Energy Minister’s promise of action causes concern

Past ministerial promises haven’t worked out so well. Why should we have faith in a minister who admits mistakes but then says he is planning major change?

Glenn Thibeault, Minister of Energy, spoke at a breakfast session for the Economic Club of Canada in Ottawa and admitted that “Ontario” (not the Liberal Party or his predecessors in the energy portfolio)  screwed up by paying too much for renewable energy.

Shock.

While that was a significant admission by Mr. Thibeault, recall that only three weeks earlier he claimed “We have the system of the future paid with yesterday’s dollars.”

His Ottawa remarks claimed Ontario’s leadership position in green energy was “absolutely the right policy,” yet the attractive fixed-term contracts handed out “created a bonanza” for wind and solar providers but “left ratepayers with a hangover.”   Minister Thibeault’s many claims made in that speech about eliminating “heavily polluting coal-fired power plants,” how “we drove significant investment in the province,” how “demand for electricity plummeted in the steep recession” of 2008, and how “Ontario had taken a leadership position in green energy,” have all been disputed by many. As just one example, the Green Energy Act (GEA), the feed-in tariff program and time-of-use pricing mechanisms were all policies copied from Germany and Denmark, and not a leading position.

Billions spent without proper planning: AG

The apparent surprise, “Ontario was paying too much for renewable energy,” was already noted by Auditor General Jim McCarter in his December 5, 2011 report: “Billions of dollars of new wind and solar power projects were approved without many of the usual planning, regulatory, and oversight processes.”

The AG report came over a year after then Energy Minister Brad Duguid released his Long-Term Energy Plan, calling for 10,700 MW of  renewable energy from wind and solar. Minister Duguid also directed spending on the Niagara Tunnel ($1.5 billion) and the Lower Mattagami River ($2.6 billion) hydro projects which presumably are some of those “yesterday’s dollars” Thibeault mentions.   Just before his LTEP was released, Minister Duguid pulled the plug on the Oakville gas plant and said, “As we’re putting together an update to our Long-Term Energy Plan, it has become clear we no longer need this plant in Oakville.”  More “yesterday’s dollars”!

As the electricity rates started spiraling upwards, Minister Duguid gave us the OCEB (Ontario Clean Energy Benefit) in February 2011, which took 10% off electricity bills for the following five years, and also added over $5 billion to the province’s debt.

Now many critics (me included) of the GEA said renewable energy would drive up electricity prices soon after the GEA was passed. One of the first articles I pointed this out in appeared seven years ago (February 24, 2010) in the Financial Post where I commented,  “As expensive electricity coming from wind and solar power slowly works its way through the system, many more rate increases will follow.”  (Several months later Minister Duguid labeled me as  a “self-appointed guru” on the Goldhawk Live TV show.  Perhaps he considered my forecasts to be “fake news”.)

Promises, promises

Back to Minister Thibeault’s speech: the remark we should all be concerned about is, “In the coming weeks you’re going to hear about out plan, how it will impact businesses and families, and most importantly, how it will provide structural changes that ensure both immediate and lasting relief.”

We ratepayers have seen claims like that before. On February 17, 2011, Minister Duguid promised: Creating more than 50,000 jobs in the clean energy economy” and “Helping reduce costs for consumers and making the power system more efficient through conservation”. 

Those jobs were never created and we reportedly reduced our consumption by the 7,100 MW Duguid had as a target, but our electricity bills increased.  In February 2011, the average electricity rate was 6.84 cents/kWh; and in Feb. 2017 it is 11.1 cents/kWh — an increase of 62.2% in just six years.  Off-peak rates are up over 70%.

The “structural changes” promised by Minister Thibeault may well turn out like past promises and fail to deliver anything close to what is promised.

Minister Thibeault and the Wynne government should instead cancel unfulfilled wind and solar contracts, LRP II (currently suspended), move the Ontario Electricity Support Program (OESP) to the Ministry of Community and Social Services, and stop the annual spending of $400 million on conservation programs.

Leave the planning to the experts!

 

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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.

Letter to Energy Minister Thibeault: facts not insults, please

The Honourable Glenn Thibeault, Minister of Energy

Dear Minister Thibeault:

I just read your “Guest Column” in the Toronto Sun headlined: “Energy minister rips report on closing coal plants.”

