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