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

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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.

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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

Challenging CanWEA’s claim about wind power and electricity bills

October 16, 2016

The Canadian Wind Energy Association (CanWEA), the wind power development lobbyist and trade association, posted a declaration last week defending wind power, saying it has no role in Ontario’s rising electricity bills. CanWEA’s Regional Director for Ontario Brandy Giannetta posted an article on their website claiming she has facts showing that wind power is a minor factor in the raft of electricity bill increases we have seen in Ontario.

Her chief source of information is a study conducted in 2014 by Power Advisory for “environmental action organization” Environmental Defence; this study has been very influential on the Wynne government’s energy policy.

The claim by CanWEA needs to be challenged.  Let’s look at real facts from the Independent Electricity System Operator (IESO).  Scott Luft collects wind data from IESO and posts it monthly on his energy analysis website.  His estimates of “curtailed” generation are indeed estimates; however, they have proven to be conservative over the past couple of years.

Luft posted data on wind power in Ontario in the first nine months of the current year; wind generated 7,035,901 megawatt hours (MWh) of electricity and curtailed* another 1,558,555 MWh.  The power restricted or curtailed actually represents slightly more than 18% of total power generation from wind.  

Together (assuming an average price of $123.50/MWh), the cost of the 8,594,456  MWh of generated and curtailed wind cost ratepayers about $1,061,415.000.   What Luft has also done is use IESO data to determine the HOEP (hourly Ontario energy price) during the generation and curtailment times and, based on that data, the market valuation of that almost 8.6 terawatt hours (TWh) was just shy of $87 million.  What that clearly indicates is the market value of 8.6 million of generated and curtailed wind contracted as a result of the GEA cost Ontario ratepayers $974 million for unneeded power that was principally exported or curtailed because it was surplus to our needs.

The data from the first nine months of the current year suggest approximately 90% of the costs associated with generating unneeded electricity from industrial wind turbines (curtailed and exported)  were costs adding no value to Ontario’s ratepayers (except for the 1 cent per kilowatt hour they would have received in a truly competitive market environment).

What this means is, the Auditor General’s observation that the government of Ontario needed to do a cost/benefit study for its non-hydro renewable energy program has become patently obvious. The wind power lobby can claim what it wants about wind power’s role in electricity bills, but the figures speak for themselves.

Parker Gallant

*IESO definition: curtailment means the involuntary curtailment of non-dispatchable load as a result of insufficient generation capacity, of a limitation in the capacity of a transmission system or of actions taken by the IESO pursuant to Chapter 5 to maintain the reliability of the IESO-controlled grid or of the electricity system

Wynne government electricity bill relief comes with a price tag

Not a chance ...
Not a chance …

October 13, 2016

Ontario Minister of Energy Glenn Thibeault is promising Ontario’s electricity customers some relief, according to several press releases springing from the Throne Speech in early September.

While the costs of the relief including the 8% Provincial Sales Tax abatement and the “low-density” monthly reduction is worrying, in that funding for it has not been disclosed, a bigger hit may be coming. The Minister said “more than a thousand new businesses soon eligible for ICI, in the September 15th press release.

ICI is the “Industrial Conservation Initiative” and refers to Class A customers (companies with peak demand is 5 megawatts or higher) whose electricity rates are subsidized by the Class B customers (demand over 50 kilowatts but less than 5 megawatts) if they reduce consumption during a few “peak” hours over the course of a year.

In Germany, the equivalent of Ontario’s Class B ratepayers pay 98% more for a kilowatt (kWh) of power than a German industrial consumer, according to statistics from Eurostat. Looking at the information for Ontario on the IESO site it appears that with the Minister’s announcement Ontario’s ratepayers may soon be put in the same position.  Currently it appears a kWh of power (commodity only) costs an average Ontario ratepayer 58% more than a Class A industrial consumer. The foregoing calculation is based on the GA (Global Adjustment) information from IESO plus the average HOEP (hourly Ontario energy price) for the 2016 January/August period.

The Minister’s announcement of an expanded ICI program reducing peak demand from 3 MW to

1 MW and adding “more than a thousand new businesses” will push the commodity cost down for those 1,000 businesses reportedly by 34%, but the contracted value of the generated power will remain.

Someone will have to pay for the difference.

Unless Minister Thibeault has suddenly found a cache of money that Finance Minister Sousa is willing to part with, it will be left to Class B ratepayers to pick up the tab.

The Energy Minister’s press release suggested a “Customer Impact Example” which was a plastic manufacturer whom he suggests could save $42K per month or $500,000 per annum.  If all 1,000 of those businesses are successful in doing that, the implication is that the cost of the ICI shift may total $500 million.

Quick math indicates the 4.5 million “average” residential ratepayers will be looking at an increase in their bills of about $10 a month, or $120 on an annual basis. Coincidentally, that $10 a month is almost equal to the $11 a month those same ratepayers  will supposedly save due to the removal of the Provincial Sales Tax portion (8%) of the HST.

What it is: another crushing blow to all of the residential ratepayers of the province.

The Energy Minister’s concept of a “benefit to all consumers in Ontario” looks to be simply a shuffling of money from one ratepayer’s pocket to another.

Parker Gallant