How much is wind power really costing Ontario?

For the cost to provide a small portion of Ontario’s power, wind is no bargain

Not a chance ...
Not a chance …

Most electricity ratepayers in Ontario are aware that contracts awarded to wind power developers following the Green Energy Act gave them 13.5 cents per kilowatt (kWh) for power generation, no matter when that power was delivered. Last year, the Ontario Auditor General’s report noted that renewable contracts (wind and solar) were handed out at above market prices; as a result, Ontario ratepayers overpaid by billions.

The Auditor General’s findings were vigorously disputed by the wind power lobbyist the Canadian Wind Energy Association or CanWEA, and the Energy Minister of the day, Bob Chiarelli.

Here are some cogent facts about wind power. The U.K. president for German energy giant E.ON stated wind power requires 90% backup from gas or coal plants due to its unreliable and intermittent nature.  The average efficiency of onshore wind power generation, accepted by Ontario’s Independent Electricity System Operator (IESO) and other grid operators, is 30% of their rated capacity; the Ontario Society of Professional Engineers (OSPE) supports that claim.  OSPE also note the actual value of a kWh of wind is 3 cents a kWh (fuel costs) as all it does is displace gas generators when it is generating during high demand periods.  On occasion, wind turbines will generate power at levels over 90% and other times at 0% of capacity.  When wind power is generated during low demand hours, the IESO is forced to spill hydro, steam off nuclear or curtail power from the wind turbines, in order to manage the grid.  When wind turbines operate at lower capacity levels during peak demand times, other suppliers such as gas plants are called on for what is needed to meet demand.

Bearing all that in mind, it is worth looking at wind generation’s effect on costs in the first six months of 2016 and ask, are the costs are reflective of the $135/MWh (+ up to 20% COL [cost of living] increases) 20 year contracts IESO, and the Ontario Power Authority awarded?

As of June 30, 2016, Ontario had 3,823 MW grid-connected wind turbines and 515 MW distributor-connected. The Ontario Energy Reports for the 1st two quarters of 2016 indicate that wind turbines contributed 4.6 terawatts (TWh) of power, which represented 5.9% of Ontario’s consumption of 69.3 TWh.

Missing something important

Not mentioned in those reports is the “curtailed” wind. The cost of curtailed wind (estimated at $120 per/MWh) is part of the electricity line on our bills via the Global Adjustment, or GA.  Estimates by energy analyst Scott Luft have curtailed wind in the first six months of 2016 at 1.228 TWh.

So, based on the foregoing, the GA cost of grid-accepted and curtailed IWT generation in the first six months of 2016 was $759.2 million, made up of a cost of $611.8 million for grid-delivered generation (estimated at $133 million per TWh) and $147.4 million for curtailed generation. Those two costs on their own mean the per kWh cost of wind was 16.5 cents/kWh (3.2 cents above the average of 13.3 cents/kWh).  The $759.2 million was 12% of the GA costs ($6.3 billion) for the six months for 5.9% of the power contributed.

But hold on, that’s not all. We know that wind turbines need gas plant backup, so those costs should be included, too. Those costs (due to the peaking abilities of gas plants) currently are approximately $160/MWh (at 20% of capacity utilization) meaning payments to idling plants for the 4.6 TWh backup was about $662 million. That brings the overall cost of the wind power contribution to the GA to about $1.421 billion, for a per kWh rate of 30.9 cents.   If you add in costs of spilled or wasted hydro power to make way for wind (3.4 TWh in the first six months) and steamed off nuclear generation at Bruce Power (unknown and unreported) the cost per/kWh would be higher still.

So when the moneyed corporate wind power lobbyist CanWEA claims that the latest procurement of IWT is priced at 8.59 cents per kWh, they are purposely ignoring the costs of curtailed wind and the costs of gas plant backup.

22% of the costs for 5.9% of the power

 Effectively, for the first six months of 2016 the $1.421 billion in costs to deliver 4.6 TWh of wind-generated power represented 22.5% of the total GA of $6.3 billion but delivered only 5.9% of the power.  Each of the kWh delivered by IWT, at a cost of 30.9 cents/kWh was 2.8 times the average cost set by the OEB and billed to the ratepayer.  As more wind turbines are added to the grid (Ontario signed contracts for more in April 2016),  the costs described here will grow and be billed to Ontario’s consumers.

