Ontario Power Generation: where more means less

Back in late 2013, I noted that Ontario Power Generation or OPG had become the whipping boy for the Ministry of Energy. Now, it’s almost six years later, and not much has changed.  Just before my article appeared on Energy Probe, OPG had applied for a change to their “unregulated hydro”. They wanted it changed to “regulated hydro” which they got approved.  What that meant was they no longer would be dependent on receiving just the HOEP (Hourly Ontario Energy Price) market price for unregulated hydro.  The HOEP by then, had fallen due to the Liberal Government’s creation of the GEA (Green Energy Act) and the climb of the Global Adjustment which fell outside of the HOEP market price.

OPG recently released their 1st Quarter 2019 results. Both revenue and generation were up, marginally, by $19 million (1.3%) and .3 TWh (1.6%) respectively.  Nuclear generation was down, but regulated hydro was up with the latter increasing from 7.7 TWh to 8.2 TWh.

Those 8.2 TWh were produced by OPG’s 7475 MW of hydroelectric capacity in service. If one looks back to their 2008 1st Quarter* it indicated OPG had 3,332 MW of regulated hydro and 3,640 MW of unregulated hydro. In 2008 they generated 9.1 TWh; that means the 6,972 MW in service operated at 59.9% of their capacity and in the 2019 comparable quarter they operated at only 50% of their capacity.

In 2008 there was no spilling of hydro reported, but in 2019 they reportedly spilled 0.3 TWh. Producing less hydroelectric generation with a higher capacity seems strange. OPG spent $2.6 billion increasing capacity on the Mattagami River system and another $1.5 billion to increase generation capacity via “Big Becky” on the Niagara River system.  So, an additional 500 plus MW of clean hydroelectric capacity costing $4.1 billion was added but resulted in less generation (0.9 TWh less) than 2008.

Why?

The higher generation of hydroelectric power in 2008 had nothing to do with water levels as peak levels that year reached 75.3 metres versus 75.9 metres in 2019. In other words, there was no shortage of “fuel” for OPG’s hydroelectric plants in either 2008 or 2019.

What really happened was back in late 2008 former Premier McGuinty bragging about how the Melancthon EcoPower Centre (199.5 MW of wind capacity) had vaulted Ontario up to the point where it had 617.5 MW of wind capacity in operation. The following year Energy Minister George Smitherman rammed through the GEA (Green Energy and Green Economy Act) which led to the 2010 Long Term Energy Plan (LTEP), released by then Energy Minister, Brad Duguid. The LTEP sought 10,500 MW of renewable energy (7,500 MW of wind plus 2,500 MW of solar and the balance in biomass). The LTEP promised utopia with the creation of 50,000 permanent jobs. Duguid also promised us electricity rates would increase by 3.5% per annum and to help defray that increase they gave residential ratepayers a 10% reduction referenced as the OCEB (Ontario Clean Energy Benefit) which has since ended and was sort of replaced with the Fair Hydro Plan. We now know how those plans and events turned out!

As an example if one looks at the May “off-peak”** rate in 2008 and compare it to 2019 you would note it jumped from 2.7 cents/kWh to 6.5 cents/kWh which is a 140.7% increase and almost five times what Duguid told us rates would increase.

The advent of wind and solar contracts granted “first to the grid” rights at astronomical prices drove up the costs of electricity and their intermittent and unreliable nature required excess generation (generally gas plants) to sit at the ready for when the wind wasn’t blowing or the sun wasn’t shining. Those changes drove up the costs of electricity and coupled with the requirement to grant those “first to the grid” rights to wind generation meant hydro was, and still is, treated as “less qualified” renewable energy.

Ontario could have considerably more clean hydroelectric generation if we were devoid of expensive, above market wind and solar contracts! Instead, because of the lack of a cost benefit analysis by the previous government, Ontario’s ratepayers are stuck with expensive electricity until those contracts expire. At the same time, the taxpayer owned entity OPG suffers from revenue shortfalls for the $4.1 billion it spent to increase their hydro capacity, yet we ratepayers must still pick up the costs of that spending without any of the benefits.

The time has come to let OPG use their full hydroelectric capacity!

PARKER GALLANT

 

*The year before the GEA was passed and the recession occurred.

