Mild spring weather, breezy days are money-making combo for wind power corporations
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.
Most Canadians love Spring simply because the snow is melting and that signals the summer is coming.
Ontario’s wind power developers love Spring, too! They know the wind will blow much stronger than in the hot summer weather and that means, their generation output will climb.
The fact the wind power lobby negotiated “first to the grid” rights with the Ontario government under Premier Dalton McGuinty means most of them will be paid 13.5 cents/kWh for whatever they produce, whether it is needed or not.
For example, May 8 was a day when the breezes were brisk throughout Ontario and the industrial-scale or utility-scale wind turbines were busy generating lots of power. The IESO (Independent Electricity System Operator) reports hourly on both the forecast for wind generation, as well as the actual output. That day, wind could have provided as much as 26% of total Ontario demand for power. But here’s the important fact: the total Ontario demand on an early May spring day is not what it is in the heat of summer or the cold of winter and that was the case on May 8. Total Ontario demand was only 322,000 MWh for the day.
Money for nothing
Because of the low demand, about 36% (30,400 MWh) of IESO’s forecast for wind power generation looks as though it was probably curtailed (paid for but not used) and the wind power operators were paid $120/MWh. That means, Ontario’s electricity ratepayers paid almost $3.7 million for nothing. Zero.
The output actually accepted into the grid was just over 54,000 MWh, which cost ratepayers about $7.3 million. Coupled with the curtailment costs, that meant each kWh of wind “grid-accepted” cost 20.3 cents/kWh.
We should also assume that Ontario was probably spilling hydro or steaming off nuclear due to low demand, which would further drive up that price.
As if this information isn’t enough of a downer on a nice spring day, the HOEP (Hourly Ontario Energy Price), or what is referred to as the “market price,” was noted in their daily summary at an average of $1.75/MWh.
And the very next day …
Ontario’s demand was so low so we didn’t need any wind generation May 9, so IESO had to sell it off at the market price to U.S. and other grid-connected operators. The surplus demand of just under 44,000 MWh (81% of grid-accepted wind generation) was sold at $1.75/MWh generating total revenue of $77,000 but cost ratepayers in the order of $6 million.
This all simply demonstrates why the Global Adjustment charge keeps climbing. If the loss of $6 million daily for just the cost of exporting our surplus energy occurred every day of the year, it would represent in excess of $2.1 billion annually as a cost to Ontario ratepayers.
The time has come to fix this weird situation created by the former Ontario government.
More work to be done to get Ontario electricity bills down
In the campaign before last year’s election in Ontario, Doug Ford promised to cut hydro bills by 12 per cent if his party won. He said it would be on top of a rate reduction (25% under the Fair Hydro Plan/FHP) from the governing Liberals, whose plan he had repeatedly criticized.
He also said he would cut rates through a variety of measures that would save the average ratepayer $173 a year. When asked about their plans in respect to the FHP he said, “We’re going to be reviewing that. That was, as far as I’m concerned, the wrong thing to do, borrowing down the future and the only people who are going to pay for it is our children, our great-grandchildren.”
He also said he would give ratepayers the dividends from the government’s share of the partially privatized Hydro One.
Since being elected with a majority, the Ontario PC Party has often issued press releases suggesting “promises made, promises kept” but so far, we haven’t heard those words uttered in respect to the electricity file.
IESO reports are now available for the first three months of 2019, so we can compare the quarter with 2018 under the previous government to see if any progress has occurred.
To begin, if you look at the IESO report reflecting the “Variance Account under Ontario’s Fair Hydro Plan” you can discern the dollars being deferred went from $410.5 to $496.6 million, a jump of $86.1 million or 21%. That is money Ontario ratepayers will have to pay back in future years! The second quarter could be just as bad: Scott Luft has estimated April 2019’s combined HOEP (Hourly Ontario Energy Price) and GA (Global Adjustment) will set a new record high.
So, let’s look at Hydro One’s dividends to determine how far they would go to achieving the 12% reduction. The December 31, 2018 annual report for Hydro One shows dividends paid of $518 million to shareholders, so the 47% ownership of Hydro One by the province would represent $243 million! If one than does the math for the promised annual average residential ratepayer saving of $173 the amount needed is about $807 million ($173 X 4,665,055 ratepayers = $807 million) for a shortfall of $564 million. Adding the additional FHP $86.1 million for the 2019 first quarter puts the shortfall at $650.1 million — so far.