CanWEA recently claimed “Ontario’s decision to nurture a clean energy economy was a smart investment and additional investments in wind energy will provide an increasingly good news story for the province’s electricity customers.” 

There is plenty of evidence to counter the claim that wind power is “a smart investment.” But it is true that this is a “good news story” — for the wind power developers, that is. They rushed to Ontario to obtain the generous above-market rates handed out at the expense of Ontario’s residents and businesses. And we’re all paying for it.

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How to get those electricity bills down

(Or not make them worse)

In my volunteer work with Wind Concerns Ontario, a coalition of community groups, individuals and families concerned about the impact of industrial-scale wind power generation in Ontario, I was pleased to be asked by Global TV News to provide an opinion on what needs to be done to help the citizens of this province with their electricity bills.

Here is our contribution to the feature, published on Global’s website:

The following is by both Parker Gallant, a retired banker who now analyses Ontario’s energy sector and is the author of the blog “Energy Perspectives” as well as Jane Wilson, the president of Wind Concerns Ontario.

The Ontario government undertook its program to add renewable power without proper cost-benefit or impact analysis.

Now we have electricity bills that are the fastest rising in North America. The rich contracts awarded to huge corporate wind power developers are a factor.

Here’s what we suggest:

Immediately cancel Large Renewable Procurement (LRP) II that is currently “suspended.” With its target of acquiring 1,000 megawatts (MW) of more renewable capacity — it’s not needed and will further add to consumers’ power bills.

Cancel the five wind power contracts awarded in 2016 under LRP I and save electricity customers about $65 million annually or $1.3 billion over 20 years. Cancellation costs will amount to a small fraction of the annual cost. Cancelling approved but not yet built wind power projects and the new FIT 5.0 program will also save money.

Cancel “conservation” spending of $400 million annually. Ontario has already cut back on power use by more than 12 per cent since 2005 when consumption was 157 tWh to 2015 when it had fallen to 137 tWh. Do this and save immediately on electricity bills.

Forecast for April 2017: the news on electricity bills will be terrible

Reducing electricity bills is hard when you keep signing contracts for more power Ontario doesn't need. (Photo:THE CANADIAN PRESS/Mark Blinch)
Reducing electricity bills is hard when you keep signing contracts for more power Ontario doesn’t need. (Photo:THE CANADIAN PRESS/Mark Blinch)

November 29, 2016

The Independent Electricity System Operator (IESO) just released the Monthly Summary for October 2016. Comparing the prices to their report for October 2015 will make you weep.

Comparing the two months one year apart, you’ll see Ontario’s consumption decreased by almost 170,000 megawatts (MWh), but the costs of consuming less increased the commodity cost by over $176 million.

What that means: the 1% drop in consumption from 10.7 TWh (terawatts) to 10.5 TWh will probably result in the OEB (Ontario Energy Board) raising prices in the spring of 2017.

Here’s why. In 2016 we exported 1.4 TWh of power, one full TWh more than in 2015.  The 2015 hourly Ontario energy price (HOEP) was also $10/MWh higher than 2016, and so for that reason our 2016 net exports cost us $110 million more.  Coupling that drop in HOEP and the additional exports, my friend Scott Luft also estimated a wind curtailment* increase by the Independent Electricity System Operator or IESO (year over year) of 180,000 MWh.  The cost of that curtailment added an estimated $22 million to October’s costs of electricity.

October is a bad sign

If October is just the beginning of five months of increases, the news in mid-April 2017 when the OEB announces the price of electricity for the following six months will be terrible.

The “mistake” Premier Wynne admitted to at the Ontario Liberal Party Convention in Ottawa just days ago will loom even larger by mid-April 2017 as any increase will create more energy poverty. I would remind all at the convention she noted: “In the weeks and the months ahead, we are going to find more ways to lower rates and reduce the burden on consumers.”  Those “ways to lower rates” are getting harder to find as the government continues to sign new long-term power contracts.

I believe electricity ratepayers in Ontario would welcome some relief from the burden of our electricity bills, but I fear the damage caused by the Green Energy Act will take a decade or more before Ontarians see it.

Cancel, now

Premier Wynne should immediately cancel plans to acquire any more wind and solar power generation as planned under Large Renewable Procurement (LRP) I and LRP II as a demonstration of genuine concern for energy poverty and the citizens of Ontario.

*Curtailment: reduction in scheduled capacity or energy delivery

Premier Wynne’s mistake: no real fixes ahead

November 25, 2016

A recent press release from Environmental Defence announced the launch of yet another effort to “green” Ontario via an organization formed by the usual cadre of environmental non-government organizations (ENGO).

