Questions unanswered on northern Ontario transmission project

A much needed connection for remote First Nation communities brings questions about funding

What connection is there between Dutton Dunwich township in Southwestern Ontario and Deer Lake First Nation of Northern Ontario? Deer Lake First Nation is 180 km north of Red Lake, or 1,915 km from Dutton Dunwich by road, so the two communities are far apart. What connects them is how the Ontario government manages the electricity sector.

Ontario’s Energy Minister issued a directive to the Ontario Energy Board or OEB on July 29, 2016, stating “the construction of the Remotes Connection Project, including the Line to Pickle Lake, is needed as a priority project.”

Deer Lake First Nation and three other of the 16 First Nation communities to benefit from being connected to the recently announced $1.6-billion Wataynikaneyap (Watay) Power grid, are also named as partners in the Strong Breeze Wind Farm (57.5MW) in Dutton-Dunwich. They were brought into the project by U.S.-based Invenergy LLC which resulted in a points advantage in the procurement bid process administered by the Independent Electricity System Operator or IESO.

The Watay Power Project is a different story: it will be a much-needed connection for 16 First Nations to the Ontario power transmission grid. The 16 First Nations represent a population of over 14,000 who currently rely on diesel for power generation. It will be owned by 22 First Nations.

Who is putting up the cash, and is it a loan or a grant?                                                                                                                    

There appears to be a disconnect on the announcements associated with the $1.6-billion project as MP Bob Nault’s website stated: “Today, the Honourable Bob Nault, along with the Honourable Jane Philpott, Minister of Indigenous Services Canada, announced $1.6 billion in federal funding for Wataynikaneyap Power to connect 16 First Nations to the provincial power grid.”

The CBC’s report had a different view of the funding, however: “Premier Kathleen Wynne and Ontario Energy Minister Glenn Thibeault along with the Minister of Indigenous Services Canada, Jane Philpott, announced an investment of $1.6 billion dollars to connect 16 First Nations in Northwestern Ontario to the electrical grid.”

The report quoted Ontario’s Premier, who said “We are putting the money up front and then the federal government is coming in and back filling that money, so the province is putting up over $1.3 billion in order to facilitate the project … in order for the project to get going, someone had to take the risk.”

There is a lack of clarity for taxpayers in the federal and provincial statements. Who is really providing the money? And is it $1.6 or $1.3 billion? Is it a loan or is it a grant? Taxpayers should be told.

Delivery costs

Grid-connected electricity for the 14,000 residents of the 16 First Nations communities works out to about $114,000 each and (assuming 3.5 residents per household) $400,000 per household. If one assumes a lifespan of 40 years* for the transmission system the delivery cost annually is $10,000 per household, without factoring in either electricity or interest costs on the debt (if it is debt).  Somehow, I doubt the 14,000 residents of the 16 First Nations will get the bill; will it fall on the taxpayers or ratepayers in Ontario, or all Canadian taxpayers to pick up the bill?  If it is Ontario ratepayers, should not the cost of this initiative properly be part of an indigenous support and development program, rather than adding to already beleagured ratepayers’ bills? Clarity on this issue would be appreciated from both the federal and provincial governments.

Environmental and health impacts                                                                                                 

An IESO “Panel Discussion: Engagement at the Local Level indicated grid connection to Ontario’s remote First Nation’s communities would: “Save $1 billion compared to diesel generation (PWC Study)” and that $472 million of the social value includes the “present value” of 6.6 million tonnes of avoided CO2 equivalent and $304 million of “adverse health impacts” over 40 years in the $1 billion reputedly saved, according to the PWC report of June 17, 2015.

What Watay Power won’t provide                                                                                                  

The website for Watay Power has a “Frequently Asked Questions” page, where two interesting questions posed. One concerns future power outages and the other asks whether the $1.6-billion transmission system will connect to the undeveloped Ring of Fire?

The first intriguing question was, “What options do communities have for back-up power during outages?” The answer was “A back up study is being prepared to develop options on how each community local distribution plans to address outages. The Wataynikaneyap Transmission Project is solely responsible for transmission.”

The second question was: “Will this line connect to the Ring of Fire?”** The answer to that question was, “The Wataynikaneyap Transmission Project is not proposing a connection to the Ring of Fire at this time.”

