May showers Ontario electricity customers with records

With a forecast of more increases on the way …

Ontario news in May focused on record rainfalls in many areas of the province, records were being set elsewhere, too: in Ontario’s our electricity sector.

While one of those records occurred on May 27 when the 4,500 MW capacity of industrial wind turbines generated a record low of one (1) megawatt hour, there were others. They won’t make you proud.

Highest “B” Class GA per MWh ever @ $123.07/MWH – What the $123.07 represents is a Global Adjustment cost to all Class B ratepayers of 12.3 cents /kWh without including the HOEP (Hourly Ontario Electricity Price) at a time when Premier Wynne has told us her government is reducing our electricity bills by 25%* so the difference between what the cost of electricity was in May and other months and the TOU rates (to be announced) will be “kicked down the road” to be paid at a future date.

Highest “B” Class total dollar GA cost ever @ $1,013.9 million – The Class “B” ratepayers got stung badly in May 2017 as their portion of the GA reached record levels.

Highest OPA contracted GA monthly cost ever @ $838.3 million – The Ontario Power Authority (since merged with IESO) was created by Dwight Duncan when Minister of Energy and contracted for all new power contracts, including those above market ones for renewable energy (wind, solar and biomass).  Those contracted generation sources set a new record for contribution to the GA representing 73.2% of the total amount as noted under # 5. below.

 Lowest “B” Class consumption for May (in evidence) @ 8.310 TWh – It would appear that Class “B” ratepayers did their best to reduce consumption and based on data on the IESO website consumption levels set a record low in May 2017.

Highest overall total GA costs ever @ $1,144.5 million – The total GA costs for May 2017 for the combination of Class B and A ratepayers achieved this record level since the GA was first created.

Based on what happened in May, it would appear that holding future rate increases in the next four years to the inflation index will result in huge increases when the hold-back (financed by taxpayers via the OPG) is slated for recovery.

That could make the Debt Retirement Charge look like chump change!

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*  The OEB has not yet announced the TOU rates that will apply effective July 1, 2017 as a result of the passing of the “Fair Hydro Plan” Act in the Ontario Legislature.

 

Free power is really expensive!

Stumbling over the IESO weekly summary* for May 24th to May 30th came with a shocking discovery that the HOEP (Hourly Ontario Electricity Price) for the week had descended to a low of $1.05 /MWh (megawatt hour) or 0.11 cents /kWh (kilowatt hour).

As it turns out, there is probably nothing you could buy for eleven one hundredths of a cent except for what was surplus to Ontario’s electricity demand for the week.

If you were looking to buy power from Ontario while living elsewhere it was much better than a Boxing Day or Black Friday sale! During that week IESO exported 278,712 MWh to NY, Michigan, Quebec, etc., which could have supplied 1.6 million average Ontario households with their electricity needs for the whole week for 19 cents.   Yes, you read that right!  The 278,812 MWh cost Ontario ratepayers the GA (Global Adjustment) which IESO’s 2nd estimate for May suggests will be $127.76/MWh (12.8 cents /kWh)!

What that means is, Ontario’s ratepayers will pick up $35.6 million in GA costs reducing electricity rates for our neighbours. Our neighbours can use that cheap power to lure small and medium sized businesses to their state or province. The businesses being lured away provide employment for many Ontarians.

Now, so surprised was I by the foregoing I fired off an e-mail to my friend Scott Luft about the meager amount of the HOEP for that week. Scott quickly responded suggesting a look at the prior week which he said was even more egregious.  So egregious, that the HOEP for the week of May 17th to May 23rd was negative at -0.48 /MWh or -0.5 cents /kWh.  He closed with the thought provoking “free power is really expensive” alluding to wind and solar as a fuel having virtually no cost!

It turned out the 308,616 MWh exported to NY, Michigan, etc., for the week commencing May 17th required Ontario ratepayers to pick up almost the full costs of our surplus and unneeded** generation and to also pay our neighbours to take it off our hands.  The cost of the latter was $148,134. and the cost of the generation based on the second IESO estimate of the GA for May was $39.4 million!  Those exported 308,616 MWh were equivalent to the “average” consumption of 1.8 million Ontario ratepayers for one week.  Those 1.8 million ratepayers if they lived in Ontario, unburdened by the GA costs, would have been paid .83 cents for their average weekly consumption.

