“Quebec Inc” scoops up Ontario renewable energy projects

Valuable contracts with above-market rates for wind and solar power are attracting investor attention

Perhaps unbeknownst to many, Ontario’s electricity ratepayers are accumulating debt in the electricity file (Fair Hydro Plan or FHP); that debt will reappear in future years to ensure electricity rate increases exceed inflation by a wide margin.

The cause of the FHP debt can be traced to the Green Energy Act (GEA) and the FIT and MicroFIT contracts handed out by the Ontario Liberal Government under Premiers McGuinty and Wynne.  Those lucrative above-market (confirmed by the Auditor General) contracts were granted to mainly foreign-owned companies. The companies rushed to Ontario to take advantage of the above-market rates offered for renewable energy of the wind and solar variety.

Many of those foreign-owned companies are now leaving Ontario, cashing out on the lucrative contracts by selling them to willing buyers. Our provincial neighbour “Quebec Inc.”, with its cheap electricity prices, is rushing in to scoop up many of those contracts along with others like the Canada Pension Plan Investment Board (CPPIB). The latter purchased NextEra’s portfolio (Head Office Florida) of 396 MW of wind and solar contracts, paying $1.871 million per MW for a total of $741 million CAD and assuming the debt (US $689 million).

“Quebec Inc’s” acquisitions are more “under the radar” and most costs are unknown, but some of the bigger investment players with Quebec headquarters are very active.

The one recent acquisition from “Quebec Inc.” caught the attention of many in Eastern Ontario was the purchase of a controlling interest in the unbuilt 100-MW Nation Rise wind power project in North Stormont, south of Ottawa. When newly elected Premier Ford’s government announced they were cancelling 758 renewable wind and solar energy projects, most Ontarians thought Nation Rise would be one of: it wasn’t. Somehow the bureaucrats in the former Ministry of the Environment and Climate Change managed to issue the REA (renewable energy approval) just a few days before the election writ was dropped despite wind power and this project in particular being a prominent election issue.

To top things off, the IESO (Independent Electricity System Operator) were satisfied that EDPR had met their “key development milestones” and issued the NTP (Notice to Proceed) on June 13, 2019, days after the election and weeks before the Ford government announced the new cabinet.

When the approval became public, community group Concerned Citizens of North Stormont, stepped up their fight to stop the power project.

Project developer EDPR then sold off controlling interest in the Nation Rise project along with other existing operating projects. Before that happened however, EDPR submitted an application dated October 11, 2018 to the Ontario Energy Board (OEB) for a electricity generation licence. Question 13 of the application asks the question; “Has the applicant secured financing?”

EDPR ticked the NO box.

The OEB appears to have overlooked the lack of secured financing (based on the application) and granted the licence December 20, 2018 without comment.

EDPR is a subsidiary of EDP a global energy company with its headquarters in Portugal and with significant renewable energy assets in North and South America. With 2,300 industrial wind turbines in the USA, EDP rank third in installations.

EDP has been a takeover target for several years by Three Gorges, a Chinese state-owned company who are already a significant shareholder. Because of the Chinese state ownership the US government expressed concerns with the possible purchase by Three Gorges. The principal concern is the volatility of US electricity grids and security issues surrounding them. Other EU countries with EDP electricity generation assets are also concerned with grid security issues in the event of a takeover by Three Gorges.

In the midst of takeover buzz, EDPR suddenly sold off controlling interest in some of their North American generation assets to a Quebec-based company, Axium Infrastructure Inc. Eight days after the OEB blessed the EDPR licence application for Nation Rise, Axium issued a press release announcing they had closed an agreement to acquire an 80-percent interest in three wind power projects, totaling 499 MW in the U.S. and Canada from EDPR.

Nation Rise was one of those acquired.

A month and a half earlier, Axium was the lead investor in the purchase from U.S.-based Pattern Energy Group of a 90-MW minority interest in the 270 MW K2* wind generation project. The purchase price was CAD $216 million.

Following OEB’s approval of the EDPR Nation Rise generation licence, Axium Infrastructure submitted an application to the OEB dated January 14, 2019 seeking approval of their majority (80 percent) acquisition. The application form asks no questions about financing, nor does it ask questions about bankruptcy or criminal issues for either the company or individual officers, unlike the “generation licence” application format.

The application to the OEB indicated Axium held investments in seven of Ontario’s wind turbine developments and 19 solar projects. It also included the following: “After completion of the Proposed Transaction and the Project, Axium and its affiliates will have a generation capacity of 1,050 MW** on a gross basis and 563 MW on a net basis within the Province of Ontario.”

