2016

Ontario’s Independent Electricity System Operator (IESO) has responsibility for running the “market” referred to as the HOEP (Hourly Ontario Electricity Price). That is defined as “the average of the twelve market clearing prices in each hour.” IESO also says the HOEP is  “a real-time market, meaning purchases of electricity are made as they are needed. There are occasions, when the best-priced energy may not be available due to limitations on the transmission lines. In this case, that generator’s offer is still used to help set the price, but another generator may be asked to provide the electricity.”

Since the beginning of 2016, the “real-time market” has valued a traded megawatt (MWh) at an average of about $16.00 or 1.6 cents a kilowatt (kWh). Compare that to what households and small businesses pay, an average price of 11.1 cents a kWh or almost seven times the market rate.

What the HOEP market is telling Ontario’s Minister of Energy Glenn Thibeault: the value you get ratepayers to pay for unreliable and intermittent renewable energy in the form of wind and solar generation has absolutely no relationship to its actual worth!

The data my friend Scott Luft posts highlights just how much the feed-in-tariff (FIT) program, with their above market rate contracts for intermittent wind and solar have distorted the HOEP.

Scott’s data source is the IESO although for reasons best known to them they don’t post DX (local distributed FIT and MicroFIT contracted generation) connected wind or solar generation. Scott estimates these in his spreadsheet and his estimates have so far proven to be conservative when the DX results are posted many months later.

Let’s examine the data. The TX (transmission connected) wind generation for the first 10 months of the current year (January 1st to October 31st) was (rounded) 6,966,000 MWh, and the DX connected are estimated at 1,079,000 MWh.  Curtailed wind generation is estimated at 1,804,000 MWh bringing total wind (generated and curtailed) to 9,849,000 MWh.. Those 9.8 TWh (terawatt hours) could have supplied approximately 1.3 million “average” households with electricity if it was delivered when needed.

It wasn’t.

So what that means is, 26% of the available energy from TX connected wind power developments was curtailed. Combining TX and DX curtailed wind MWh represents 18.3% of available energy from that source!

Power sold at a fraction of the contract price

At the same time as wind turbines were delivering or curtailing those megawatts of power, IESO was exporting surplus generation to our neighbours in New York, Michigan, Quebec, etc., selling it for a fraction of the FIT contracted price. Referring again to Scott Luft’s data it should be noted he actually includes the average HOEP price as of the hour(s) of generation or curtailment.   That price averaged about $9.50 per MWh for the 10 months using his data!   The sale price is a far cry from the FIT and MicroFIT contracted value for wind of $135.00/MWh plus as much as 20% for cost of living (COL) increases and an estimated $120.00/MWh for curtailed generation.

What we can calculate from the pricing information is that wind power generated and curtailed for the 10 months cost ratepayers almost $1.3 billion. If all the 9.8 TWh were included in the exported surpluses the net cost to ratepayers after recovering almost $100 million (9.8 TWh X $9.5 per TWh = $93.1 million) from its sale value is $1.2 billion. That’s about the same as moving two gas plants.

Cost: $300 a year for each electricity customer

The monthly cost of $120 million adds over $300 annually to the average ratepayer’s bill — and that doesn’t include the additional costs of the wasted power from other sources such as spilled hydro, steamed-off nuclear or the idling gas plants.

While we can’t say for sure the exported surplus generation sold to our neighbours came from industrial wind power developments, it is worth noting exports to the end of October were about 18.2 TWh or almost twice the amount of generated and curtailed wind produced in the same time-frame. Was wind-generated electricity a large part of those exports or did it cause other, cheaper, power to be exported? It is extremely likely.

Energy Minister Thibeault needs to recognize he needs to permanently cancel LRP I and LRP II along with any remaining unbuilt wind and solar projects in order to stop the upward pressure on electricity rates.   As noted in the press release from the Ministry September 27, 2016, “Ontario will benefit from a robust supply of electricity over the coming decade to meet projected demand.”

It’s time for Energy Minister Thibeault to recognize the power to reduce upward pressure on electricity rates resides with him; he should use it to halt purchases of power we don’t need.

