Where did the $50 billion go, Premier Wynne?

He said, she said: we say, where did the money GO? [Photo: Toronto Star]
Last September 13, Minister of Energy Glenn Thibeault issued a press release announcing the  Ontario Liberal government would reduce electricity bills for five million families, farms and small businesses.  The relief granted was equivalent to the 8% provincial portion of the HST. The press release also claimed Ontario had “invested more than $35 billion” in new and refurbished generation.

Fast forward to March 2, 2017 and that $35 billion jumped to $50 billion in a press conference the Premier jointly held with Minister Thibeault. An increase of $15 billion in six months!

The press conference was to inform us the 8% relief announced by Minister Thibeault would be added to, with a further 17% reduction. A Toronto Star op-ed Premier Wynne wrote March 7, 2017 reaffirmed the $50 billion investment claim made the previous week, and further claimed: “By delivering the biggest rate cut in Ontario’s history and holding rate increases to inflation for at least four years, this plan provides an overdue solution.”

That made history alright, but not the way she meant. What the Premier forgot to say was that her government had brought us the biggest rate increases in Ontario’s history.  In March 2011 the Ontario Energy Board (OEB) website shows the average electricity rate was 6.84 cents per kilowatt hour (kWh) and on May 1, 2016 it had increased to 11.1cents/kWh.  In just over five years, the price of the commodity — electricity — increased 62%, a multiple of the inflation rate during that five years, which added about $400 to the average consumer bill.

Electricity price goes down, your bills go UP

From 2010 to 2015 Ontario demand fell by 5 TWh (terawatt hours) to 137 TWh.* That is enough to provide electricity to 550,000 “average” Ontario households for a year, yet the price for residential consumers increased 62%.   The increase was not driven by the trading value via the hourly Ontario electricity price (HOEP) market.  In fact, the market treated Ontario generated electricity badly as it fell from an average of 3.79 cents/kWh in 2010 to 1.66 cents/kWh in value for 2016 —  a 56.2% drop.

As to how they were achieving this “relief,” Wynne and Thibeault told us they were pushing the payback period for the 20-year contracts (wind and solar) out another 10 years. Those generation sources are the principal cause of the increase in electricity prices.  (For further proof of that, read  Scott Luft’s recent analysis on the costs of “other” generation in 2016 which confirms its effect on our rising electricity rates.)

Where did the money go?

What the Wynne/Thibeault announcement means is, ratepayers will pay for the intermittent and unreliable power for their 20-year contracted term(s), and continue to pay for the same contracts which, by that time use equipment that will be heading for, or already in the scrap yard.

It is time for Minister Thibeault to disclose what is behind his claim of $35 billion invested and for Premier Wynne to disclose the details of the $50 billion she says went to “necessary renovations” to rebuild “the system.”

Time to come clean.

* Ontario consumption remained at 137 TWh in 2016.

More Global Adjustment: what the costs are

February 21, 2017

The Global Adjustment (GA) charge in 2016 was responsible for 85% of the cost of electricity billed to all of Ontario’s ratepayers, less for large industrial clients.  The cost of the GA is for the cost of generation of electricity at the door (metaphorically) of the generation unit.  It does not include “line losses” which are found in the “delivery” lines of our bills and represented a cost of approximately $400 million at an average 3% line loss!

In dollar terms, IESO reported the 85% cost of the GA was $12.333 billion in 2016.  Because of the size of those GA costs the question on many minds is, what is it?   Steve Aplin of Canadian Energy Issues defines it this way: “It is simply a price recovery mechanism. It is the difference between the price the government promised any particular electricity generating company and the ‘market’ price of electricity.” 

So what are the relative parts of the GA which place the biggest burden on the climb in costs in the “electricity” line we have experienced.

The IESO published a News Release  on January 18, 2017 providing statistics on:  generation by fuel type and its percentage of contribution; ratepayer costs per kilowatt (kWh) for both the GA (9.66 cents per  kWh) and for the HOEP (1.66 cents/kWh) or market price;  and, imports and exports and provincial demand (137 TWh).  IESO don’t provide generation produced within the DX (distributor connected) sector.  The following are best estimates of some of the DX generated electricity and curtailed wind.

