Surplus power: the other side of wind’s “success story”

Napanee gas plant: more flexible resources needed to offset intermittent wind -- trouble is, they also push emissions up
Napanee gas plant: more flexible resources needed to offset intermittent wind — trouble is, they also push emissions up

January 23, 2017

The Canadian Wind Energy Association (CanWEA) summarized their submission on Ontario’s long-term energy plan (LTEP) to the IESO on their website.  “Ontario is the Canadian leader in clean wind energy with 4,781 megawatts of installed capacity, supplying about 5 per cent of the electricity that Ontarians depend on,” CanWEA said. “Wind has been the largest source of new electricity generation across Canada over the past decade. Over this time, costs have come down as capacity factors have increased.”

Here’s the other side of that apparent success story. It’s not as rosy as CanWEA, the wind power industry lobbyist, would like you to believe.

The IESO just released the 2016 Electricity Data indicating industrial wind turbines (IWT) were responsible for the generation of 9.0 terawatts (TWh) of power, representing 6% of Ontario demand of 137 TWh.

What IESO doesn’t say about wind power generation, however, is annoying.  IWT generation in 2016 was actually10.7 TWh when DX (distributor connected) industrial-scale wind turbines or IWTs are included.  If the 2.2 TWh of “curtailed” wind is added, the bill to ratepayers was for 13 TWh.  The estimate of curtailed and DX wind comes from Scott Luft who does a remarkable job of tracking what is actually happening with generation.  IESO fails to disclose either curtailed or DX generation for whatever reason as they are the settlement agent for all generation in the province.

They have the data available to supply the public with those details.

Surplus baseload means possible grid failure

Not surprisingly IESO continue to run “stakeholder committees” that generate reports disclosing concerns about the intermittent and unreliable nature of wind (and solar), referencing it as “Variable Generation.” They note the production of Surplus Baseload Generation (SBG) which may cause grid failure leading to brownouts or blackouts. One of those reports from May 2016 noted: “SBG in ~65% of hours in 2015, even with 2 major nuclear outages” and “So far, SBG in ~88% of hours in 2016”.

Interestingly enough the current Minister of Energy, Glenn Thibeault on December 16, 2016 issued a directive to IESO instructing them to negotiate an exit from some of the NUG (non-utility generators) gas contracts labeled as “baseload” generators. IESO obeyed the directive as noted by my friend Scott Luft in his recent post “Ontario’s IESO steps off the gas”. We should suspect this action was not aimed at reducing SBG, but instead is aimed as trying to give credibility to the addition of the “cap and trade” tax that took effect January 1, 2017 by showing some negligible reduction in emissions.

The oxymoron in that is also to be found in a June 2016 IESO report titled: “Review of the Operability of the IESO-Controlled Grid to 2020” which suggested:

“We recommend enhancing the flexibility of Ontario supply resources to ensure that there are increased quantities of resources able to address the hour-ahead VG forecast inaccuracy, 95% of the time. This translates to needing ~1,000 MW of additional flexibility. The additional flexibility needs to be located in unconstrained parts of the system to ensure they can operate without restriction. Methods to enhance the flexibility of Ontario resources could include: increased utilization of existing resources, enabling simple cycle operation at combined cycle plants, or adding new peaking generation, grid energy storage or demand response resources. Methods chosen, which are expected to happen through open competitive processes, must ensure that they are cost effective and can meet expected operational duty requirements – given that these resources are required in the near-term to address reliability needs.”

Serious problems with wind

What IESO’s concerns and subsequent recommendations suggest is the variable and unpredictable nature of wind generation has created serious problems in the eyes of those entrusted to run Ontario’s electricity system.

So, here are the facts: power generation from wind cost Ontario’s ratepayers over $1.7 billion (approximately 12% of total generation costs) in 2016 for just over 6% of demand, and will cause ratepayers hydro bills to be further affected negatively.   IESO’s responsibility to manage the system through the exercises suggested in their recommendations will cost the system more money, increasing costs just to ensure industrial wind developments are able to extract money from the pockets of Ontario’s ratepayers.

