One spring day just cost you millions

A happy day for power importers south of the border. For you? Not so much…

April 9, 2017 was a perfect day to demonstrate the mess the current Ontario government could have expected if they had simply done a cost-benefit study of the electricity sector prior to imposing the GEA (Green Energy and Green Economy Act).

The April 9th IESO generator report and Daily Market Summary provide highlights of many of the mistakes the Liberal government has made, as does my friend Scott Luft’s “Daily Electricity Supply Estimates.”  IESO’s report fails to provide details of distributor connected (DX) generation (principally solar and wind) whereas Scott estimates those along with the curtailment of wind, solar, hydro and nuclear generation. His estimates have proven to be on the conservative side in the past.

IESO’s “Market Summary” shows Ontario Demand was only 294,600 MWh (megawatt hours) which Scott noted was the “3rd lowest Ontario Demand day in the history of the market” and that day, along with five other recent “lowest Ontario Demand” days have all occurred within the past 12 months.   How low is demand? Scott says the six low demand days were lower than any day during the massive blackout of 2003.

Seriously.

Demand in Ontario on April 9th of 294,600 MWh could have been easily supplied by nuclear generation (236,400 MWh including 14,800 MWh steamed-off) and hydro generation (101,900 MWh including 1,200 MWh spilled, and 2,600 MWh from DX).  Those two clean, emission-free power sources could have delivered 338,300 MWh, leaving 43,700 MWh available for sale to our neighbours.  The 338,300 MWh should have cost Ontario ratepayers $20,554,000 based on what we pay on average for nuclear and hydro generation.  That would equate to 6.1 cents per kilowatt hour (kWh) combined!

As it happened, Sunday April 9 saw 51,400 MWh of net exports (exports less imports) sent to our neighbours in Michigan, New York and elsewhere, along with an average payment of $3.08/MWh. They gladly took those free MWh along with our payment of $158,312.00.

Sunday April 9th also saw Ontario’s ratepayers pick up the bill for transmission (TX) and DX-connected wind of 25,700 MWh and another 46,300 MWh of curtailed (one of the highest curtailed days ever) wind at a total cost of $9.290 million.  If we calculate the cost for just the accepted wind generation (25,700 MWh,) the cost per MWh becomes $361/MWh or 36.1 cents/kWh.

Ontario ratepayers also picked up the bill for the 10,533 MWh of solar generation (DX and TX) and the 667 MWh of solar estimated as curtailed. Solar’s costs were $5.280 million, which means the delivered generation cost last Sunday was $501.28/MWh or 50.1 cents/kWh.

Meanwhile, those same ratepayers picked up a $4.143 million bill for gas generators who delivered 5,773 MWh (TX and DX) at a delivered cost of $717.12/MWh or 71.7 cents/kWh. Scott Luft noted the 5,773 MWh delivered to the system by the gas plants set a record low.*

The cost of unnecessary power for ONE DAY?

The total cost of the unneeded supply of power on April 9th coming from wind, solar, gas and biofuel ($368,000) plus the payment made to export ($158,312.) came to over $20 million.

What that means is, this one day of generation, Ontario’s ratepayers are obliged to pay for, was $40.8 million or 13.6 cents/kWh yet the 294,000 MWh they actually consumed was produced at a cost of $17.9 million (not including the $2.7 million loss on exporting).

Premier Wynne has admitted her government has made mistakes on the energy file. The “mistake” on that Spring day turned out to be a burden on all of Ontario’s ratepayers (rich and poor) with the extra cost of over $20 million in order for the Minister of the Environment and Climate Change and Premier Wynne to be able to claim the “cap and trade” tax is driving down emissions in the energy sector, by reducing generation from fossil fuels (gas).

They are not likely to mention that anyone using electricity from Ontario’s generators would have had to more than double — 13.8 cents/kWh instead of the 6.1 cents/kWh — so they could make that claim!

* Lower gas generation will allow Glen Murray, Minister of the Environment and Climate Change to claim the “cap and trade” tax is working.

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No natural gas, more natural gas: what is the Wynne government’s game?

February 6, 2017

In April 2015 Brad Duguid, then Minister of Economic Development, Employment and Infrastructure issued a press release stating: “Increased natural gas access, through the $200 million Natural Gas Access Loan and $30 million Natural Gas Economic Development Grant, will attract new industry, make commercial transportation and agriculture more affordable, help to create jobs, provide more energy choices and will lower electricity prices for businesses and consumers across Ontario.”

The focus was expansion in rural communities and the money offered would do wonderful things including lowering “electricity prices.”  The Duguid statement appears to have flowed from the 2013 Long-Term Energy Plan (LTEP) released by Bob Chiarelli when he held the Energy Minister’s portfolio as noted in the OEB’s 2014-2017 Business Plan.

Just days ago, another press release was issued on the same issue by Bob Chiarelli, Minister of Infrastructure:  “Ontario is expanding access to natural gas for communities that do not currently have service, including those in rural and Northern Ontario and First Nations communities.”  It gave a “Quick Fact”: “Natural gas is the dominant heating source in Ontario and continues to be consistently less expensive than alternative sources such as electricity, heating oil and propane.” The Chiarelli announcement increased the “grant” amount to $100 million.

