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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Report of power shortage in Ontario a Chicken Little story

October 16, 2018

IESO says the sky isn’t really falling. So why does the Globe and Mail say it is?

Reading the lead article in today’s Globe and Mail business section of October 16, 2018 headlined “Ontario faces electricity shortfall within five years” one would think the sky is falling.  The article references an IESO report which the Globe reporter suggests “In its forecast IESO concluded the projected summer peak shortfall will be about 1,400 megawatts in 2023 and will grow to 3,500 megawatts later in the decade”.

Wow!

But, spend some time reviewing the 130-page IESO document 2018 Technical Planning Conference and you will discover under the heading “Energy adequacy outlook-key observations” this statement from the IESO.

“Absent continued availability of existing resources post contract expiration, Ontario is expected to remain energy adequate until the late 2020s. Energy production shortfalls would begin to emerge in the late 2020s.”

The forecast goes on: “However, with continued availability of existing resources post-contract expiration, Ontario is expected to remain energy adequate throughout the planning outlook.”*

That means the IESO forecast, without existing expiring contracted generation, is that Ontario is “energy adequate” until the late 2020s and with continued availability until 2035!

Why the dire headline?

The IESO forecast of “Higher Demand” for Ontario starts in 2019 at about 143 TWh increasing to 163 TWh by 2035. The “Lower Demand” scenario starts at about 139 TWh in 2019 and drops to 134 TWh in 2035. To put that in context, total Ontario demand in 2017 was 136.55 TWh and generation 150.7 TWh.

On the generation side, IESO are forecasting “Energy adequacy outlook” (including exports) at 161 TWh dipping slightly after the Pickering nuclear closings and increasing to about 169 TWh in 2035. If the current generation capacity and “continued availability of existing resources” is to remain adequate and generate that output we appear to be in a comfortable position. The forecast clearly contains the caveat that shortages will occur in circumstances “Without continued availability of existing resources post contract expiry.”

What that means: any shortfalls will be occasional in nature and occur during a few peak hours. It appears IESO have plans to cover off those forecasted rare shortfalls via the Industrial Conservation Initiative (ICI) etc., as they note “The current impact of ICI is estimated to be 1,400 MW.”

How and why the Globe’s energy reporter headline suggests the sky is falling is upsetting; the latter part of his article articulates some of the factual information outlined above, yet the headline paints a dire picture.

Perhaps scary headlines sell more newspapers?

PARKER GALLANT

*The outlook period in the forecast extends to 2035.

Calculating the costs of Ontario’s electricity: which sources add the most to our bills?

More transparency in the Ontario Energy Ministry  would reveal important facts, sooner 

The Ontario Energy Board (OEB) took more than nine months to compile and release what they label Ontario’s System-Wide Electricity Supply Mix: 2017 Data, a one-page document identifying the Electricity sources and the “Electricity Mix.”  The data includes both TX (transmission-delivered electricity) and DX (distributor-delivered electricity), but only in percentage terms. In order to determine the amount of electricity actually generated by the “Supply Mix” one must go through a mathematical exercise.

Lagging transparency

If one wonders why it takes nine months and why the OEB won’t supply the amount of electricity delivered by each of the “Electricity sources” you wouldn’t be alone.  Why have we spent billions on “smart meters” and the “smart grid” (developed by IESO) and the data can’t be provided within, say, the first Quarter of the following year?  That question should be raised by our elected politicians as the ratepayers of the province would like to know that all those billions weren’t wasted.

Digging deeper

Going though the math exercise isn’t unduly onerous; if one uses nuclear as the base (generating 60.1%) and the IESO “2017 Electricity Data” the information shows nuclear generated and delivered 90.6 TWh (terawatt hours), so the other percentages can be used to calculate the actual electricity delivered.  As all of nuclear generation is grid-connected, the total electricity generated (DX + TX) for 2017 was 150.7 TWh.  From that it is easy to determine solar with 2.2% generated 3.3 TWh, wind 10.85 TWh, hydro 38.6 TWh, biomass .6 TWh, natural gas 6.0 TWh and other .45 TWh. Add those figures to nuclear generation of 90.6 TWh and it comes to 150.7 TWh

The next step is determining the costs of those generation sources so we ratepayers can judge if they are giving us value for money. That is easier said than done; however, there are enough clues and information available to give us some reason to believe we will come close to disclosing costs.

Let’s start with the HOEP average for 2017 which was $15.81/MWh (megawatt hour) or $15.81 million per TWh meaning the 150.7 TWh of generation represents a cost of $2,282.6 million. The GA (Global Adjustment) inclusive of Class A and B for 2017 total was $11,851 million making total generation costs $14.233 billion for the 150.7 TWh.   Other costs such as transmission and wholesale market service charges add another $1.8 billion to total costs.  Adding the latter brings total cost to $16.033 billion.

