If I were Ontario’s new Minister of Energy …

 

One initiative: look at why an expensive expansion to hydro isn’t being used

On June 8, after the Ontario election, Ontario’s new premier – whoever that is – will be thinking of selecting a new Minister of Energy. With the challenges in that portfolio, the immediate question for anyone considering accepting the job would be, how can one fix the electricity side of the portfolio after the damage done over the previous 15 years by my predecessors?

Here are a few “fixes” I would take that to try to undo some of the bad decisions of the past, if I were the new energy minister.

Green Energy Act

Immediately start work on cancelling the Green Energy Act

Conservation

Knowing Ontario has a large surplus of generation we export for 10/15 per cent of its cost I would immediately cancel planned conservation spending. This would save ratepayers over $433 million annually.

Wind and solar contracts

I would immediately cancel any contracts that are outstanding, but haven’t been started and may be in the process of a challenge via either the Environmental Review Tribunal) or in the courts.                                 This would save ratepayers an estimated $200 million annually.

Wind turbine noise and environmental non-compliance

Work with the (new) MOECC Minister to insure they effect compliance by industrial wind developers both for exceeding noise level standards and operations during bird and bat migration periods. Failure to comply would elicit large fines. This would save ratepayers an estimated $200/400 million annually.

Change the “baseload” designation of generation for wind and solar developments

Both wind and solar generation is unreliable and intermittent, dependent on weather, and as such should not be granted “first to the grid rights”. They are backed up by gas or hydro generation with both paid for either spilling water or idling when the wind blows or the sun shines.

The cost is phenomenal.

As an example, wind turbines annually generate at approximately 30 per cent of rated capacity but 65 per cent of the time power generation comes at the wrong time of day and not needed.                                                                 The estimated annual ratepayer savings if wind generation was replaced by hydro would be $400 million and if replaced by gas, in excess of $600 million.

Charge a fee (tax) for out of phase/need generation for wind and solar

Should the foregoing “baseload” re-designation be impossible based on legal issues I would direct the IESO to institute a fee that would apply to wind and solar generation delivered during mid-peak and off-peak times. A higher fee would also apply when wind is curtailed and would suggest a fee of $10/per MWh delivered during off-peak and mid-peak hours and a $20/per MWh for curtailed generation.  The estimated annual revenue generated would be a minimum of $150 million

Increase LEAP contributions from LDCs to 1 per cent of distribution revenues

The OEB would be instructed to institute an increase in the LDC (local distribution companies) LEAP (low-income assistance program) from .12 per cent to 1 per cent and reduce the allowed ROI (return on investment) by the difference.  This would deliver an estimated $60/80 million annually reducing the revenue requirement for the OESP (Ontario electricity support program) currently funded by taxpayers.

Close unused OPG generation plants

OPG currently has two power plants that are only very, very, occasionally called on to generate electricity yet ratepayers pick up the costs for OMA (operations, maintenance and administration). One of these is the Thunder Bay, the former coal plant converted to high-end biomass with a capacity of 165 MW. It would produce power at a reported cost of $1.50/kWh (Auditor General’s report). The other unused plant is the Lennox oil/gas plant in Napanee/Bath with a capacity of 2,200 MW that is never used. The estimated annual savings from the closing of these two plants would be in the $200 million range.

Rejig time-of-use (TOU) pricing to allow opt-in or opt-out

TOU pricing is focused on flattening demand by reducing usage during “peak hours” without any consideration of households or businesses. Allow households and small businesses a choice to either agree to TOU pricing or the average price (currently 8.21 cents/kWh after the 17% Fair Hydro Act reduction) over a week.  This would benefit households with shift workers, seniors, people with disabilities utilizing equipment drawing power and small businesses and would likely increase demand and reduce surplus exports thereby reducing our costs associated with those exports.  The estimated annual savings could easily be in the range of $200/400 million annually.

Other initiatives

Niagara water rights

I would conduct an investigation into why our Niagara Beck plants have not increased generation since the $1.5 billion spent on “Big Becky” (150 MW capacity) which was touted to produce enough additional power to provide electricity to 160,000 homes or over 1.4 million MWh. Are we constrained by water rights with the U.S., or is it a lack of transmission capabilities to get the power to where demand resides?

