energy policy – Parker Gallant Energy Perspectives

Should the Pickering nuclear plant be closed? Not based on cost and performance…

Pickering: working at 95% capacity during the heat wave [Photo: OPG]

July 6, 2018

Wind power a failure during recent high demand during heat wave; dependable power needed

I got a call at 11 a.m. on June 25th from the producer of the Scott Thompson show on CHML 900 AM to appear on the show to discuss the suggestion by NDP leader Andrea Horwath about closing the Pickering Nuclear plant.

Essentially it was about her statement during the election campaign indicating the NDP’s position on Pickering: “we will begin the decommissioning process immediately, which will bring more jobs to the area — as opposed to the Liberal plan, which is to mothball that facility for 30 years and allow the next generation to figure out the decommissioning”.

Doug Ford, leader of the Ontario Progressive Conservatives, on the other hand stated: “The Pickering plant can continue to safely operate until at least 2024. We can generate 14 per cent of Ontario’s power needs right here”.

The producer suggested Scott wanted to explore the opposing issues with me.

Aware I was scheduled to be on his show at 12:35 p.m., and remembering that a Brady Yauch article a few months earlier in the Financial Post had suggested closing Pickering, I felt I should do more research before the call back. Brady’s principal point was Pickering was a poor performer and the estimated costs ($300 million) of the extension would prove to be negative for ratepayers.

OPG’s website describes Pickering as follows: “Pickering Nuclear has six operating CANDU® (CANadian Deuterium Uranium) reactors. The station has a total output of 3,100 megawatts (MW) which is enough to serve a city of one and a half million people, and about 14 per cent of Ontario’s electricity needs.”.

Pickering Nuclear traces its roots back to 1971 when it first commenced operation with four units and expanded to eight units in 1983. Two of the first four units have been in voluntary lay-up since 1997. The CNSC (Canadian Nuclear Safety Commission) awarded OPG’s Pickering and Darlington nuclear stations its highest safety rating in 2017.

Combined, the Pickering and Darlington nuclear stations generated 10.4 TWh (terawatts) of power for the 1st Quarter of 2018 at a combined cost of 7.2 cents/kWh (up from 5.8 cents/kWh in the comparable quarter). The 10.4 TWh was sufficient to supply the 4.6 million average residential households in the province.

Directing my research to IESO’s hourly Generator Report I was able to discern Pickering at hour 10 of June 25th had just generated 2,308 MWh out of 10,457 MWh produced by all the nuclear plants in the province. Pickering nuclear represented 22% of nuclear generation at that hour, 15.6% of Ontario demand and 14% of total demand (including exports). At hour 10, wind turbines were generating 452 MWh or 10% of their capacity versus Pickering nuclear which was operating at about 74.5% of its capacity.

Both nuclear and wind are classified as “base-load” generation!

As it turned out, when I was on Scott’s show the bulk of our chat was related to his prior guest’s discussions about Premier Ford’s cancellation of the “cap and trade” tax. Only a couple of questions were raised about Pickering which I responded to.

Interestingly enough, now that the Ontario July heat wave has passed, I felt the urge to look at the performance of Pickering and IWT over the seven days when peak demand was high. Pickering nuclear performed well generating close to 3,000 MWh each and every hour over the period meaning it was operating at over 95% of capacity. Wind power generation, however was all over the map reaching a high of 2,769 MWh (62% of capacity) at midnight July 1st and a low of 5 MWh (0.11% of capacity) at 10AM on July 4th!

It is obvious that wind fails miserably as “base-load” generation when needed and the relative cost of generating power (sans back-up costs) is over 17 cents/kWh.

It sure looks like we should keep Pickering nuclear operating, as Premier Ford suggested.

Parker Gallant

Ontario’s electricity export tariff

Special to The PostMedia Network, June 14, 2018

BY PARKER GALLANT, GUEST COLUMNIST

Former Energy Minister Chiarelli and his claim of a $6B profit on surplus electricity exports. “You can verify it.” No, you can’t.

