Question for Minister Thibeault: how does buying power we don’t need save us $70 million?

OPEN LETTER to Minister of Energy Glenn Thibeault 

December 16, 2016

Dear Minister Thibeault:

As a concerned citizen of our wonderful province I do my best to stay up on current events.   In that regard I recently noted Ontario Premier Wynne and Quebec Premier Couillard attended the official signing of “the historic electricity trade agreement between Hydro-Québec and the Independent Electricity System Operator of Ontario (IESO).”

It appears you also attended the signing and had a quote recorded on the press release: “By importing 2 terawatt hours of clean electricity, enough to power the City of Kitchener for a year, Ontario will reduce carbon emissions and system costs by $70 million.”

I read that and wondered how importing 2 TWh of electricity from Hydro-Québec would save “system” costs by $70 million? It just didn’t ring true based on the math I was taught and have used throughout my lifetime. I pondered your comment for a while and then I wondered if statements of that standard are simply inherited with the portfolio.

Thinking back I recalled several which left me and many others scratching their heads. What if I give you a simple test by asking if you know which energy minister uttered the following. The answers can be found on page 2 but don’t peek until you have at least guessed.

Here they are in no particular order. From Energy ministers:

  1. “Conservation is the cleanest and least costly energy resource, and offers consumers a means to reduce their electricity bills.”
  2. “I think most in the industry would expect that the rates will likely go down, but we’re confident we’ll do that in a way that maintains confidence in the investment climate in Ontario”
  3. The same energy minister in 2. above also said: “When you put in the new meter you find out the previous meter wasn’t billing and working properly. So the new meter is bringing bills up to date and is more accurate.”
  4. We anticipate about 1% per year of additional rate increase associated with the bill’s implementation over the next 15 years.”
  5. “if you change your behaviour, if you use less carbon emitting products you are actually going to see your bill reduced”

Now, reverting to your December 15, 2016 quote I hope you were aware that in 2015 Ontario exported 22.6 TWh of electricity to our neighbours because it was surplus to our needs!  According to the IESO (a signatory to the above agreement) and an earlier release from your ministry we have a “robust supply” of electricity that will last us for a decade.  I checked out current IESO data and determined that, up to the end of October 31, 2016, Ontario has exported 18.33 TWh of surplus electricity.  The average “sale price” of those 18.33 TWh was $16.04 million per TWh but it cost ratepayers $112.26 million per TWh according to IESO.

In simple math terms we were billed $2,057.7 million for the 18.33 TWh and sold it for $294 million — meaning it cost ratepayers $1,763.7 million or about $360.00 per ratepayer …  and we still have two months left in the year to account for.

Importing two (2) more TWh will simply add to our surplus generation meaning we will either have to export it at a big loss or; curtail wind, spill hydro or steam-off Bruce Nuclear. What we are looking at here is similar to “Dutch Disease” but in reverse.

I hope you understand the math better than your predecessor(s) and you are able to provide me, and many others with a plausible explanation as to exactly how importing 2 more TWh from Hydro Quebec will save $70 million in system costs?   Were you aware that in the past five years (2011-2015) Ontario has imported 18.9 TWh (per IESO) from Quebec or an average of 3.78 TWh annually.  That begs the question—what is so special about the additional 2 TWh we will be importing in the future?

OK, now is the time to let you know which Minister of Energy was behind the quotes on the first page.

  1. The first one was a Minister Bob Chiarelli quote from his “Conservation first” Long-Term Energy Plan in 2013.
  2. This was a Minister Brad Duguid quote from Reuters November 24, 2010 when he was telling them the rates for “green power” were going to go down.
  3. This one was a Brad Duguid quote from the Toronto Star November 16, 2010 when he was attempting to explain why electricity rates went up again.
  4. This particular quote was from George Smitherman when he sat in the Energy Minister’s chair and was ushering in the Green Energy and Green Economy Act.   He said this to the committee hearings members about the GEA.
  5. I assume you guessed this one as it was you on December 9, 2016 as you were interviewed on Global TV and asked a question about how the “cap and trade” bill would affect heating bills. From my perspective your response was perhaps rushed or you were badly prepped by your staff in the ministry. The reason I would suggest the foregoing is if you look back in time you will note your predecessors all look pretty dumb!   When you review events that unfolded after their quotes they have been proven to be very wrong. History will undoubtedly prove you to be wrong like your predecessors.