MPAC’s wind turbine assessments

One of the previous Minister’s of Finance instructed MPAC (Municipal Property Assessment Corp,) to assess industrial wind turbines (IWT) at a maximum of $40,000 per MW of capacity despite their value of $1.5/2 million each.   I would request whomever is appointed by the new Premier to the Finance Ministry portfolio to recall those instructions and allow MPAC to reassess IWT at their current values over the terms of their contracts.  This would immediately benefit municipalities (via higher realty taxes) that originally had no ability to accept or reject IWT.

Do a quick addition of the numbers and you will see the benefit to the ratepayers of the province would amount to in excess of $2 billion dollars.

Coincidentally, that is approximately even more than the previous government provided via the Fair Hydro Act. Perhaps we didn’t need to push those costs off to the future for our children and grandchildren to pay!

Now that I have formulated a plan to reduce electricity costs by over $2 billion per annum I can relax, confident that I could indeed handle the portfolio handed to me by the new Premier of the province.

Parker Gallant

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OFA: lending support to Ontario’s new energy plan

The Ontario Federation of Agriculture has published support for the new Long Term Energy Plan — but did they even read the numbers? Government spending seems to run counter to OFA goals

 

OFA in conflict?

About a year ago, Energy Minister Glenn Thibeault told a community meeting in Sault Ste. Marie, “Since 2003, Ontario has invested more than $35 billion in over 16,000 megawatts (MW) of new and refurbished clean generation, including nuclear, natural gas and renewables – this represents about 40 per cent of our current supply and is the main reason why hydro bills will continue to rise in the future.”

That was followed on March 2, 2017 by Premier Wynne who put out a statement on Ontario’s Fair Hydro Plan and how much had been spent:  “In the past few years we’ve invested more than $50 billion in electricity infrastructure”.

Now, to the release of Minister Thibeault’s 2017 Long-Term Energy Plan  (LTEP) “Delivering Fairness and Choice” which says this: “Nearly $70 billion has been invested in the electricity system since 2003. These investments have several benefits, including providing a clean, reliable electricity system.”

In just one year, Ontario’s Premier and Minister of Energy changed the claims made about spending on the electricity sector to the point where they suggest we have spent an additional $35 billion dollars in just one year!

In response to the LTEP, the Ontario Federation of Agriculture or OFA put out a very short paper that simply seems to buy into the government claims: $70 billion was invested in our electricity system over the past 15 years, much of these investments were for the shift to non-emitting generation sources.”

You might think Ontario’s farmers, who are very dependent on energy, would be far from happy with electricity prices. In fact, on their Issues page on their website, they say “OFA believes Ontario farms need competitively priced energy, including access to natural gas and reasonably priced electricity, to be able to compete and to contribute to the growth of our rural economy.”

They are no doubt concerned about the Fair Hydro Act and what will happen when the bill for its $40-billion cost falls due and electricity rates shoot up again. But you wouldn’t know that from reading their LTEP review: it suggests refinancing the Global Adjustment to defer costs was a good thing!

Perhaps Don McCabe, former President of the OFA, still plays a role in determining the OFA’s position on the electricity sector?   As people may recall, McCabe was one of several “environmentalists” who were members of the GEAA (Green Energy Act Alliance) who claim responsibility for bringing us the Green Energy and Green Economy Act. Back in 2011 the Ontario Sustainable Energy Association (OSEA) awarded Don McCabe a trophy for that role! (The OFA continues to maintain membership in OSEA but the current representative is Ian Nokes.)

As an OFA executive, Mr. McCabe should step up and help the Premier and Minister to present a dollar amount to the public that is consistent, and doesn’t suggest spending jumped $35 billion in one year.

On the other hand, he and the other members of the GEAA could be blamed for increasing electricity bills plus the removal of the rights of rural communities to say yes or no to industrial wind turbines, and for the negative impacts on neighbours of any farmers who signed leases with wind power developers

Perhaps Mr. McCabe is content to keep a low profile as the spending claims keep growing!