Many will recall Bob Chiarelli, when in the position as Ontario’s Minister of Energy, was questioned on the costs of exporting our surplus electricity on TVO and stated: “since 2008, the province of Ontario – and you can verify it with the IESO – has made a $6 billion profit on the trading of electricity.”

Needless to say Minister Chiarelli was called out by the media and opposition parties for making such a spurious claim.

Let’s look at Ontario’s 2017 electricity exports and see what he would claim about them. The U.S. Energy Administration Information (EIA) in a recent release, had the following information posted from data supplied by Canada’s National Energy Board (NEB):

“Electricity accounts for a small, but locally important, share of bilateral trade. In 2017, the value of U.S. imports of electricity from Canada increased for the second straight year, reaching $2.3 billion*. The United States imported 72 million megawatt hours of electricity from Canada in 2017 and exported 9.9 million megawatt hours, based on data from Canada’s National Energy Board.”

As it turns out, Ontario’s exports of 19.1 million megawatt hours (MWh) in 2017 represents 26.5% of the 72 million MWh reported as exported by the NEB and those 19.1 million MWh generated “revenue” of $496.6 million (approximately) made up of the $15.80/MWh of the yearly average HOEP (hourly Ontario energy price) as reported by IESO and another $10.20/MWh for transmission** costs.

The implied revenue generated represented 16.6%* of total Canadian electricity revenue versus 26.5% of total Canadian electricity exports. The Ontario based generators of that 19.1 TWh of power were paid a yearly average of $115.5 million/TWh (yearly average includes HOEP plus global adjustment based on the IESO’s December 2017 monthly summary.

That means the cost to Ontario ratepayers for exported power was $1,709.5 billion and the credit (net of the monies to Hydro One of $194.8 million for transmission) resulted in Ontario’s ratepayers picking up the missing revenue of $1,507.7. Anyone with a small math knowledge would not refer to that as a profit as it would represent a cost of about $300 per Ontario household.

Export tariff?

The cost to ratepayers of electricity exports in 2017 at over $1.5 billion and prior years played a significant role in driving up electricity rates and represented almost 10% of total generation costs. To put that in current context, Ontario’s ratepayers were slapped with an “export tariff” by our Ontario government of 88% which greatly exceeds the US tariffs recently announced by the US government on Canadian manufactured steel and aluminum.

Getting slapped with only a 10% or 25% tariff would be a net benefit to Ontario’s ratepayers.

*Presumably US dollars so would represent approximately $3 billion CDN dollars at a $1.30/$1.00 exchange rate.

**A large part of these revenues ($194.8 million estimated) went to Hydro One who control about 99% of all transmission in the province.

Hydro One takeover of U.S. company a big negative for Ontarians

The Financial Post, August 10, 2017

Parker Gallant: Thibeault and Wynne believe it’s wrong for the province to borrow $4 billion to reacquire Hydro One shares, but OK for Hydro One to borrow $5.1 billion while diluting the province’s interest in it

PostMedia photo

By Parker Gallant
On March 28th, a few weeks after Ontario Premier Kathleen Wynne and Energy Minister Glenn Thibeault held their press conference about the “Fair Hydro Plan,” Andrea Horwath, leader of the NDP, delivered a motion to the Ontario legislature calling for a buy-back of Hydro One. The motion failed and later resulted in Thibeault calling the NDP motion “short on details and long on hollow promises.” He noted that many of the NDP’s proposals “rely on a vague and yet-to-be-determined ‘expert panel’ that will be convened in the future.” Buying back $4 billion in Hydro One shares is costly, the energy minister added, and “will not take one cent off electricity bills. What it will do is send billions to the stock market instead of making much needed infrastructure investments in communities across Ontario.”