On February 28, 2019 Axium issued a further press release reporting they acquired a 50-percent interest in a 101-MW solar portfolio in Ontario from Mitsubishi Corporation.

In short, Axium has been very aggressive in acquiring Ontario’s foreign-owned wind and solar projects and Ontario’s regulator, the OEB, have blessed everything Axium has done.

That’s obvious if one reads the short letter dated February 14, 2019 from the OEB notifying  Axium about their Nation Rise acquisition: “the OEB does not intend to issue a notice of review of the proposal.”  Was this due diligence?

Tomorrow, in Part 2 of my look at the “Quebec Inc” acquisition spree, I will attempt to explore who is behind Axium Infrastructure, the interaction with the Ontario Energy Board and how the latter executes its Vision: “The OEB supports and guides the continuing evolution of the Ontario energy sector by promoting outcomes and innovation that deliver value for all Ontario energy consumers.”

PARKER GALLANT

 

*K2 was a Samsung project commissioned in September 2015 so has about 17 years left in its contract and if it operated at 30% of capacity would generate approximately $540 million in gross revenue over the remaining term of its contract for the 90 MW of capacity now owned by the Axium consortium.                                                                                                                                 **That amount of renewable generation would represent approximately 14% of all current operating renewable wind and solar in Ontario.

 

 

 

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Another spring day, more big bucks for wind power operators

Mild spring weather, breezy days are money-making combo for wind power corporations

Wind turbine beside MIlford, in Prince Edward County: wind power not needed to meet demand

As very recently pointed out, utility-scale wind power operators love the spring because it brings nice breezes that result in lots of generation for which they are paid.  The bad news for Ontario electricity customers is that the power produced is generally not needed, but due to the wind power industry’s negotiated “first-to-the grid” rights, they must be paid regardless.

That was the case on May 8 and again the following day.

May 9 was another low demand day in Ontario as reported by IESO with only 337,700 MWh required to supply all of the province’s needs for electricity.  IESO’s forecast for power generation from wind was about 79,400 MWh, which would have represented 23.5 % of total demand.  However, a large part of it was forecast for low demand hours; no doubt that meant power from other relatively cheap sources of generation were dispatched off.

Low demand on a low demand day caused IESO to curtail 29,400 MWh (37.1%) of the forecast output and to sell off surplus generation to our grid-connected neighbours in New York, Michigan, Quebec, etc. The net exports of 41,600 MWh (rounded) sold to those buyers represented 83% of the accepted “output” of wind power.

In other words, Ontario didn’t really need any wind power!

The net exports were worth $3.70 per MWh (average of the Hourly Ontario Electricity Price or HOEP for the day) meaning they produced total revenue for Ontario of approximately $154,000.

So, you might ask, how much wind generation cost Ontario ratepayers for the day?

The 29,400 curtailed MWh at the $120/MWh IWT operators get paid was $3.528,000 and adding in the cost of the 50,000 MWh actually accepted at $135/MWh adds another $6,750,000 to the cost of wind. That brings the total cost of wind for that spring day to $10,124,000 if we deduct the $154,000 generated by the sales of our net exports.

Ten million paid, $150,000 recouped–makes sense doesn’t it?

So, wind power on May 9 cost Ontario ratepayers $202.48/MWh or 20.2 cents/kWh. That doesn’t include any of the other costs its generation may have caused such as spilling cheap hydro or steaming off cheap nuclear. To top it off, most of the day’s wind power generation, if exported, at an average price of $3.70/MWh means a loss of $198.78 for every megawatt hour sold.

The “average” Ontario ratepayer would love to be able to buy the 9 MWh they consume in a year at those bargain basement prices of $3.70/MWh. Imagine: it would cost them $33.30 for a full year’s electricity needs.  I’m confident our small and medium-sized businesses would also love the opportunity to pick up some of that cheap electricity, instead of being forced to pay for expensive, intermittent and unreliable wind and solar generation!

It’s time to sort out the mess created by the McGuinty/Wynne governments in respect to the electricity file.

If it isn’t, Ontario will continue to be stuck with climbing above-market electricity prices until the wind and solar contracts finally end.

PARKER GALLANT

5 reasons you can’t believe the wind power lobby spin

Part 1 of an analysis of the lobbyist’s claims for low power prices and good times ahead

Since the new Government of Ontario announced it would repeal the Green Energy and Green Economy Act (GEA), the wind power trade association and lobbyist CanWEA, together with the Ontario NDP, Ontario Green Party and numerous environmental groups such as Environmental Defence, Greenpeace Canada, etc., have been throwing temper tantrums.