A look back at Ontario Liberal promises: the true cost of bungling

Former Premier Dalton McGuinty: The Liberal promises of affordable electricity and politics-free policy were discarded [Photo: Huffington Post]
A Globe and Mail article of November 11, 2002 reported that Dalton McGuinty, leader of the Ontario Liberal Party (OLP), then in Opposition, was upset because Premier Ernie Eves had promised legislation to cap electricity prices.

Liberal Leader Dalton McGuinty said the true cost of the Conservative government’s hydro bungling will add billions of dollars to the debt.

“Now that families and businesses have been scared to death, now that new investment in supply has been scared off, now that everyone knows hydro has been completely mismanaged, Ernie Eves is going back to square one,” Mr. McGuinty said in a news release on Monday.

“The government should have had its act together before the market opened. And the bill for its failure to do that hasn’t been cancelled — it’s just been put off.”

Mr. McGuinty said the Ontario Liberals have been calling for action for months, but the Eves government has not acted until now to freeze electricity prices and increase supply.

The Liberal Leader said his real concern is what Ontarians will have to pay over the long term.

Fast forward to September 14, 2005 when Dalton McGuinty was Ontario’s Premier. In a keynote speech to the Ontario Energy Association, he bragged about what the OLP had accomplished and their plans for the future. Let’s examine the promises made in that speech.

McGuinty: “We won’t gamble away Ontario’s future prosperity because of what the next poll might or might not say...”

A noble thought, but discarded by the OLP. When seeking re-election in 2011 McGuinty cancelled the Mississauga and Oakville gas plants and plans to contract for offshore wind developments.  Polling in ridings affected by the foregoing showed several Liberal seats in jeopardy.   More recently, shortly after a poll indicated Premier Wynne’s approval rating was at 20 %, she announced hydro rates would be cut by 25 %.  Policy by polls…

McGuinty: … Or because of what new technology might or might not be developed.

The launch of the Green Energy and Green Economy Act (GEA) in 2009 focused on wind and solar generation at above market prices, without a cost/benefit study as pointed out by the Ontario Auditor General in his December 5, 2011 report.  Both wind and solar were old technologies promoted by ENGO and wind and solar associations and known to be intermittent and unreliable sources of generation.

McGuinty: That’s why we asked the OPA to report on a long-term plan.

The Ontario Power Authority (OPA) produced a viable plan with limited wind and solar capacity to be contracted for in a competitive environment, but the plan was suspended by Energy and Infrastructure Minister George Smitherman before approval via his directive to the OPA dated September 17, 2008.

McGuinty: That’s why we acted to take the politics out of pricing.

The recent Fair Hydro Act and the gas plant moves dispel the notion that politics has been removed from pricing, as do the FIT and MicroFIT programs that past Minister Smitherman enabled via a directive issued September 24, 2009 to the OPA which included a domestic content requirement.  The latter resulted in a challenge before the World Trade Organization which Canada lost and taxpayers picked up the costs.

McGuinty: This spring, the Ontario Energy Board, a truly arms-length public agency will set the price of power for small consumers. The OEB sets the price based on what electricity costs, not on what politicians think it should cost, or wish it would cost.

While those homilies are correct, the prices are set based on input costs which the OEB has no control over. In simple terms, they divide the input costs accumulated (Global Adjustment + Hourly Ontario Electricity Price + transmission) and divide it by kilowatt hours consumed.  The impact of above market (highlighted by the Auditor General reports) contracts with wind, solar, and other generators and the plethora of other spending (e.g., conservation $400 million per year, etc.) dictated by the Energy Minister, plus above market salaries and benefits for OPG and Hydro One employees etc., are all part of those costs.

McGuinty: We could require our businesses and families to subsidize the price of electricity through their taxes.

Premier McGuinty did just that when he moved the gas plants and part of the cost was paid by taxpayers. The Liberal government also drove up the price of hydro and put 600,000 household into energy poverty. It fell on charities, supported by Ontario taxpayers, to help those households.  Tax dollars from those households also supplied grants to buyers of expensive Tesla automobiles and those grants continue today!

McGuinty: But, having finally put our province on a sound financial footing, we choose to ensure the price of electricity reflects the true cost of electricity.