Fast forward to July 19^th, when Thibeault was beside himself with excitement because Hydro One will be paying US$5.3 billion ($6.7 billion) to purchase Avista, a much smaller electricity and natural gas utility headquartered in Spokane, Wash., 3,200 kilometres from Toronto. Hydro One offered a 24-per-cent premium on the traded value of the stock price over its July 18th closing and, based on Avista’s 2016 annual profit, it will take Hydro One 38 years to recoup the $6.7-billion price tag. Thibeault’s press release announcing the takeover carried this obtuse claim: “It is to the shared benefit of Hydro One’s customers, employees and shareholders to see the company strengthened and growing.” He also stated that, “In particular, we welcome the fact that this proposed acquisition will not impact the rates that Ontario customers pay. Neither will it have any impact on local jobs.”

The privatization of Hydro One and dilution of the province’s shareholding keep its debt off of the province’s balance sheet

Thibeault and Wynne believe it’s wrong for the province to borrow $4 billion, as the NDP suggested, to reacquire Hydro One shares, but OK for Hydro One to borrow $5.1 billion while diluting the province’s interest in it. The privatization of Hydro One and dilution of the province’s shareholding keep its debt off of the province’s balance sheet.

So, is the acquisition all that Thibeault and Hydro One’s CEO, Mayo Schmidt, claim it is or is the spin meant to distract ratepayers into believing the takeover will lessen pressure on future rate increases? Let’s examine a few facts:

— The acquisition of Avista will result in Hydro One’s debt (short and long term) increasing by 46 per cent, or $5.1 billion, to reach in excess of $16 billion. Should interest rates increase Hydro One will submit an application to the Ontario Energy Board (OEB) for a rate increase, an accepted OEB process.

— Hydro One’s 2017 first-quarter report notes it currently has five rate applications awaiting approval by the OEB and plans to file another nine rate applications over the next four years.

— Washington, where Avista’s electricity ratepayers are located, pays the second-lowest rates of any state on average, with all-in residential rates of 9.43 cents/kWh as of April 2017. Only Louisiana can claim lower rates at an average of 9.35 cents/kWh (U.S. rates expressed in U.S. currency).

— Based on the information in Avista’s 2016 annual report, it appears the all-in cost of a kilowatt-hour delivered to its ratepayers was 8.68 cents/kWh.

— Hydro One, on the other hand, has the highest rates in Canada and in most of North America. It is difficult to see how Washington ratepayers will see any benefit from this acquisition. Based on the data supplied by Hydro One to the OEB for 2015, its average cost of a kilowatt-hour was almost double Avista’s at 17 cents/kWh.

It is difficult to believe several of the claims in Hydro One’s news release

It is difficult to believe several of the claims in Hydro One’s July 19th news release. As an example, it states the acquisition of Avista “will be accretive to earnings per share in the mid-single digits in the first full year of operation.” Politicians and regulators in Washington may be tougher than those in Ontario when Hydro One seeks a rate increase! It gains increases in Ontario from the OEB and via political tampering, which recently resulted in a requirement that taxpayers pick up a part of Hydro One’s bad debt allocations via the Ontario Electricity Support Program.

Another quote is also a stretch: “Efficiencies through enhanced scale, innovation, shared IT systems and increased purchasing power provides cost savings for customers and better customer service, complementing both organization’s commitment to excellence.” This claim comes from the company that had the distinction of being singled out by Ontario’s ombudsman for issuing over 100,000 faulty hydro bills. Moreover, last October Global TV found Hydro One had almost 226,000 clients in arrears, which represented 20 per cent of all its residential clients and 40 per cent of all ratepayers in arrears in the province.

Ratepayers and taxpayers should view the Hydro One takeover of Avista as negative. To re-purpose Thibeault’s comment to the NDP leader, this action “will not take one cent off electricity bills.”

Financial Post

Parker Gallant is a retired bank executive who looked at his power bill and didn’t like what he saw.

One (megawatt) is the loneliest number

On one day recently, for one hour, Ontario’s thousands of towering wind turbines delivered just one megawatt of power. And still, Ontario had a surplus that was sold off cheap.

