Social Distancing for Covid-19 affects electricity costs

The economic effects of Covid-19 are driving up the costs of electricity for residential and small businesses in jurisdictions, like Ontario, where time-of-use pricing is the standard.  As many businesses shut down temporally, lay off their employees or get them to work from home, electricity consumption will drop.  That drop will have little effect on the generators of that power, be they crown corporations or privately contracted ones. They receive guaranteed prices for their generation and for curtailed power (wind and solar), spilled hydro or steamed-off nuclear.  To add fuel to the fire we export surplus power to our neighbours at a price of about 10% of its cost.

The “social distancing” resulting from business closures, etc. will result in a power consumption drop. Despite the drop, however, costs to ratepayers and taxpayers will climb.  The effect; resulting from that social distancing and those milder temperatures during the Spring Freshet, means, demand will fall and consumption will drop even more than it always does during April, May and June.

Ironically those three months is when the wind is blowing and the sun is shining meaning industrial wind and solar generation is high and those contracted generators have “must-take” contracts and are also paid handsomely to curtail their generation.

As an example of the foregoing Scott Luft tracks wind generation and its curtailment and in 2019 during those three months ratepayers picked up the $111 million cost of 938,244 MWh (megawatt hours) of curtailed wind.  That curtailed generation represented what 447,000 average households would consume in three months.  To make matters worse Ontario exported 5,145,700 MWh (what 2.4 million average households would consume) to our neighbours and sold it for an average of $8/MWh but the costs of that generation was north of $120/MWh. A rough estimate of the cost of selling off that surplus is $575 million. So, ratepayers in Ontario, during last Spring, paid almost $700 million for nothing!  During those same three months 2,266,700 MWh of wind generation was accepted and paid for at a cost to the ratepayers/taxpayers of approximately $330 million and solar’s 1 TWh or so of generation, added costs of over $500 million. We clearly didn’t need any of that!

As if to exacerbate the foregoing (during this pandemic) our system of control, over pricing, via the Ontario Energy Board, allows our major generators, OPG and others, the ability to generate a ROE (return on equity) in the 9% range.

Ratepayers represented by small and medium sized businesses are fighting to stay alive during this pandemic and must pay the full time-of-use rates which during high demand hours are 20.8 cents/kWh to keep the revenue flowing to those in the electricity sector.

Time to use the “State of Emergency”

Perhaps it’s time for Premier Ford to use the recently declared “State of Emergency” for the electricity sector to ease the pain for our small and medium sized businesses as well as all of those residential customers who have been temporally laid off.   Pass legislation that will get our contracted and crown owned electricity generators to reduce their generation prices during this pandemic.

It’s time for all of us to equally share the pain!

OPG’s Record Results for 2019

The Ontario Power Generation (OPG) announced their financial results March 12, 2020 for the year ended December 31, 2019 and the media appears to have been so focused on Covid-19 to even notice.  At first glance the $1,126 million of after-tax income reported appears to be less than 2018’s $1,195 million but the latter includes after-tax income of $205 million associated with the sale of the Lakeview Generating Station and unrelated to earnings from power generation.

Power generation was 77.8 TWh (terawatt hours) in 2019 versus 74 TWh in 2018 and gross revenue climbed by $485 million from $5,537 million to $6,022 million.  Payments, in lieu of taxes, were $190 million versus $141 million in 2019. All-in, the province will be able to include $1,316 million as revenue.  That, as Scott Luft points out, is a long way from covering the $5.5 billion in costs for the “Ontario Electricity Rebate”* (OER) for the upcoming March 31st year-end budget.

Noted in the financial report is the following: “The Enterprise Total Generating Cost (TGC) per megawatt hour (MWh) was $50.82 for 2019, compared to $53.24 for 2018.”  While it appears the claim in this statement is the cost of generating a MWh decreased on a year over year basis, OPG do not define what is included in the “TGC” calculation.  One should suspect a number of substantial costs, paid by ratepayers, are not included in the TGC!

This writer’s preference is to calculate the actual costs per MWh by simply dividing gross revenue by actual generation.  If one does that calculation for 2019 for OPG; the per MWh cost is simply $6,022 million (total revenue) divided by 77.8 TWh (generation reported).  Resulting from this calculation; the cost per MWh for 2019 was $77.40/MWh or 7.74 cents/kWh (kilowatt hour).  Ratepayers in the province would be happy if that was the average of TOU (time-of-use) rates, but ratepayers know, other factors played a role in increasing costs.  Wind and solar generation have driven prices up over the past 10 years by over 100% due to above market, contracted prices and the inability of wind and solar to generate power when it is actually needed causing us to export surplus generation for pennies on the dollar to our neighbours.

