Canada Pension Plan’s investment in part of a wind-solar power portfolio seems to ignore a lot of negatives, including the energy poverty rising in Ontario due to electricity bills
Canada Pension Plan contribution rates are rising again, as reported by the Financial Post December 14, 2017: “the contribution rate (i.e., the CPP tax) has increased from 3.6 per cent when the CPP was launched in 1966 to its current rate of 9.9 per cent. It will increase further to 11.9 per cent beginning in 2019.”
The Canada Pension Plan Investment Board (CPPIB) is an active investor, looking for good rates of return without taking “excessive risk.” So they either searched for assets that pay guaranteed above market rates, or were approached by U.S. Power giant NextEra who sold them their Ontario portfolio of 396 MW of wind and solar contracts. CPPIB paid $1.871 million per MW for a total of $741 million CAD and also assumed the debt (US$689 million) attached to the NextEra portfolio. The press release associated with the acquisition had this quote from Bruce Hogg, Managing Director, Head of Power and Renewables: “As power demand grows worldwide and with a focus on accelerating the energy transition, we will continue to seek opportunities to expand our power and renewables portfolio globally.”
Perhaps Mr. Hogg was unaware “power demand” in Ontario has actually fallen from 153.4 TWh in 2004 to 132.1 TWh in 2017 despite an increase in our population of approximately 450,000. He may also be unaware industrial wind turbines create health problems, cause property values to drop and kill birds and bats including those on the endangered species list.
What the CPP acquisition means is Ontario ratepayers will be indirectly contributing additional funds to the CPP without the benefit of reducing either their annual tax burden or increasing their future pension benefits. A “win, win” for CPP and a “lose, lose” for Ontario’s taxpayers. The sole redeeming feature is that the money will stay in Canada instead of flowing elsewhere.
Ironically, the CPP by acquiring and holding those assets will also be showing their support for energy poverty. The Ontario Energy Board (OEB) in their December 2014 report noted: “Using LIM* as a measuring tool, and relying on Statistics Canada household data, Ontario has 713,300 low-income households.” At that point in time the 713,300 households represented almost 16% of residential ratepayers in the province and one should suspect that number has increased over the past three years.
So, one should also wonder why NextEra, headquartered in Florida, sold those assets and their above market returns? The press related to their announcement of the sale speaks volumes: “As discussed during our earnings call in January, we expect the sale of the Canadian portfolio to enable us to recycle capital back into U.S. assets, which benefit from a longer federal income tax shield and a lower effective corporate tax rate, allowing NextEra Energy Partners to retain more CAFD** in the future for every $1 invested.”
No doubt the NextEra sale may be a sign of the future as the Canadian economy has shown serious signs of slowing as taxes rise and foreign investment falls. The bulk of the investment in the renewable energy sector in Ontario came from offshore companies who rushed to take advantage of the above market rates and guaranteed prices offered under the Feed-in-Tariff (FIT) program available under the Green Energy Act.
Those investors will look to cash in on the sale of those assets, so we should expect to see more public and private Canadian pension funds stepping up to purchase them.
*Statistics Canada’s Low-Income Measure is simply defined as half of the median adjusted economic family income.
**Cash Available for Distribution
March 5, 2018
Being asked to do a presentation at Wind Concerns Ontario’s annual conference this past Saturday to describe the costs associated with industrial wind turbines was something I relished!
The presentation I developed used IESO information for 2017.
Discovered in the preparation of my presentation was the fact that nuclear and hydro power alone could have supplied over 100% of all grid-connected consumption for 2017, at a average cost of about 5.9 cents per kilowatt hour.
The cost for Class B ratepayers in 2017 however, was almost double, coming in at 11.55 cents per kwh.
So why the big jump? Have a look at the presentation to see why and look at Slide 6 in particular where you get an inkling of how IESO views the reliability of industrial wind generation in their forward planning process!
Wind power on two recent windy days cost Ontario electricity customers three times the current rate … and the surplus meant emissions-free hydro and nuclear was wasted
A simple Google search “wind power is cheapest energy” will generate 1.2 million hits.
If you search “wind power is most expensive energy” you get 2.1 million hits.
Two days last week in Ontario are real-world proof of the cost of wind power, no matter what the government or wind power industry spin tells you. Tuesday, December 5th and Wednesday December 6th were two very windy days, an excellent opportunity to examine both the power generation from industrial wind turbines in Ontario and their delivered cost of power to the grid.
The numbers for those two days:
$$$ IESO forecasts indicated that wind could have delivered 23.8% (177,100 MWh) of total Ontario demand (755,200 MWh) via the 4,200 MW of grid-connected wind capacity.
But wind turbines have a bad habit of generating power when it’s not needed (middle of the night, spring and fall) so the intermittent power must often be curtailed (constrained/wasted but paid for). It was!
$$$ The IESO curtailed 41.8% of their forecast generation meaning 74,000 MWh were not used!