The government of Ontario led by Premier Wynne will (in the near future) claim their actions on the electricity file were instrumental in reducing emissions, but here’s the thing: the flexible resources IESO seeks will push the emissions up again.

The trick is, that won’t be seen until after the 2018 election.

Forecast for April 2017: the news on electricity bills will be terrible

Reducing electricity bills is hard when you keep signing contracts for more power Ontario doesn't need. (Photo:THE CANADIAN PRESS/Mark Blinch)
Reducing electricity bills is hard when you keep signing contracts for more power Ontario doesn’t need. (Photo:THE CANADIAN PRESS/Mark Blinch)

November 29, 2016

The Independent Electricity System Operator (IESO) just released the Monthly Summary for October 2016. Comparing the prices to their report for October 2015 will make you weep.

Comparing the two months one year apart, you’ll see Ontario’s consumption decreased by almost 170,000 megawatts (MWh), but the costs of consuming less increased the commodity cost by over $176 million.

What that means: the 1% drop in consumption from 10.7 TWh (terawatts) to 10.5 TWh will probably result in the OEB (Ontario Energy Board) raising prices in the spring of 2017.

Here’s why. In 2016 we exported 1.4 TWh of power, one full TWh more than in 2015.  The 2015 hourly Ontario energy price (HOEP) was also $10/MWh higher than 2016, and so for that reason our 2016 net exports cost us $110 million more.  Coupling that drop in HOEP and the additional exports, my friend Scott Luft also estimated a wind curtailment* increase by the Independent Electricity System Operator or IESO (year over year) of 180,000 MWh.  The cost of that curtailment added an estimated $22 million to October’s costs of electricity.

October is a bad sign

If October is just the beginning of five months of increases, the news in mid-April 2017 when the OEB announces the price of electricity for the following six months will be terrible.

The “mistake” Premier Wynne admitted to at the Ontario Liberal Party Convention in Ottawa just days ago will loom even larger by mid-April 2017 as any increase will create more energy poverty. I would remind all at the convention she noted: “In the weeks and the months ahead, we are going to find more ways to lower rates and reduce the burden on consumers.”  Those “ways to lower rates” are getting harder to find as the government continues to sign new long-term power contracts.

I believe electricity ratepayers in Ontario would welcome some relief from the burden of our electricity bills, but I fear the damage caused by the Green Energy Act will take a decade or more before Ontarians see it.

Cancel, now

Premier Wynne should immediately cancel plans to acquire any more wind and solar power generation as planned under Large Renewable Procurement (LRP) I and LRP II as a demonstration of genuine concern for energy poverty and the citizens of Ontario.

*Curtailment: reduction in scheduled capacity or energy delivery

NAFTA wind farm decision shows need for onshore wind power research too

Related image

October 26, 2016

The events of the past few months have been difficult for new Minister of Energy Glenn Thibeault as he continues to try to defend his predecessors’ decisions. He has tried to justify: increased energy poverty, the fastest growing electricity rates in North America, the slow demise of energy intensive enterprises (manufacturing, mining, refining, pulp and paper production, etc.), gas plant cancellations and the privatization of Hydro One, to name a few.

Not to be ignored are the many challenges lodged by rural ratepayers against contract awards allowing construction of industrial-scale wind power projects in their communities. Thousands of those ratepayers have challenged the contracts and spent millions of personal after-tax dollars sitting in front of Environmental Review Tribunals, valiantly doing their best to protect the environment and wildlife from the highly invasive power projects. Only a very small percentage of the challenges have proven successful.

Just days ago another ruling was issued and once again it was in favour of an industrial wind developer. This time however, it came from a tribunal sanctioned under the North American Free Trade Agreement (NAFTA), and it was against the Government of Canada because of actions by the Ontario government.

The challenge by Windstream Energy LLC resulted in an award of $25 million and an additional $3 million in legal fees against the decision by the provincial governing party to place a moratorium on a contract granted to Windstream for an offshore 300-MW wind development.

The ruling by the tribunal “found that the Government of Ontario treated Windstream Energy LLC’s (Windstream) investments in Canada unfairly and inequitably” and also ruled “on the whole did relatively little to address the scientific uncertainty” surrounding offshore wind that it relied upon as the main publicly cited reason for the moratorium.