This one, the 100% RE or Renewable Energy, pushes the insanity of suggesting Ontario’s “next energy plan should empower citizens and communities to join the global movement toward 100 per cent renewable energy.” It suggests Ontario “should follow the lead of communities, such as Oxford County, that are transitioning to clean and healthy 100 per cent renewable energy”.

It is apparent that the people at Environmental Defence — the same ENGO that was a participant in the creation of the Green Energy Act — somehow believe they are superior energy planners than those with qualifications. Beyond Environmental Defence, the 100%RE group includes the usual suspects such as the David Suzuki Foundation, Pembina, Greenpeace, the Ontario Clean Air Alliance, Physicians for the Environment, the Registered Nurses Association of Ontario and several lesser known names, including the Toronto Environmental Alliance and TREC. The latter were responsible for the Toronto Exhibition Place wind turbine used by countless Ontario Liberals as a photo-op but which generates almost no usable power and whose control now rests in the hands of Toronto Hydro. TREC have placed a plaque at the base of the turbine with the names of the people who invested in the turbine and have no hope of ever seeing a return on their money.  One of the names on the plaque is Dianne Saxe, the current Environmental Commissioner.  (It appears supporting industrial-scale wind turbines that kill birds and bats did not deter the Ontario Liberal government from appointing Ms. Saxe as commissioner of the environment.)

Now, with Premier Wynne’s recent mea culpa at the Ontario Liberal Party convention when she referred to Ontario citizens having to choose between heating their house or buying food, one has to wonder:  exactly why did it take her so long to admit to her mistake?  Maybe it’s because the Ontario media has recently noted rising electricity bills are causing energy poverty; the hard-luck stories in print and on TV are often heart-wrenching.  Those stories, and the relentless arrival of the monthly hydro bill, has had a lot to do with recent polling results showing that 67% disapprove of the job Premier Wynne is doing.

One of the obvious “mistakes” Premier Wynne made was not paying attention. When she was confronted by communities back in August 2013 declaring themselves “unwilling hosts” to industrial wind turbine developments, her response, as reported in the Ottawa Citizen, was to shrug it off: “Wynne has asked the Ontario Sustainable Energy Association to raise awareness in communities slated for the turbine projects about the benefits of hosting, including the financial gains that can come from being power generators in a cash-strapped economy.”

Was she so naive that she didn’t realize those “financial gains” would come from the pockets of average households, and that OSEA claimed responsibility for developing the Green Energy Act that had a role in rising electricity bills?

Her announcement on the repeal of the 8% provincial portion of the HST is at best comparable to sticking her finger in a dike to stop the flood.  It has apparently slipped her mind she was part of the team that placed the tax on our energy bills, while simultaneously blessing a 10% rebate known as the Ontario Clean Energy Benefit.

The net gain to households from those actions was a 2% reduction, at the same time as the Ontario Energy Board was approving rate increases for both the electricity and distribution lines on our bills that were multiples of the 2% net gain from the Liberal government actions.

The upcoming plan to add a “cap and trade” tax to households will quickly negate the latest 8% reduction.  On top of the new tax, Ontario Power Generation, which generates about 60% of the power we consume in the province, has submitted a rate application to the OEB that could add $63 to the average bill.

Premier Wynne’s “mistake” will continue to drive up our bills for some time. If she pays any attention to the dreamy musings of Environmental Defence and their ilk in the drive for 100% renewables, those heart-wrenching stories will become a daily occurrence.

Creating the Green Energy Act based on faulty ideology, and with no comprehensive cost-benefit analysis in place was a big mistake — one that remains fundamentally not corrected.

What’s in your hydro bill? November-December dates

Since the Premier of Ontario has admitted her government has made a “mistake” and she is now concerned about rising electricity bills in Ontario, there is a lot of attention being paid to these bills.

I have been invited to speak at two Town Hall events coming up in the next few weeks.

• Saturday, Dec. 3: 10 a.m. to noon at the Kinburn Community Centre, 3045 Kinburn Side Rd., Kinburn.

• Saturday, Dec. 3: 2 to 4 p.m. at the Intercultural Dialogue Institute, 335 Michael Cowpland Dr. unit 112, Kanata.

Here is a news story about last week’s event.

parkergallanttownhall-metrolandpic

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.

 

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.