One (megawatt) is the loneliest number

On one day recently, for one hour, Ontario’s thousands of towering wind turbines delivered just one megawatt of power. And still, Ontario  had a surplus that was sold off cheap.

May 27 was a Saturday which is usually a “low demand” day for electricity in Ontario, compared to weekday power demand and assuming weather patterns are close to average. The temperature on the recent May 27 was slightly below historic averages in Toronto; as people woke up and set about their activities that day, the demand for electricity built slowly.

According to the IESO’s (Independent Electricity System Operator) Daily Market Summary, Ontario demand peaked at 14,069 MW and averaged 12,751 MW (total Ontario demand was 306,024 MWh for the whole day).  If anyone checked IESO’s “Power Data” page at, say, just after 11 AM, they would have noted demand was 13,208 MW at 10 AM and the HOEP (Hourly Ontario Energy Price) was indicating a negative price of -$4.00 /MWh.   If one had also looked at the “Generator Output and Capability” and scrolled down to “Wind Total” they would have seen that under the heading “Output” the number appearing on the screen was “1”!

As in, one single megawatt of power.

About half the capacity of one ordinary wind turbine.

So, at 10 AM on May 27, 2017 the approximately 4,500 MW capacity of the more than 2,000 wind turbines installed throughout the province by the McGuinty/Wynne governments with lucrative, 20-year contracts, were delivering one megawatt of power.

And yet, to the best of my knowledge, Ontario didn’t experience a blackout or brownout because intermittent wind power generation was almost completely absent, nor did our emissions increase, as we got all the power needed from nuclear and hydro resources.   In addition, the almost 9,000 MW of gas generation was idling, operating at an average of about 2% of capacity almost all day.

Despite wind only producing an average hourly output of 75 MW for the day and just the “1” for hour 10, Ontario still exported 43,584 MW of power at a cost to ratepayers of $5.6 million*.

Despite the lackluster performance of industrial wind turbines May 27 and on many other occasions, a visit to the home page of CanWEA still claims:  “Wind is delivering clean, reliable and low-cost electricity”!

Sure!

Perhaps with another 4,500 MW of capacity in Ontario, the industrial wind turbines may have delivered TWO MW of power at 10 AM on May 27?

 

*Cost estimate assumes the second IESO estimate of May’s Global Adjustment of $127.76 holds up.

What good is wind power?

April brought high winds, record curtailment of wind power, and record low consumer demand. Wasted and exported power could have supplied half the homes in Ontario for a month.

The Independent Electricity System Operator (IESO) recently released their April 2017 Monthly Market Report with information on power consumption, market pricing, exports and a host of other data.  What the April report revealed was Ontario’s average demand was low — so low that when energy analyst Scott Luft searched IESO’s records, he found the total demand for the month was a record low. He searched back to 1994, which is as far back as available.

The total demand reported by IESO for April 2017 was 9,788,614 megawatt hours (MWh): Ontario ratepayers are conserving, or we have lost many industrial clients, or both!

Another significant fact appearing on IESO’s website is that April was a pretty good month for Class A ratepayers. They consumed 21.9% of Ontario’s demand, but were only charged 11.4% of the Global Adjustment (GA), $965.7 million.  Class B ratepayers (that’s you and me, and small businesses) were charged with paying 88.6% of the GA, but represented only 78.1% of Ontario’s demand.

Cost: $160 million for revenue of $14 million

The other disturbing fact about April was our net export sales of power. That totaled 1,311,120 MWh sold at an average price of $11.14/MWh for a revenue of just $14.6 million for power that cost ratepayers $160 million. The loss of $145.4 million for the month contributed to the GA total of $965.7 million.

That 1.3 million MWh of exported power — which you paid for — could have provided power for more than 1.7 million average Ontario households at a cost of 1.11cents/kWh or just $8.35 for the month! (Assuming average use of 750 kilowatt hours/kWh of electricity for the month.)

Reviewing the IESO stats provides relatively current information but it doesn’t disclose the source of the generation, or what caused the hourly Ontario electricity price (HOEP) to be so low. Did we, for example, have to curtail wind?

Wind power: wasted. Again.

For that information I depend on my friend Scott Luft, who keeps a monthly data file which includes not only actual industrial wind generation, but also an estimate (always conservative) of curtailed wind power which we pay for but isn’t delivered to the electricity grid.  For the month of April 2017, wind power generated and curtailed (521,056 MWh) was 1,374,873 MWh, for a cost of  approximately $182 million.