If one were to discuss the contracts awarded by the Ontario Power Authority or IESO with the people who have challenged wind power projects at Environmental Review Tribunals I suspect the words: unfairly and inequitably would be frequently heard.  Many rural Ontarians living in proximity to operating turbine installations and suffering the effects of audible and inaudible (infrasound) noise would raise the issue of the lack of research on the effects of the noise on humans.

“Relatively little” has been done to address the scientific uncertainty surrounding onshore wind turbines, as well.

Parker Gallant

The Premier’s mandate letters (2): why bills are rising so fast

September 28, 2016

More proof of why Ontario’s electricity bills are rising the fastest in North America

Ontario Energy Minister Thibeault has been the centre of media attention over the past several days for his announcement we will save $2.45 every month because he has “suspended” the Large Renewable Procurement process or LRPII, the result of a directive issued by former Energy Minister Bob Chiarelli to acquire 600 megawatts (MW) of wind and 300 MW of solar capacity.

Premier Wynne’s mandate letter to Minister Thibeault contained directions which were previously tied to a press release issued by his Ministry related to building transmission lines to service First Nations communities. The news release dated July 29, 2016 announced: “Ontario has selected Wataynikaneyap Power LP (Watay) to connect 16 remote First Nation communities that currently rely on diesel power to the province’s electricity grid.”

No mention was made about the cost of the project, only that it would create “over 680 jobs” and “save $1 billion over the life of the project” compared to the “use of costly diesel fuel”.   It was subsequently  reported the project was a $1.4 billion dollar build and would service 10,000 people in those 16 communities and save $43 million in annual diesel costs.  In simple terms that works out to be $140,000 per person and a 32.5 year payback.  I am not sure how the government got to the idea of saving “$1 billion over the life of the project.”

To reinforce the Minister’s earlier press release we must presume these extracts from the Premier’s mandate letter are related: “Working within the principles of the recent Political Accord, and upholding commitments to First Nation and Métis communities, to support and participate in new generation and transmission projects, and in conservation and community energy planning initiatives.” And “Expanding transmission to remote First Nation communities in Northwestern Ontario to reduce reliance on diesel-powered generation.” And, “Continuing negotiations with the federal government to secure a fair cost sharing arrangement in support of the remote communities grid connection project.”

Those comments Ontario is moving ahead with the project while counting on the federal government to kick in money. No matter the outcome of  Minister Thibeault’s negotiations with the federal government, it certainly appears it will be up to the province to supply the lion’s share of the $1.4 billion. What does that mean? Ontario’s electricity ratepayers will pick up the costs.

It is ironic that the Province is committed to the transmission build but not to building a road to the “ring of fire” estimated to only cost $550 million according to a joint study by Provincial/Federal officials and reported in the Globe and Mail.  The road would actually create both investments and jobs for the same First Nations communities and presumably allow cheaper construction of transmission lines while generating new taxes.

The actions of the Provincial government continue to remind me of the recent Cadillac ads which show the car moving forward but everything else in the ad moving backwards.

The time has come for Ontario to move forward with some common sense planning.

Parker Gallant

In the billions: the cost of closing Ontario’s coal power plants

The annual cost of closing Ontario’s coal plants 

The first article in respect to Ontario’s decision to close our coal plants examined the MW (megawatt) capacity and the type of generating capacity added to our electricity grid since 2011. The added capacity replaced the 4,484 MW of coal-fired generation at the end of 2011 in anticipation of increasing demand.

What I’ve done is approximate the costs of the added capacity versus the 4.1 TWh generated by the 4,484 MW of coal-fired plants, which cost only $135 million (3.3 cents/kWh) in 2011. 

Nuclear instead of wind and solar

As an example, the 1,532 MW of emissions-free Bruce Nuclear refurbished generation, at a capacity factor of 90% supplying 12.08 TWh, easily covered the loss of 4.1 TWh of coal-fired generation and left 8.7 TWh for added demand due to its flexibility to steam off or bypass the turbines. The 12.08 TWh could have supplied most of the 2015 solar generation of 3.04 TWh and the 10.2 TWh of wind, which proved to be unneeded.   The latter two alone in 2015 added an additional $2.7 billion to generation costs before curtailment (wind) costs of $88 million.