So, it would appear no backup plan is included in the estimated $1.6 billion cost, nor is a connection planned to the Ring of Fire which is regarded as “ Ontario’s version of the Oil Sands, the deposit has been said to contain $60-billion in mineral wealth.”

The Watay Power project poses many questions for Ontarians and Canadians. While the project is worthy in connecting remote communities to the power grid, Queens Park and Ottawa need to provide more details on who is really paying for it.

Parker Gallant                                                                                                                                 April 16, 2018

* “Studies have shown that building the transmission infrastructure to these remote communities would save over $1 billion compared to continued diesel generation over the next 40 years.”

**”Ten years after a large chromite deposit in Ontario’s James Bay lowlands was first discovered and declared a “game-changer” for the Canadian economy, the Ring of Fire mining development is flaming out in a dispute over who is talking to whom.”

Parker Gallant is an independent commentator on energy issues

 

Advertisements

Wind power myths busted on one fall weekend

Beautiful … but costly. All that “free” wind power. [Photo: The Weather Network}
October 21 and 22 was a beautiful fall weekend in Southern Ontario with lots of sunshine, beautiful colours, mild temperatures and gentle breezes. That combination meant low electricity demand: power demand for the two days was slightly less than 603,000 MWh (megawatt hours) for all types and classes of Ontario ratepayers according to IESO’s (Independent Electricity System Operator) “Daily Summary Reports”.  As a result we exported surplus generation to New York, Michigan, etc. at an average two-day price of $2.65 per MWh, but at the same time, that cost Ontario’s ratepayers about $120/MWh*.

So, the “Net Exports” (exports less imports) of just under 98,000 MWh sold to our neighbours recovered about $260,000, but cost Ontario’s ratepayers almost $11.8 million … even more if we attribute it all to wind generation.

It turns out, the blame can easily be allocated to industrial wind turbines as they could have generated about 107,000 MWh, but were partially curtailed by IESO. As the weekend unfolded, 38,000 MWh were curtailed and 69,000 MWh were delivered to the grid.   Ontario’s ratepayers picked up the tab for the curtailed wind at $120/MWh and $135/MWh for the grid-delivered generation, bringing the weekend wind costs to almost $14 million ($13.875 million).  You should note curtailed and grid-accepted wind generation exceeded our net exports by 9,000 MWh — that’s enough to power 10,000 average households for a full year!

As it turned out, we didn’t need wind generation at all and we normally don’t. A look at our generation capabilities on the weekend via the IESO’s “Generators Output and Capability Reports” also shows IESO were busy controlling the grid to prevent blackouts or brownouts, and frequently did so by getting Bruce Nuclear to “steam off.” It must be assumed that OPG were also required to “spill hydro,” our cheapest form of generation!  Needless to say, we ratepayers were also paying for that!

Once again, the past weekend demonstrates power generation from industrial wind turbines wasn’t needed.

But the way the Ontario Liberal government has negotiated the contracts with wind power developers means Ontario’s ratepayers are required to pick up the bill for the unreliable and intermittent nature of power that often winds up creating a surplus of unneeded power that is exported at a substantial cost.

It is clearly time to end the charade — kill the GEA and cancel any outstanding unbuilt wind contracts.

 

* Due to the nature of grids, it is impossible to determine what source of generation was actually exported so the suggested cost reflects (approximately) the GA (Global Adjustment) plus the HOEP (hourly Ontario electricity price) of all types of generation either contracted or regulated.

Ontario’s class distinction stings ordinary hydro customers

Electricity bill-payers are subsidizing business to the tune of over $1 billion, every year

 In early 2010, then Minister of Energy Brad Duguid issued a directive to the OPA (Ontario Power Authority) instructing them to create and deliver an “industrial energy efficiency program” specifically for large transmission connected (TX) ratepayers.

That directive led to the creation of the two classes of ratepayers that now exist in Ontario.

Originally, Class A ratepayers were only the largest industrial clients (TX) whose peak hourly demand was 5 megawatts (MW) per hour, or higher.   Since the launch of the new distinction in January 2011, Class A clients have evolved further under Energy Ministers Chiarelli and Thibeault, to allow those with peak demand exceeding 500 kilowatts (kW) per hour.