May 27 was a Saturday which is usually a “low demand” day for electricity in Ontario, compared to weekday power demand and assuming weather patterns are close to average. The temperature on the recent May 27 was slightly below historic averages in Toronto; as people woke up and set about their activities that day, the demand for electricity built slowly.

According to the IESO’s (Independent Electricity System Operator) Daily Market Summary, Ontario demand peaked at 14,069 MW and averaged 12,751 MW (total Ontario demand was 306,024 MWh for the whole day). If anyone checked IESO’s “Power Data” page at, say, just after 11 AM, they would have noted demand was 13,208 MW at 10 AM and the HOEP (Hourly Ontario Energy Price) was indicating a negative price of -$4.00 /MWh. If one had also looked at the “Generator Output and Capability” and scrolled down to “Wind Total” they would have seen that under the heading “Output” the number appearing on the screen was “1”!

As in, one single megawatt of power.

About half the capacity of one ordinary wind turbine.

So, at 10 AM on May 27, 2017 the approximately 4,500 MW capacity of the more than 2,000 wind turbines installed throughout the province by the McGuinty/Wynne governments with lucrative, 20-year contracts, were delivering one megawatt of power.

And yet, to the best of my knowledge, Ontario didn’t experience a blackout or brownout because intermittent wind power generation was almost completely absent, nor did our emissions increase, as we got all the power needed from nuclear and hydro resources. In addition, the almost 9,000 MW of gas generation was idling, operating at an average of about 2% of capacity almost all day.

Despite wind only producing an average hourly output of 75 MW for the day and just the “1” for hour 10, Ontario still exported 43,584 MW of power at a cost to ratepayers of $5.6 million*.

Despite the lackluster performance of industrial wind turbines May 27 and on many other occasions, a visit to the home page of CanWEA still claims: “Wind is delivering clean, reliable and low-cost electricity”!

Sure!

Perhaps with another 4,500 MW of capacity in Ontario, the industrial wind turbines may have delivered TWO MW of power at 10 AM on May 27?

*Cost estimate assumes the second IESO estimate of May’s Global Adjustment of $127.76 holds up.

Wynne spin and the “Fair Hydro Plan”

Re-reading Premier Wynne’s statement of March 2, 2017 on her announcement of Ontario’s Fair Hydro Plan, one is struck by the avoidance of the truth, the sudden empathy displayed and her blatant claims. As one example, she suddenly noticed “Electricity is not a frill — it’s an essential part of our daily lives.”

The Premier has obviously forgotten her party clearly treated it as a “frill” by taking advice from environmentalists who persuaded her (and predecessor Dalton McGuinty) that industrial wind turbines (IWT) and solar panels could easily replace the power generated by coal plants. They were so taken by those claims the energy minister didn’t bother to do a cost-benefit analysis as noted by Ontario’s Auditor General (AG). They also charged ahead installing “smart meters” at a cost of $2 billion (AG report) and instructed the OPA (Ontario Power Authority) to acquire 10,500 MW of renewable energy principally in the form of IWT and solar panels.

The year prior (2008) to the creation of the Green Energy Act, Ontario’s coal generation plants produced 23.2 TWh (terawatts) or enough electricity to supply 2.4 million (55%) average households . In 2016 wind and solar* collectively and intermittently generated 14.2 TWh — 9 TWh less than coal plants generated in 2008. The collective cost of wind and solar and their back-up (gas) in 2016 was approximately $3.8 billion or 27 cents per kilowatt (kWh,) whereas the cost per kWh of coal power generated in 2008 was 5.5 cents/kWh (OPG annual report).

Renewables: five times more costly

In short, the collective cost of electricity supplied by renewables and their back-up (gas) to replace coal generation turned out to be five times more which clearly raised the cost of the “frill,” but our Premier(s) and Energy Ministers were apparently unaware** costs were rising to that extent.