Wind

IESO report wind generated 9.3 TWh and Scott Luft reported 1.7 TWh were generated by DX connected wind turbines making total generated generation 11 TWh at a cost of $135 million per TWH (3.5 cents/kWh). An additional 2.2 TWh were curtailed at a cost of $120 million/TWh.

Total cost of wind capacity in 2016

11 TWh @ $135MM/TWh: $1,485 MM

2.2 TWh curtailed wind @$120MM/TWh: $264MM

TOTAL cost wind: $1,749 MM

LESS HOEP value of 11 TWh @$16.6MM/TWh: $183 MM

NET COST of wind to GA $1,566 MM

Solar

IESO reported solar generated .46 TWh in 2016 and the best estimate of DX generated solar at 15% of rated capacity for the 2,100 MW is 2.76 TWh for a total of 3.22 TWh. The average cost of solar generation in the province (roof and ground mounted) is about $480 million per TWh (48 cents/kWh).

Total cost of solar capacity in 2016:

3.22 TWh @480MM/TWh: $1,546MM

LESS HOEP value of 3.22 TWh @$16.6 MM/TWh: $53MM

NET COST of solar to GA: $1,493 MM         

Gas

Due to the intermittent and unreliable nature of wind and solar generation it must be backed up by other reliable generation capable of providing generation when the wind isn’t blowing or the clouds cover the sky. The back-up is generally provided by gas plants.  With 6,800 MW of wind and solar capacity the suggested replacement is 90% of capacity or about 6,120 MW of gas generation representing about 62% of its installed capacity (9,943 MW per IESO).  Gas plants are viewed as “peaking” plant capacity so contracts call for a monthly payment related to the amortized cost per MW and reputedly ranges from $10/15,000 per month per MW.   This calculation will use $10,000 per month/MW!

Total cost of gas generation as back-up for Wind and Solar in 2016

 6,120 MW @ $10,000 per month (6,120 X $10,000 X 12): $ 734 MM

Conservation

Another portion of money included in the GA is conservation spending allocated to all of the LDC based on commitments to reduce their demand over the 2015-2020 period. The total budget over those six years is about $2 billion so equates to $300 million per annum with a significant portion allocated to businesses and upgrades for low-income households.  The LDCs are allowed to apply for rate increases associated with their decline in revenue as a result of the conservation once achieved.

Total cost of conservation spending in 2016

Estimate based on 2015-2020 budget of $2B over 6 years: $ 300 MM

Ontario Electricity Support Program

The Ontario Electricity Support Program (OESP) launched on January 1, 2016 is aimed at low-income households who have suffered from the climb in electricity rates. The OEB study released in late 2014 estimated the cost of the program at $200/$225 million.  Logically, if the province was responsible for driving an estimated 571,000 ratepayers into energy poverty, the program’s cost should have been allocated to the Ontario Ministry of  Community and Social Services, but instead it has become another cost to all Ontario ratepayers.  At this point, the estimate of the first year’s costs are unknown, but if one assumes the OEB’s estimates were close they will impact all ratepayers.

Total cost of the OESP

 Estimate based on OEB’s study: $ 200 MM

GRAND TOTAL COST all of the above: $4,293 MM

Cost per terawatt hour of 14.22 TWh from wind, solar, conservation and OESP added to the GA  $302 million/TWh or 30.2 cents per kWh

 Missing from the above calculation is spilled hydro and nuclear power steamed off at Bruce Nuclear due to surplus base-load generation from wind and solar. The latter would add about another 5 TWh and another $300 million driving the per kWh cost to 32.5 cents per kWh.

If one deducts the 14.22 TWh from total Ontario generation (including DX) in 2016 one is left with 140.1 TWh and if the $4,293 million is deducted from the $12.333 billion of the 2014 GA cost the 140.1 terawatts from nuclear, hydro and gas generation cost was 19% of the GA or                   $57.38 million/TWh or 5.74 cents per kWh

The time has come to kill the Green Energy Act and return to sanity!

