Numbers don’t lie: intermittent wind and solar surplus to Ontario’s energy needs

The IESO (Independent Electricity System Operator) released 2017 data for grid-connected* generation and consumption and, surprise! The data reveal that power from wind and solar is surplus to Ontario’s  energy needs.

IESO reported Ontario’s consumption/demand fell 4.9 TWh (terawatt hours) in 2017 to 132.1 TWh. That’s a drop equivalent to 3.6% from the prior year.

Nuclear (90.6 TWh) and hydro (37.7 TWh) power generation was 128.3 TWh, making up 97.1% of Ontario’s total demand (without including dispatched power from either nuclear or hydro). The cost to Ontario ratepayers for the 128.3 TWh was approximately $7.6 billion or 5.9 cents/kWh.

Spilled hydro (paid for by Ontario’s ratepayers but not used) reported by Ontario Power Generation or OPG was 4.5 TWh for the first nine months of 2017. Out that together with 511 nuclear manoeuvres and the number is 959.2 GWh (gigawatt hours) wasted but paid for by Ontario’s ratepayers. Add in three nuclear shutdowns and it means Ontario’s nuclear and hydro generation alone could have easily supplied more than 136 TWh of power or over 103% of demand.

That doesn’t include spilled hydro in the last quarter of 2017 which will probably exceed at least one TWh.

Nuclear and hydro does it all

Nuclear and hydro could also have supplied a large portion of net exports (exports less imports) had all the generation potential actually been delivered to the grid. Net exports totaled 12.5 TWh in 2017.  Grid connected wind (9.2 TWh) and solar (0.5 TWh) in 2017 supplied 9.7 TWh and their back-up generation: from gas plants, supplied 5.9 TWh.  In all, the latter three sources delivered 15.6 TWh or 124.8% of net exports.  Net exports were sold well below the average cost of generation. Exports brought in revenue of about $400 million, but here’s the kicker: that surplus power cost Ontario’s ratepayers $1.4 billion, which is really a loss of $1 billion.

Grid-connected wind, solar and gas generation collectively cost approximately $3.5 billion for the 15.6 TWh they delivered to the grid, included curtailed (paid for but not used) wind power generation of 3.3 TWh. The cost of the wind power was more than $220 million per TWh, or 22 cents/kWh. That’s almost double the Class B average rate of 11.55 cents/kWh cited in IESO’s 2017 year-end results.

The 9.7 TWh generated by wind and solar was unneeded. If it had been required, it could have been replaced by gas power generation at a cost of only around two cents per kWh. Why? Gas generators are guaranteed payment of  about $10K per MW (average) of their capacity per month to be at the ready and if called on to generate power are paid fuel costs plus a small markup.

Price tag: $2 billion

In other words, if no grid-connected wind or solar generation existed in Ontario in 2017 the bill to ratepayers would have been about $2 billion** less! Grid-connected wind generation (including curtailed) cost ratepayers in excess of $1.7 billion and grid-connected solar added another $250 million!

That $2 billion, coincidentally, is about the same cost estimate of the annual amount to be deferred, and paid by future rate increases via the Fair Hydro Plan! In other words the current government could have easily saved future generations the estimated $40 billion plus cost of the Fair Hydro Plan by having never contracted for wind and solar generation!

The IESO results for 2017 sure makes me wonder: why hasn’t the Ontario Ministry of Energy canceled all the wind power projects that have not yet broken ground?

 

*   Distributor connected solar (2,200 MW) and wind (600 MW) added over $1.4 billion to the GA.

** The first 6 months of the variance account under the Fair Hydro Plan in 2017 was $1,378.4 million.

 

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Wind waste should worry Ontario ratepayers

Ontario’s electricity ratepayers paid more than $500 million in 2017 for nothing

With only one month left in the current year, the bad news on the electricity sector keeps getting worse.

Well before the official sources such as IESO report on how much power industrial wind turbines generated and how much was curtailed (constrained, or paid for but not added to the power grid), my friend Scott Luft has published his estimates for both the former and the latter for the month of November.

As he reports (conservatively), curtailed wind in November was over 422,000 megawatt hours (MWh)  that could have supplied 562,000 average Ontario households with free power for the month.

Instead, no one got free power; the cost of the 422,000 MWh of undelivered wind power to Ontario ratepayers was $120/MWh.  That $50.7-million cost for the month was simply added to the costs of the electricity bills ratepayers will be obliged to pay, while some of it will deferred to the future as part of the Fair Hydro Plan.