The “sound financial footing” didn’t last long, and during the Liberals’ reign Ontario’s debt has increased from $132 billion to over $300 billion. Ontario has seen only one budget in the last decade that will seemingly balance and that was the most recent one.

McGuinty: We can’t guarantee price certainty –; that just isn’t realistic, given the nature of the challenges before us.

The Fair Hydro Act just passed by the Wynne government guarantees price certainty for four years for certain classes of ratepayers.  This isn’t realistic: refinancing those assets may conflict with their ability to continue to generate electricity for an additional ten years.  Amortization of fixed assets is based on the longevity of those assets, but the Wynne government has decreed that they can extend their life so that our children will be stuck with the replacement costs.

McGuinty: But I can assure you that we will do everything we can to ensure safe, clean, affordable electricity is always in full supply in the Province of Ontario.

When the OLP became the government, the average price of a kilowatt hour was 4.3 cents. By 2016 it averaged 11.2 cents — a 160% increase.  The 25% reduction touted by Premier Wynne as the largest in Ontario’s history followed.  The subsidy to cover that 25% will accumulate within the confines of OPG and at the end of increases held to “the rate of inflation for the next four years,” that subsidy will rise well above that benchmark in the years following that moratorium.

McGuinty: We won’t subsidize prices or cap prices –; that would mean more debt or higher deficits. Both of which would lead ultimately to higher taxes.

By deferring debt to subsidize hydro prices for four years within OPG’s balance sheet (guaranteed by the Province), the plan is to hide (temporarily) the impact from ratepayers while supposedly balancing the budget.

So, what happened to all those lofty promises of “affordable” electricity costs for consumers and business, that is immune to politics?

Was this what all those promises really meant?

“The true cost of the Liberal government’s hydro bungling will add tens of billions of dollars to the debt.

Parker Gallant

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.

How much did Premier Wynne’s hydro “mistake” actually cost?

Five months ago, Premier Kathleen Wynne admitted to the delegates at the annual Ontario Liberal Party convention her government “made a mistake” allowing electricity rates to rise so high.  Those rates have actually soared, increasing by 80.9% from 2009.

Comparing Ontario electricity rates to other indicators such as inflation, shows just how bad the situation is. Comparing the IESO (Independent Electricity System Operator) Monthly Summaries for January and February 2009 with the same two months in 2017, the combined costs of HOEP (hourly Ontario energy price) plus the Global Adjustment (GA) show costs per kilowatt hour (kWh) have increased from 5.85 cents/kWh to 10.58 cents/kWh. That is an 80.9% increase.  Average inflation over the same time-frame has increased about 14%.   (The reader should note the 2009 and 2017 costs are before HST so the 8% reduction commenced January 1st has had no effect on contracted or regulated electricity rates.)

So how bad? The cost of the basic commodity has increased by almost six times the inflation rate!

Commodity cost is way up

Reviewing the IESO Monthly Summaries for the two-month periods in 2009 versus 2017 also shows Ontario demand fell by 7% or 1,713,000 MWh (1.7 TWh). The Summary reports indicate the 24.43 TWh representing Ontario demand in 2009 cost $58.49 million/TWh or $1,429 million for January and February. The 22.7 TWh of Ontario demand in 2017 cost $105.78 million/ TWh or $2,330 million for the same two months.  That represents an increase in the commodity cost of electricity of $901 million for 7% less electricity — an average monthly increase of $450 million.

So, why?

Exports

One of the reasons was the drop in the market price as the HOEP fell from an average of $51.93/MWh in 2009 for the two months to $21.56/MWh in 2017 while the GA jumped from an average of $6.56/MWh in 2009 to $82.27/MWH in 2017. What that means is, the loss on exports from Ontario in 2009 cost Ontario ratepayers $13.1 million and in 2017 cost ratepayers $174.2 million as the GA costs are not included in the sale of exports via the HOEP.

OK, of that $900+ million increase, we have $174 million found … $727 million to go!

Wind power

Another obvious cause of the big jump was generation and payment for curtailment of power from industrial wind turbines (IWT). Back in the early part of 2009, Ontario had approximately 800 MW of IWT capacity; in the early 2017 we have about 4,550 MW of capacity.   According to my friend Scott Luft, who uses IESO data to estimate the generation and curtailment of IWTs,  in 2009 the turbines delivered almost 395,000 MWh in January and February. In 2017, it’s a different story: generation and curtailment combined jumped to about 2,926,000 MWh.