Another issue for you is the query about why gas bills won’t disclose the “cap and trade” levy when it takes effect.   When questioned as to why the information would not appear on gas bills you stated that the OEB acts “independently” and your ministry doesn’t give them directions!Just to remind you, one of the first things you did when you took over the energy portfolio was to issue a directive (June 27, 2016) to the Ontario Energy Board which contained the following (emphasis mine): “I write in my capacity as the Minister of Energy in order to exercise the statutory power I have under section 35 of the Ontario Energy Board Act, 1998 (the “Act”) to require the Ontario Energy Board (the “Board”) to examine and report back to the Ministry of Energy (the “Ministry”) with advice on the questions outlined below.”

In looking over the letters and directives in the OEB files, it appears letters of directions and directives (“orders in council”) are commonplace and reflect the full power of the “minister” and the governing “caucus” over the OEB.

You have the power to instruct the OEB to tell natural gas distributors to disclose the amount the “cap and trade” act will add to their bills.

In a related issue, your predecessor Bob Chiarelli ensured electricity bills disclosed the amount of savings due to the cancellation of the debt retirement charge or “DRC” while (seemingly) intentionally failing to order disclosure of the cost of removal of the OCEB (Ontario Clean Energy Benefit).If you want your legacy as the Minister of Energy to reflect the bad traits of your predecessors then you can continue doing as you have been doing, but if you believe in transparency you have an opportunity to demonstrate those beliefs by coming clean.I certainly hope you will review your actions of the recent past and show the ratepayers of the province you have the ability and the intestinal fortitude to stand up and recognize the abuse we have suffered for the past decade and show us actions that stop the climb in electricity rates that are a necessity of life in this province.

Yours truly,

Parker Gallant 

A concerned citizen

PS: Looking forward to your response on how the imported TWh will save the system $70 million

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Dancing in the streets when Ontario’s wind power “tyranny” ends?

My article in the Financial Post, December 15, 2016.

[Photo: Getty Images]

The editor of the magazine, North American Windpower, recently marked the demise of Ontario’s wind industry. His article was titled “Eulogizing Ontario’s Wind Industry.” Apparently the eulogy was a result of Ontario Energy Minister Glenn Thibeault’s announcement of Sept. 27 that he was “suspending” the acquisition of 1,000 MW (megawatts) of renewable energy under the previously announced LRP ll (Large Renewable Procurement).

Thibeault explained that “IESO (Independent Electricity System Operator) had advised that Ontario had a robust supply of electricity over the coming decade to meet projected demand.” Thibeault didn’t express surprise at this sudden turn of events or explain what led to the realization. To put some context around the suspension, only a few months earlier former Energy Minister Bob Chiarelli had issued the directive to acquire the 1,000 MW that Thibeault shortly after “suspended.”

The Windpower article opens with: “Ladies and gentlemen, we are gathered here today to pay our respects to Ontario’s utility-scale wind industry, which has passed away from unnatural causes (a lack of government support).”

If Ontario’s wind industry had truly passed away, the celebrations among hundreds of thousands of Ontario ratepayers would have rivaled the scale of celebrations exhibited in Florida by Cuban exiles after hearing that Castro died. As it is, Ontarians are hardly celebrating. We will be forced to live with and among industrial wind turbines for at least the next 20 years. The “government support” alluded to in the eulogy isn’t dead. It continues to get pulled from the pockets of all Ontario ratepayers and has caused undue suffering.

