Multi-million-dollar power contracts IESO style

Or, how the IESO could have saved Ontario ratepayers more than $400 million by cancelling one wind power project, but didn’t 

Surplus power in Ontario: why not get out of a contract if you could?[Photo: IESO]
February 6, 2018

On March 10, 2016 the Independent Electricity System Operator or IESO announced the outcome of the “Competitive Bids for Large Renewable Projects” via a news release which, among other issues claimed, they said they would award “five wind contracts totalling 299.5 MW, with a weighted average price of 8.59 cents/kWh”. The news release also described the contracting process: “The LRP process was administered by the IESO and overseen by an external fairness advisor. Robust and transparent public procurement practices were followed throughout the process, and each proposal was carefully evaluated for compliance against a list of specific mandatory requirements and rated criteria.”

Fast forward to October 26, 2017 and the release of Energy Minister Glenn Thibeault’s “Long-Term Energy Plan 2017 Delivering Fairness and Choice,” which offers some context for power contracts currently.

“Due to the substantial decline in the cost of wind and solar technologies over the last decade, renewables are increasingly competitive with conventional energy sources and will continue to play a key role in helping Ontario meet its climate change goals.”

and

“Ontario is Canada’s leader in installed wind and solar power.”

Economics of power procurement

Further on in the Plan are examples of how the Ministry, via the institutions under it, is working with communities. This one suggests the IESO is cognizant of the costs affecting ratepayers: “Ontario Power Generation (OPG) and Gull Bay First Nation (GBFN) are in the early stages of building an advanced renewable microgrid on the GBFN reserve on the western shore of Lake Nipigon. GBFN has an on-reserve population of 300 people and is one of the four remote First Nation communities that the IESO has determined to be economically unfeasible to connect to the provincial grid at this time.”

IESO recently issued their 18-Month Outlook for the period January 2018 to June 2019 and this report also noted the situation in respect to surplus power: “Conditions for surplus baseload generation (SBG) will continue over the Outlook period. It is expected that SBG will continue to be managed effectively through existing market mechanisms, which include intertie scheduling, the dispatch of grid-connected renewable resources and nuclear manoeuvres or shutdowns.”

Those manoeuvres or shutdowns in 2017 caused over 10 TWh (terawatt hours) to be wasted, but their costs were added to ratepayers’ bills and included 3.3 TWh of curtailed wind.

So, the province has a surplus of power, and the costs of wind and solar have become more competitive. Why would the IESO then not seize upon the opportunity to deal with a high-cost industrial-scale wind power project, when they had the ability to cancel it due to non-compliance with the original contract? At the very least shouldn’t they have renegotiated the contract to reduce the impact on ratepayers?

They did neither.

The White Pines story is a curious exercise in contract law, to be sure. A successful appeal* to the Environmental Review Tribunal by the community group the Alliance to Protect Prince Edward County** resulted in the project being reduced from 59.45 MW to 18.45 MW last fall. IESO could have simply canceled it because it was clearly unable to meet a condition requiring delivery of 75% of the capacity agreed to in the contract. At the very least, IESO could have renegotiated the terms of the contract to fulfill the Energy Minister’s claim that “renewables are increasingly competitive”.

But the IESO amended the contract for the reduced project, and granted waivers to the original conditions of performance, it was learned in a Belleville courtroom recently.

Cancelling would save millions

If IESO had canceled the contract, the Ministry could have claimed they reduced future rate increases saving ratepayers $21 million annually or $420 million over the full 20-year term. Even if IESO had only renegotiated the contract to the 8.59 cents/kWh achieved via the competitive bidding process instead of the 13.5 cents/kWh of the original contract, the Ministry could have claimed savings of about $5 million over the full term of the contract based on the currently approved 18.45 MW of capacity.

Has the IESO forgotten this line in in its Mission Statement ?

“Planning for and competitively procuring the resources that meet Ontario’s electricity needs today and tomorrow”

Cancelling just this one project*** would have helped to reduce surplus baseload and therefore the costs kicked down the road under the Fair Hydro Plan to be paid for in the future.

 

 

*The appeal was one on the grounds that the project would cause serious and irreversible harm to wildlife

**Disclosure: I am a member of the community group

*** The IESO has five contracts for more wind power projects totaling $3 billion, for power Ontario does not need.

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Ministry of the Environment missing in action on Prince Edward County fuel spill

Hard to imagine how a wind power contract handed out by the Ontario Power Authority could have a negative impact on Prince Edward County miles away, but it has!   The contract was awarded to a shell company (Windlectric Inc.) owned by Algonquin Power.  The approval granted Windlectric is to erect 26 industrial wind turbines (IWT) each soaring over 500 feet high with a capacity of 74.3 MW on Amherst Island.  When completed, they would deliver unneeded surplus power intermittently and unreliably.