The recent announcement indicates the Duguid offer fell flat so perhaps Chiarelli’s announcement is an effort to see the claim he endorsed in the 2013 LTEP as one he is determined to follow through on, even if it raises Ontario’s debt by $100 million!

It is also ironic that Chiarelli is pushing expansion of natural gas consumption while our current Energy Minister, Glenn Thibeault is heading in the opposite direction. He recently instructed IESO (Independent Electricity System Operator) to basically shut several of the NUG (non-utility generators) gas plants down. Minister Thibeault’s recent directive to IESO notes:  “Ontario has put in place legislation for its new cap and trade program to limit greenhouse gas pollution while moving to a low-carbon economy.”   Most NUG contracts are gas generation units whose original contracts (executed in the Peterson Liberal government days) are close to expiry, and are “take or pay” contracts.  With the  surplus of power today, Minister Thibeault considers them expendable.  As a result the directive instructed IESO to renew contracts but only: “if the IESO is able to negotiate replacement contracts (IESO Contracts) with OEFC NUGs that incentivize them to operate in a manner that is better aligned with the integrated power system’s needs.”

As noted by Scott Luft some of those NUG contracts have been renegotiated, others ended, (the plants will be closed or mothballed) while some are in the process of  renegotiation.  One of those cancelled contracts offered to produce and sell power for 5.9 cents/kWh, but that offer was rejected even though it was way under prices paid for generation from industrial wind turbines and solar panels. Both those forms of power generation are unable to generate power when needed.

Is the objective of the Energy Minister to reduce emissions from gas plants so Premier Wynne can claim the “cap and trade” tax is working?

Meanwhile, if Minister Chiarelli is successful at handing out the $100 million tax dollars as grants to expand natural gas use, emissions will increase! Any increase will generate additional cap and trade revenue to help pay for the grants and the early shutdown of those gas plants.

Here’s the game: reduce emissions in the (already clean) electricity sector while pushing them up elsewhere and capture additional taxes along the way.

The topsy-turvy world of power policy in Ontario continues.

Back room conversations at the Ontario Liberal Party?

With recent polling results in Ontario putting the Ontario Liberal Party in third place and almost 60% of those polled suggesting Premier Wynne should resign, we imagine there might be some hand-wringing going on among party executives and senior MPPs.

The following is my take on how one of the strategy sessions to plan for the upcoming 2018 election might go.

The players:

VB—President of the party

SG—Liberal strategists

GM—Environment Minister

GT—Energy Minister

PW—Premier

CS—Finance Minister

VB: OK, folks, I’ve called this meeting because we are down deep in all the polling results and we only have a little over a year to turn things around.  I felt after our last planning session the announcements by the Premier and the Energy Minister to drop the 8% provincial portion of the HST and the reduction offered to rural ratepayers would do the job.  That hasn’t happened and the media have kept presenting bad news stories about hydro rates despite those two actions.  We need to do more so I need some ideas!

SG: As I see it the start of the “cap and trade” tax sure hasn’t helped the parties image either, in spite of how we painted it as Ontario “leading the world in a climate change environment.”   We also got both the environmentalists and the Prime Minister himself to bless it!  The good thing though is the tax will pull in lots of money so we should think about how we can use it.  Just a warning Charles—you may have to be imaginative when you present the budget to show it coming to balance in 2018 and Glen—most of the funds won’t be at your disposal either! We need to get voters back on side in the urban centres now too.  We are looking weak in Ottawa, Windsor and even Toronto in a few ridings.   We have to get electricity costs off the front burner!  So, how?

GM: I’m OK with not getting a chunk of the money—we are so far ahead of everyone else on this issue.

GT: Well, as you suggest, the electricity sector is at the top of the list among voter’s concerns so we have to do something to show rates going down.  We have made some noises about looking at the distribution rates and can, to a certain extent, blame the municipalities who own the local distribution companies. Or, we could blame the OEB so maybe we should focus on getting those down?  Could we use some of the “cap and trade” tax for that purpose?

PW: We have kind of teased the media that we will use some new money for exactly that, looking for more ways we can get rates down so let’s do it.  Glenn, I am glad you followed through and got some of those old gas plants shut down as that should mean the electricity sector emissions will show a slight decrease, and let’s pray for no smog days in 2017 so we can brag about it.  It also makes it look like we know what we are doing!   One thing I should tell you though, Glenn: stay away from O’Leary. Your letter to him didn’t do so well in social media.  I probably shouldn’t have gone after him either, so from now on let’s just pretend he doesn’t exist!

Now Charles, how much do you think we can put towards getting those rates down, oh, and don’t forget, as soon as we are re-elected we can put the 8% right back on those electricity bills?