 

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The lesson of November 10: cancel the contracts Minister Thibeault

Ontario Energy Minister Thibeault: needs to look at reality for Ontario's electricity customers
Ontario Energy Minister Thibeault: needs to look at reality for Ontario’s electricity customers

November 12, 2016

November 10 appears to have set a record for both wind power generation and curtailment of wind power, based on data found on the IESO website.

The “average” household in Ontario (defined by the OEB) consumes 27 kilowatts (kWh) per day.   So with that in mind, the 50,000+  MWh of wind-generated and grid-accepted electricity on that day could have supplied 1.9 million households.  The 24,000 MWh of curtailed wind could have supplied another 900,000 households with their daily needs.

Imagine: over 60% of Ontario’s households could have had all their electricity needs met by industrial wind turbines for that day.

There is more to the story, however (there always is).

That generated and curtailed wind power represented a cost of just over $9.4 million; none of it was needed as IESO were busy exporting our surplus generation which averaged 2,628 MW per hour and for the day totaled more than 63,000 MWh.  According to the IESO daily summary we were paid $2.28 per MWh meaning gross revenue for those exported MWh generated only $144,000 or the equivalent of 2/10th of 1 cent per kWh. Meanwhile, those “average” Ontario electricity customers were paying an average of 11.1 cents/kWh.

It sure pays to be on the other side of the Ontario border!

November 10th serves as a perfect example of what’s happening to electricity customers in Ontario: that day, the government’s electricity policy shows we reward huge corporate wind power developers and it also highlights the intermittent nature of power generation from wind — it is out of phase with demand.

November 10 should be the basis of a message to the Minister of Energy, Glenn Thibeault on the Large Renewable Procurement (LRP) program: Ontario should cancel both the LRP I contracts awarded last April and cancel the now “suspended” LRP II process.  The Minister has already admitted our electricity supply is more than adequate for the next 10 years (“robust” in fact, he says) so acquiring more wind generated power (and solar) should be immediately suspended. It does nothing other than drive up the costs for “average” households.

The $9.4 million of ratepayer dollars handed out November 10 neither reduced emissions nor provided useful electricity. Time for a complete overhaul of electricity policy in Ontario, starting with those contracts and the LRP process.

 

Don’t expect visionary long-term energy planning in Ontario

Calendar

November 7, 2016

The concept of “long term” for Ontario’s Liberal government and its energy ministers appears to be two or three years at best, or when a new minister is appointed.

Energy Minister Glenn Thibeault, who took over the reins last June, has now launched his version of “long-term” planning in the Long-Term Energy Plan (LTEP). Consultations on the new plan are being held throughout November in various locations.

Minister Thibeault’s vision differs widely from his predecessor’s. Chiarelli’s view in 2013 was: “Several factors are at play that are likely to put upward pressure on electricity prices over the next several years, including the costs of rebuilding and renewing the electricity system and the supply gap that is likely to emerge toward the end of the current decade.

Chiarelli added, “Although the global economic downturn of the past few years dampened electricity demand in Ontario and elsewhere, a shortfall in capacity may emerge as early as 2018.”

Chiarelli’s version was full of bad news like that about supply gaps, whereas Minister Thibeault’s preamble to the launch of a new plan suggests, three years later, everything is rosy: “We have a robust supply of all forms of energy for at least the next 10 years.”

Anyone looking at the two forecasts would wonder what happened in that three-year time frame to so dramatically alter the vision.  Let’s examine a few of the changes:

In 2012 we exported 14.6 terawatts (TWh) of surplus energy at an average price of $24.07 per MWh (megawatt). That cost Ontario’s ratepayers $73.30/MWh to generate, so exports added about $720 million to the commodity cost.

In 2015 we exported 22.6 TWh (up 54.8% from 2012 and 16.5% of Ontario’s demand) of surplus energy at an average price of $23.58/MWh. That cost Ontario ratepayers $101.38/MWh to generate, so exports added about $1.8 billion to the commodity cost.