For the first quarter of 2019, Ontario total electricity demand including net exports (exports minus imports) increased by 392 GWh (gigawatt hours) with Class A ratepayers increasing consumption by 486 GWh and Class B by 217 GWh while net exports declined by over 300 GWh. The weighted average of the GA and HOEP as reported by IESO on April 30th of each year climbed from $103.80/MWh in 2018 to $110.67 in 2019 a gain of $6.87/MWh or 6.6%. Multiplying the $6.87/MWh by Class B consumption of 25,628,600 MWh in the first three months of 2019 comes to approximately $44 million. That is about $42 million shy of the $86.1 million increased transfer to the FHP over the 2018 transfer. (We must assume, as frequently happens, IESO made an adjustment to the prior month’s transfer and that is the reason for the difference.)
In specifically examining wind generation and curtailment from Scott Luft’s post it appears year over year grid-accepted wind declined by 40,000 MWh and curtailed wind dropped 66,000 MWh. What that suggests is that the increase in costs is a reflection of the rate increases granted by the OEB to OPG for their nuclear generation at Darlington and Pickering. This marks the first time over a long period when increased costs cannot be blamed on either wind or solar generation or both!
The foregoing 2019 first quarter results may present a major road block for Premier Ford in achieving his “promise made, promise kept” catchphrase in respect to the energy file.
Last December, former Minister of Energy Glenn Thibeault, was testifying at a committee hearing and responded to a question on the portfolio as follows: “There was lots that was happening on the file, and I was still learning it, right? As I said earlier, I was drinking from a thousand firehoses. Not that I’m trying to minimize the complexity of the file, but there was lots for me to learn and, at the same time, trying to find ways to reduce rates was, I think, the most important thing.”
Perhaps that point should be borne in mind by the current Minister, under Premier Ford. There are ways and means of reducing upward pressure on electricity costs, but so far Greg Rickford, Minister of Energy, Northern Development and Mines seems to have missed them or is still trying to digest the complexities of his portfolio.
My advice: Start with the cancellation of the Nation Rise 100-MW wind power generation project which will eliminate over $400 million from future electricity bills. And for those living with industrial wind turbines in rural Ontario, ensure they are in compliance with audible and inaudible noise regulations! Consultation with the Minister of the Environment, Conservation and Parks to ensure the regulations are followed would go a long way to reducing costs.
Minister Rickford could also consult with some external experts and find out what can be done to reduce costs, beyond getting rid of the “$6 million dollar man” from Hydro One!
Refuting those two claims for omission of facts was relatively easy.
Here are the details on the remaining three.
3. CanWEA claim: “Wind energy will be necessary if Ontario is to keep Ontario’s electricity supply reliable through the next decade.”
CanWEA says the IESO “forecast a need for significant new electricity generation, especially from 2023 onwards, as the Pickering Nuclear station shuts down, other nuclear units are being refurbished, and generation contracts expire.” Well, that is true as IESO did suggest a shortfall, but here are the facts: the forecast shortfall is 1,400 MW. The OPG Lennox generation station with 2,100 MW has a contract expiring that year. So the question is, will the contract be extended? I was recently taken on a tour of the Lennox facility where I observed they were in the process of refurbishing one of the four 525-MW units which suggests they anticipate a renewal of the contract. With the anticipated renewal the “need for significant new electricity generation” is simply a figment of CanWEA’s imagination.
This claim goes on to suggest: “New wind energy would help keep Ontario’s electricity supply reliable, as well as more affordable.” And, “Other jurisdictions around the world are proving this – for example, Denmark now produces more than 44 per cent of its electricity from wind turbines on an annual basis.” The Denmark example ignores the cost of residential electricity on Danish households which is the highest in Europe. Denmark’s household electricity price is 312.60 Euro/MWh or $471.10 CAD/MWh, based on current exchange rates.
Is CanWEA suggesting is that if Ontario’s ratepayers were paying 47.1 cents/kWh it would be affordable? That seems like a big stretch and would push many more households into energy poverty!