Bruce Power supplies from the 1,532 MW would have cost ratepayers $800 million, reducing the ratepayer burden by almost $2 billion annually.  Additionally “nuclear maneuvers” (reductions),  of 897 gigawatt hours added about $60 million during surplus baseload periods, caused mainly by (unreliable) intermittent power generation from wind.

Too much gas? 

Let’s look at the gas plant addition of 602 MW:  In 2011 the 9,549 MW of gas generation produced 22 TWh,  operating at a capacity factor of 26.3%.  Fast forward to 2015: the 10,151 MW generated 15.5 TWh  operating at a capacity factor of 17.5%.  Gas plants are quite capable of operating at a capacity factor of 40% to 60% (combined or single cycle).  In either case, they are regarded as peaking plants and for that reason investors know they will be called on when needed. Their contracts pay them for simply being “at the ready.”  Those costs vary but generally payments are $7,000 to $15,000 per MW per month.  The additional 602 MW of gas added about $100 million annually to the costs.  With gas generation falling from 22 TWh in 2011 to 15.5 TWh in 2015, ratepayers were burdened with the costs of the drop of 6.5 TWh at a cost of approximately $100 million per TWh, raising the cost of gas generation by $750 million since 2011.

Adding costly hydro

The bulk of the 754 MW added to the grid since 2011 came from the Niagara tunnel, (“Big Becky”) with a promise of 150 MW, and the Mattagami expansion added 438 MW of run-of-river hydro. Both of these projects by OPG were hugely expensive, costing ratepayers $4.1 billion plus interest on the money borrowed to fund the projects. If one amortizes those costs over 50 years it adds about $80 annually to ratepayer bills and the interest costs annually add about $120 million at 3% per annum. So that is $200 million for those two projects, without adding their OMA (operations, management and administration) costs.

As well, OPG is frequently forced to “spill” water under SBG (surplus baseload generation) periods mainly due to excessive intermittent wind and solar generation. In 2015 the latter was 3.4 TWh which cost ratepayers $150 million.  The other event affecting hydro costs was an amendment to change “unregulated” hydro to regulated pricing.  This change added $474 million to ratepayers’ bills for 2015 for the 30.4 TWh generated by OPG versus 2011.  So hydro costs in the four years from 2011 jumped from a cost of $37.7 million/TWh to $53.3/TWh.  The total additional costs of hydro (OPG only) in 2015 was therefore over $800 million.

Coal conversion 

The Ontario Energy ministers also issued directives instructing conversion of the 200-MW Atikokan and the 300-MW Thunder Bay coal plants operated by OPG.  A 2005 directive from Dwight Duncan was the first and told OPG to convert Thunder Bay “to operate using a fuel source other than coal”.  Later on when Brad Duguid sat in the energy chair he ordered it converted to gas but in the end it became a shareholder direction from Bob Chiarelli, ordering it to be converted to “advanced biomass” and agreed to cover the annual $30 million operating costs.  As disclosed by the Auditor General, if Thunder Bay produces any power, it will cost $1,500 per megawatt hour (MWh).  In respect to the conversion of Atikokan it may produce cheaper power in the 20 cents/kWh range but will probably operate at 10% of capacity and generate an annual cost of about $35 million.  So collectively, both of these conversions will produce almost no power but will add approximately $65 million annually to ratepayers’ bills.

Conservation is expensive 

The long-term conservation budget for 2015-2020 is $2.6 billion, meaning IESO will allocate spending of $433 million annually to local distribution companies (LDC) to reduce consumption by 7 TWh.   Should the LDC be successful, their delivery revenue will drop.  Assuming the delivery charge represents about 35% (on average) the revenue drop for all LDC would be approximately $300 million.  Then the LDC will be entitled to apply for a rate increase based on the drop in revenue, meaning the $300 million may be fully recovered.  Adding that to the monies spent annually convincing us to reduce our electricity consumption via the “conservation budget” adds another $483 million annually ($433 million + [$300/6 years = $50 million] = $483 million).