Save on energy … and pay more anyway

It is worth noting Ontario ratepayers reduced consumption from 2013 to 2015 by 3% (4.3 TWh) but saw their cost of electricity soar by 32%, principally due to contracts for the addition of about 3,000 MW of intermittent and unreliable power from industrial wind turbines and solar panels. The average commodity cost in July 2013 at the launch of Minister Chiarelli’s “Conservation First” long-term plan was 8.4 cents per kilowatt (kWh); at the launch of Minister Thibeault’s planning document it is 11.1 cents/kWh.

At this point in time it is obvious former Energy Minister Bob Chiarelli’s “gap” perhaps lay in the ability of his ministry to recognize that one of his predecessors (Dwight Duncan) had agreed to Bruce Nuclear refurbishing as many as four of their nuclear units. The Auditor General in a “special report” for the Ministry noted: A Limited Partnership (Bruce A LP), was formed, to not only refurbish Units 1 and 2 but also take over Cameco’s interest in Units 3 and 4 and make future improvements to them. Bruce A LP would thus ulti­mately be operating and maintaining all four Bruce A units. Those four units represent about 3,200 MW of reliable baseload power!

It seems obvious there are serious flaws in the planning process if we can go from a “shortfall” to a “robust supply” in only three years, knowing major generation supply sources take years of planning, development and construction.

Look out Ontario: Premier Wynne is “helping” you again

Queen’s Park Hallowe’en announcement: trick or treat?

The morning after Wynne's Hallowe'en message: promises don't look so good
The morning after Wynne’s Hallowe’en message: promises don’t look so good

The press release issued by the Ontario government on October 31st (Hallowe’en Night) carried this headline:   “Helping Homeowners Cut Energy Bills.” As soon as I read it I thought, haven’t we heard this before?

The release inferred the government was going to help around 37,000 homeowners obtain “home energy audits and retrofits”.  The committed dollar amount was $100 million over three years from the “Green Investment Fund” (GIF).  The $325 million GIF was announced in the “2015 Fall Economic Statement” and again in the 2016 Budget and will come from the “cap and trade” tax we will shortly experience.  The GIF is already committed to spend almost $300 million of the total fund.  The upcoming tax is forecast to generate $1.9 billion annually; the bulk of the tax will come from the 4.5 million households in the province who were told the cost will be $5.00 monthly per household if you heat by natural gas, and an additional monthly cost of $8.00 for transport included in the fuel price.  The $13.00 per month per household should generate annual revenue around $700 million (4.5 million [households] X $13.00 X 12 [months] = $702 million).

The promise made in the press release is: “Thanks to this investment, Ontario homeowners can upgrade their homes, improve their energy efficiency, reduce their carbon footprint and, importantly, save money.”  Really.

Let’s recall former Minister of Energy Bob Chiarelli’s and his July 2013 message in which he told us we would save money by conserving electricity use: “Ontario has saved billions of dollars through conservation, and we have a clear opportunity to do more. By investing in conservation before new generation, where cost-effective, we can save ratepayers money and give consumers new technology to track and control energy use.”

Chiarelli’s July 2013 forecast, when the average cost of a kilowatt hour (kWh) of electricity was 8.4 cents, was wrong. Very wrong.

Three years later, the average cost is 11.1 cents/kWh, up 38%, costing the average ratepayer $250 more a year, and yet we did conserve!   With that in mind, we should expect the same thing to happen in respect to the natural gas file. Energy ministers have consistently failed to complete a cost/benefit study and have actually lied to Ontarians about savings.

Current plans offering financing for natural gas expansion of $230 million to extend gas pipelines to rural areas will surely raise the distribution costs for existing and future homeowners heating with natural gas. Building transmission lines to carry intermittent unreliable wind and solar electricity generation to the grid did, so we should expect the same!  Coupled with the “cap and trade” tax to be levied on natural gas distributors, the expansion will push the cost of heating with gas higher.

In the meantime, the MOECC (Ministry of the Environment and Climate Change) also announced their plans to hand out the new “cap and trade” tax to individuals who purchase an electric vehicle as per a June press release: “Cash back: When you buy or lease a green plate eligible electric vehicle, you can receive an incentive of up to $14,000. You may also receive an incentive of up to $1,000 for the purchase and installation of a Level 2 home charging station. Ontario will also work with the federal government to explore ways to eliminate the HST from new and used EVs by 2018.”