**Off-peak averages approximately 66% of most residential bills.

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Do wind turbines contribute to flooding?

A look at how water flows are managed brings up a few questions …

[ Ashley Fraser/Postmedia]
The Government of Ontario recently announced their plans to initiate “an internal task force that will consult with our municipal partners and other stakeholders in impacted areas on ways to improve the province’s resilience to flooding.” The announcement occurred as many areas in Ontario experienced water levels approaching the 2017 levels. Since then water levels in Lake Ontario have surpassed those of 2017 as noted in the Democrat & Chronicle: “The water level in Lake Ontario hit a modern-day high on Friday, exceeding by a sliver the record set just two years ago.”

Flooding in Lake Ontario is not a new event as that story noted: it “has happened in seven spring-summer periods since 1918, when record-keeping began: 1993, 1974, 1973, 1952, 1951, 1947 and 1943. The lake’s waters rose very close to 248 feet* on four other occasions dating as far back as 1929.”

The parties involved in managing water levels are numerous and include the IJC (International Joint Commission) which controls the Moses-Saunders dam between Cornwall, Ontario and Massena, New York. That dam controls the water levels in the Great Lakes to try and prevent flooding along the St. Lawrence River.

As well, the Ottawa River Planning Board was established to ensure integrated management of the principal reservoirs of the Ottawa River Basin.  Members on this Board include representation from OPG and Hydro Quebec as well as Federal Government members.  Interestingly, IESO, who manage Ontario’s electricity grid, are not members; yet on a minute by minute basis, IESO determine the flows for generation and spillage of almost all hydro dams in Ontario.

As if all this wasn’t enough to create complexity in water management, back in December 2016 the IJC adopted “Plan 2014” aimed at increasing “wetlands” in the Great Lakes. It was endorsed by Prime Minister Trudeau and President Obama.  Its effect was aimed at raising lake levels to create wetlands after lobbying efforts by people who thought this was good for the environment.  The IJC said, the lake will often be a bit higher than it had been in the spring and fall, and roughly the same in summertime.

Now the IJC and all the other bodies involved in managing the water levels are blaming good old “Mother Nature” for the 2017 and 2019 events! The floods occurred despite the record snowfalls being reported by weather stations throughout the first three months of 2019. Record snowfalls generally signal major spring runoffs.

So, let’s look at 2019 and review the first three months of specific electricity generation in Ontario and compare it to the same three months in 2017 to see what might be different and determine if it raises a question—did wind power generation play a role in causing flooding in 2019?

If you look at the IESO’s “Generator Output by Fuel Type Monthly Report” for the first three months of 2017 you see grid-accepted wind power generation was 3,462.5 GWh (gigawatt hours); in 2019 it was 3,919.7 GWh or 12.9% higher.  Curtailed wind** on the other hand decreased from 635.7 GWh to 225.2 GWh which was a decrease of 410.5 GWh or 64.4%.   Coincidentally, that decrease was almost equal to the higher grid-accepted wind amount and also coincidentally quite close to the decrease in SBG (surplus baseload generation) spillage by hydro dams as noted below.

Looking at grid-accepted hydro for those three months, we note in 2017 it was 9,544.1 GWh and in 2019 was 9,787.5 GWh, an increase of only 243.4 GWh or 2.6%. Hydro spillage for SBG in 2019 was 0.3 TWh (terawatt hours) whereas in 2017 it was 0.8 TWh (also in 2018), a drop of 0.5 TWh or 64%.

So another question is: why was SBG spillage in the first three of 2019 about 500 GWh less, while Ontario’s demand during those same three months was up by 1,411.1 GWh?

One would expect when a major spring melt is anticipated, reducing water levels in reservoirs from mid-February into March would be the accepted practice in order to alleviate flooding later. The spring melt from tributaries deliver the melted snow to places like the Ottawa River basin where its funneled for run-off or held in those reservoirs.

For the 2019 flooding, the question becomes: did IESO favour industrial wind turbines (IWT) over either increased hydro generation or reduced spillage? OPG is paid for SBG spillage as are IWT developments for curtailed wind.  Paying for curtailed wind while allowing more hydro generation and/or spillage may well have resulted in less flood damage costs which in 2017 were estimated at $200 million!  This year’s cost could be higher.