The same applies to the claim of it being “reliable.” As noted in a June 2017 peer-reviewed report by Marc Brouillette, wind generation in Ontario presented itself when needed only 35% of the time. If one considers that wind’s annual generation averages about 30% of capacity, it is therefore “reliable” about 10.5% of the time it’s actually needed. (Note: IESO values wind generation at 12% in their forecasts)
4. This CanWEA claim suggests: “Wind energy provides many services to system operators to keep electricity supply flexible.” Their view of “flexible” fails to align with what the grid operator IESO would consider flexible. As Marc Brouillette’s report noted, “… wind output over any three-day period can vary between almost zero and 90 per cent of capacity.” That variance often requires clean hydro spillage or nuclear steam-off or the export of surplus capacity or full curtailment.
All of those actions cost ratepayers considerable money. Wind is unable to ramp up if demand increases and is the reason Ontario has over 10,000 MW of gas/oil plant capacity, with much of it idling in case the wind stops blowing or clouds prevent solar from generating. CanWEA needs to review the definition of “flexible.”
Another amusing statement under this claim is that: “Wind energy can also provide a suite of electricity grid services, often more nimbly and more cost effectively than conventional sources, helping to ensure reliable and flexible electricity supply. These services include: operating reserve, regulation, reactive support, voltage control, primary frequency response, load following, and inertia and fast frequency response.” The bulk of those “suite of electricity grid services” are requirements for any generators on the grid. The ones suggesting operating reserve, reactive support, load following and fast frequency support are really referencing the curtailment of wind generation as noted in the preceding paragraph.
5. CanWEA’s final claim is: “Wind energy is essential to reducing greenhouse gas emissions” and goes on to suggest: “Ontario has achieved a 90 per cent reduction in electricity sector greenhouse gas emissions over the past 15 years, and wind energy has been an important contributor. Wind turbines do not emit greenhouse gases, just as they do not pollute the air.” If CanWEA bothered to be truthful, the trade association would not claim “wind energy has been an important contributor” in reducing greenhouse gas emissions. If you review year-end data as supplied by IESO for the year 2004 and compare it to the data for 2018, you are obliged to reach the conclusion that wind generation played absolutely no role in the “90% reduction in the electricity sector greenhouse gas emissions.”
Ontario demand in 2004 was 153.4 TWh (terawatt hours) and in 2018 was 137.4 TWh representing a drop in demand of 16 TWh. Nuclear generation in 2004 was 77 TWh and in 2018 was 90.1 TWh for an increase in generation of 13.1 TWh. The drop in demand of 16 TWh, plus the increased nuclear generation of 13.1 TWh, equals 29.1 TWh. Those 29.1 TWh easily displaced the 2004 coal generation of 26.8 TWh!
Ontario didn’t need any wind turbines to achieve the 90 per cent reduction in emissions by closing the coal plants, and CanWEA was totally wrong to suggest wind generation played anything more than a very small role.
As the saying goes, “there are always two sides to every story” but if it doesn’t fit the message you wish to convey, you simply ignore the other side! CanWEA has done that consistently while ignoring the negative impacts of industrial wind turbines.
Here are just five:
1.Providing intermittent and unreliable generation,
2. Causing health problems due to audible and inaudible noise emissions,
3. Driving up electricity costs,
4. Killing birds and bats (all essential parts of the eco-system), and
5. Possible link to contamination of water wells.
I could list other negative impacts, but I would first invite CanWEA to attempt to dispel those five.
Needless to say, the anticipated response will be “crickets”!
Why ‘down’ is actually ‘up’ in topsy-turvy Ontario
Last month, the Independent Electricity System Operator (IESO) released the grid-connected 2018 Electricity Data. Under the “Price” heading the IESO said this: “The total cost of power for Class B consumers, representing the combined effect of the HOEP [2.43 cents/kWh] and the GA [9.07cents/kWh] was 11.50 cents/kWh”.
In 2017, that combined price was 11.55 cents/kWh, so there has been a slight decline. That slight decline represents an annual savings to the average household consuming 9,000 kWh per annum of—wait for it—$5.00.