Via the contracts in place with wind power companies, IESO is obliged to pay for both delivered and curtailed power at prices for grid-accepted power at $135/MWh and $120/MWh for curtailed power.
$$$ Quick math: the cost for grid-accepted wind on those two days meant Ontario ratepayers got charged approximately $22.8 million or $221.14/MWh for grid-accepted wind. That means it cost ratepayers 22.11cents/kWh (kilowatt hour), well above what the average time-of-use rates would be for the average Ontario ratepayer! The cost of the delivered wind power for those two days was almost three times the current levied* “average” cost of 8.22 cents/kWh, and 3.7 times the off-peak cost of 5.9 cents/kWh.
There’s more (sorry): be assured IESO instructed OPG to spill water over the hydro dams and Bruce Nuclear to steam off nuclear power — so power from our two reliable, emissions-free sources of power generation was also wasted. OPG and Bruce will be paid for that waste and the cost will be added to our bills. At the same time gas plants (backing up wind and solar) were being paid for idling.
Those two December days also saw sales of surplus power of 93,700 MWh to our neighbours in New York, Michigan, and others for pennies of the actual cost. In all probability, we recovered around 15% of their generation costs meaning, we bit the bullet for another $10/11 million.
Total: too much
Just the cost of the curtailed and grid-accepted wind and the losses on our surplus exports for those two days was $32/33 million for absolutely no benefit to any of us ratepayers. If every day of the year was like those two days last week, Ontario’s ratepayers would be shelling out over $6 billion annually, due to the abysmal planning and management of the electricity sector by the current Ontario government.
Imagine how far $6 billion would go to improve our health care system.
December 10, 2017
* This price reflects the 17% deferral under the Fair Hydro Act.
Ontario’s electricity ratepayers paid more than $500 million in 2017 for nothing
With only one month left in the current year, the bad news on the electricity sector keeps getting worse.
Well before the official sources such as IESO report on how much power industrial wind turbines generated and how much was curtailed (constrained, or paid for but not added to the power grid), my friend Scott Luft has published his estimates for both the former and the latter for the month of November.
As he reports (conservatively), curtailed wind in November was over 422,000 megawatt hours (MWh) — that could have supplied 562,000 average Ontario households with free power for the month.
Instead, no one got free power; the cost of the 422,000 MWh of undelivered wind power to Ontario ratepayers was $120/MWh. That $50.7-million cost for the month was simply added to the costs of the electricity bills ratepayers will be obliged to pay, while some of it will deferred to the future as part of the Fair Hydro Plan.
Somebody’s enjoying cheap power — not you
No doubt the wasted wind power presented itself when it wasn’t needed; if it had been accepted into the grid, that extra power could have caused blackouts or brownouts, so it was curtailed. At the same time, much of the grid-accepted wind was exported to our neighbours in New York, Michigan and elsewhere, at discount prices! Curtailed wind for November 2017 compared to 2016 was almost 55% higher.
How bad is it? Let’s review the first 11 months of the current year, compared to 2016.
So far in 2017, curtailed wind is about 786,000 MWh higher (+33.8%) at just over 3.1million MWh. The cost of all the curtailed wind so far in 2017 is approximately $373.6 million, or $94.3 million more than 2016 costs.
And wind wasn’t the only source of power generation constrained. When Ontario Power Group reported their third Quarter (September 30, 2017) results they said this:
“Baseload generation supply surplus in Ontario continued to be prevalent in 2017, resulting in forgone hydroelectric generation for OPG of 1.1 TWh*: and 4.5 TWh in the three and nine month periods ended September 30, 2017, respectively, compared to 0.5 TWh and 3.9 TWh during the corresponding periods in 2016.”
Translation: ratepayers will pick up the approximately $165 million cost of that waste via their electricity bills.
Not only are we curtailing wind and spilling hydro, but we also steamed off nuclear power generated by Bruce Nuclear at the same time we pay for idling gas plants to back up intermittent wind and solar power generation.
Intermittent wind and solar cost us
The cost of “greening” Ontario with unreliable and intermittent wind and solar keeps climbing, no matter what their proponents or politicians say. As ratepayers and taxpayers we should reflect on why 25% of the waste of the noted 7.6 TWh of undelivered power and its cost of $539 million (so far this year) is being deferred via the Fair Hydro Plan. And at the same time, we should recognize that we have experienced the worst possible planning in the Energy Ministry in the history of the province.
The energy sector in Ontario needs real planning by experts that will provide real value for money and save ratepayers from paying more than $500 million a year … for nothing!