If one than examines total Ontario demand for 2017, it would be the 132.1 TWh that IESO claim in their year-end report plus generation within the DX sector of 4.45 TWh making Ontario demand 136.55 TWh.

Finally, If one estimates the revenue generated from “net exports,”* reported as 12.471 TWh at the HOEP value of $15.81 million per TWh, the net revenue generated was $197 million reducing total electricity costs to $15.826 billion.

Putting total Ontario demand (136.55 TWh) in context, nuclear generation of 90.6 TWH and hydro’s 38.6 TWh together provided 94.6% (129.2 TWh). In 2017 OPG was forced to spill 6 TWh and Bruce Nuclear steamed off 1 TWh meaning those two generation sources could have supplied almost 100% (99.7%) of Ontario’s total demand.  Gas generation (10,548 MW capacity) could have easily supplied the balance including peak periods as they operated at only 6.5% of capacity.

So, what did wind and solar cost? 

Wind generated 10.85 TWh so at $135/MWh cost $1.465.000,000 + curtailment of 3.3 TWh at $120/MWh, added $396 million, making the total cost from wind generation $1,861,000,000. Solar generated 3.3 TWh so at an average of $448/MWh would add costs of $1,478,400,000

The two together — without including spilled hydro or steamed-off nuclear or gas back-up — totalled $3.339 billion.

The math calculation to get the actual cost of 2017 Ontario consumption therefore is simply dividing total electricity costs of $15.826 billion by 136.55 TWh, giving a per kWh cost of 11.6 cents kWh!

Without the total costs of wind and solar of $3.339 billion the costs of electricity consumed by Ontario electricity customers would have been $12.487 billion or 9.14 cents a kWh. That would have been 2.5 cents a kWh less than we experienced with wind and solar as generation sources.

The additional costs of wind and solar in 2017 added approximately $220.00 per average household to their electricity bills. Should wind and solar contribute similarly over the next 20 years the costs to Ontario ratepayers will be in excess of $66 billion.

The time has come to demand more transparency and to re-evaluate the details in long-term wind and solar contracts.

PARKER GALLANT

PS: Scott Luft has created pie charts that highlight much of what is contained in the foregoing article and they can be found here: https://twitter.com/ScottLuft/status/1050045294287745024/photo/1?ref_src=twsrc%5Etfw%7Ctwcamp%5Eembeddedtimeline%7Ctwterm%5Eprofile%3AScottLuft&ref_url=http%3A%2F%2Fcoldair.luftonline.net%2F

*exports less imports

 

Big Wind’s hyperbolic spin should not impress

Grand claims about wind power’s role in Ontario not borne out by the facts

September 18, 2018

The Canadian Wind Energy Association (CanWEA) has a new web posting titled “Ontario Wind Energy Market Profile” that is pure hyperbolic spin.

The four-page report says: “Ontario is our nation’s leader in clean wind energy with an installed capacity of 5,076 MW, about 40 per cent of Canada’s total installed wind energy capacity. There are 2,577 wind turbines currently operating in Ontario at 96 separate facilities.” It goes on to say “Supplying 7.7 per cent of Ontario’s electricity demand today, wind energy helps to diversify Ontario’s electricity generation mix.”

What CanWEA’s report doesn’t say is that wind represents over 12% of grid-connected generation and that the 7.7% supply it adds to the grid is intermittent, unreliable and frequently (65% of the time it is actually generating power) out of sync with demand.   As an example, on Friday September 14, 2018 at hour 18 (6 PM), when demand in Ontario was near or at its peak, the 4,400 MW of grid-connected wind generated a miserly 10 MWh.

That’s 0.23% of capacity.

To put the 10 MWh in context, that is enough to supply one average household with electricity for a year.  At the same time as wind was probably consuming more electricity than the turbines were generating, gas plants (installed to back up wind capacity) were generating 3,862 MWh.

Total generation for hour 18 was 19,274 MWh, not including net imports (imports less exports) of 1,249 MWh, representing Ontario grid demand of 20,523 MWh.* That means the 12% of grid-connected wind generation contributed 0.05% of grid demand. For the full 24 hours of the 14th of September, wind generated just over 3,500 MWh which equates to 3.3% of their capacity. If that isn’t bad enough, 2,500 MWh of that generation occurred from 12 AM to 7 AM when demand is lowest.  Needless to say, nuclear, hydro and gas supplied the bulk of Ontario demand for the day.

What this all means is that industrial wind capacity does nothing more than add to the costs of the generation of electricity in Ontario, and, actually, pretty well everywhere else in the world.

Ontario can’t and shouldn’t fall for the hyperbolic self-interested wind spin, so hopefully our politicians recognize it for what it does—drive up the cost of electricity while killing birds and bats and inflicting harm to humans in rural communities due to the audible and inaudible noise emitted.

PARKER GALLANT

*IESO’s Daily Market Summary indicates Ontario’s peak demand was 20,845 MWh on September 14, 2018.