If Bob Chiarelli was still Minister of Energy, he would probably suggest you could now purchase two “Timmies” with that much money!
The price drop isn’t very much but, the question is, how or why did the average price drop?
Ontario’s overall consumption in 2018 increased from 2017 by 5.3 TWh (terawatt hours) or 4%. In 2017 the IESO reported grid-connected consumption was 132.1 TWh and in 2017 it increased to 137.4 TWh. This is increase is a “good thing.” Here’s why:
Curtailed (paid for but not used) wind power fell by 1.207 TWh, which saved around $145 million!
Nuclear maneuvers (steam-off) or shutdowns declined by 791 GWh (gigawatt hours) and saved approximately $60 million.
Net exports (exports less imports) also fell by 2.318 TWh and, combined with the higher HOEP average for the year, saved ratepayers approximately $320 million.
Foregone hydro generation was probably lower as the first three quarters reported by OPG show it dropped from 4.5 TWh to 2.4 TWh (down 2.1 TWh). That saved around $90 million.
Taken together, that $615 million ratepayers had to absorb in 2017 comes to much more than Class B residential ratepayers benefited in 2018. There are only 4,665,000 of them so total net savings was only about $25 million.* Other Class B ratepayers presumably received some very minor benefits, too.
The reason these benefits were not more is because additional costs were levied in 2018, absorbing most of the remaining $590 million. The Ontario Energy Board approved large rate increases for OPG for the regulated hydro and nuclear generation segments. The rates for the latter rose substantially and will also increase further in 2019 and 2020 before falling back in 2021 as the OEB used their power to attempt to “smooth” the nuclear refurbishment costs over several years.
Despite the fact that increased consumption in 2018 helped to, ever so slightly, reduce costs, the IESO continued their efforts to get us to reduce consumption by spending upwards of $350 million on conservation programs.
The small price drop for Class B ratepayers turns the economic law of “supply and demand” which is: increased demand will increase prices. Somehow that law works in reverse in Ontario’s electricity sector!
Enjoy your two extra “Timmies” this year!
*These savings have nothing to do with the 25% reduction under the Fair Hydro Act which eliminated the 8% provincial portion of the HST and provides a 17% reduction for residential ratepayers. The FHA amortized assets over a longer timeframe than normal in the rest of the electricity generation world.
IESO wants residential ratepayers to “Set the mood”
It’s true! Ontario’s Independent Electricity System Operator (IESO) in a recent posting on their SaveOnEnergy site suggested we “Cut the lights and light some candles to set the mood for a cozy evening.”
IESO spends approximately $400 million annually on conservation initiatives, and they come up with this? They even go so far as to describe the event as a “Hygge, a Danish word: (pronounced hue-guh not hoo-gah) used when acknowledging a feeling or moment, whether alone or with friends, at home or out, ordinary or extraordinary as cosy, charming or special.”
I personally find it ironic that the word chosen by IESO is Danish. Denmark is where electricity prices for residential homes is the most expensive in Europe* at EURO per kWh of 0.3126 or Canadian 0.48 cents per kWh. Doesn’t that make all Ontario residents feel cosy!
Denmark is home to VESTAS and their product line is exclusively wind turbines. Vestas employs over 24,000 people which makes them one of the 10 largest employers in the country. Vestas’s website claim they have installed 97 GW (97,000 MW) of industrial wind turbines (IWT) globally. All those noise-emitting, bird- and bat-killing, intermittent and unreliable wind turbines might make the Danes “cosy” but somehow I doubt it, with the price they are paying for electricity.
The IESO post suggests we: turn off the phone, unplug appliances and devices, eat comfort food and use energy-efficient cooking methods like a pressure cooker! ** The message to the reader goes on to suggest pulling on wool socks and using our favourite blanket to get cosy and then to “get lost in the moment” by reading our favourite book!
IESO should stop the wasted spending on conservation efforts of this ilk. Does IESO not understand we are all billed monthly for our cost of electricity usage and have been doing our best to “stay cosy”? For many it has been an effort to simply avoid energy poverty.
Stop lecturing us, stop wasting our money and focus your efforts on managing the grid in a manner that will reduce the costs of electricity.
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”.
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?
*The outlook period in the forecast extends to 2035.