Instead of a benefit, those ratepayers were obliged to pay 12.8 cents /kWh for power they didn’t consume and also pay $20.00 for their own “average” consumption of 172 kWh for the week.

Conclusion

In just two weeks of May Ontario ratepayers subsidized the generation and export of 587,328 MWh at a cost of $75 million (excluding costs of curtailed wind, spilled hydro, etc.) to ensure our grid was stable and not cause blackouts or brownouts.

What the foregoing highlights is the complete mess our various Ministers of Energy have made of Ontario’s electricity system by catering to the whims of the many unqualified environmental groups who have led our government down the path of contracting for intermittent and unreliable wind and solar generation at high rates to save the world without even so much as a cursory cost/benefit analysis.

Just those two weeks of May 2017 make it obvious: Free power is really expensive!

Parker Gallant,

June 6, 2017

* IESO’s weekly summaries commence Wednesday running to Tuesday of the following week.

**Unneeded generation costs include: spilled hydro, curtailed wind, steamed-off nuclear and idling gas plants.

What good is wind power?

April brought high winds, record curtailment of wind power, and record low consumer demand. Wasted and exported power could have supplied half the homes in Ontario for a month.

The Independent Electricity System Operator (IESO) recently released their April 2017 Monthly Market Report with information on power consumption, market pricing, exports and a host of other data.  What the April report revealed was Ontario’s average demand was low — so low that when energy analyst Scott Luft searched IESO’s records, he found the total demand for the month was a record low. He searched back to 1994, which is as far back as available.

The total demand reported by IESO for April 2017 was 9,788,614 megawatt hours (MWh): Ontario ratepayers are conserving, or we have lost many industrial clients, or both!

Another significant fact appearing on IESO’s website is that April was a pretty good month for Class A ratepayers. They consumed 21.9% of Ontario’s demand, but were only charged 11.4% of the Global Adjustment (GA), $965.7 million.  Class B ratepayers (that’s you and me, and small businesses) were charged with paying 88.6% of the GA, but represented only 78.1% of Ontario’s demand.

Cost: $160 million for revenue of $14 million

The other disturbing fact about April was our net export sales of power. That totaled 1,311,120 MWh sold at an average price of $11.14/MWh for a revenue of just $14.6 million for power that cost ratepayers $160 million. The loss of $145.4 million for the month contributed to the GA total of $965.7 million.

That 1.3 million MWh of exported power — which you paid for — could have provided power for more than 1.7 million average Ontario households at a cost of 1.11cents/kWh or just $8.35 for the month! (Assuming average use of 750 kilowatt hours/kWh of electricity for the month.)

Reviewing the IESO stats provides relatively current information but it doesn’t disclose the source of the generation, or what caused the hourly Ontario electricity price (HOEP) to be so low. Did we, for example, have to curtail wind?

Wind power: wasted. Again.

For that information I depend on my friend Scott Luft, who keeps a monthly data file which includes not only actual industrial wind generation, but also an estimate (always conservative) of curtailed wind power which we pay for but isn’t delivered to the electricity grid.  For the month of April 2017, wind power generated and curtailed (521,056 MWh) was 1,374,873 MWh, for a cost of  approximately $182 million.

Curtailed wind in April was the highest on record since we began paying for it back in September 2013!

Here’s the fatal math:

net exports of 1.3 million MWh +

the 521,000 of curtailed wind = 18.7% of total Ontario demand.

Combined, the 1,832,176 MWh at the HOEP price of $11.14/MWh and 1.11 cents/kWh and what do you get? Enough power for more than 2.4 million average households (over 50% of all households in the province) with their average need for power at a cost of only $8.35 — for the whole month.

Why doesn’t Premier Wynne simply cancel the Green Energy Act and the contracts for projects not yet built?

Either math is a problem for the Premier or she doesn’t want to admit to another “mistake”!

Parker Gallant

May 28, 2017

*Please note the GA is the can Premier Wynne is “kicking down the road” under her “Fair Hydro Plan” where she will refinance assets the Province doesn’t own by getting Ontario Power Generation to accumulate the debt for the uncoming 25% reduction in our monthly bills for the next four years. Look forward to a reappearance of the DRC (Debt Retirement Charge) but on a bigger scale in 2021!