Looking back in OPG’s past is interesting.  If one reviews their financial statements for 2009 (the year the GEA was passed) the same calculation as noted above indicates a per MWh cost of $60.97 (6.1 cent/kWh). That means we have seen an increase of $16.43 per MWh or 26.9% over the 10 years!   Ontario’s inflation rate over those same 10 years was 17.97% so the cost of OPG’s generation over that time-frame was slightly above Ontario’s inflation rate.

While we can commend OPG for keeping their costs of generation at reasonable levels it is unclear why they suddenly went south of the border to acquire a string of hydro electric generating stations at a cost of C$1.12 billion. The acquisition of Cube Hydro (merged with Eagle Creek Renewable Energy) adds 627 MW of (mainly) hydro electric capacity but does absolutely nothing (on its surface) to benefit Ontario ratepayers.  As a provincial crown corporation their focus should be to ensure the delivery of cheap reliable power to Ontario ratepayers!

We ratepayers will need to keep our eyes fixed on OPG to ensure they don’t loose sight of their mission which is noted on their website as “ Ontario Power Generation’s mission is to provide low-cost power in a safe, clean, reliable and sustainable manner for the benefit of our customers and shareholder.”

*The OER replaced the Wynne led governments “Fair Hydro Plan” subsidizing rates for residential customers.

Pigs can fly and “Renewable energy should be the cornerstone of Canada’s net zero strategy”

A recent article in the Globe and Mail, as noted above, makes claims that cannot be supported by facts. The article tries to suggest Canada can be saved from the cataclysmic clutches of climate change but it is obvious the reporter (term used lightly) simply took what he was told and accepted it—no questions asked!

The article uses claims made by the spokespeople of the four parties who, in 2015, founded the Canadian Council on Renewable Energy (CanCORE).  Those four parties are the trade associations for the wind, solar, tides and hydro electricity generating companies.

Some of the information was taken from what appears to be a singular report on the CanCORE website from 2016 and embellished by the spokespeople, eg: “The flexible and dependable foundation provided by Canada’s existing waterpower infrastructure, coupled with the rapidly plunging costs of our wind and solar resources, makes renewable energy the least costly option for new clean and reliable power.”

The article says 60% of Canada’s electricity generation comes from hydro, 399.1 TWh  (terawatt hours) and 68% from all four.  So, the 8% difference came from wind, solar and tides.  If one reviews the latest information available from Natural Resources Canada in 2017, total electricity generation was 652 TWh .  Wind in 2017, is credited with the provision of 28.7 TWh, solar 3.3 TWh and tides with 0.2 TWh.

Further on in the article it says: “Waterpower is so abundant in Canada that increasing capacity at existing waterpower sites by less than 2 per cent would produce enough electricity to more than power Canada’s entire light-duty vehicle fleet.”  There is nothing in the article or the CanCORE report indicating what is meant by the “entire light-duty vehicle fleet” or it’s required power.  Putting that aside, a 2% increase in hydro generation would represent 8 TWh.

Looking at Ontario (only), OPG’s 2017 financial report noted hydro spillage was 5.9 TWh due to SBG (surplus baseload generation). The spillage was likely caused by wind generation added to the grid when it wasn’t needed as it is granted “first-to-the-grid” rights. To top things off, 2017 also saw 3.3 TWh of curtailed wind and ratepayers were required to pay for it along with the spilled hydro.  As recently reported Ontario has reduced emissions in the electricity sector by 18 MT (megatonnes) from 2010 to 2019 at a cost to it’s ratepayers and taxpayers of $23.8 billion.

To make matters worse for Ontario ratepayers, surplus power generation is sold in the export market at the Hourly Ontario Energy Price which is well below the contracted costs. Over the 10 years referenced above an average of 18.2 TWh annually were sold to Ontario’s neighbours. The cost to Ontario ratepayers was $12.5 billion.

While the current government of Canada has embraced the goal of achieving “net-zero” greenhouse gas (GHG) emissions by 2050, the obsession, will devastate the Canadian economy no matter what claims are made by the associations of wind, solar and tides generators!