Your article seeks to discredit the work of the Fraser Institute referring to it as a “right-wing” institution, and the principal author as a “climate change denier” despite their record of achievements!

Interestingly enough, you don’t stop there to insult the authors, but ramble on with further insults and launch into rhetoric without any discernable facts.   You cite a variety of organizations without offering any specifics on how they; either researched the relationships between Ontario’s coal plants and those in neighbouring jurisdictions, or the effects of what those plants were spewing that wound up in Ontario’s air.   If you bothered to actually research the information the report contains you will see the authors effectively proved closing Ontario’s coal plants did little to improve air quality but what was effective turned out to be the switching of electricity generation in our neighbours’ land from coal generation to gas generation.  The prevailing winds did the rest! 

Throwing insults around is not an effective way to make a point.

It is interesting that you pick one year only to note the number of “smog days” Ontario experienced.  If you had checked with the Ministry of the Environment and Climate Change you would have learned that in  2012 we had 30 such days, in 2009 we had only five, but in 2007 we had 39.  If you are going to cite statistics you should not just pick one that makes the weak point you are striving for unless you can prove it wasn’t an aberration.

Your closing was presumably meant to show your compassion (like the Prime Minister’s hug the other night) and it does a nice job but I would note a lot of people remember back in July, August and September when all the bad news was hitting the press about energy poverty, people having to choose between eating or paying their electricity bill.  At that time Ontarians found out that at the end of 2015 there were 566,902 ratepaying households in arrears and 60,000 ratepayers were disconnected.  Those households in arrears represented over 12% of all of Ontario’s ratepayers and the many of the 60,000 households cut off had some very sad stories that the mainstream media picked up on.

Your compassion at that time was not flattering and the fix you brought in has been mitigated by the advent of the “cap and trade” tax that will continue to cause energy poverty. 

It is time your Ministry accepted responsibility for the mess that has been created in this province, home to the highest electricity prices in the country and the fastest rising in the U.S. or Canada.

Yours truly,

Parker Gallant,

A concerned citizen

Energy stakeholders to the Wynne government: the new plan should focus on costs

January 11, 2017

Last October, Energy Minister Glenn Thibeault launched the “Discussion Guide to Start the Conversation” with the objective of “Planning Ontario’s Energy Future”. The Long-Term Energy Plan or LTEP when presented in 2017 will be the sixth LTEP (including 1 and 1[a], discarded by Smitherman) developed by the current government in the past nine years, which says a lot about “long-term” planning.

Naturally when an opportunity to contribute to policy comes along, organizations offer their views on the direction the plan should take. I have prepared a review of some of the comments made to the Ministry of Energy on the LTEP.

First we have Robert Hornung (MA, Political Science), president of wind power trade association and lobbyist the Canadian Wind Energy Association or CanWEA, who suggested “The only way to meet those goals [reducing carbon emissions] is to increase the use of electricity, particularly electricity generated from sources that don’t emit carbon. Wind is well-positioned to meet that need.”

Then Jack Gibbons (former Toronto Hydro commissioner) of Ontario Clean Air Alliance said: “While the world shifts to green sources, Ontario is doubling down on nuclear, rebuilding ten aging reactors, while pushing renewable energy to the fringe. This is a bad plan and an economically disastrous direction . . . Ontario should set a target or moving to 100 per cent renewable energy by 20150.” [sic]

Now that is what I call “long-term planning”!

On the other hand we have organizations who are interested in ensuring electricity rates stop rising at multiples of the inflation rate.

Canadian Federation of Independent Business – The CFIB suggested in their comments to the Energy Ministry that “Ontario Hydro rates are out of control”; they met with the Minister of Energy and made the following recommendations.

• Eliminate all time-of-use (Smart Meter) rates for small businesses and implement a lower cost rate system on the first 3,000 kilowatt hours (kWh) of electricity consumed per month.
• Accelerate the removal of the Debt Retirement Charge from commercial hydro bills, which is currently slated for April 1, 2018.
• Require the display of the “Global Adjustment” on all hydro bills to increase transparency.
Canadian Taxpayers Federation – The Canadian Taxpayers Federation website posting shows their concern:
“If Hydro Rates are ‘Urgent Issue’ for Wynne, She Must Repeal Green Energy Act” and also, “Ontario customers have seen the largest increase in electricity prices anywhere in Canada – more than 60 per cent higher than the national average between 2006 and 2015.”