Wynne spin and the Fair Hydro Plan–Part 2

Part 1 in this series featured Premier Wynne’s assertion that “In the past few years we’ve invested more than $50 billion in electricity infrastructure — new dams in the south, new towers in the north, $13 billion to refurbish nuclear power plants alone and billions more to ensure new transmission and distribution lines everywhere.”

She is obviously spinning tales! Those “new dams in the south” are nowhere to be seen unless she is talking about “Big Becky” the tunnel under Niagara Falls at a cost of $1.5 billion ($600 million over budget) and the “new towers” in the north are presumably the industrial wind turbines (IWT) erected on the shores of Lake Superior where they despoil the landscape made famous by the Group of Seven.   And most of those “new transmission and distribution lines” were added to accommodate wind and solar developments, not to improve the existing electricity infrastructure!

The Premier’s spin about bringing bills down by 25% and her declaration “This is the largest cut to electricity rates in the history of Ontario” ignored the facts when she references “the elephant in the room” claiming it took “too long to come to grips with” how costs had increased.

The Premier claiming the “largest cut to electricity rates” should have admitted to how much rates have increased, but that admission would have failed to win back any of her former supporters. The “elephant” was the 138% increase Ontario’s average residential ratepayer has seen in time-of-use rates since May 1, 2008 in just the raw commodity (electricity) cost — that increased from $420 a year to $1,002.   The $582.00 increase is exclusive of the provincial portion (8%) of the HST!  The cost to small and medium-sized businesses was naturally a lot worse, as their consumption is much higher.

The Premier has already removed the provincial tax portion on out bills so the remaining reduction will reduce the average residential bill by 17% or $170 on the commodity cost for a monthly drop of $14. That’s almost the same amount as the Wynne government suggests the “cap and trade” tax will cost us!

How did we get to a 138% increase?

Let’s look at where that 138% increase came from. Based on the Ontario Energy Board’s Yearbook of Distributors for 2008* and 2015** the “cost of power” increased from $9.031 billion to $13.971 billion, an increase of $4.940 billion despite a reduction in consumption of 4.2 terawatts (enough to supply 465,000 average households).  As well, “average” consumption fell while the number of customers increased by 362,000!

That additional annual cost for less power of $4.940 billion was the product of the GEA passage in early 2009 which resulted in contracted developers being paid above market prices for intermittent, unreliable wind and solar generation requiring back-up from new gas plants.

A prior article dealing with 2016 costs for wind, solar, gas and conservation was based on information from IESO that allowed me to estimate an annual cost of $4.123 billion made up of: wind-$1.566 billion, solar-$1.493 billion, gas back-up-$734 million and conservation-$300 million.  Not included was an estimate for the low-income support program or OESP (Ontario Electricity Support Program) which was included in the recent budget for the 2016/2017 year as $400 million.  Also not included are the costs of spilled hydro and steamed-off nuclear (about 5 TWh or enough to power 550,000 average households) which would add another $300 million bringing the estimate to $4.823 billion and close to the 2008/2015 increase of $4.940 in the commodity cost***.

The next article, Part 3 in this series, will examine Finance Minister, Sousa’s recent budget. We will do our best to identify the budgeted costs of the “Fair Hydro Plan” as they make their appearance in the forecasts.   Just how much are the Premier Wynne led government kicking “down the road” for future generations to pay?

 

* Note that both the cost of power and the consumption information in the OEB’s Yearbook do not include: First Nation Distributors, Hydro One Remotes, and Direct Connections to the Transmission Grid

** The OEB has not yet posted the 2016 information.

*** The Yearbook for the 2008/2015 comparison indicates distribution costs increased $767 million in this time frame which was a 21.6% increase and slightly higher than the cost of living increases.

April winds blow in high wind power costs

How badly were ratepayers hit? Millions upon millions for power produced out of phase with demand…

The Independent Electricity System Operator or IESO’s 18 month outlook report uses theirMethodology to Perform Long Term Assessments” to forecast what industrial wind turbines (IWT) are likely to generate as a percentage of their rated capacity.

The Methodology description follows.