CS: I figure we can throw $1.2 to 1.3 billion into the Energy Ministry pot to help get rates down. It’s less than 1% of the budget.  Glenn and I figure it will get distribution rates down quite a bit—possibly as much as $300 a year for residential ratepayers.  That would be $25 per month and should win us back a bunch of those voters that are ticked off with us.  Even if we get, say, 1 million voters back, that will go a long way to bringing us another majority.   I’m pretty sure I can find a way to come up with what looks like a balanced budget for 2018 even without that money.  Thank God the economy is showing some signs of life as that is helping to push revenues up a little bit. Some of those recent fee increases for licenses, etc. also help, not to mention the HST tax on the cap and trade tax.

SG: OK, I think this plan makes sense so let’s keep our fingers crossed and make it happen.  We will help the Premier coordinate the news releases to make sure the media can’t do anything but praise her and the party.  Timing will be key so let’s keep this under wraps for a little while and just offer some snippets to give the sense that good news is coming.  Later this year we can deliver the goods!

VB: OK.  I agree with SG that this should be a major plank in our comeback bid and we can hopefully see those polling numbers change for the better.  I have a good feeling that we will be able to get those supporters back and come through the 2018 election with another majority.  This meeting is over!

END

 

Now we taxpayers and ratepayers can sit back and watch as the Ontario LIberals do what they continue to do before the next election, or we can push for real change to reduce the burden on households rather than simply watch the shell game unfold.

As Abraham Lincoln once said: “You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.”

 

Outrageous: Ontario’s electricity CO 2 reductions cost

January 16, 2017

Ontario Premier Wynne: not to be outdone  (Lucas Oleniuk/Toronto Star via Getty Images)
Ontario Premier Wynne: not to be outdone

Prime Minister Justin Trudeau announced on October 3, 2016 he would put a price on carbon starting in 2018, if the provinces have not put one in place. He also announced the price would start at $10 a ton and rise to $50 per ton by 2022.  As Ontario residents may already know, as of January 1, 2017 the Premier Wynne-led government already moved in that direction imposing a “cap and trade” tax they claim will burden us with a cost of $13 per month via a tax on gasoline and one on our home heating source of natural gas.

This new tax comes on top of one ratepayers in this province should already be aware of as we have been paying for carbon reduction for some time via our electricity bills.

A website providing the Ontario Energy Report states at the bottom it “was first produced in Q3 2014” and uses IESO as its data source.  The quarterly reports contain lots of information; however, they are generally not available until the end of the quarter following the one being reported on.  The reports provide: generation achieved from the TX (transmission connected) market and details on the capacity of both TX and DX (local distributor connected) sectors.  The report is also specific in terms of both exports of surplus electricity and imports and their respective destinations (exports) or sources (imports).  Contained in the 16 pages are many charts and graphs providing information on other facts such as the average hourly electricity price (HOEP), the Global Adjustment (GA) by ratepayer class (A and B), conservation initiatives, etc.

The report also has a graph specific to CO2 emissions from Ontario’s electricity sector starting in 2007 and identifies, by year, the Megatonne (MT) emissions.   If one looks at 2009, which is the year the Green Energy and Green Economy Act (GEA) was passed, total emissions were 16 MT. In 2015 emissions had dropped to 7 MT.  The 7 MT in 2015 were flat measured against 2014’s emissions and, based on results available for the first three quarters of 2016, it appears set to a level that will be around 5.5 MT!  The drop of 10.5 MT since 2009 suggests the Ontario electricity sector reduced CO2 emissions by 10,5 million tons.

How much have Ontario electricity customers paid?

Ontario ratepayers should suspect the foregoing results have been achieved via our electricity bills as they have climbed at multiples of inflation to accommodate renewable energy in the form of wind, solar, biomass, etc.   So, how much have we have paid, and continue to pay, for that achievement, and what does that translate to on a cost per ton basis?

That question can be answered in part by the Ontario Auditor General (Bonnie Lysyk) report of late 2015. That report noted ratepayers paid $37 billion more than necessary from 2006 to 2014 for contracts negotiated by the Ontario Power Authority, and they will pay another $137 billion more by 2032 to satisfy those and other contract obligations through to their expiries.

That brings the cost to $170 billion.

The AG’s report noted wind and solar contracts were estimated to have been paid $9.2 billion over the actual market value, due to prices that failed to reflect the drop in a competitive environment.

So, using the $170 billion to calculate the cost per ton to reduce the 10.5 million tons of CO2 emissions, it appears ratepayers are paying about $16,000 per ton.   Using only the $9.2 billion (wind and solar) the cost per ton of reducing CO2 emissions comes in at over $835 per ton.  The latter cost does not account for the intermittent and unreliable nature of wind and solar which requires back-up from gas plants and easily doubles the costs, raising the emission reduction cost to over $1,600 per ton.

What the ratepayers of Ontario have been paying to reduce emissions in the electricity sector makes the Prime Minister’s upcoming carbon tax of $10 a ton in 2018 and $50 per ton by 2022 look like chump change!

If he really is intent on driving the Canadian economy into the ground, he needs to take a lesson from Ontario’s Premier Wynne and her predecessor, Premier McGuinty.