One would hope the Ontario government’s “internal task force” investigates the above issues to more effectively understand all the reasons for the excess flooding and not simply blame “Mother Nature”!

PARKER GALLANT

*Refers to “above sea level”.

**Thanks to Scott Luft who tracks both grid-accepted and distributed curtailed wind.

OPG: generating less power, but earning more

Lots more. A record, in fact.

K2 Wind: first-to-the-grid rights for wind and solar, and lucrative 20-year contracts added to costs

Ontario Power Generation (OPG) released its 3rd Quarter report in mid-November, and it was impressive!

Revenue was up $156 million to $1,373 million (+12.8%) and after-tax income was 113% higher, increasing from $131 million to $279 million. For the first nine months of 2018, OPG reports RoE (return on equity) of 10.8% and will easily generate record after-tax profits for the full year of well over $1 billion. Nine-month profits sit at $948 million, up 84% or $433 million—that’s a record.

Revenue is also poised to crack the $5 billion-dollar level (nine-month revenue is $4,062 million) as it has many times in the past; however, after-tax profits have never been this high since the creation of OPG in 1999 when Ontario Hydro was broken up into several different entities.

What’s interesting about those record profits? OPG is record profits despite a substantial decline in generation.

Look at year-end December 31 2000: OPG generated and sold (into the grid) 139.8 TWh (terawatt hours) and earned revenue of $5,978 million for an after-tax profit of $605 million.   What that means is, back in 2000, OPG’s approximate cost to generate 1 TWh was $42.7 million (4.3 cents/kWh). In 2018 (so far) the cost has jumped to $74.8 million (7.5 cents/kWh) for the 54.3 TWh delivered in the first 9 months.

The 54.3 TWh delivered so far in 2018 is down from the comparable 2017 period by 1.7 TWh or 3% and from 2000 (9 months) by 49.4 TWh* or 46%!   Comparing the first nine months of 2018 to 2000, net income is up $405 million or 74.6%

With such significant drops in generation one would expect net income to drop so what happened?

Some five years ago (December 4, 2013) an article I wrote for Energy Probe was headed up: “OPG-whipping boy for the Ministry of Energy” and it outlined how the GEA (Green Energy Act) had a detrimental effect on OPG’s electricity generation and its revenue, which resulted in declining profits.

I noted how their many “unregulated hydro” assets received only the HOEP (hourly Ontario energy prices) which produced revenue of just over 2 cents/kWh, and how they had been instructed to build “Big Becky” (cost of $1.5 billion) and the Mattagami run-of-river project (cost of $2.6 billion).  Falling out of the GEA also was the rise in prices caused by wind and solar generation with first-to-the-grid rights and had resulted in declines in consumption. That meant much of OPG’s power generation was called on less and less.

OPG were also instructed by the Liberal Minister of Energy to convert power plants such as Atikokan and Thunder Bay from coal to biomass and to close the remaining coal-fired plants, one of which required a multi-million dollar write-down for prior expenditures on “scrubbers” to eliminate emissions.

As all this was happening, over the subsequent years, OPG applied for rate increases such as being paid “regulated prices” for all of their hydro assets and for revenue when they were forced to spill hydro. Those were eventually approved along with other increases to cover pension contribution shortfalls, increases in operational management and administrative costs (OMA), and for refurbishment of some nuclear plants.

OPG’s capacity has fallen from 25,800 MW in 2000** to 16,218 MW today, yet in 2000 they generated electricity at a capacity level of almost 62%. So far in 2018, they are operating at a capacity level of just under 51%.

OPG power could have eliminated excessive costs for wind and solar

If OPG were granted the rights to operate at the 62% level of capacity as they did in 2000, they could have generated 65.8 TWh easily, replacing all the generation produced by industrial wind turbines and solar panels. That generation would have resulted in a cost of electricity of less than 7.5 cents/kWh and eliminated the excessive costs for wind and solar under those 20-year contracts!

Today, OPG seems to no longer look like the “whipping boy” but still produces power at prices well below the costs of contracted generation under the GEA and should earn over $1 billion for 2018!