“Monthly Wind Capacity Contribution (WCC) values are used to forecast the contribution from wind generators. WCC values in percentage of installed capacity are determined from actual historic median wind generator contribution over the last 10 years at the top 5 contiguous demand hours of the day for each winter and summer season, or shoulder period month. The top 5 contiguous demand hours are determined by the frequency of demand peak occurrences over the last 12 months.”

 The most recent 18-month outlook forecast wind production at an average (capacity 4,000 MW growing to 4,500 MW) over 12 months at 22.2%, which is well under the assumed 29-30 % capacity claimed by wind developers. For the month of April, IESO forecast wind generation at 33.2% of capacity.

April 2017 has now passed; my friend Scott Luft has posted the actual generation and estimated the curtailed generation produced by Ontario’s contracted IWT.   For April, IESO reported grid- and distribution-connected IWT generated almost 703,000 megawatt hours (MWh), or approximately 24% of their generation capacity. Scott also estimated they curtailed 521,000 MWh or 18 % of generation capacity.

So, actual generation could have been 42% of rated capacity as a result of Ontario’s very windy month of April 2017, but Ontario’s demand for power wasn’t sufficient to absorb it! April is typically a “shoulder” month with low demand, but at the same time it is a high generation month for wind turbines.

How badly did Ontario’s ratepayers get hit? In April, they paid the costs to pay wind developers – that doesn’t include the cost of back-up from gas plants or spilled or steamed off emissions-free hydro and nuclear or losses on exported surpluses.

Wind cost=22.9 cents per kWh

For the 703,000 MWh, the cost* of grid accepted generation at $140/MWh was $98.4 million and the cost of the “curtailed” generation at $120/MWh was $62.5 million making the total cost of wind for the month of April $160.9 million.   That translates to a cost per MWh of grid accepted wind of $229.50 or 22.9 cents per kWh.

Despite clear evidence that wind turbines fail to provide competitively priced electricity when it is actually needed, the Premier Wynne-led government continues to allow more capacity to be added instead of killing the Green Energy Act and cancelling contracts that have not commenced installation.

* Most wind contracts are priced at 13.5 cents/kilowatt (kWh) and the contracts include a cost of living (COL) annual increase to a maximum of 20% so the current cost is expected to be in the range of $140/MWh or 14cents/kWh.

Wind power lobby myth buster is busted

The opening sentence in a recent post on the Canadian Wind Energy Association’s (CanWEA) website states:  “Various pundits assert that the major reason for higher electricity bills in Ontario is the addition of renewable energy to the province’s electricity mix. This is a myth.”

The post was created by Brandy Giannetta, Ontario Regional Director of CanWEA. Ms. Giannetta holds a Master of Arts and Public Policy degree and was recently appointed to the Independent Electricity System Operator’s (IESO) Strategic Advisory Committee (SAC).  The Committee, says IESO, “gives senior stakeholder and community representatives the opportunity to provide policy-level advice and recommendations directly to the IESO Board of Directors and Executive on matters relating to the IESO’s mandate and other matters that may be of concern to stakeholders and the general public.”

I have trouble believing a representative of wind industry trade association CanWEA will represent the concerns of the general public.

Ms. Giannetta’s post on CanWEA’s website on April 24, 2017 underlines my worries.

Her article points to two articles that purportedly support the “myth” she is “busting,” but both require closer examination.   She cites Waterloo professor Natin Nathwani’s, (PhD in chemical engineering and a 2016 “Sunshine list” salary of $184,550) article of March 6, 2017, posted on the TVO website, which supports Premier Wynne’s dubious claims of “a massive investment, on the order of $50 billion, for the renewal of Ontario’s aging electricity infrastructure.”  Professor Nathwani offers no breakdown of the investment which suggests he simply took Premier Wynne’s assertion from her “Fair Hydro Plan” statement as a fact!  It would be easy to tear apart Professor Nathwani’s math calculations — for example, “The total electricity bill for Ontario consumers has increased at 3.2 per cent per year on average” — but anyone reading that blatant claim knows his math is flawed!

The second “study” cited is by Keith Brooks, Program Director at Environmental Defence (Masters degree in Environmental Studies from York) in which he claims “the average Ontario household pays about $11 per month for wind power, and $9 for solar power.”  Collectively it amounts to an annual cost of $240 for the “average Ontario household”.  Mr. Brooks and Ms. Giannetta apparently believe that, by providing a figure representing a small monthly amount, we will all buy into CanWEA’s spin that wind and solar are competitive with other generation sources.