Curtailed wind in April was the highest on record since we began paying for it back in September 2013!

Here’s the fatal math:

net exports of 1.3 million MWh +

the 521,000 of curtailed wind = 18.7% of total Ontario demand.

Combined, the 1,832,176 MWh at the HOEP price of $11.14/MWh and 1.11 cents/kWh and what do you get? Enough power for more than 2.4 million average households (over 50% of all households in the province) with their average need for power at a cost of only $8.35 — for the whole month.

Why doesn’t Premier Wynne simply cancel the Green Energy Act and the contracts for projects not yet built?

Either math is a problem for the Premier or she doesn’t want to admit to another “mistake”!

Parker Gallant

May 28, 2017

*Please note the GA is the can Premier Wynne is “kicking down the road” under her “Fair Hydro Plan” where she will refinance assets the Province doesn’t own by getting Ontario Power Generation to accumulate the debt for the uncoming 25% reduction in our monthly bills for the next four years. Look forward to a reappearance of the DRC (Debt Retirement Charge) but on a bigger scale in 2021!

Free power for a month for 4,000 Ontario families? Here’s how we missed that

How many homes could have benefitted from the excess power Ontario wastes, or sells off cheap?

Recently reading comments on an article related to the cost of wind power generation in Ontario, I was struck by a simple message.

The commenter had obviously visited the IESO “Data Directory”  and reviewed one item labeled Intertie Flows; he observed that IESO had exported 3,000 MWh (megawatt hours) in an hour.   He then observed that the exported power could have supplied 4,000 homes with free power for a month.  (Here’s the math: 3,000 MWh equals 3 million kWh; the “average” Ontario household consumes 750 kWh per month, so divide the 3 million by 750 and the answer is 4,000.)

This simple fact has not been picked up on by the media and yet, it is an easy way to shed more light on Premier Wynne’s “mistake” and our rising electricity rates.   The commenter also suggests going further and examining a full quarter to determine how many Ontario households would benefit from no exported power.

Excess wind and solar costs us

To be fair, while Ontario has frequently exported 3,000 MWh, we also import electricity generated elsewhere presumably at similar market prices. Those net exports or net imports (very infrequent for Ontario) are contained in the Intertie* hourly reports posted by IESO. Let’s look at the first three months of the current year.

To begin, IESO’s Monthly Market Reports for January, February and March of 2017 indicate Ontario’s “average net intertie schedule” for the first quarter of the current year totaled 2,909,000 MWh. While that was happening, industrial-scale wind turbines were generating over 3.9 million MWh in the same three months, and were also required (by IESO) to curtail (and be paid for) another 536,000 MWh.  So, the wind power developers picked up about $620 million for those three months.

To make matters worse, the average of the Hourly Ontario Electricity Price (HOEP) received (via the traded market) over those three months was only $22.72 per MWh or 2.27 cents per kWh.   That means Ontario received $66.1 million for the sale of the 2.9 million “intertie” MWh, while the average cost paid by ratepayers at 11.1 cents/kWh means the cost of those exports was almost $324 million.

Reducing power bills by 25% is peanuts—kill the contracts

Let’s go farther: if 1.3 million (28% of all residential households) of Ontario’s average ratepayers could have purchased those net exported kWh over the three months at the same price they were sold for, the 2250 kWh they consumed would have cost them $51 instead of the $250 they were billed. That would have reduced their cost of electricity by 390%. That makes Premier Wynne’s supposed 25% electricity bill reduction pale in comparison.

If the Premier really wants to lessen the burden on future ratepayer bills she should immediately cancel any wind and solar contracts that have not broken ground, and suspend any all future procurement of these unreliable and intermittent generation sources.

 

*Intertie is defined as an interconnection permitting passage of current between two or more utility systems.

Wynne spin and the Fair Hydro Plan, Part 3

The recent 2017/2018 budget speech from Finance Minister Sousa had this to say about the Fair Hydro Plan.

“People from across the province shared their concerns about rising electricity bills. We listened and we are responding. Recognizing that there needed to be a fairer way to share the costs of building a cleaner, more modern and reliable electricity generation system, we are taking action to reduce electricity costs. Through Ontario’s Fair Hydro Plan, starting this summer, household electricity costs would be lowered by an average of 25 per cent. We are also capping rate  increases to inflation for the next four years. Low‐income families, and those living in rural, remote or on-reserve First Nation communities, would receive additional relief as well.”