* 1 (one) terawatt is equivalent to 1 billion kWh
This past weekend’s stats are not kind to the wind power cheerleaders
The wind power trade association, the Canadian Wind Energy Association or CanWEA, uses every opportunity to push for more wind power development, and often uses “selective facts” to promote their claims. One of the latest relied on investment firm Lazard by stating: “A December 2016 report from the U.S. investment firm Lazard found that wind energy is the lowest cost option for new supply in the United States without any subsidies. Wind energy costs continue to fall, offering an attractive electricity source to provinces seeking to clean and diversify their electricity systems.”
That statement is included in CanWEA’s recently released brochure “The Secret is Out, Wind is in”.
Had the unknown author(s) at CanWEA simply looked at the Ontario Energy Board’s (OEB) semi-annual Regulated Price Plan they would have noted Table 2 on page 21 of the April 20, 2017 report that the cost of a wind-generated kilowatt hour (kWh) in Ontario is shown as 17.3 cents ($178/MWh), as the cost of “curtailed” (not added to the grid) wind is also included as a cost input.
Had the author(s) also simply looked at IESO data they might also have noticed that maybe wind energy costs are not continuing to fall! Saturday, November 25th was an example: it was a very windy day in Ontario with an especially windy night. Unfortunately for the wind power cheerleaders, our demand for power from 12 AM until 7 or 8 AM was relatively low, but the wind was really blowing. That meant the 4,200+ MW of wind capacity were running at 90% (approximately) of their capacity, at the same time as Ontario’s demand for power was hovering mid-way between 11,000 and 12,000 MW. That’s very close to what our nuclear plants can provide on their own without help from other generation sources.
As a result, IESO ordered wind’s curtailment, hydro’s spilling and nuclear steam-off. At the same time, they were exporting whatever the market would take.
So, all together on November 25, the IESO curtailed 35,600 MWh of grid-connected wind and accepted 30,600 MWh into the grid, while scrambling to prevent brownouts or blackouts by exporting about 50,000 MWh over the day.
Industrial-scale wind power developers get paid $120/MWh for curtailed wind and $135 MWh for grid-accepted wind.
Quick math on all that means:
Ontario’s ratepayers picked up the costs of almost $8.6 million for curtailed and grid-accepted wind power produced when it wasn’t needed.
The cost of the grid-accepted wind (30,600 MWh) was therefore just over $280/MWh or 28 cents per kWh or, 10.7 cents more than the OEB reported back in April. On top of that, we ratepayers also ate the costs of spilled hydro, steamed off nuclear and the losses on the 50,000 MWh exported at a price close to zero.
Now if that author or authors who cranked out the latest CanWEA “selective facts” brochure were brutally honest, they would immediately change the title to:
“The Secret is out: wind is horribly expensive, intermittent and unreliable!”
Once again, the numbers show: wind power shows up when it’s not needed, adding to consumers’ electricity bills
The IESO/Independent Electricity System Operator just released their October 2017 Monthly Market Report.
As usual, it was full of bad news.
Ontario power consumption was down 2.6% from October 2016 and was the third lowest consumption month of the 10 so far in 2017.
October 2017 was also the fourth highest month for curtailed wind* in 2017 with 37.9% (481,243MWh [megawatt hours]) curtailed, compared to May’s record curtailment of 49.3%, April’s of 42.6% and June’s curtailment of 38.1%. History has shown wind’s generation levels in Ontario tend to always be higher in the Spring and Fall months, so this was no surprise. What it does underscore, again, is that the months of lowest power consumption line up with wind power’s best days on the job. Power when its not needed! Curtailment of wind in October cost Ontario ratepayers about $58 million.
On top of the wind power curtailment, Ontario also was busy exporting surplus power to our neighbours in New York, Michigan, etc. providing them with cheap power subsidized by the ratepayers of Ontario. Net exports (exports minus imports) averaged 1,438 MW per hour so 1,069,872 MWh were delivered elsewhere. Based on the record Global Adjustment (GA) for the month of $125.63 and the very low HOEP (hourly Ontario electricity price) of $8.75 MWh (0.088 cents.kWh) the cost to Ontario ratepayers; after recovery of the HOEP, transmission and congestion charges was approximately $107 million.
In summary, Ontario ratepayers picked up costs of curtailed wind of $58 million plus lost revenue from exports of $107 million for 1,550,000 MWh (rounded) generation of no value to them. Those 1,550,000 MWh were enough power to have supplied 172,000 average households with power for a full year or almost 2.1 million average households with power for the full month of October.
No doubt we also spilled cheap clean hydro and steamed off emissions free nuclear while paying for idling gas plants, at the ready; to ensure power when clouds passed over solar panels and the wind refused to blow.
This all adds up to very Un-Fair Hydro Plan!
November 23, 2017
Note: “constrained” means the power was not needed so not added to the grid … but paid for anyway.
* Thanks to Scott Luft for his invaluable data!