In fact, Ms. Giannetta chose to ignore other more factual information that is readily available on other websites, including the Ontario Energy Board’s (OEB) semi-annual Regulated Price Plan, Price Report.  The following is a chart from the Price Report (May 1, 2017 to April 30, 2018) the OEB uses in setting TOU prices on a go-forward basis for the ensuing six months.  Note the chart provides a breakdown by percentage of generation supply and of the Global Adjustment (GA) and a per kWh cost of the specific generation:

Table 2: Total Electricity Supply Cost

  % of Total Supply % of Total GA Total unit cost (cents/kWh)
Nuclear 60% 40 6.9
Hydro 24% 12 5.8
Gas 6% 15 20.5
Wind 8% 18 17.3
Solar 2% 14 48.0
Bio Energy 0% 0 13.1

Source: Navigant NB: Hydro excludes NUGs and OPG non-prescribed generation. Gas includes Lennox, NUGs and OPG bioenergy facilities. Percentage (%) of Total GA excludes CDM costs.

Based on information in the OEB chart, it is relatively easy to calculate the individual generation supply costs* to the Global Adjustment or GA. The IESO provide the specific detail on the GA and for 2016 it totals $12.333 billion.  As noted, the chart indicates wind is forecast to represent 18% of the GA so the cost of wind should be around $2.220 billion, solar (14%) around $1.6 billion and gas (15%) $1.850 billion.

The OEB forecast is that wind and solar, (granted “base-load” status via their contacts) will cost ratepayers $3.820 billion over the next 12 months representing 32% of total GA costs, but will only deliver 10% of the power generation — often when it’s not needed!

To ensure wind and solar generation is backed up, gas plants (classified as “peaking plants”) stand at the ready and are estimated to impact the GA by $1.850 billion (15%) for a forecast 6 % of generation.

Collectively, wind solar and gas generation over the next 12 months are forecast to provide a meager 16% of total generation but will represent a cost of $5.670 billion of the Global Adjustment or 47% of total GA costs.

Most would agree $5.7 billion in annual costs is more than a “myth” and could have gone a long way in providing social, health, education and transit services for the people in Ontario, rather than creating wealth for wind and solar developers!

….

*In the prior year’s forecast wind was estimated to generate 8% of supply, solar 2% and gas 9% and represent 44% of the GA costs. Also note the IESO GA reports are on a calendar year (Jan. 1st to Dec. 31st) basis.

Premier Wynne’s $50-billion elephant

Do a Google search of “premier wynne+elephant in the room” you get 1,140,000 hits while a search for just “premier wynne” only gets 486,000 hits. The word “elephant” has been used by Ontario’s premier on a number of occasions. For example, the “elephant” popped up at one of the expensive Ontario Liberal Party fundraising dinners a year ago where she declared, referring to the provincial deficit, “So while some want to characterize Ontario’s deficit as the elephant in the room, I think a panda is the more appropriate metaphor,” she said. “Truly, Jia Panpan and Jia Yueyue [visiting pandas at the Toronto Zoo] were adorable. But the pandas are leaving Ontario in 2018, and in 2017-18 our deficit will be gone, too.”

The “elephant” has returned for her government in the form of high electricity prices but instead of cute little “pandas,” Premier Wynne was forced to call them her “mistake”!

Let’s look at that elephant now.

The recent release of Ontario Power Generation (OPG) 2016 annual report provides enough information to allow one to figure out exactly what created the elephantine mistake and where to point the finger.   To do that we will compare the results of 2016 to 2009* and show the cause of the above market climb in electricity prices.

Price Comparison

IESO’s (Independent Electricity System Operator) data discloses the cost of electricity generation in 2009 was 6.22 cents/kWh or $62.20 per megawatt hour (MWh) or $62.2 million/TWh (terawatt hour) and in 2016 was 11.32 cents/kWh or $113.20/MWh or $113.2 million/TWh. The increase from 2009 to 2016 represents a jump of 82% in only seven years and in simple terms, is a jump of 11.7% annually.