PARKER GALLANT

*Enough to power all of Ontario’s 4.9 million households for a full year with over 5 TWh left over.         **Staffing levels have dropped from 12,250 (including 650 under contract) in 2000 to 7,700 in 2018 meaning the ratio of employees to capacity has remained static at 2.1 employees per MW.

Numbers don’t lie: intermittent wind and solar surplus to Ontario’s energy needs

The IESO (Independent Electricity System Operator) released 2017 data for grid-connected* generation and consumption and, surprise! The data reveal that power from wind and solar is surplus to Ontario’s  energy needs.

IESO reported Ontario’s consumption/demand fell 4.9 TWh (terawatt hours) in 2017 to 132.1 TWh. That’s a drop equivalent to 3.6% from the prior year.

Nuclear (90.6 TWh) and hydro (37.7 TWh) power generation was 128.3 TWh, making up 97.1% of Ontario’s total demand (without including dispatched power from either nuclear or hydro). The cost to Ontario ratepayers for the 128.3 TWh was approximately $7.6 billion or 5.9 cents/kWh.

Spilled hydro (paid for by Ontario’s ratepayers but not used) reported by Ontario Power Generation or OPG was 4.5 TWh for the first nine months of 2017. Out that together with 511 nuclear manoeuvres and the number is 959.2 GWh (gigawatt hours) wasted but paid for by Ontario’s ratepayers. Add in three nuclear shutdowns and it means Ontario’s nuclear and hydro generation alone could have easily supplied more than 136 TWh of power or over 103% of demand.

That doesn’t include spilled hydro in the last quarter of 2017 which will probably exceed at least one TWh.

Nuclear and hydro does it all

Nuclear and hydro could also have supplied a large portion of net exports (exports less imports) had all the generation potential actually been delivered to the grid. Net exports totaled 12.5 TWh in 2017.  Grid connected wind (9.2 TWh) and solar (0.5 TWh) in 2017 supplied 9.7 TWh and their back-up generation: from gas plants, supplied 5.9 TWh.  In all, the latter three sources delivered 15.6 TWh or 124.8% of net exports.  Net exports were sold well below the average cost of generation. Exports brought in revenue of about $400 million, but here’s the kicker: that surplus power cost Ontario’s ratepayers $1.4 billion, which is really a loss of $1 billion.

Grid-connected wind, solar and gas generation collectively cost approximately $3.5 billion for the 15.6 TWh they delivered to the grid, included curtailed (paid for but not used) wind power generation of 3.3 TWh. The cost of the wind power was more than $220 million per TWh, or 22 cents/kWh. That’s almost double the Class B average rate of 11.55 cents/kWh cited in IESO’s 2017 year-end results.

The 9.7 TWh generated by wind and solar was unneeded. If it had been required, it could have been replaced by gas power generation at a cost of only around two cents per kWh. Why? Gas generators are guaranteed payment of  about $10K per MW (average) of their capacity per month to be at the ready and if called on to generate power are paid fuel costs plus a small markup.

Price tag: $2 billion

In other words, if no grid-connected wind or solar generation existed in Ontario in 2017 the bill to ratepayers would have been about $2 billion** less! Grid-connected wind generation (including curtailed) cost ratepayers in excess of $1.7 billion and grid-connected solar added another $250 million!

That $2 billion, coincidentally, is about the same cost estimate of the annual amount to be deferred, and paid by future rate increases via the Fair Hydro Plan! In other words the current government could have easily saved future generations the estimated $40 billion plus cost of the Fair Hydro Plan by having never contracted for wind and solar generation!

The IESO results for 2017 sure makes me wonder: why hasn’t the Ontario Ministry of Energy canceled all the wind power projects that have not yet broken ground?

 

*   Distributor connected solar (2,200 MW) and wind (600 MW) added over $1.4 billion to the GA.

** The first 6 months of the variance account under the Fair Hydro Plan in 2017 was $1,378.4 million.

 

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!