And, “Great perks: You get a green licence plate that identifies you as an EV owner and allows you to drive in all provincial high occupancy vehicle (HOV) lanes, even with only one person in the vehicle, and will provide free access to high occupancy toll (HOT) toll lanes in the future. You’ll also get free fuel under Ontario’s overnight charging program between 2017 and 2020.”

The Ontario citizens who heat their homes with natural gas or electricity, but can’t afford to purchase an EV should bask in the warmth of knowing by paying the “cap and trade” tax (hidden in your natural gas heating bill and via gasoline purchases) you are helping the rich people purchase an EV and also making sure they don’t have to pay for their fuel, or even the upkeep of the roads they travel on.

Now, doesn’t that make you feel better, knowing that the next time you see a Tesla automobile you’re seeing your tax dollars are hard at work?

In the meantime sit back and enjoy all the money the Premier Wynne-led government has saved you —just like she did on your electricity bill.

No hydro price rise today? Just wait

November 1, 2016

Ontario’s electricity ratepayers or customers were somewhat surprised when the OEB (Ontario Energy Board) announced on October 19 there would be no change to electricity rates for the following six months.  That announcement was only the third time out of the last 18 since 2007 where rates didn’t increase.

Many commentators said, however, this can’t hold and the government has simply punted a rate increase down the road. So, what is likely to happen come Spring 2017?

We have some clues in recently released information. The IESO (Independent Electricity System Operator) just published the September 2016 Monthly Market Report which provides the Class B weighted average of both HOEP (hourly Ontario energy price) and the Global Adjustment for the first nine months of the current year, representing the commodity cost.  For the first nine months of 2016, the raw commodity cost’s “weighted average” was $110.93 per megawatt hour (MWh) compared to $98.88/MWh in 2015.

So, that would be up: that signals a 12.2% increase year over year in the electricity1. generation cost.

The IESO has also been posting the consumption and costs of the HOEP and the GA for each of the two customer classes A and B; if you calculate the difference between Class A and Class B consumption and costs for the same period as noted above you discover this.

  • Class A ratepayers increased consumption by 2 terawatts (TWh) from 19 TWh to 21 TWh whereas Class B ratepayers decreased their consumption from 87 TWh in 2015 to 86 TWh year over year.
  • Class A ratepayers paid $70 million more for the additional 2 TWh which was at the bargain price of 3.5 cents per kWh. The raw commodity cost for Class A ratepayers declined from $65.42/MWh in 2015 to $62.50/MWh in 2016 for a 4.4% reduction.

Class B ratepayers may have reduced the electricity consumption (by 1 TWh or 1 billion kWh) but they paid an additional $893 million over 2015.   The extra cost for Class B ratepayers of 1.04 cents per kWh is equivalent to just over $90 a year for the “average” household.

That cost will presumably find its way to the next announcement in mid-April 2017 when the OEB tells us what households will be paying for the six months commencing May 1, 2017.

The Class B to Class A shift will increase further (implementation date has not been announced) in the future, based on Energy Minister Thibeault’s announcement in a press release on September 15, 2016, granting an additional 1,000 plus companies access to the Industrial Conservation Initiative (ICI) program.

The balancing act of trying to retain jobs while greening Ontario’s energy generation via the Class B to Class A subsidy (now approaching $1 billion annually) appears set to create more energy poverty in the Class B group despite removal of the 8% provincial portion of the HST.

The Spring forecast? Increased electricity rates.

Parker Gallant

1. This does not include transmission, regulatory, distribution, etc. costs.

Energy Minister Thibeault tries to explain power bill savings, and leaves a few things out

Napanee gas plant: about to start up and cost you money, soon
Napanee gas plant: about to start up and cost you money, soon

The difference between Ontario’s previous Energy Minister, Bob Chiarelli and his replacement, Glenn Thibeault is now out in the open.

For those of you who may not remember how Bob Chiarelli responded to the Auditor General’s announcement about the cost of the Oakville gas plant scandal this excerpt from an article in the Toronto Sun of December 5, 2013 will refresh your memory: “The cancellation of a signed contract to build a gas plant in Oakville will cost hydro customers up to $2 a year, the Ontario Power Authority (OPA) says. ‘It’s less than a cup of Tim Hortons coffee,’ Energy Minister Bob Chiarelli said Thursday.” 