The individuals who provided their dubious non-factual rhetoric to the author of the Globe & Mail article did so for the sole purpose of furthering the financial well-being of members of their associations.  They ignore the further damage to Canada their recommendations would cause. They should not be treated by journalists as they are and must be questioned about their claims and those writing the articles should do proper research.

Ontario’s three Classes of electricity ratepayers

The title above is intentionally misleading.

Ontario has only two classes of ratepayers which are: large industrial users referred to as, Class A and the rest as simply Class B!

Class A’s do have sub-categories related to their peak demands and in order to obtain lower rates, they must pick the “high five” hours of the year when Ontario’s demand reaches its highest level(s).  Picking those hours and reducing their demand (by firing up a diesel generator) allows them to achieve significant savings. Reference to IESO’s report for 2019 detailing Class A consumption and the cost of the GA allocated, indicates the average cost of the GA (Global Adjustment) was 5.89 cents/kwh. That GA cost plus the average HOEP of 1.83 cents/kWh for 2019 produced an average cost of electricity for Class A ratepayers of 7.72 cents/kWh.  The substantial all-in lower cost of electricity for Class A ratepayers is due to the allocation (subsidy) of the GA costs being charged to Class B ratepayers.

The Ontario Liberal Party during its time in power piled up electricity costs by signing contracts well above market rates for intermittent and unreliable power from wind and solar which needed back-up power from gas plants.  The combination of the three sources of power drove rates up resulting in large industrial customers making the point: Ontario’s cost of electricity made them uncompetitive.  The result was the Liberals simply reallocated costs to residential and small/medium sized companies.

The all-in Class B rate (GA plus HOEP) for 2019 was 12.63 cents/kWh.

Recently, not all Class B ratepayers had to pay the foregoing average rate, as “residential ratepayers” * now receive a taxpayer subsidy, appearing on our electricity bills as the “Ontario Electricity Rebate”.   A “rebate” of 25% off of the electricity line on our bills was initially referenced as the “Fair Hydro Plan” and enacted by the Wynne led government mere months prior to the last provincial election.  The Liberal government, under Wynne, noted voters were extremely upset with electricity rates climbing by over 100% in just several years. They felt it would affect the outcome of the election without the rebate.  Despite the rebate Ontario’s Liberal Party felt the wrath of the electorate and lost party status.  The Ford government moved the rebate to taxpayers and added other allocations such as:  conservation spending ($400 million annually), low income support programs ($200 million annually), Northern Ontario tax credit ($120 million annually) etc. to the taxpayer pot.  As a result (based on the writer’s calculation) taxpayers are now picking up almost 40% of the GA allocated costs for residential ratepayers under the “Electricity Cost Relief Program” recently estimated to cost $5.5 billion.

Second class, Class B ratepayers

The small and medium sized businesses** in Ontario are still bearing the full brunt of the increased electricity costs as they get no relief.  They are treated as second class citizens of Class B which are already regarded as second class citizens by our electricity operator. A significant factor affecting them is related to Ontario’s time-of use rates with the highest costs (20.8 cents/kWh during On-Peak hours) applied to when most small/medium sized businesses are operating and consuming electricity.

A recent occurrence allowed me to review an electricity bill for a company with just under 100 employees.  Their electricity costs were 18.9 cents/kWh.  A comparable company operating in the USA would pay (average of all US states) 10.8 cents/kWh according to the US Energy Information Administration.  The net difference of 8.1 cents/kWh would have saved the company almost $200,000 annually which may have resulted in the hiring of additional staff.  Those employees would have produced additional taxes for the Provincial and Federal coffers.

Bear in mind this is only one of the hundreds of thousands of small/medium sized businesses in Ontario.  Imagine what would have happened if we had not contracted at those above market rates for the intermittent and expensive power generated by those many foreign wind and solar generators that rushed to Ontario to take our hard-earned dollars.

The time has come to treat Ontario’s largest employers with the respect they deserve by axing the Global Adjustment and the time-of-use pricing mechanism!

We should surmise those small/medium sized companies are not in favour of subsidizing large industrial complexes or those greenhouse operators producing marijuana!  Let’s level the playing field!

*Full disclosure! I calculated my average electricity line cost from my recent bill (adjusted for the “Electricity Cost Relief Program”) and it worked out to 9.11 cents/kWh

**The CFIB in a 2016 report stated Ontario had 1.4 million small/medium sized businesses.

Canada’s wind power lobbyist re-energizes its spin


September 3, 2018

The Comber wind power project in Ontario: intermittent, unreliable power. Alberta, are you watching?