Using the above prices to show the full cost of electricity generation in those two years is accomplished by multiplying total generation by the cost per TWh so:

Total generation 2009: 148 TWh X $62.2 MM= $9,205 MM

Total generation 2016: 149.5 TWh X $113.2 million = $16,923 MM

(Source: IESO)

That means an increase of $7,718 million (+83.8%) in the raw cost of the commodity-electricity.

Finding the “mistake”

Why did the cost jump 83.8%?

Let’s start with the generation produced by OPG who, according to their 2009 annual report generated 92.5 TWh and 78.2 TWh in 2016. Bruce Nuclear in 2009 generated 35.7 TWh and in 2016 they generated 46.1 TWh.  Collectively OPG plus Bruce generated 128.2 TWh in 2009 and that represented 86.6% of total generation (148 TWh) by all generators that year.  In 2016 the collective total was 124.3 TWh which represented 83.1% of all generation (149.5 TWh) in that year as reported by IESO.

Costing the generation 

2009

For OPG: The costing of generation coming from OPG is a relatively simple task requiring only their gross revenue for the year divided by the generation they reported.  For 2009 gross revenue was $5,640 million for the 92.5 TWh delivered making the all-in cost $61 million/TWh.

For Bruce Nuclear: The reported price paid to Bruce was $65.90/MWH.   So, for the 35.7 TWh they generated, the gross revenue generated was $2,352 million or $65.9 million /TWh.

The combined costs of $5,640 million from OPG plus the $2,352 million from Bruce was $7,992 billion to produce 128.2 TWh making the combined cost per TWh $62.34 million or 6.23 cents/kWh.

As noted above, total costs for all generation reported by IESO for 2009 was $9,205 million meaning $1,213 million ($9,205 million less OPG/Bruce combined of $7,992 million) was spent to acquire the 19.8 TWh generated by the other private generators, making their costs per TWh $61.3 million or 6.13 cents/kWh.  (Note: 9.8 TWh was generated by OPG’s coal plants in 2009.)

2016

For OPG: As noted above OPG in 2016 generated 78.2 TWh and their gross revenue was $5,653 million making their generation cost per TWh $72.3 million (7.23 cents/kWh).  Included in OPG’s gross revenue was a $207 million payment for hydro spillage of 4.7 TWh due to SPG2. (surplus base-load generation).

For Bruce Nuclear: Bruce in 2016 generated 46.1 TWh at a reported cost of $66 million/TWh making so gross revenue was $3,043 million including the cost of steaming off almost 1 TWh due to SBG.  

The combined costs of $5,653 from OPG plus the $3,043 million from Bruce was $8,696 million to produce 124.3 TWh making the combined cost per TWh $70 million or 7.0 cents/kWh.

Cost of the “other” generation

The all-in costs for generation for 2016 was, as noted above, $16,923 million. If one deducts the combined costs of OPG and Bruce Nuclear for their generation in 2016 ($8,696 million) the balance of $8,227 million went to pay for the 25.2 TWh produced by other generators.   Simply dividing the $8,227 million by the 25.2 TWh creates a cost per TWh of $326.5 million or 32.7 cents/kWh. ***

Had the 25.2 TWh cost ratepayers $70 million/TWh, or the same as the OPG/Bruce Nuclear generation combination (25.2 TWh X $70 million = $1,764 million), Ontario ratepayers would not be on the hook for the $6.9 billion in excess costs! ($8,227 million – $1,764 million= $6,932 million or the very high $326.5 million/TWh)

In just one year’s data, compared to 2009, we have located many of the reasons for higher electricity costs. The Premier now claims $50 billion was needed to invest in transmission and generation but her “mistake” was in not seeing the costs would go up more than 83%, principally related to the acquisition of intermittent, unreliable renewable energy from wind and solar!

There may be even more elephants in this particular room.

 

*The choice of 2009 is related to the Legislative passage of the Green Energy and Green Economy Act (GEA) in the Spring of that year creating the FIT and MicroFIT programs and subsequent acquisition of renewable energy at above market prices.

**Surplus Base-load Generation is simply anticipated “base-load less Ontario demand”.

***The per TWh cost reflects the FIT contracted generation for industrial wind turbines, solar panels, bio-mass along with curtailed wind, conservation spending, the cost of selling our surplus power to other jurisdictions at only 15% of its cost, etc. etc.