Fast forward to October 21, 2016 and the press conference announcement from Premier Wynne about a deal to annually import 2 terawatts (TWh) of electricity from Quebec.  Bob Chiarelli’s replacement Glenn Thibeault suddenly had to field questions about how this announcement will benefit Ontario ratepayers.  In an interview on CFRA 580 with Kristy Cameron he was pressed to answer what it will do to reduce ratepayers’ bills.    The Minister’s response was ponderously slow. He eventually said the result would be a savings of “somewhere about ten cents.”  Cameron pressed him further and he finally confessed it was “ten cents overall”.  Not monthly, not annually — just “overall”!

Despite the hoopla from Wynne’s announcement it appears the Ontario/Quebec agreement to import 2 TWh of electricity annually is simply an attempt to mask the mess the governing party has created.

The agreement may in fact raise the cost of electricity.  The premier claims hydro imports from Quebec will replace gas-generated power which currently costs ratepayers substantially as we pay those generators $10-15,000 per MW per month to idle.  When they are called on to produce power the cost is basically for fuel and that cost is approximately 2.5 cents/kWh. So, if we are paying Quebec the rumoured 6 cents a kWh ($60 million per TWh), those 2 TWh will result in Ontario ratepayers picking up a cost of about $70 million or $15 per electricity ratepayer annually.

That will quickly erase the “10 cents overall” benefit claimed by Energy Minister Thibeault. Too bad he didn’t come clean like his predecessor and simply say it will raise the price of electricity, and by how much, even if it was an (inaccurate) folksy analogy.

Not to be forgotten in the gas plant scandal is the fact that both the Mississauga (now Sarnia) and the Oakville (now Napanee) plants are scheduled to come on-stream over the next year, meaning we will have another 1,200 MW of gas generation idling. The annual cost to idle will be about $180 million.

We should brace ourselves. With the gas plants and the five wind power contracts announced earlier this year, there will be plenty more increases to Ontario’s electricity bills.

Parker Gallant

NAFTA wind farm decision shows need for onshore wind power research too

Related image

October 26, 2016

The events of the past few months have been difficult for new Minister of Energy Glenn Thibeault as he continues to try to defend his predecessors’ decisions. He has tried to justify: increased energy poverty, the fastest growing electricity rates in North America, the slow demise of energy intensive enterprises (manufacturing, mining, refining, pulp and paper production, etc.), gas plant cancellations and the privatization of Hydro One, to name a few.

Not to be ignored are the many challenges lodged by rural ratepayers against contract awards allowing construction of industrial-scale wind power projects in their communities. Thousands of those ratepayers have challenged the contracts and spent millions of personal after-tax dollars sitting in front of Environmental Review Tribunals, valiantly doing their best to protect the environment and wildlife from the highly invasive power projects. Only a very small percentage of the challenges have proven successful.

Just days ago another ruling was issued and once again it was in favour of an industrial wind developer. This time however, it came from a tribunal sanctioned under the North American Free Trade Agreement (NAFTA), and it was against the Government of Canada because of actions by the Ontario government.

The challenge by Windstream Energy LLC resulted in an award of $25 million and an additional $3 million in legal fees against the decision by the provincial governing party to place a moratorium on a contract granted to Windstream for an offshore 300-MW wind development.

The ruling by the tribunal “found that the Government of Ontario treated Windstream Energy LLC’s (Windstream) investments in Canada unfairly and inequitably” and also ruled “on the whole did relatively little to address the scientific uncertainty” surrounding offshore wind that it relied upon as the main publicly cited reason for the moratorium.

If one were to discuss the contracts awarded by the Ontario Power Authority or IESO with the people who have challenged wind power projects at Environmental Review Tribunals I suspect the words: unfairly and inequitably would be frequently heard.  Many rural Ontarians living in proximity to operating turbine installations and suffering the effects of audible and inaudible (infrasound) noise would raise the issue of the lack of research on the effects of the noise on humans.

“Relatively little” has been done to address the scientific uncertainty surrounding onshore wind turbines, as well.

Parker Gallant