Somebody’s enjoying cheap power — not you  

No doubt the wasted wind power presented itself when it wasn’t needed; if it had been accepted into the grid, that extra power could have caused blackouts or brownouts, so it was curtailed.  At the same time, much of the grid-accepted wind was exported to our neighbours in New York, Michigan and elsewhere, at discount prices!  Curtailed wind for November 2017 compared to 2016 was almost 55% higher.

How bad is it? Let’s review the first 11 months of the current year, compared to 2016.

So far in 2017, curtailed wind is about 786,000 MWh higher (+33.8%) at just over 3.1million MWh.  The cost of all the curtailed wind so far in 2017 is approximately $373.6 million, or $94.3 million more than 2016 costs.

And wind wasn’t the only source of power generation constrained. When Ontario Power Group reported their third Quarter (September 30, 2017) results they said this:

“Baseload generation supply surplus in Ontario continued to be prevalent in 2017, resulting in forgone hydroelectric generation for OPG of 1.1 TWh*: and 4.5 TWh in the three and nine month periods ended September 30, 2017, respectively, compared to 0.5 TWh and 3.9 TWh during the corresponding periods in 2016.”  

Translation: ratepayers will pick up the approximately $165 million cost of that waste via their electricity bills.

Not only are we curtailing wind and spilling hydro, but we also steamed off nuclear power generated by Bruce Nuclear at the same time we pay for idling gas plants to back up intermittent wind and solar power generation.

Intermittent wind and solar cost us

The cost of “greening” Ontario with unreliable and intermittent wind and solar keeps climbing, no matter what their proponents or politicians say.  As ratepayers and taxpayers we should reflect on why 25% of the waste of the noted 7.6 TWh of undelivered power and its cost of $539 million (so far this year) is being deferred via the Fair Hydro Plan.  And at the same time, we should recognize that we have experienced the worst possible planning in the Energy Ministry in the history of the province.

The energy sector in Ontario needs real planning by experts that will provide real value for money and save ratepayers from paying more than $500 million a year … for nothing!

~

*  1 (one) terawatt is equivalent to 1 billion kWh

Boldface type on hydro bills doesn’t make statements true

 

The baby’s not smiling… he can see the future

If you just received your monthly electricity bill from Hydro One (presumably all local distribution companies will have the same message), you will be drawn to the boldface type declaring:  “Ontario’s Fair Hydro Plan saved you $XX.XX on your bill. This amount includes the 8% Provincial Rebate.”

The next paragraph elaborates on that message by telling you “Ontario’s Fair Hydro Plan substantially lowers electricity bills for typical residential consumers.  This includes the eight percent rebate introduced in January 2017 and builds on previous initiatives to deliver broad-based relief on all electricity bills.” (“Previous initiatives”? Huh?)

Also included with your bill is a leaflet (English on one side and French on the other) expanding on the wonders of the Fair Hydro Plan with a picture of a happy smiling family (mom and dad but not the one-year-old in mom’s lap) viewing a laptop computer. Right above the picture is a white on black square with the words “Ontario’s Fair Hydro Plan Bringing electricity bills down”.

The baby is right not to smile: the information on the bill and insert contain only selective facts.*

What’s missing: 

Missing on the bill and the brochure was an explanation on why our cost of electricity climbed well over 100% due to the Green Energy and Green Economy Act which handed out long-term, above market contracts for intermittent and unreliable wind and solar generation.

Missing was information about the cost of moving two gas plants to save Liberal seats in Oakville and Mississauga.

Missing was any information about why we pay gas plant generators hundreds of millions of dollars to sit idle to back up intermittent and unreliable wind and solar generation.

Missing was any mention about the Global Adjustment Mechanism (GA) forcing Ontario to export surplus generation to NY and Michigan for pennies on the dollar causing ratepayers to pick up hundreds of millions of missing dollars to cover the cost of surplus generation.

Missing was any mention of the hundreds of millions of dollars the curtailment of wind generation, steaming-off of nuclear or spilling of hydro costs ratepayers.

Missing is any mention of the costs of hundreds of millions of dollars to annually pay for discounts for LED lights, an energy-efficient furnace or a new energy-efficient refrigerator, etc., etc.

Missing was any mention of the hundreds of thousands of families placed in “energy poverty” who have had to choose to either buy food or pay their hydro bills.

Missing is any claim to the harm caused to humans and nature by the thousands of unreliable, intermittent wind turbines erected or any mention about how their installation is now affecting water aquifers in certain parts of the province.