Impressive words signaling reallocation of charges to taxpayers previously paid by ratepayers as well as direct relief. The budget’s forecast however doesn’t jibe with the words contained in the speech from Premier Wynne when she announced the relief March 2, 2017 and said, “Although the refinancing occurs within the electricity system and is accounted for separately, the overall fiscal impact of this relief and restructuring will cost the province about $2.5 billion over the next three years.”

The Premier’s remarks suggest relief will cost about $833 million annually but the budget notes the “Electricity Rate Relief Programs” are forecast to cost $1.438 billion.

The budget estimate(s) presumably include the costs associated with the OESP (Ontario Electricity Support Program) for low-income families. Those “heat or eat” households were driven to that situation by climbing electricity rates caused by lucrative contracts handed out by the current and past energy ministers.  As well, free delivery costs for First Nations communities will become standard and taxpayer supported as will the RRRP (Rural or Remote Rate Protection) in low-density regions.  Also added to the pot is an “Affordability Fund” for households who can’t afford energy efficiency upgrades.  Finance Minister Sousa’s budget obviously forecasts those costs to taxpayers at over $600 million more than the Premier!  So what are Ontario’s taxpayers/ratepayers to believe?

Based on the foregoing we must assume the Premier’s $2.5 billion over three years are to only cover the programs moved to other ministries and will cost taxpayers about $4.5 billion if the relief ends three years hence.  Based on the record of this government we shouldn’t expect the relief programs to end in three years!

The other part of the Premier’s statement was: “In addition, this rate relief is designed to last. After we bring bills down by 25% we will hold them there with rates rising only with inflation — or roughly 2% — for at least four years.”  Once again the Premier avoids telling us the whole story. Other associated documents the general public have a difficult time locating tell another story.  One such document was the “Technical Briefing” appendix attached to a directive dated March 2, 2017 sent to the OEB by Energy Minister Glenn Thibeault.  Under a heading labeled “Refinancing the Global Adjustment” we find:  “Under current forecasts, the immediate reduction (i.e., the financed portion) in the GA would be about $2.5 billion per year on average over the first ten years,  with a maximum annual interest cost of $1.4 billion.”

What that means is, they are “kicking the can down the road” by refinancing $25 billion of contract and adding $14 billion in interest costs. At some point in the not too distant future (year 5?) electricity rates will need to jump to accommodate the $39 billion of accumulated debt within the portfolio.  What is being refinanced are those 20-year contracts for wind, solar and gas generation, yet the contracts will have expired and should, yet we don’t know if they will still be operational!

Interestingly enough, if we include the taxpayer-related relief costs of at least $4.314 billion ($1,438 million X 3 years) “kicking the can down the road” will labour taxpayers/ratepayers with $43.3 billion in costs. That $43.3 billion exceeds what was supposed invested in electricity generation ($35 billion) and is only $6.7 billion short of what they claim has been invested in the electricity system as this quote from the “Technical Briefing” notes:  Between 2005 and 2015, government invested more than $50 billion in the electricity system, including $35 billion in electricity generation to restore reliability, replace coal and meet environmental objectives.

So what are taxpayers and ratepayers seeing when they look ahead? First, a new debt associated with the electricity system will burden us with an additional $43.3 billion on top of the reputed $50 billion the Premier Wynne led government claims has been invested.  That accumulated debt will require payback which will drive rates and taxes higher.   Secondly many of the $35 billion investments in electricity generation and the $15 billion of investments in the electricity system will have reached their end of life and will require replacement.

The forecast for ratepayers is they should expect to see a new charge on their future hydro bills. Logic suggests the new charge should be referred to as the LDRC (Liberal Debt Retirement Charge)!

 

 

 

Wynne spin and the Fair Hydro Plan–Part 2

Part 1 in this series featured Premier Wynne’s assertion that “In the past few years we’ve invested more than $50 billion in electricity infrastructure — new dams in the south, new towers in the north, $13 billion to refurbish nuclear power plants alone and billions more to ensure new transmission and distribution lines everywhere.”

She is obviously spinning tales! Those “new dams in the south” are nowhere to be seen unless she is talking about “Big Becky” the tunnel under Niagara Falls at a cost of $1.5 billion ($600 million over budget) and the “new towers” in the north are presumably the industrial wind turbines (IWT) erected on the shores of Lake Superior where they despoil the landscape made famous by the Group of Seven.   And most of those “new transmission and distribution lines” were added to accommodate wind and solar developments, not to improve the existing electricity infrastructure!