$4 billion … a year

So the cost of replacing the 4.1 TWh of coal generated at a cost of about $135 million in 2011 is in excess of $4 billion annually.

Confirmation of the foregoing cost can be simply calculated. If one reviews the “average” cost of a kWh on the OEB “Historical Electricity Prices” as of November 1, 2011 was 7.57 cents/kWh versus 10.70 cents/kWh on November 1, 2015.  The increase of 3.13 cents/kWh (+41.3%) translates to an increase of $31.3 million per TWh and applied to the 143.6 TWh consumed in 2015 provides an annual cost increase of $4.5 billion to ratepayers since 2011.

The cost blows away the purported healthcare costs supposedly caused by coal generation.   At the same time, it removes about $1,000 of after-tax money from the pockets of the 4.5 million ratepayers in the province every year.

This is a sad commentary on what the Ontario Liberal government has done to Ontarians.

Parker Gallant,

August 29, 2016

 

Ontario Power Generation report: waste and loss, more cost to consumers

Spilling, constraining, steaming off–Ontario’s surplus power situation is costing millions

August 14, 2016

Ontario Power Generation (OPG) just released their second quarter results and if you read the news release quickly you might think everything is wonderful — but it’s not.

OMA (operations, maintenance and administration) costs were up $59 million (9.1%) for the quarter compared to 2015, net income was down to $132 million from $189 million in the comparable quarter, and OPG are now the proud owners of Hydro One shares as this excerpt from the quarterly report indicates.

“In April 2016, OPG acquired nine million common shares of Hydro One at $23.65 per share as part of a secondary share offering by the Province through a syndicate of underwriters. The acquisition was made for investment purposes to mitigate the risk of future price volatility related to OPG’s future share delivery obligations to eligible employees under the collective agreements with the PWU and The Society renewed in 2015.”

The Hydro One share acquisition was of course one of the “net-zero” wage settlements touted by the Ontario Liberal government, and this one made specifically by former Energy Minister Bob Chiarelli when the announcement of a settlement with the employees at OPG was made.

Paid to waste power–and you pay them to do it

OPG also disclosed in the news release that they were again forced to spill hydro power which is normally sold into the grid for about 4.4 cents per kilowatt hour (kWh). The amount they spilled in the quarter was 1.7 terawatts (TWh) and 3.4 TWh for the first six months, compared to 1.5 TWh in the comparable 2015 six month period.  If that information makes you feel bad for OPG, don’t — they are paid the same for spilling hydro as for delivering it to the grid.  A change in regulations by the government created the “pay for spilling” situation.  The 3.4 TWh spilled could have supplied about 750,000 “average” households meaning, we wouldn’t have needed other much more expensive power such as intermittent and unreliable wind and solar.

The cost to ratepayers for the spillage of the hydro is about $150 million and will wind up in our electricity bills under the Global Adjustment charge.

While OPG were busy spilling hydro, we were also curtailing wind in the first six months of this year; my friend Scott Luft (http://coldair.luftonline.net/) keeps a record of those curtailments. Curtailments for the first six months on his chart were estimated at 1.245 TWh, and have already surpassed IESO reported curtailments for the whole of 2015 of .733 TWh.   The latter cost ratepayers about $88 million at the reputed $120 per megawatt (MWh) wind generators are paid for curtailment.   Curtailment costs for 2016 so far are about $150 million.

There were other wastes of generation and ratepayers money in the first six months of 2016 too as Bruce Power was frequently asked to “steam off” nuclear generation at two of their units, but no disclosure is yet available to tell us how much. In 2015 it amounted to .897 TWh which cost ratepayers about $60 million; it is probably more in 2016 as demand is down.

So ratepayers for just the first six months of 2016 will pick up the costs for OPG buying Hydro One shares, spilling hydro, curtailing wind, and steaming off nuclear without one kWh delivered to the “average” household despite the ratepayers responsibility for costs of about $600 million.   We also picked up costs to promote conservation which was probably north of $200 million for the six months.

Ontario’s electricity customers should be “steamed” about the increasing waste we continue to pay for.

© Parker Gallant