Fairness is in the eye of the beholder and the current claim that the government is “Bringing electricity bills down” should be expanded to state what most Ontarians know: “Bringing electricity bills down” today, will cause them to rocket upwards in the near future due to our complete mismanagement of the energy portfolio.

(C) Parker Gallant

November 18, 2017

 

* Selective facts are “true” facts that only tell us part of the story.

 

 

 

 

 

Hydro One: the Svengali behind the Fair Hydro Act?

If you are a Hydro One customer, when you get your bill this month it will include a letter addressed “To our valued customers” which describes the wonderful things Hydro One has supposedly done for you.  The letter, signed by CEO Mayo Schmidt, is filled with claims about actions taken and how they were all done to “serve you better.”

One of the paragraphs is particularly noteworthy. It declares:

“For our customers who are struggling with affordability, I want you to know that we are strongly advocating on your behalf. Earlier this year we urged government to make affordability a priority and we made several suggestions that resulted in the creation of the Fair Hydro Plan. The majority of our customers consuming 750 kWh a month have started to see an average reduction of 31 per cent on their monthly bill. For many of our customer, this represents a savings of $600 a year.”

So, the take-away from those words of sympathy from CEO Schmidt ($4.4 million* in compensation in 2016) suggests it was he — not Premier Wynne or Energy Minister Thibeault — who conceived the “kick the can down the road” concept that became the Fair Hydro Act!

Look back to a recent comment from Minister Thibeault in a CBC article, he said this about the Plan:  “ ‘This is like remortgaging our house,’ Energy Minister Glenn Thibeault told reporters Monday at Queen’s Park. “I’ve always said that the Fair Hydro Plan was a fair plan; it was the best plan we could come up with when we were talking with energy experts, accounting experts, the legal experts.”

When the Fair Hydro Plan was launched back on March 2, 2017 Premier Wynne said: “I have heard from people around the province who are worried about the price they are asked to pay for electricity and the impact it has on their household budget. Electricity is a necessity. By fixing problems in the system, we will be able to provide every residential customer in Ontario with an average 25 per cent off their bills now and make rates fairer in the future.”

So the question is, does the “we” include Hydro One’s CEO Schmidt, and is he classified as one of the “energy experts” Minister Thibeault claimed they talked with?  If so, I hope Schmidt told him about the rate increases Hydro One has applied for that will increase average customer’s bills by $141 a year in 2022 (based on current Hydro One rate applications under review by the OEB).

Those rate increases are needed by Hydro One to help pay for their upcoming purchase of Avista Corp. as it will represent a revenue gain to them of close to $500 million annually.

The LDC benefiting the most from the Fair Hydro Plan was Hydro One which still has the second highest distribution rates. Before privatization, they had the highest ratepayer arrears (past due accounts), the bulk of ratepayers accessing the Ontario Electricity Support Program (OESP) and the highest level of bad debts.  A part of the rate increase they currently seek would allow them to install “pre-paid smart meters” meaning if a ratepayer couldn’t afford top up their account they would be automatically disconnected.

On October 17, 2017 ratepayers got further bad news from Bonnie Lysyk, Ontario’s Auditor General reported due to the way in which the Fair Hydro Plan is being financed, ratepayers will be required to pay an extra $4 billion in interest costs.  That $4 billion increases estimated borrowing costs by 19% to $21 billion to cover the forecast $18.4 billion cost of the Plan. The latter costs represent the bulk of the 25% reduction (16%**), bringing total estimated costs for this portion to $39.4 billion.

The shell game of the Ontario Liberal government in Ontario’s energy portfolio continues, aided and abetted by Hydro One. If Hydro One’s rate applications are approved, their distribution rates will jump bringing more misery to their ratepayers!

 

* The CEO’s compensation is more than the total amount available annually under the LEAP (Low-income Energy Assistance Program) from the 73 local distribution companies in the province.

** The other 9% comes from removing the provincial portion of the HST (8%) and putting the OESP and RRRP (1%) as a taxpayer responsibility.

 

The Fair Hydro Act: Ontario’s unfair future

Wynne government’s “Fair Hydro” plan: another $3 billion a year. Fair?

The Fair Hydro Act kicked in July 1, 2017: we can now look at the first month of the 25% reduction Premier Wynne and her Minister of Energy Glenn Thibeault, gave us, and determine if the projected costs look reasonable.