Ontario Chamber of Commerce – The Ontario Chamber of Commerce (OCC) were more subdued but their report of July 2015 commented: “The price of electricity is a major factor in the overall cost of doing business for many companies. As such, it is also a critical component of a jurisdiction’s competitiveness in the global economy. Jurisdictions with high electricity prices are at a disadvantage when it comes to creating jobs and attracting investment.”
The OCC’s submission on this LTEP noted in muted tones: “the addition of renewable energy resources under the Feed-in Tariff (FIT) program has contributed to overall systems costs by guaranteeing long-term and above-market payouts to generators.”

Canadian Manufacturers and Exporters – The Canadian Manufacturers and Exporters (CME) were much more aggressive in their submission on the LTEP. “We are calling for immediate relief for manufacturers from Ontario’s sky-high electricity rates and a longer term plan to use the system as a tool for economic development” said Ian Howcroft, Vice President of Canadian Manufacturers & Exporters (CME) Ontario Division. And “we urge the government to push further and faster to bring rates in line with competing jurisdictions.”
CME’s priorities for reductions included several recommendations including: Providing relief targeting smaller to medium sized manufacturers that aren’t covered by existing programs, and eliminating the Debt Retirement Charge (DRC), and “Offering more surplus capacity to manufacturers” among other suggestions.
Finally, they added this grave warning: “Lower manufacturing rates are necessary to retain and attract investment in Ontario rather than seeing it go to other jurisdictions.”

Ontario Society of Professional Engineers – A September 2016 article by Terence Corcoran of the Financial Post noted “Experts and analysts have been warning of the excess wind and solar expansions for years. The Ontario Society of Professional Engineers’ Paul Acchione warned in 2012 that wind expansion is ‘costly’ and ‘technically difficult to integrate’ into the Ontario system.” OSPE’s submission on the LTEP is a focused document that carries a lot of interesting facts. For example, they say this about power generation from wind:
“Wind generation has relatively little economic value in Ontario’s low emission power system.”

OSPE’s recommendations on ways to reduce the price of electricity are: Reduce operating costs or increase revenue from the sale of surplus electricity; Move existing costs not directly associated with producing electricity into tax-supported accounts; Transfer market risks from electricity consumers to investors; and, Remove government sales and water use taxes on electricity.
While the recommendations appear short and simple people “in the know” will recognize the seriousness subtly expressed in each of those four recommendations.

Strategic Policy Economics – Marc Brouillette’s excellent submission on behalf of Bruce Nuclear also carries some sane observations such as “Wind generation has not matched demand since its introduction in Ontario” and, “Over 70% of wind generation does not benefit Ontario’s supply capability.” And this one, which is becoming more evident as ratepayers are forced to pay for curtailed generation: “Wind generation will not match demand in the OPO Outlook future projections as 50% of the forecasted production is expected to be surplus.”

The recommendation that will cause the most handwringing will be: “The LTEP should integrate the objectives of Ontario’s environmental, energy, industrial, and economic policies for the long-term future benefit of Ontarians.”

Wind Concerns Ontario – The coalition of community groups and individuals throughout Ontario had this to say by way of advice to the Ministry: “The government policy to promote “renewables” such as wind and solar have been a critical factor in the grave economic situation today. Wind power for example, now represents 22% of electricity cost, while providing only 5.9% of the power. Worse, that power is produced out-of-phase with demand, as has been detailed by two Auditors General; so much of it is wasted. This is unsustainable.

“Clearly,” WCO continued, “the direction for the Ministry of Energy is to formulate a new Long-Term Energy Plan that will take immediate action on reducing electricity costs. Those actions must include a review of all contractual obligations for power generation from wind, and action to mitigate further costs to the system, and the over-burdened people of Ontario.”

WCO called for cancellation of all the wind power contracts given in 2016, the FIT 5.0 program, and further, cancellation of all contracts for projects not yet built or which are not going to make a critical commercial operation date. In fact, all wind power contracts should be reviewed and paid out, as Ontario can save money by eliminating the need to dispose of the surplus electricity.

 

Time will tell what the Long-Term Energy Plan will look like, but if it doesn’t include direct action to reduce actual costs to the system, it will be no plan at all.

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