Premier Wynne’s $50-billion elephant

Do a Google search of “premier wynne+elephant in the room” you get 1,140,000 hits while a search for just “premier wynne” only gets 486,000 hits. The word “elephant” has been used by Ontario’s premier on a number of occasions. For example, the “elephant” popped up at one of the expensive Ontario Liberal Party fundraising dinners a year ago where she declared, referring to the provincial deficit, “So while some want to characterize Ontario’s deficit as the elephant in the room, I think a panda is the more appropriate metaphor,” she said. “Truly, Jia Panpan and Jia Yueyue [visiting pandas at the Toronto Zoo] were adorable. But the pandas are leaving Ontario in 2018, and in 2017-18 our deficit will be gone, too.”

The “elephant” has returned for her government in the form of high electricity prices but instead of cute little “pandas,” Premier Wynne was forced to call them her “mistake”!

Let’s look at that elephant now.

The recent release of Ontario Power Generation (OPG) 2016 annual report provides enough information to allow one to figure out exactly what created the elephantine mistake and where to point the finger.   To do that we will compare the results of 2016 to 2009* and show the cause of the above market climb in electricity prices.

Price Comparison

IESO’s (Independent Electricity System Operator) data discloses the cost of electricity generation in 2009 was 6.22 cents/kWh or $62.20 per megawatt hour (MWh) or $62.2 million/TWh (terawatt hour) and in 2016 was 11.32 cents/kWh or $113.20/MWh or $113.2 million/TWh. The increase from 2009 to 2016 represents a jump of 82% in only seven years and in simple terms, is a jump of 11.7% annually.

Using the above prices to show the full cost of electricity generation in those two years is accomplished by multiplying total generation by the cost per TWh so:

Total generation 2009: 148 TWh X $62.2 MM= $9,205 MM

Total generation 2016: 149.5 TWh X $113.2 million = $16,923 MM

(Source: IESO)

That means an increase of $7,718 million (+83.8%) in the raw cost of the commodity-electricity.

Finding the “mistake”

Why did the cost jump 83.8%?

Let’s start with the generation produced by OPG who, according to their 2009 annual report generated 92.5 TWh and 78.2 TWh in 2016. Bruce Nuclear in 2009 generated 35.7 TWh and in 2016 they generated 46.1 TWh.  Collectively OPG plus Bruce generated 128.2 TWh in 2009 and that represented 86.6% of total generation (148 TWh) by all generators that year.  In 2016 the collective total was 124.3 TWh which represented 83.1% of all generation (149.5 TWh) in that year as reported by IESO.

Costing the generation 

2009

For OPG: The costing of generation coming from OPG is a relatively simple task requiring only their gross revenue for the year divided by the generation they reported.  For 2009 gross revenue was $5,640 million for the 92.5 TWh delivered making the all-in cost $61 million/TWh.

For Bruce Nuclear: The reported price paid to Bruce was $65.90/MWH.   So, for the 35.7 TWh they generated, the gross revenue generated was $2,352 million or $65.9 million /TWh.

The combined costs of $5,640 million from OPG plus the $2,352 million from Bruce was $7,992 billion to produce 128.2 TWh making the combined cost per TWh $62.34 million or 6.23 cents/kWh.

As noted above, total costs for all generation reported by IESO for 2009 was $9,205 million meaning $1,213 million ($9,205 million less OPG/Bruce combined of $7,992 million) was spent to acquire the 19.8 TWh generated by the other private generators, making their costs per TWh $61.3 million or 6.13 cents/kWh.  (Note: 9.8 TWh was generated by OPG’s coal plants in 2009.)

2016

For OPG: As noted above OPG in 2016 generated 78.2 TWh and their gross revenue was $5,653 million making their generation cost per TWh $72.3 million (7.23 cents/kWh).  Included in OPG’s gross revenue was a $207 million payment for hydro spillage of 4.7 TWh due to SPG2. (surplus base-load generation).

For Bruce Nuclear: Bruce in 2016 generated 46.1 TWh at a reported cost of $66 million/TWh making so gross revenue was $3,043 million including the cost of steaming off almost 1 TWh due to SBG.  

The combined costs of $5,653 from OPG plus the $3,043 million from Bruce was $8,696 million to produce 124.3 TWh making the combined cost per TWh $70 million or 7.0 cents/kWh.