The contracted wind power prior the passage of the Green Energy Act is estimated to be at the rate of $90/MWh, whereas wind power contracted for after the Act was at $135/MWh (plus a cost-of-living annual increase) meaning they currently are estimated at $140/MWh. The math on the 2009 generation therefore shows a cost of $35.5 million and the 2017 generation/curtailment cost becomes $409.6 million.  The increased cost of wind from 2009 is ($409.6 million less $35.5 million) $374 million.   Deducting the $374 million from $727 million leaves $353 million to find to get to $901 million!

Gas

Since 2009, more than 3,300 MW of gas plant capacity has been added to the Ontario grid. Its addition was basically to back up the wind and solar capacity (which is unreliable and intermittent) to ensure sufficient generation is available during renewables’ failure and high demand periods.  The private sector companies investing in those plants are paid for their capital investments amortized over their life span. When generating electricity they receive fuel costs plus a nominal markup. Payments details are not available in the public domain, but it is understood payments contracted are per MW of capacity, and  estimates given are $8/15,000 per MW per month.  Assuming the 3,300 MW of capacity secured since 2009 is at the mid-range ($12,000 per MW) the cost to ratepayers is $79 million (3,300 X $12,000 X 2 months).

That $79 million means we are still looking for $274 million.

Consuming less but paying more

IESO shows ratepayers consumed 1.7 TWh less in the first two months of 2017 than in 2009, but paid more. That is evident in OPG reports.  As OPG has not released its 2017 1st Quarter report estimates are based on the 2016, 1st Quarter report.  First we estimate spilled (wasted) hydro was 1.2 TWh at a reported cost of $44 million/TWh so that cost ratepayers $53 million.   The 21.0 TWh produced by OPG in the 2016, 1st Quarter generated average revenue per TWh of $70.4 million.  Estimating the first two months of 2017 generation at 14 TWh results in a cost of $985.6 million.  In 2009 OPG generated 25.6 TWh at an average of $57.8 million/TWh. Again estimating the total cost of the 17 TWh generated by OPG in the first two months produces a cost of $982.6 million so adding the $3 million to the spilled water cost shows an increase of $56 million.  Subtracting $56 million from $274 million means we are looking for the last $218 of the increase.

Solar, conservation, bio-mass and sundry

We assume the balance of the increased 2017 versus 2009 costs came from solar and bio-mass with a portion from the conservation program. Based on Figure 23 “Total Global Adjustment by Components” of the IESO Summary report we can estimate the costs of each of those for the two months.  It appears conservation spending (absent in 2009) represented about $50/55 million for the first two months of 2017 and bio-mass (incented by the FIT and MicroFIT programs) generated costs of around $40 million.  Solar (low during winter months) generated a minimum of $100/$120 million in costs for the two months based on the IESO Figure 23.  While those are “best” estimates to get to the increase of $901 million for the two months, we have not included increased costs from the IESO and OEB budgets which have both increased.

“No checks” in the system

An article recently appeared in the Globe and Mail written by George Vegh, former general counsel to the OEB.  This paragraph is perhaps why Premier Wynne admitted to her “mistake”

“Generation procurements are determined entirely by the government. The system operator – the Independent Electricity System Operator (IESO) – implements government directives. Neither the Ontario Energy Board nor any other independent regulator reviews these procurements. There are no independent criteria, no cost-benefit analysis, no consideration of the need for the procurements, and no review of alternatives. In short, there is virtually no check on the power to procure supply.”

 

What we have in Ontario is a “mistake” that will continue to cost Ontario ratepayers and taxpayers billions for years to come.

Admitting a mistake is one thing, doing something about it is another: Premier Wynne needs to recognize the Ontario Liberal government’s error, kill the Green Energy Act, and halt continued procurement of power from unreliable and intermittent wind and solar generators!