The wind industry rushed to Ontario to enjoy the largesse of government support via a government program that granted above-market payments for intermittent and unreliable power. Industrial wind turbines have so driven up electricity prices that Ontario now suffers the highest residential rates in Canada and the fastest growing rates in North America. The Ontario Association of Food Banks in its recent 2016 “Hunger Report” noted: “Since 2006, hydro rates have increased at a rate of 3.5 times inflation for peak hours, and at a rate of eight times inflation for off-peak hours. Households across Ontario are finding it hard to keep up with these expenses, as exemplified by the $172.5 million in outstanding hydro bills, or the 60,000 homes that were disconnected last year for failing to pay.”

Beyond that, the cost of energy affects businesses and, as noted by the Canadian Federation of Independent Businesses, “fuel, energy costs” ranks for their Ontario members as the second-highest “major cost constraint” behind “tax, regulatory costs.”

Until the day we actually see Ontario electricity consumers dancing in the streets one day, the eulogy for this province’s wind-power tyranny is unfortunately premature.

Solar power: how much does it cost Ontario?

Solar: it costs plenty, too and has environmental "downsides" [Photo: IESO]
Solar: it costs plenty, too and has environmental “downsides” [Photo: IESO]
December 12, 2016

Earlier I deal with the question: “How much is wind power really costing Ontario?” Since then many have asked the same question about solar.

The actual generation of solar power is much harder to pin down on an hourly, daily, weekly or monthly basis as most of it is LDC (local distribution company) connected (DX), and the IESO (Independent Electricity System Operator) doesn’t report it.

There appears to be only a single report, “Ontario’s System-Wide Electricity Supply Mix: 2015 Datawhere one can find solar information. That report is from the Ontario Energy Board and only produced annually. The OEB report for 2015 (dated July 21, 2016) doesn’t provide actual generation; instead it gives a percentage of its contribution (grid-connected and LDC-embedded) to total generation which then can be utilized to determine solar contribution to the supply mix. First, one must determine, via IESO, what actual generation was from all sources in Ontario.

The OEB report for 2015 indicates solar (grid-connected plus embedded) contributed 1.9% to Ontario’s total generation of 153.7 terrawatts (TWh). The 1.9% noted by the OEB would suggest combined generation for grid and LDC connected solar was 2.92 TWh for 2015.

The average price paid for solar (roof-top and ground mounted) is approximately $448.00/MWh or $448 million per TWh — that means the 2.92 TWh generated in 2015 cost ratepayers about $1.3 billion.

Not environmentally perfect

Unlike wind power projects, solar installations don’t appear to suffer a requirement to ensure either their decommissioning or recycling; the cost of either (or both) will presumably be a burden that eventually falls to taxpayers. A National Geographic article from November 2014, “How green are those solar panels, really?” had this to say: “As the world seeks cleaner power, solar energy capacity has increased sixfold in the past five years. Yet manufacturing all those solar panels, a Tuesday report shows, can have environmental downsides.”

When Energy Minister Glenn Thibeault recently suspended LRP II (the second phase of Large Renewable Procurement), trade association CanSIA (Canadian Solar Industries Association) expressed their disappointment: “…it represents a significant back-step from previously committed renewables procurement in the Province that we believe will be required to deal with supply and GHG emission risks, such as delayed nuclear refurbishment schedules, un-met conservation targets, or increased demand as a result of electrification to meet the province’s climate change targets.”

Needless to say, Ontario’s ratepayers were not disappointed. We would like to see Minister Thibeault fully “cancel” both LRP II and contracts awarded under LRP I, and any other contracts that have missed their agreed start dates.

13% of the costs for 1.9% of the power

The $1.3 billion for 1.9% of solar generation represents approximately 13% of the 2015 total Global Adjustment pot of $9,962.6 million and drives electricity costs up by almost $1 billion annually.

Further installations of solar generation in the latter part of 2015 and throughout 2016 such as the 100-MW Kingston Solar on 1,000 acres of land will add to the generation costs, increase our surplus generation, and further drive up the cost of electricity for ratepayers.

Parker Gallant

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.

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.