The good old days of electricity prices in Ontario

… when supply and demand meant something, and electricity costs weren’t skewed by overpriced FIT contracts and “first-to-the-grid” rights

October 21, 2018

The good old days… just 11 years ago

My friend and energy analyst Scott Luft posted some interesting charts on his twitter account about generation on October 16, 2018, noting the wind was blowing and also that we used very little fossil fuel for power generation — the gas plants were basically all idling!

As is often the case in our fall and spring months, Ontario’s demand for power was low and IWTs (industrial wind turbines) were spinning. In fact the TX (transmission-connected) IWT delivered about 44,850 MWh and had another 26,760 MWh curtailed.  The corporate wind power operators were paid for potentially operating at 66% of their capacity — well above their annual average of 29 or 30%.  The cost of the generation they delivered, along with the curtailed (wasted) generation, put $9,265,000 into the pockets of the developers and all but approximately $84,000 found its way into the GA (Global Adjustment) account, as did the cost of hydro spills and those idling gas plants.

On a fall day when Ontario demand was only 343,680 MWh, as noted by IESO in their “Daily Market Summary”, we had net exports (exports less imports) of just under 50,000 MWh for which we received the market price (HOEP) of $1.88/MWH.  Those exports returned about $94,000 for generation that cost Ontario ratepayers north of $5.6 million.  As IESO reported, the total value of our consumption and exported electricity had a market value (HOEP) of only $749,000, but a cost of about $45 million.

Nostalgia about the good old days took me back to 2007 when the Global Adjustment Mechanism* was first introduced, so I looked at the IESO’s “Daily Market Summary” of October 16, 2007 to see what that day’s HOEP was.  On that day there were few wind and solar “renewables” in place and Ontario demand was higher at 393,000 MWh.  The HOEP for the day was $54.47/MWh or 5.5 cents per kWh. That is slightly higher than what IESO said the cost of electricity was in 2007 in the year-end report when they noted “The average weighted electricity price in 2007 was 5.05 cents per kilowatt hour (kWh)”.

The good old days of supply and demand

Compare that to the IESO Monthly Market Report for August 2018 which came in at $113.32 (HOEP + GA) or 11.32 cents/kWh — that’s 124% higher than 2007 just 11 years later! Put another way, before we added intermittent and unreliable wind and solar in large amounts to our generation sources, the market operated in a way that properly reflected supply and demand economics!

All this serves to demonstrate how intermittent renewable energy sources in the form of wind turbines and solar panels which have been granted guaranteed prices under FIT (Feed-in-Tariff) prices and “first to the grid”** rights, can distort Ontario’s electricity market.

A cost/benefit study, recommended by two Auditors General in the past, might have proved useful.

It is time for the incumbent government to cancel the acquisition of any more wind or solar power generation that have not commenced construction or are fighting actions before the ERT or the courts.

PARKER GALLANT

*The GA was originally called the “Provincial Benefit” but the name changed when the ruling Ontario Liberal Party introduced the “Ontario Clean Energy Benefit” reducing hydro bills by 10%.

**Wind and solar generation ranks at the same level as non-dispatchable nuclear power so when generated must be accepted or if not needed due to low demand will still be paid.

 

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Forecast for April 2017: the news on electricity bills will be terrible

Reducing electricity bills is hard when you keep signing contracts for more power Ontario doesn't need. (Photo:THE CANADIAN PRESS/Mark Blinch)
Reducing electricity bills is hard when you keep signing contracts for more power Ontario doesn’t need. (Photo:THE CANADIAN PRESS/Mark Blinch)

November 29, 2016

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.

Cancel, now

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