Behind the scenes at Premier Wynne’s news conference

While the Premier was promising relief for Ontario electricity customers (and blaming lots of other people), more proof of the government’s mistakes was occurring …

The press conference and press release on March 2nd for Premier Wynne’s announcement on reducing electricity bills by 25% took a full hour — she and Energy Minister Glenn Thibeault hung around to answer questions from the media.

The speech and the press release were a mea culpa — she apparently hadn’t noticed rates had climbed and referred to those high rates as the “elephant in the room.”  She laid the blame on all previous governments in her answers to questions, for example:

Decades of under-investment in the electricity system by governments of all stripes resulted in the need to invest more than $50 billion in generation, transmission and distribution assets to ensure the system is clean and reliable.

The decision to eliminate Ontario’s use of coal and produce clean, renewable power, as well as policies put in place to provide targeted support to rural and low-income customers, have created additional costs.

If the premier was genuinely interested in the cause for high electricity bills she could have looked no farther back than her immediate predecessor, Dalton McGuinty. Premier McGuinty brought Ontario the Green Energy Act and the misinformed, unfounded belief that getting power from industrial wind turbines and solar panels, while paying at price multiples of other available reliable power, would work!

Those wind turbines and solar panels were generating power out of phase with Ontario demand even during her news conference, for which ratepayers are paying as much as 80.2 cents a kilowatt hour (kWh).

During the news conference hour, Ontario ratepayers consumed 17,300 megawatt hours (MWh); 85% of that consumption was provided by nuclear (10,000 MWh) and hydro (4,900 MWh).  The balance came from gas, wind, solar and biomass. The average generation cost of nuclear and hydro generation was about $59/MWh (5.9 cents/kWh) and $191/MWh (19.1 cents/kWh) for the 15% provided by gas, wind, solar and biomass.   The former costs include the “water tax” on hydro generation and the “decommissioning and fuel disposal” costs of nuclear whereas the latter does NOT include the cost of curtailed wind, idling costs of gas plants or the costs of moving those two gas plants from Oakville and Mississauga to save Liberal seats during the McGuinty era!

Also during that hour, Ontario exported 1,075 MWh to Michigan and 1,203 MWh to New York.  Those 2,078 MWh (20% of Ontario’s demand) were sold to our neighbours at an average of $11.38/MWh (1.14 cents/kWh). The exports cost about $202,000, under the contract terms, yet resulted in just $23,000 of revenue to offset that cost. Ontario ratepayers picked up the loss of $179,000.

In fact, for that whole day, “net exports” hit Ontario’s ratepayers with a cost of $2.4 million.

Admitting she made a “mistake” while blaming decades of previous “governments of all stripes” is not a solution. And the 25% reduction in bills isn’t real, either: Premier Wynne is kicking the can down the road and laying the burden of her mistake on taxpayers.  She still doesn’t appear to have the political courage to admit she, Mr. McGuinty and their governments made a mistake believing the environmental non-government organizations who persuaded them to believe in a green dream that has now, negatively affected all ratepayers in the province, driving away jobs in the private sector.

The herd of elephants is still in the room. Premier Wynne should start clearing them out by cancelling all wind and solar contracts that have not put a shovel in the ground!

More Global Adjustment: what the costs are

February 21, 2017

The Global Adjustment (GA) charge in 2016 was responsible for 85% of the cost of electricity billed to all of Ontario’s ratepayers, less for large industrial clients.  The cost of the GA is for the cost of generation of electricity at the door (metaphorically) of the generation unit.  It does not include “line losses” which are found in the “delivery” lines of our bills and represented a cost of approximately $400 million at an average 3% line loss!

In dollar terms, IESO reported the 85% cost of the GA was $12.333 billion in 2016.  Because of the size of those GA costs the question on many minds is, what is it?   Steve Aplin of Canadian Energy Issues defines it this way: “It is simply a price recovery mechanism. It is the difference between the price the government promised any particular electricity generating company and the ‘market’ price of electricity.” 

So what are the relative parts of the GA which place the biggest burden on the climb in costs in the “electricity” line we have experienced.

The IESO published a News Release  on January 18, 2017 providing statistics on:  generation by fuel type and its percentage of contribution; ratepayer costs per kilowatt (kWh) for both the GA (9.66 cents per  kWh) and for the HOEP (1.66 cents/kWh) or market price;  and, imports and exports and provincial demand (137 TWh).  IESO don’t provide generation produced within the DX (distributor connected) sector.  The following are best estimates of some of the DX generated electricity and curtailed wind.