The consistent claim was “it will have a chilling effect on job creation and investors in the clean economy.” CanWEA have been one of the most outspoken complainers issuing several press releases  with spurious claims about wind power.

One blog post, on October 11, 2018, was the most blatant of the propaganda campaign.  It was titled “Five reasons why wind energy is Ontario’s best option for new electricity supply” and, then, in case you missed it, or to support a new PR onslaught in Ontario, it was reposted via their Facebook page March 31, 2019. The post references selected CanWEA and AWEA claims, including some prepared by others but paid for by CanWEA.

Let’s examine their claimed “five reasons” to choose wind power, starting with two

  1. CanWEA claim: “Wind energy is now the lowest-cost new electricity source” and note: “Alberta recently agreed to procure power from four wind generation projects at an average contract price of 3.7 cents per kilowatt hour – a price that is considerably below the cost of power generation in Ontario today.”

CanWEA fails to disclose that for each MWh of power, wind generators are given a REC (renewable energy certificate) which can be sold to anyone required to either reduce their emissions or purchase a carbon credit/REC. Valuations vary with demand but RECs generally have a value of $15/50 MWh or 1.5/5.0 cents/KWh. If the value of that REC was included in the CanWEA claim, they would have to say the “average contract price” was from 5.2 cents/kWh to 8.7 cents/kWh. Wind power generation in Alberta, as in Ontario, gets “first to the grid rights” meaning whatever is produced, no matter the need, must be accepted by the Alberta Electric System Operator/AESO.

If the wind power isn’t needed, AESO disperses other generation, which they presumably pay for, adding electricity generation costs to ratepayer bills. To make that clearer — In Alberta the AESO in a report notes wind generation negatively impacts pricing. A chart of wind’s capacity factor during “AIL (Alberta Internal Load) peak demand” (in the report) in 2017 shows wind reflected at 6% of its capacity!

That is a clear message that wind cannot be counted on to deliver power when needed.

Those same issues/problems are found in Ontario (wind rated at 12% of capacity) and most other regions around the world where industrial wind turbines represent a minor or major part of grid-connected capacity.

2.CanWEA claim: “Wind energy provides significant economic benefits” and states: “Ontario leads Canada in wind energy operations and wind energy supplies almost 8 per cent of the province’s electricity demand.”

One assumes the 8% refers to 2017, as 2018 results for Ontario were unknown at the time of the CanWEA post in October 2018. Total grid-connected generation, including gross exports in 2017, were 151.2 TWh. Wind accepted generation was 9.2 TWh which represents 6.1% of total demand.

If you include the 3.3 TWh of curtailed wind the wind power owners were paid for, the percentage rises to 8.1% .

That makes the delivered price for grid-accepted wind 17.8 cents/kWh.

And, that 17.8 cents/kWh doesn’t include the 6 TWh of spilled hydro or the 1 TWh of steamed-off nuclear, or the costs of idling gas plants (for when the wind doesn’t blow) which would add another $860 million more driving wind costs to ratepayers to over 27 cents/kWh.

CanWEA’s claim includes several other assertions.

Thousands of well paying, much-needed jobs in manufacturing, construction and local services” and provides a link to a report commissioned by CanWEA by Compass Renewable Energy Consulting Inc. In the Compass report, a chart indicates the economic benefits the 5,552 MW of industrial wind turbines in the province will create. Over the years (2006-2030) “Direct and Indirect Full Time Equivalents (FTEs) [of] 64,500”. They define FTEs as: “Full Time Equivalents refers to full time employment for one year. One FTE = 2,080 hours.” If one calculates the annual jobs the forecast of 64,500 FTE over 20 years (normal FIT contract terms) for 5,552 MW of wind power results in an average of 322.5 jobs annually. This is hardly something to be bragging about.

A stable source of income for landowners” which fails to mention the landowner is committed to a “non-disclosure agreement” meaning if adverse effects occur such as health problems experienced by the landowner families or animals, they can say nothing. Also, if the developer has incurred debt to erect the turbines, the lender will frequently register a lien on the property which may affect the ability of the landowner to borrow funds using the property as security. The landowner is also usually committed to extend the terms of the lease via the agreement for further periods of time in the event the developers contract may be extended.

Property tax revenue for municipalities” which is true, but … the revenue is nominal as the wind turbines are subject to industrial rates that have no connection to their capital costs (approximately $1.5 million per megawatt [MW]) whereas all other industry in a municipality, pay taxes on the full value of their invested capital. This means the decree by former Minister of Finance, Dwight Duncan to MPAC to assess IWT at only $40K per MW is still enforced with only minor adjustments.   The “tax revenue” to municipalities is often much less due to the declined values of households affected by the closeness of those turbines. It frequently causes a net tax loss to municipalities.