The cost forecast for the Act according to the Financial Accountability Office (FAO) of Ontario, was: “the Province is proposing to borrow an estimated average of $2.5 billion per year through 2027 to pay a portion of electricity costs, thereby temporarily reducing the amount paid by eligible ratepayers. The Province would recover the borrowed funds, including interest, from ratepayers over an estimated 18-year period starting in 2028.” 

The FAO’s estimate includes: the 8% provincial portion of the HST, the reduction of 17% in electricity costs and the additional 6% promised to 800,000 rural customers (principally Hydro One ratepayers) who will pay less. The latter is related to taxpayers picking up the costs of the RRRP (rural and remote rate protection plan) and the OESP (Ontario Electricity Support Program) under the Fair Hydro Act.

While the estimate by the FAO for the deferral appears significant at $189 million per month* (plus interest), it may turn out to be much higher, based on what we see in the very first month.

The first month’s deferral has been reported by IESO as $394.7 million. According to IESO it includes adjustments for May ($110.2 million) and June ($136.6 million) that represent the “partial reduction” granted by the OEB to “eligible customers.”  That puts the monthly costs for July 2017 at $147.9 million.

The IESO spokesperson also noted due to billing cycles of the various local distribution companies (LDC), the full monthly cost will not become evident until August submissions are made by the LDC.

The $147.9 million will obviously be higher in the months and years ahead and well exceed the FAO’s estimates. For example, the July deferred GA amount would not include monies related to the different billing cycles, or include the 8% provincial portion of the HST.   Making a calculated guess, these would add another $100 million, meaning the monthly cost will be approximately $250 million or $3 billion annually.  As well, the OEB April 30, 2017 RPP (regulated price plan) report noted rates would have increased 3.1% May 1st had the Fair Hydro Act not altered normal procedures.

The 3.1% increase mentioned in the OEB report becomes clearer from this report excerpt: “After taking into account the reduction in the forecast amount of the Global Adjustment of approximately $1B, the average supply cost drops by $13.79/MWh relative to May 2016 prices, or $17.28/MWh relative to what RPP consumers otherwise would have paid starting on May 1, 2017.”

That 3.1% increase we avoided (deferred) and other rate increases approved by the OEB over the next several years will also be deferred, but accrued to appear on our future electricity bills.

Hydro One alone has nine rate applications either before the OEB or in the hopper, so we should expect a future whiplash from rate increases that will make the recent past look good!

And to think we thought the gas plant moves were costly!

Parker Gallant,

August 27, 2017

 

* The FAO chart 6-1 estimates a monthly impact of $41.00 per “average” residential ratepayer per month so the math equation is: $41.00 X 4,612,551 residential ratepayers (OEB Yearbook of Distributors for 2016) = $189,114.591 or $2.3 billion annually plus interest.

Hydro One’s hype

The power monopoly claimed its advice influenced the Wynne government decision to lower electricity bills. What did the government really hear?

A year ago I wrote an article titled:  “And the winner is: Hydro One! Most expensive residential power rates in North America” and it was posted on my new blog.  The “most expensive” was a reference to what are classified by Hydro One as “low-density clients”.  The article itself drew thousands of viewers, dozens of links to other sites, and may have partially influenced a focus on Hydro One and hydro rates in general by the mainstream media.

On September 12, 2016 Premier Wynne’s government suddenly acknowledged rates were too high and announced the 8% provincial portion of the HST would no longer be charged on residential hydro bills.

The 8% was estimated to cost $1 billion dollars in lost tax revenue, but was a drop in the bucket when measured against the 100% plus rate increases occurring since the Liberals gained power. The pressure to do more built up and because it was top of mind on the list of voter concerns, the Wynne government declared they would do more.

On March 2, 2017 Premier Wynne announced the Fair Hydro Plan declaring,  “I have heard from people around the province who are worried about the price they are asked to pay for electricity and the impact it has on their household budget. Electricity is a necessity.”

The Plan was to reduce residential bills by 25% (including the 8% Provincial tax) by deferring the costs of the reduction for four years. The debt generated would accumulate on the books of OPG and become a rate increase five years hence. What the Plan really does is discard accepted accounting standards! Once the “Plan” turned into an “Act,” local distribution companies were duty bound to make announcements. Hydro One was particularly gushy as noted in a bill insert:  “Our customers have been telling us that their electricity bills are too high. That’s why we advocated to government on their behalf for a more fair and affordable electricity bill.”

This insert also informed their monopolized customers, “the majority of our customers will see an average reduction of 31 per cent on their monthly bills, meaning an annual savings of about $600.”* The “asterisk” identifies a “majority” customer as one who consumes an average of 750 kWh monthly.