Needless to say, residents of Amherst Island have been fighting the IWT invasion. Unfortunately, even though the island is considered an Important Bird Area (IBA) and labeled the “Owl Capital of North America” the residents have been unable to stop the project.  The power developer recently moved to start construction, first attempting to build a temporary dock enabling them to bring in the heavy equipment and supplies needed to erect the turbines.

The “temporary” dock and the IWT footings require tonnes of aggregate which it now appears they planned to source from Prince Edward County via barges.  The first barge brought into Picton Bay on March 23 was badly damaged and sank, releasing what appeared to be oil into the bay.  As time marched on, late on March 28 it was reported contaminants entered the Picton water intake zone.  Due to overnight wind forecasts the County declared a “water emergency” halting water processing at the Picton-Bloomfield drinking water plant.  The emergency continues and a “boil water” advisory was put in place on March 30th for residents of Picton and Bloomfield.  The water advisory required utilization of trucked drinking water from other locations in the county.

It is interesting to discover Windlectric’s website, Facebook page and Twitter feed initially said nothing about this event, but they posted an apology letter on their site in respect to a power outage they earlier caused to the residents of Amherst Island.   It is also interesting the Marine Logistics Plan is dated March 27, 2017, four days after the barge sinking.  It suddenly appeared on their website but fails to mention Windlectric’s plan to source aggregate from Prince Edward County or the total tonnage of aggregate required for the dock and the footings for those 26 IWTs.  It does say:“The Project estimates peak delivery requirements at up to six main barge round trips per day, six days per week, between the Project’s mainland dock and the Project’s island dock.” 

Anyone familiar with the geography of Prince Edward County will recognize the “mainland dock” referenced has nothing to do with the supply of aggregate.

As the week went on, the County’s emergency team did its best to ensure drinkable water is readily available for the residents of both Picton and Bloomfield by opening bulk water stations and shuttling it to the Picton-Bloomfield water system from Wellington and Rossmore. The event has resulted in a massive effort to bring a team together to manage the problem(s). The team consists of not only the marine company McKeil Marine Limited, owning the barge and the County of Prince Edward. Additional involvement includes the Canadian Coast Guard, Transport Canada, the Department of Fisheries and Oceans (Eastern Canada Response Corporation), Environment Canada and Climate Change and the Mohawks of the Bay of Quinte First Nation.

One is hard-pressed to find a representative of the Ontario government in that list.

As it turns out, the provincial Ministry of Environment and Climate Change (MOECC) has jumped in, but not to help. They issued “an order to McKeil Marine under the Ontario Water Resources Act to retain qualified consultants to investigate the environment impact on the County’s water system and private shoreline wells.” It’s too bad the MOECC didn’t require the same when handing out Renewable Energy Approvals (REA) to the developers who rushed to Ontario to erect IWTs and solar farms due to the high prices being offered on the backs of ratepayers.

One should anticipate the MOECC will find a reason to issue a fine as a penalty to McKeil Marine for the accident, but the ironic (and truthful) issue is, the MOECC is the Ontario Ministry that granted the Renewable Energy Approval (REA) to Windlectric Inc. in the first place. The REA seems to not have required Windlectric to file a “Marine Logistics Plan” until after the accident and the one filed is incomplete.   Should a fine be issued, it should be against the MOECC for their disregard for an IBA and the 34 species at risk when granting the original REA to Windlectric.

While issuing the REA was a flagrant disregard for the above reasons the other immediate issue that comes to mind is not recognizing Amherst Island is an “island” meaning supplies and equipment needed will have to travel by water. As just one example the 26 turbines being erected would require around 15,000 tonnes of concrete, slightly less than the foundation supporting the CN Tower and it will require approximately 1,000 concrete trucks to supply that amount! One should expect the local township roads will take a beating from all of that heavy (as in weight) traffic.

Makes you wonder how the MOECC officials issuing the REA, anticipated the concrete would get to Amherst Island if not by barge and cement trucks.

It is clearly time for Energy Minister, Glenn Thibeault to cancel this contract!

Parker Gallant,

April 2, 2017

Thanks to “countylive.ca” for their continuing updates!