Cost of the “other” generation

The all-in costs for generation for 2016 was, as noted above, $16,923 million. If one deducts the combined costs of OPG and Bruce Nuclear for their generation in 2016 ($8,696 million) the balance of $8,227 million went to pay for the 25.2 TWh produced by other generators.   Simply dividing the $8,227 million by the 25.2 TWh creates a cost per TWh of $326.5 million or 32.7 cents/kWh. ***

Had the 25.2 TWh cost ratepayers $70 million/TWh, or the same as the OPG/Bruce Nuclear generation combination (25.2 TWh X $70 million = $1,764 million), Ontario ratepayers would not be on the hook for the $6.9 billion in excess costs! ($8,227 million – $1,764 million= $6,932 million or the very high $326.5 million/TWh)

In just one year’s data, compared to 2009, we have located many of the reasons for higher electricity costs. The Premier now claims $50 billion was needed to invest in transmission and generation but her “mistake” was in not seeing the costs would go up more than 83%, principally related to the acquisition of intermittent, unreliable renewable energy from wind and solar!

There may be even more elephants in this particular room.

 

*The choice of 2009 is related to the Legislative passage of the Green Energy and Green Economy Act (GEA) in the Spring of that year creating the FIT and MicroFIT programs and subsequent acquisition of renewable energy at above market prices.

**Surplus Base-load Generation is simply anticipated “base-load less Ontario demand”.

***The per TWh cost reflects the FIT contracted generation for industrial wind turbines, solar panels, bio-mass along with curtailed wind, conservation spending, the cost of selling our surplus power to other jurisdictions at only 15% of its cost, etc. etc.

Ontario Power Generation report: good news and bad news

Ontario Power Generation (OPG) just released its annual report for the year ended December 31, 2016.

It’s a mix of good and bad news.

For example, gross revenue (net of fuel expenses) increased by $137 million and $34 million of that increase found its way to the bottom line, for a $436 million profit.

Generation from 2015 increased slightly from 78 terawatt hours (TWh) to 78.2 TWh, with nuclear generation increasing by 1.1 TWh and hydro decreasing by .9 TWh, which was further exacerbated (see next paragraph) by spillage due to surplus base-load conditions.

The bad news was that 4.7 TWh of hydro was “spilled” or wasted in 2016, up from 3.7 TWh in 2015. Those wasted 4.7 TWh of power could have supplied more than 500,000 (approximately 11% of all residential ratepayers) average Ontario homes with electricity for the full year.

The spillage by OPG didn’t affect their revenue, however, as they are paid for spillage at an average of about $44/MWh or $44 million/TWh. That means they received $207 million for wasted power and paid the Ontario Ministry of Finance the “water rental” fee for the spillage (although the latter wasn’t disclosed in the report).

Other “good/bad” news indicates OPG sold their Head Office on University Avenue in Toronto with closing scheduled for the second quarter of 2017. They expect the sale will generate an after-tax profit of $200 million.  The bad news is, OPG is obligated to turn over the profit to the Consolidated Revenue Fund. The land, building and maintenance costs fell to the ratepayers of Ontario to pay for via the electricity rates, yet the profit generated on its sale will be tossed into the bottomless pit of the Finance Ministry, instead of going towards reducing OPG’s costs of generation which could have benefited ratepayers.  That $200 million won’t even pay the interest on Ontario’s debt for a week!

SOLD! But the money won’t help you ..

The previous Energy Minister Bob Chiarelli on June 9, 2016 (four days before he was replaced by Glenn Thibeault) also issued a “declaration” to OPG instructing them: “to transfer, sell, dispose of or divest all of the Corporation’s interest in the Lakeview Site, comprised of the Municipal Park Lands and the Uplands”.  The Lakeview site is 67 acres running along the Lake Ontario shoreline and the Municipal Park Lands are the remaining 110 acres of the Lakeview Site.  Any excess revenues associated with the sale is to be transferred to the Government (Consolidated Revenue Fund), again rather than going to reduce electricity rates.

Ontario’s ratepayers absorbed the impairment costs of closing the coal plants in 2003, absorbing a “loss of $576 million as a result of the termination of cash flows from these stations after 2007.” The ratepayers of the province deserve to benefit from any recovery resulting from the write-off of the plant closings!

All this is more evidence of the “shell game” being perpetrated on Ontario ratepayers and taxpayers and the continuing legacy of the McGuinty/Wynne-led governments.

More to come …