Now to explain why “average” Hydro One customers will see a 31 per cent reduction instead of the 25% touted by Premier Wynne and her Energy Minister, Glenn Thibeault! The first element is the Ontario Electricity Support Program (now taxpayer’s responsibility) and the second is the RRRP or Rural and Remote Rate Protection Plan.  Collectively, these two costs added close to $400 million to Hydro One’s delivery line on our bills and presumably make up the additional 6% reduction low-density and medium-density clients will experience.

As you can guess, Hydro One is happy. Taxpayers will pay a part of their bad debt allowances.

To suggest they influenced the decision when their low and medium density ratepayers were screaming is a bit disingenuous: the votes from those ratepayers was what Premier Wynne and Energy Minister Thibeault really heard.

Hydro One’s rates are still the highest in Canada and in five years those deferred costs* will force them even higher!

 

 

 

* A minimum of $25 billion for the whole province.

May power cost stats a harbinger of worse to come

If May is any indication, the Wynne government’s “Fair Hydro” plan costs will be considerable

The “Fair Hydro” plan ushered in by the Wynne government is setting up ratepayers for higher bills as soon as 2021 arrives. When the hiatus ends, limiting increases to ratepayer bills to no more than the “cost of living” (COL) over the next four years, the cumulative debt acquired by OPG to “refinance” the reported $50 billion of electricity assets will have to be repaid.

Early indications suggest the costs will be higher than the $2.5 billion being set aside for the next three years by Premier Wynne and Energy Minister, Glenn Thibeault.

Evidence? A look at May 2017 compared to May 2016 indicates the increase in the Global Adjustment (GA) costs for Class B ratepayers was 7.9% higher than 2016 and well above the May COL index of 1.4%.  Any increase in costs above the inflation rate will be added to the $2.5 billion being refinanced and become the responsibility of ratepayers to pay when the hiatus ends.

Demand drops but the cost goes UP

The IESO May 2017 Monthly Market Report indicates Ontario Class B ratepayers consumed 344,000 megawatt hours (MWh) less than they did in May 2016, which represents a 4% drop. That’s about the same as 460,000 average households would consume for the month. The Global Adjustment (GA) costs on the reduced amount of electricity consumed, however, increased by $82.7 million from $931.2 million in 2016 to $1,013.9 million in 2017.  Many will recall in May 2016, lower consumption during the prior six months caused the OEB to raise rates!

So, what caused the 7.9% spike ($82.7 million) in GA costs?   It appears there were two principal causes with one of them related to Ontario’s “Net Exports”.*

In 2017, net exports averaged 600 MW per hour higher than 2016, meaning they increased by 446,400 MWh (600MWh X 24 hours X 31 days) in May 2017 (enough to power almost 600,000 average households for the month). The buyers in New York, Michigan, Quebec, etc., paid only the Hourly Ontario Electricity Price (HOEP) of $3.17/MWh, while Ontario’s ratepayers were required to pay the GA costs of $54.8 million or $122.89/MWh.

The other major cause of the GA spike appears related to power generation from wind and its record curtailment in May 2017. My friend Scott Luft posts both the generation from TX (transmission connected) and DX (distributor connected) industrial wind turbines (IWT), and also conservatively estimates “curtailment”.  In May 2016 TX and DX connected IWT generated 699,371 MWh, not including 130,000 MWh of curtailed generation.

Combined: wind power in May 2016 cost ratepayers about $113 million or $162/MWh.  May 2017 saw 669,011 MWh of wind power delivered either to the grid (TX) or to local distribution companies (DX). Curtailed wind in May 2017 was a record as Scott estimated almost 524,000 MWh (enough to power almost 700,000 average households for the month) were curtailed.   The cost for generated and curtailed wind increased to slightly more than $158 million for the month, which raised the cost of accepted wind generation to $236/MWh.

$100 million added … for just one month

What this means is, wind-generated and curtailed costs in May 2017 were $45 million higher. Coupled with the increase in net exports of surplus generation and related costs, $100 million was added to the GA … for just one month.  If May 2017 is in any way representative of the four years of the rate freeze (tied to the COL index), the costs of refinancing those assets will be much more than the March 2, 2017 press release suggested it would be:  “These new measures will cost the government up to $2.5 billion over the next three years.”

Based on past forecasts by the Ontario’s Liberal government, keeping the costs at $2.5 billion over the next three years may be a “stretch goal”!

Parker Gallant

*“Net Exports” are total exports less total imports.