Hard to see through the fog of Wynne government energy promises

On October 21, 2013 Premier Wynne wrote a letter “To the people of Ontario” with a few promises.

“We must also unlock public data so that you can help us solve problems and find new ways of doing things. I believe that government data belongs to the people of Ontario and so we will make government data open by default.”

and

“Our Open Government initiative will help create the transparent, accessible government that the people of Ontario deserve. Over the months and years to come, we’ll be bringing forward additional initiatives that will improve transparency, accountability, and connectivity.”

Almost a year later, possibly in an effort to augment her promise of “transparency” she wrote “mandate letters” to her Ministers. To her Minister of Energy, Bob Chiarelli she said, “We want to be the most open and transparent government in the country. We want to be a government that works for the people of this province — and with them. It is of the utmost importance that we lead responsibly, act with integrity, manage spending wisely and are accountable for every action we take.” [Italics mine]

Premier Wynne’s “mandate letter” to the current energy Minister, Glenn Thibeault, September 23, 2016 said nothing about transparency but does say:  “At this halfway mark of this government’s mandate, I encourage you to build on the momentum that we have successfully achieved over the past two years, to work in tandem with your fellow ministers to advance our economic plan”.

After almost three and a half years since Wynne’s letter to the people, perhaps it’s time to look at the promise to “unlock public data” and how the “Open Government” promise has delivered on  “transparency”!

  • Two months after Wynne’s letter to her Energy Minister Bob Chiarelli, in an appearance on TVO he claimed, “since 2008, the province of Ontario – and you can verify it with the IESO — has made a $6 billion profit on the trading of electricity.”
  • Current Energy Minister, Glenn Thibeault when asked in an interview with Global TV for information on how many ratepayers were behind in their hydro bills and how many had been disconnected, he had no idea! Neither did the OEB, or Ministry of Energy staff. Thibeault wouldn’t admit there was a crisis.
  • Less than two months after Thibeault refused to agree there was a crisis, Premier Wynne admitted rising hydro bills were “an urgent issue”. Loss of a critical byelection finally opened her eyes.

The IESO (Independent Electricity System Operators) website dazzles with the amount of data available. Search using the terms “transparency” or “transparent” you get 2,800 hits. Impressive, but as the saying goes, actions speak louder than words!

IESO fail to provide data on:

  • How much wind is curtailed or
  • How much water is spilled by hydro electric generators or
  • How much nuclear is “steamed off” by Bruce Nuclear or
  • How much wind or solar distributor connection energy was produced or
  • How much money was generated from sales of surplus exported power to our neighbours and
  • How much that exported power cost Ontario’s ratepayers

IESO is responsible for the financial aspects of settling (contracted and/or regulated) with each and every generator in the province either directly or via local distribution companies, and also must settle with the buyers and sellers of both our exported and imported energy. In effect they play a major role in determining the final cost of what each and every ratepayer are charged for the line on their bills reading either “electricity” and “GA” or Global Adjustment.

They should be the purveyors of all the “public data” from the energy sector Premier Wynne referenced in her letter to us in September 2013 but as noted, they are falling short.

A recent event made that obvious.

On January 18, 2017, IESO issued a News Release, “ Ontario’s Independent Electricity System Operator Releases 2016 Electricity Data”. The release had a table summarizing Ontario’s transmission connected generator output by fuel type, listing the outputs as: Nuclear 91.4 TWh (terawatt hours), Hydro 35.6 TWh, and Wind 9.0 TWh respectively.   Two days later, those three “outputs” were suddenly different with Nuclear at 91.7 TWh, Hydro at 35.7 and Wind at 9.3 TWh.

No apologies, no explanations or even a mention they altered the original News Release. The .7 TWh added to the output represents a cost of about $70 million ratepayers will pay, yet no explanation was posted about the change.

In Ontario today, transparency is shrouded in fog, and “spending wisely” has been forsaken by this government, in the badly managed electricity sector.