Funding for community-based initiatives” is something that was forced on wind developers as many communities wanted to fight back, but were thwarted in Ontario by the GEA. They tried using existing by-laws under their control but usually lost. In order for the developers to proceed with limited objection they proffered “community funding”! The funding was normally less than one half a percent (0.5%) of anticipated revenue so many municipalities accepted the tokenism.

New and sustainable revenue for Indigenous partners” which the Ontario Liberal Government built into the FIT program presumably to suggest support for First Nations by offering higher subsidies if some ownership was held by them. This allowed the developers to negotiate use of First Nations land for the erection of those IWT similar to the “Funding for community-based initiatives”.

Last, this assertion.

Ontario’s wind energy industry is at the heart of a growing wind turbine operations and maintenance business for Canada’s 6400+ wind turbines”. This claim came about because CanWEA established an     O & M (operations and maintenance)“ program to bring together stakeholders to address key challenges facing Canadian wind farm operators. Its key areas of focus are determined by program participants, and include benchmarking data, health and safety best practices, improved networking, and information sharing on critical issues like wildlife and the environment.” Why CanWEA brags about normal maintenance issues is beyond the pale, but claiming “improved networking and information sharing” should be read as their ability to lobby hard for the developers in respect to those “critical issues” that actually connect with the public like noise emissions and health problems, and the killing of birds and bats.

PARKER GALLANT

Soon: Part 2 in this series will deal with the remaining three claims made by CanWEA

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.

Which is it, Mr Manley?

John Manley of the Business Council of Canada is complaining that cancelling wind power contracts is bad for business. But he says high electricity costs are bad for business, too.

Business spokesperson John Manley doesn’t get it: high-priced wind power contracts aren’t good for business

July 27, 2018

The unwanted and unneeded 18.45 MW White Pines wind power project being erected in Prince Edward County is receiving a lot of attention. The people in “The County” have been fighting the project for years with some success and were continuing that fight.  Nevertheless, IESO granted wpd Canada an NTP (notice to proceed) after the writ for the Ontario election was drawn up, and the power developer charged ahead.

They did so knowing the newly elected Premier Ford-led government were proceeding with a “special act” in the Ontario Legislature to stop the project. German owned wpd ignored the backdating of the “act” to July 10, 2018 and in response to the “act” (noted in a CBC article) responded: “The company has indicated that it will seek to recoup $100-million that it has sunk into the project, but it is not clear how much the provincial government will agree to pay. The legislation requires wpd to cover the cost of decommissioning the project and to restore the land to ‘clean and safe condition’.”

The action caused Berlin’s ambassador to Canada Sabine Sparwasser to suggest the move to cancel the project represents a black mark for the province in the eyes of foreign investors: “Obviously, every incoming government has the right to change policy direction. But to have a unilateral cancellation pushed through by law that way is unsettling for the company, but is also something that will unsettle other potential investors.”

Shortly after, John Manley, President of the Business Council of Canada, wrote a letter to Premier Ford in which he said: “(The Act) would revoke permits several years after the proponent obtained them from the appropriate regulatory bodies, cancel contracts with the Independent Electricity System Operator that were negotiated in good faith and unilaterally set the terms upon which the proponent may be eligible for compensation.” What Mr. Manley failed to note is that wpd were facing three charges under the Environmental Protection Act and the NTP was issued after the writ period, so it was in fact the proponent who failed to act in “good faith”. Mr. Manley did not fully investigate the circumstances surrounding the proposed act and simply sided with the developer without consideration of the other contentious issues.

Interesting is a letter Mr. Manley sent to Premier Wynne, last June 15, 2017 in which he noted: “According to the Ministry of Finance’s Long-Term Report on the Economy, Ontario’s average annual growth rate is projected to slow to 2.2 per cent between 2016-2020. At the same time, businesses in Ontario are adjusting to sharply higher electricity rates, higher CPP contribution rates and the implementation of a cap-and-trade program for greenhouse gas reductions.”

Yet another letter Mr. Manley sent to Glen Murray, then Ontario’s Minster of the Environment and Climate Change back in March 2015 stated: “Ontario firms are facing a number of challenges, not the least of which is higher electricity costs as a result of policies already adopted by the government.”

It would appear Mr. Manley, a former Liberal MP and Deputy Prime Minister of Canada, failed to realize how industrial wind turbines helped cause those “higher electricity costs.” At the same time, he seems to condone the actions of parties who fail to follow legislation meant to protect voters and our environment.

Mr. Manley and the Council he represents cannot have it both ways.