That move leave the great unwashed “B” Class – you and me — to pick up the subsidy costs for  Ontario’s larger employers. The concern was (is) that those companies without subsidies might exit the province and take their jobs with them.

The algorithm that determines what a Class A customer pays is related to how successful they are at picking the top five hours of Ontario’s peak demand. The “A” class companies who fire up their own generators (usually natural gas) or close their plants/operations down and reduce demand on Ontario’s generation sources during the five highest peak-demand hours over the 12 months, will get the biggest discount.

The focus on “conservation” during those hours carries the political hope of achieving “peak” demand reduction.  The theory is the reduction should result in reduced need for new generation.*

While that goal may have been the intent, at the same time Ministers Duguid, Chiarelli and Thibeault were (are!) giving orders to contract for more and more renewable wind and solar contracts to the point where the “market price” or HOEP (Hourly Ontario Electricity price) continued a slow descent due to surplus generation.   The HOEP in May 2017 achieved a new low of $3.17 per MWh or 32/100th of 1 cent/kWh. In June 2008, it was $62.30/MWh.

Both classes of ratepayer equally pick up the full cost of the HOEP on a per kWh basis!

With the focus on the cost shift of the ratepayer classes tied to the GA (Global Adjustment), the higher the latter the greater the cost shift.   The addition of so many more businesses to the Class A group simply amplified the cross-class subsidy!

For an example of the growth in the dollar value of that shift, let’s look at some June numbers, now that IESO has released the June 2017 summary report.

The first year the B to A shift happened was in 2011: for June of that year the GA was $423.1 million and Class A ratepayers picked up $46 million of that cost. Unfortunately, IESO did not start disclosing the consumption by ratepayer class until 2015, so it is not possible to determine what percentage of the GA was being paid by Class A versus Class B ratepayers.

The June 2015 IESO webpage discloses consumption of 11.004 terawatt hours** (TWh) with Class A consumption of 2.061 TWh (23%), and GA paid by Class A ratepayers of $90.4 million. That’s 9.6% out of total GA costs of $943.1 million.  So, Class B ratepayers picked up $126.5 million to subsidize Class A ratepayers that month.  That translates to a GA cost per kWh for Class A of 4.4 cents versus 9.5 cents for Class B ratepayers. HOEP for June 2015 was $15.31/MWh!

IESO discloses total consumption of 11.509 TWh for June 2016 with Class A consumption of 2.308 TWh (20.05%). The GA for Class A was $121.6 million out of GA costs of $995.3 million. Had the GA been allocated on the 20.05% Class A consumption, they would have paid $200.4 million meaning Class B ratepayers subsidies were $78.8 million for the month.  HOEP for that month was $20.17.

June 2017 total consumption was 11.617 TWh, of which 2.482 TWh (21.36%) was for Class A ratepayers. The Class A GA totaled $137.9 million, but if they had been allocated the 21.36% of their consumption on the GA of $1.208.8 billion instead of the 11.4%, they would have paid $258.2 million.  Class B ratepayers provided a subsidy of $120.3 million.

The 5,055,000 (2015 OEB Yearbook of distributors) Class B ratepayers in the province each picked up an average of $23.80 of subsidy costs for June 2017.

If that becomes the norm, those ratepayers will pony up around $1.4 billion annually. 

Back before former Energy Minister Duguid issued his directive, the Association of Major Power Consumers of Ontario, the Ontario Chamber of Commerce, and the Canadian Federation of Independent Business were lamenting the rising costs of electricity in Ontario. Some companies left the province due to costs, so it was inevitable the Ontario Liberal government would finally hear their pleas for relief.  The result? The creation of the two rate classes.

In effect, the creation of the two rate classes and the subsidy shift from Class B to Class A ratepayers should be labeled “employment insurance” as it was needed to simply retain jobs in jeopardy because many companies were threatening to leave the province due to high uncompetitive electricity rates.

Why can’t our Energy Ministers come to the realization they should cease contracting for new, unreliable and intermittent wind and solar generation that produces power out of phase with demand?

*   The claim by the government is that by not contracting for new capital investment in generation, we ratepayers save future rate increases

**1 terawatt is equal to 1 billion kilowatts

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