No natural gas, more natural gas: what is the Wynne government’s game?

February 6, 2017

In April 2015 Brad Duguid, then Minister of Economic Development, Employment and Infrastructure issued a press release stating: “Increased natural gas access, through the $200 million Natural Gas Access Loan and $30 million Natural Gas Economic Development Grant, will attract new industry, make commercial transportation and agriculture more affordable, help to create jobs, provide more energy choices and will lower electricity prices for businesses and consumers across Ontario.”

The focus was expansion in rural communities and the money offered would do wonderful things including lowering “electricity prices.”  The Duguid statement appears to have flowed from the 2013 Long-Term Energy Plan (LTEP) released by Bob Chiarelli when he held the Energy Minister’s portfolio as noted in the OEB’s 2014-2017 Business Plan.

Just days ago, another press release was issued on the same issue by Bob Chiarelli, Minister of Infrastructure:  “Ontario is expanding access to natural gas for communities that do not currently have service, including those in rural and Northern Ontario and First Nations communities.”  It gave a “Quick Fact”: “Natural gas is the dominant heating source in Ontario and continues to be consistently less expensive than alternative sources such as electricity, heating oil and propane.” The Chiarelli announcement increased the “grant” amount to $100 million.

The recent announcement indicates the Duguid offer fell flat so perhaps Chiarelli’s announcement is an effort to see the claim he endorsed in the 2013 LTEP as one he is determined to follow through on, even if it raises Ontario’s debt by $100 million!

It is also ironic that Chiarelli is pushing expansion of natural gas consumption while our current Energy Minister, Glenn Thibeault is heading in the opposite direction. He recently instructed IESO (Independent Electricity System Operator) to basically shut several of the NUG (non-utility generators) gas plants down. Minister Thibeault’s recent directive to IESO notes:  “Ontario has put in place legislation for its new cap and trade program to limit greenhouse gas pollution while moving to a low-carbon economy.”   Most NUG contracts are gas generation units whose original contracts (executed in the Peterson Liberal government days) are close to expiry, and are “take or pay” contracts.  With the  surplus of power today, Minister Thibeault considers them expendable.  As a result the directive instructed IESO to renew contracts but only: “if the IESO is able to negotiate replacement contracts (IESO Contracts) with OEFC NUGs that incentivize them to operate in a manner that is better aligned with the integrated power system’s needs.”

As noted by Scott Luft some of those NUG contracts have been renegotiated, others ended, (the plants will be closed or mothballed) while some are in the process of  renegotiation.  One of those cancelled contracts offered to produce and sell power for 5.9 cents/kWh, but that offer was rejected even though it was way under prices paid for generation from industrial wind turbines and solar panels. Both those forms of power generation are unable to generate power when needed.

Is the objective of the Energy Minister to reduce emissions from gas plants so Premier Wynne can claim the “cap and trade” tax is working?

Meanwhile, if Minister Chiarelli is successful at handing out the $100 million tax dollars as grants to expand natural gas use, emissions will increase! Any increase will generate additional cap and trade revenue to help pay for the grants and the early shutdown of those gas plants.

Here’s the game: reduce emissions in the (already clean) electricity sector while pushing them up elsewhere and capture additional taxes along the way.

The topsy-turvy world of power policy in Ontario continues.

How much is wind power really costing Ontario?

For the cost to provide a small portion of Ontario’s power, wind is no bargain

Not a chance ...
Not a chance …

Most electricity ratepayers in Ontario are aware that contracts awarded to wind power developers following the Green Energy Act gave them 13.5 cents per kilowatt (kWh) for power generation, no matter when that power was delivered. Last year, the Ontario Auditor General’s report noted that renewable contracts (wind and solar) were handed out at above market prices; as a result, Ontario ratepayers overpaid by billions.

The Auditor General’s findings were vigorously disputed by the wind power lobbyist the Canadian Wind Energy Association or CanWEA, and the Energy Minister of the day, Bob Chiarelli.