Wind

IESO report wind generated 9.3 TWh and Scott Luft reported 1.7 TWh were generated by DX connected wind turbines making total generated generation 11 TWh at a cost of $135 million per TWH (3.5 cents/kWh). An additional 2.2 TWh were curtailed at a cost of $120 million/TWh.

Total cost of wind capacity in 2016

11 TWh @ $135MM/TWh: $1,485 MM

2.2 TWh curtailed wind @$120MM/TWh: $264MM

TOTAL cost wind: $1,749 MM

LESS HOEP value of 11 TWh @$16.6MM/TWh: $183 MM

NET COST of wind to GA $1,566 MM

Solar

IESO reported solar generated .46 TWh in 2016 and the best estimate of DX generated solar at 15% of rated capacity for the 2,100 MW is 2.76 TWh for a total of 3.22 TWh. The average cost of solar generation in the province (roof and ground mounted) is about $480 million per TWh (48 cents/kWh).

Total cost of solar capacity in 2016:

3.22 TWh @480MM/TWh: $1,546MM

LESS HOEP value of 3.22 TWh @$16.6 MM/TWh: $53MM

NET COST of solar to GA: $1,493 MM         

Gas

Due to the intermittent and unreliable nature of wind and solar generation it must be backed up by other reliable generation capable of providing generation when the wind isn’t blowing or the clouds cover the sky. The back-up is generally provided by gas plants.  With 6,800 MW of wind and solar capacity the suggested replacement is 90% of capacity or about 6,120 MW of gas generation representing about 62% of its installed capacity (9,943 MW per IESO).  Gas plants are viewed as “peaking” plant capacity so contracts call for a monthly payment related to the amortized cost per MW and reputedly ranges from $10/15,000 per month per MW.   This calculation will use $10,000 per month/MW!

Total cost of gas generation as back-up for Wind and Solar in 2016

 6,120 MW @ $10,000 per month (6,120 X $10,000 X 12): $ 734 MM

Conservation

Another portion of money included in the GA is conservation spending allocated to all of the LDC based on commitments to reduce their demand over the 2015-2020 period. The total budget over those six years is about $2 billion so equates to $300 million per annum with a significant portion allocated to businesses and upgrades for low-income households.  The LDCs are allowed to apply for rate increases associated with their decline in revenue as a result of the conservation once achieved.

Total cost of conservation spending in 2016

Estimate based on 2015-2020 budget of $2B over 6 years: $ 300 MM

Ontario Electricity Support Program

The Ontario Electricity Support Program (OESP) launched on January 1, 2016 is aimed at low-income households who have suffered from the climb in electricity rates. The OEB study released in late 2014 estimated the cost of the program at $200/$225 million.  Logically, if the province was responsible for driving an estimated 571,000 ratepayers into energy poverty, the program’s cost should have been allocated to the Ontario Ministry of  Community and Social Services, but instead it has become another cost to all Ontario ratepayers.  At this point, the estimate of the first year’s costs are unknown, but if one assumes the OEB’s estimates were close they will impact all ratepayers.

Total cost of the OESP

 Estimate based on OEB’s study: $ 200 MM

GRAND TOTAL COST all of the above: $4,293 MM

Cost per terawatt hour of 14.22 TWh from wind, solar, conservation and OESP added to the GA  $302 million/TWh or 30.2 cents per kWh

 Missing from the above calculation is spilled hydro and nuclear power steamed off at Bruce Nuclear due to surplus base-load generation from wind and solar. The latter would add about another 5 TWh and another $300 million driving the per kWh cost to 32.5 cents per kWh.

If one deducts the 14.22 TWh from total Ontario generation (including DX) in 2016 one is left with 140.1 TWh and if the $4,293 million is deducted from the $12.333 billion of the 2014 GA cost the 140.1 terawatts from nuclear, hydro and gas generation cost was 19% of the GA or                   $57.38 million/TWh or 5.74 cents per kWh

The time has come to kill the Green Energy Act and return to sanity!