On the latter point the Premier in her statement claims: “But it’s not as if I’ve been unaware of the challenge. I have seen the rising rates. My family and I get a bill like anyone else.” Premier Wynne’s salary in 2016 was $208,974.00 and in 2006 was $108,031.00 so she has seen a pay increase of 92% in 10 years. It’s doubtful she was impacted by the $536,84 average annual increase she experienced in her cost of electricity as it represents less than one day’s pay at her current compensation level.

The Premier’s statement blames rate increases on past governments and claims since the Liberals regained power in 2003 they had to engage in “fixing a system that had been structured unwisely”. Naturally, the 2003 blackout (caused by a fault in Northern Ohio) is blamed for the upgrade by the Premier to obscure their contracting of unreliable and intermittent wind and solar generation at above market prices. The Premier now claims the “electricity grid” they created “is second to none.” And yet, the AG noted in her December 2015 annual report that power outages increased 24% and lasted 30% longer!

Later in her statement the Premier notes “But the way we financed those investments was a mistake.” The disturbing part of the statement about “those investments”, was Premier Wynne’s assertion “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.”

That part of the Premier’s spin will form the basis of Part 2, in this series, tomorrow.

* Wind and solar generation are classified as “base-load” generation whereas coal was strictly used for “peaking” (high demand periods) purposes.

** The writer has consistently sent Premier Wynne and her predecessor along with the various Energy Ministers a link to every article written no matter where it appeared.

Dancing in the streets when Ontario’s wind power “tyranny” ends?

My article in the Financial Post, December 15, 2016.

[Photo: Getty Images]

The editor of the magazine, North American Windpower, recently marked the demise of Ontario’s wind industry. His article was titled “Eulogizing Ontario’s Wind Industry.” Apparently the eulogy was a result of Ontario Energy Minister Glenn Thibeault’s announcement of Sept. 27 that he was “suspending” the acquisition of 1,000 MW (megawatts) of renewable energy under the previously announced LRP ll (Large Renewable Procurement).

Thibeault explained that “IESO (Independent Electricity System Operator) had advised that Ontario had a robust supply of electricity over the coming decade to meet projected demand.” Thibeault didn’t express surprise at this sudden turn of events or explain what led to the realization. To put some context around the suspension, only a few months earlier former Energy Minister Bob Chiarelli had issued the directive to acquire the 1,000 MW that Thibeault shortly after “suspended.”

The Windpower article opens with: “Ladies and gentlemen, we are gathered here today to pay our respects to Ontario’s utility-scale wind industry, which has passed away from unnatural causes (a lack of government support).”

If Ontario’s wind industry had truly passed away, the celebrations among hundreds of thousands of Ontario ratepayers would have rivaled the scale of celebrations exhibited in Florida by Cuban exiles after hearing that Castro died. As it is, Ontarians are hardly celebrating. We will be forced to live with and among industrial wind turbines for at least the next 20 years. The “government support” alluded to in the eulogy isn’t dead. It continues to get pulled from the pockets of all Ontario ratepayers and has caused undue suffering.

The wind industry rushed to Ontario to enjoy the largesse of government support via a government program that granted above-market payments for intermittent and unreliable power. Industrial wind turbines have so driven up electricity prices that Ontario now suffers the highest residential rates in Canada and the fastest growing rates in North America. The Ontario Association of Food Banks in its recent 2016 “Hunger Report” noted: “Since 2006, hydro rates have increased at a rate of 3.5 times inflation for peak hours, and at a rate of eight times inflation for off-peak hours. Households across Ontario are finding it hard to keep up with these expenses, as exemplified by the $172.5 million in outstanding hydro bills, or the 60,000 homes that were disconnected last year for failing to pay.”

Beyond that, the cost of energy affects businesses and, as noted by the Canadian Federation of Independent Businesses, “fuel, energy costs” ranks for their Ontario members as the second-highest “major cost constraint” behind “tax, regulatory costs.”

Until the day we actually see Ontario electricity consumers dancing in the streets one day, the eulogy for this province’s wind-power tyranny is unfortunately premature.