Here are some cogent facts about wind power. The U.K. president for German energy giant E.ON stated wind power requires 90% backup from gas or coal plants due to its unreliable and intermittent nature.  The average efficiency of onshore wind power generation, accepted by Ontario’s Independent Electricity System Operator (IESO) and other grid operators, is 30% of their rated capacity; the Ontario Society of Professional Engineers (OSPE) supports that claim.  OSPE also note the actual value of a kWh of wind is 3 cents a kWh (fuel costs) as all it does is displace gas generators when it is generating during high demand periods.  On occasion, wind turbines will generate power at levels over 90% and other times at 0% of capacity.  When wind power is generated during low demand hours, the IESO is forced to spill hydro, steam off nuclear or curtail power from the wind turbines, in order to manage the grid.  When wind turbines operate at lower capacity levels during peak demand times, other suppliers such as gas plants are called on for what is needed to meet demand.

Bearing all that in mind, it is worth looking at wind generation’s effect on costs in the first six months of 2016 and ask, are the costs are reflective of the $135/MWh (+ up to 20% COL [cost of living] increases) 20 year contracts IESO, and the Ontario Power Authority awarded?

As of June 30, 2016, Ontario had 3,823 MW grid-connected wind turbines and 515 MW distributor-connected. The Ontario Energy Reports for the 1st two quarters of 2016 indicate that wind turbines contributed 4.6 terawatts (TWh) of power, which represented 5.9% of Ontario’s consumption of 69.3 TWh.

Missing something important

Not mentioned in those reports is the “curtailed” wind. The cost of curtailed wind (estimated at $120 per/MWh) is part of the electricity line on our bills via the Global Adjustment, or GA.  Estimates by energy analyst Scott Luft have curtailed wind in the first six months of 2016 at 1.228 TWh.

So, based on the foregoing, the GA cost of grid-accepted and curtailed IWT generation in the first six months of 2016 was $759.2 million, made up of a cost of $611.8 million for grid-delivered generation (estimated at $133 million per TWh) and $147.4 million for curtailed generation. Those two costs on their own mean the per kWh cost of wind was 16.5 cents/kWh (3.2 cents above the average of 13.3 cents/kWh).  The $759.2 million was 12% of the GA costs ($6.3 billion) for the six months for 5.9% of the power contributed.

But hold on, that’s not all. We know that wind turbines need gas plant backup, so those costs should be included, too. Those costs (due to the peaking abilities of gas plants) currently are approximately $160/MWh (at 20% of capacity utilization) meaning payments to idling plants for the 4.6 TWh backup was about $662 million. That brings the overall cost of the wind power contribution to the GA to about $1.421 billion, for a per kWh rate of 30.9 cents.   If you add in costs of spilled or wasted hydro power to make way for wind (3.4 TWh in the first six months) and steamed off nuclear generation at Bruce Power (unknown and unreported) the cost per/kWh would be higher still.

So when the moneyed corporate wind power lobbyist CanWEA claims that the latest procurement of IWT is priced at 8.59 cents per kWh, they are purposely ignoring the costs of curtailed wind and the costs of gas plant backup.

22% of the costs for 5.9% of the power

 Effectively, for the first six months of 2016 the $1.421 billion in costs to deliver 4.6 TWh of wind-generated power represented 22.5% of the total GA of $6.3 billion but delivered only 5.9% of the power.  Each of the kWh delivered by IWT, at a cost of 30.9 cents/kWh was 2.8 times the average cost set by the OEB and billed to the ratepayer.  As more wind turbines are added to the grid (Ontario signed contracts for more in April 2016),  the costs described here will grow and be billed to Ontario’s consumers.

CanWEA recently claimed “Ontario’s decision to nurture a clean energy economy was a smart investment and additional investments in wind energy will provide an increasingly good news story for the province’s electricity customers.” 

There is plenty of evidence to counter the claim that wind power is “a smart investment.” But it is true that this is a “good news story” — for the wind power developers, that is. They rushed to Ontario to obtain the generous above-market rates handed out at the expense of Ontario’s residents and businesses. And we’re all paying for it.