A recent posting by Robert Hornung, President of the Canadian Wind Energy Association (CanWEA), occurred shortly after the Ontario government passed an Act to terminate the White Pines wind power project.

Mr. Hornung’s post on the CanWEA website contained these statements.

“Maintaining investor confidence in the Ontario marketplace is important for Ontario’s short- and long-term economic prosperity. The Canadian Wind Energy Association (CanWEA) shares the Ontario Government’s commitment to an affordable and reliable electricity system that benefits Ontarians. CanWEA notes that wind energy projects in Ontario are an important source of sustained revenue for municipal and Indigenous partners. Ontario’s wind energy projects are providing long-term, stable pricing for Ontario ratepayers. Wind energy is now the lowest-cost option for new electricity supply in Ontario, across Canada, and throughout much of the world.”

It is ironic that Mr. Hornung, on behalf of CanWEA’s members, would claim they share the “commitment to an affordable and reliable electricity system” while suggesting “Maintaining investor confidence in the Ontario marketplace is important”.

Is he unaware Ontario has lost many good manufacturing and processing jobs due to the high cost of electricity, or has he simply chosen to continue to spin the fallacious claim that wind power projects have not played a role in driving up the operating costs (electricity rates) of the numerous large and small manufacturing and processing plants that have either closed or moved to other jurisdictions?

CanWEA, leaving behind its effect on Ontario’s economic well-being, appears to be moving on to greener pastures, promoting the same spin to politicians who buy into their claims. Now that they have sucked Ontario dry, they are headed to Alberta where Premier Notley has signaled her plan to close the 6,300 MW of coal plants and replace two-thirds of them with 5,000 MW of renewable energy, including 4,500 MW of industrial wind turbines (IWT).

CanWEA in yet another post on its website seems excited at the new prospects and boasts: “Wind energy developments are making positive and lasting social and economic contributions in communities across Alberta.”

With that in mind, it is ironic that at 11 AM on August 20, 2018, the 1,491 MW of wind turbines in Alberta delivered just 5 MWh* of power to the grid — that’s about 0.33% of their capacity.

Needless to say, similar occurrences have been seen in Ontario and many other places around the world where wind turbines have been constructed. This clearly demonstrates power generation from wind is both intermittent and unreliable, and must be backed up with reliable generation in the form of hydro or fossil fuel generation.

CanWEA buttresses their claims with promises of jobs and prosperity in yet another recent posting on their website. “Wind energy will also generate jobs and other benefits for Albertans, as a recent Delphi Group report demonstrates. And it can be an important part of a broader economic diversification strategy for the province, with the total potential for local project development and construction spending alone reaching $3.6 billion by 2030.”

If you actually read that report, you’ll find it suggests most of the estimated $8.3 billion spending ($1.8 million per MW) will actually occur elsewhere. Alberta produces very little of the materials required to erect wind turbines so the local jobs created will be temporary, in the planning and construction phase. In fact, the report suggests only 15,000 person-years of employment will be created for the $3.6 billion planned to be spent on planning and construction. The report also suggests 714 jobs may be permanent during the O&M (operations and maintenance) phase; however, even that seems optimistic as that would suggest one permanent job for every six MW which at a 2-MW average would represent only three turbines. In fact,the standard is one technician per ten turbines.

With the recent negative Superior Court ruling on the Trans Mountain pipeline build, and Premier Notley’s plea for action by the federal government, it is obvious her government will soon experience a lack of anticipated revenue to execute both her social programs and the provincial climate plan. The slowdown in royalty revenues will push Alberta into further debt. For that reason, it is not enough that she has pulled out of the federal climate plan and should, if logic prevailed, also cancel the provincial climate plan.

I found it stupefying that Premier Notley said “The time for Canadian niceties is over. We are letting other countries control our economic destiny. We can’t stand for it.” Is she suggesting the National Energy Board and the Superior Court are controlled by “other countries”?

Premier Notley should have cancelled the provincial climate plan including replacing coal generation plants with unreliable wind and solar power generation if she really wants to make her point, instead of blaming others.

The time has come, alright: time for Canada’s politicians to stop believing the spin from lobbyist CanWEA, and instead act in the best interests of Canada’s ratepayers/taxpayers. Politicians need to show us they aren’t controlled by those foreign-controlled entities granted contracts to erect symbolic industrial wind turbines.

PARKER GALLANT

*Thanks to Steve Aplin who posted this info on his twitter account: https://twitter.com/SteveAplin