The Premier’s spin about bringing bills down by 25% and her declaration “This is the largest cut to electricity rates in the history of Ontario” ignored the facts when she references “the elephant in the room” claiming it took “too long to come to grips with” how costs had increased.

The Premier claiming the “largest cut to electricity rates” should have admitted to how much rates have increased, but that admission would have failed to win back any of her former supporters. The “elephant” was the 138% increase Ontario’s average residential ratepayer has seen in time-of-use rates since May 1, 2008 in just the raw commodity (electricity) cost — that increased from $420 a year to $1,002.   The $582.00 increase is exclusive of the provincial portion (8%) of the HST!  The cost to small and medium-sized businesses was naturally a lot worse, as their consumption is much higher.

The Premier has already removed the provincial tax portion on out bills so the remaining reduction will reduce the average residential bill by 17% or $170 on the commodity cost for a monthly drop of $14. That’s almost the same amount as the Wynne government suggests the “cap and trade” tax will cost us!

How did we get to a 138% increase?

Let’s look at where that 138% increase came from. Based on the Ontario Energy Board’s Yearbook of Distributors for 2008* and 2015** the “cost of power” increased from $9.031 billion to $13.971 billion, an increase of $4.940 billion despite a reduction in consumption of 4.2 terawatts (enough to supply 465,000 average households).  As well, “average” consumption fell while the number of customers increased by 362,000!

That additional annual cost for less power of $4.940 billion was the product of the GEA passage in early 2009 which resulted in contracted developers being paid above market prices for intermittent, unreliable wind and solar generation requiring back-up from new gas plants.

A prior article dealing with 2016 costs for wind, solar, gas and conservation was based on information from IESO that allowed me to estimate an annual cost of $4.123 billion made up of: wind-$1.566 billion, solar-$1.493 billion, gas back-up-$734 million and conservation-$300 million.  Not included was an estimate for the low-income support program or OESP (Ontario Electricity Support Program) which was included in the recent budget for the 2016/2017 year as $400 million.  Also not included are the costs of spilled hydro and steamed-off nuclear (about 5 TWh or enough to power 550,000 average households) which would add another $300 million bringing the estimate to $4.823 billion and close to the 2008/2015 increase of $4.940 in the commodity cost***.

The next article, Part 3 in this series, will examine Finance Minister, Sousa’s recent budget. We will do our best to identify the budgeted costs of the “Fair Hydro Plan” as they make their appearance in the forecasts.   Just how much are the Premier Wynne led government kicking “down the road” for future generations to pay?

 

* Note that both the cost of power and the consumption information in the OEB’s Yearbook do not include: First Nation Distributors, Hydro One Remotes, and Direct Connections to the Transmission Grid

** The OEB has not yet posted the 2016 information.

*** The Yearbook for the 2008/2015 comparison indicates distribution costs increased $767 million in this time frame which was a 21.6% increase and slightly higher than the cost of living increases.

Wynne spin and the “Fair Hydro Plan”

Re-reading Premier Wynne’s statement of March 2, 2017 on her announcement of Ontario’s Fair Hydro Plan, one is struck by the avoidance of the truth, the sudden empathy displayed and her blatant claims.   As one example, she suddenly noticed “Electricity is not a frill — it’s an essential part of our daily lives.”

The Premier has obviously forgotten her party clearly treated it as a “frill” by taking advice from environmentalists who persuaded her (and predecessor Dalton McGuinty) that industrial wind turbines (IWT) and solar panels could easily replace the power generated by coal plants.  They were so taken by those claims the energy minister didn’t bother to do a cost-benefit analysis as noted by Ontario’s Auditor General (AG).  They also charged ahead installing “smart meters” at a cost of $2 billion (AG report) and instructed the OPA (Ontario Power Authority) to acquire 10,500 MW of renewable energy principally in the form of IWT and solar panels.

The year prior (2008) to the creation of the Green Energy Act, Ontario’s coal generation plants produced 23.2 TWh (terawatts) or enough electricity to supply 2.4 million (55%) average households .  In 2016 wind and solar* collectively and intermittently generated 14.2 TWh — 9 TWh less than coal plants generated in 2008.   The collective cost of wind and solar and their back-up (gas) in 2016 was approximately $3.8 billion or 27 cents per kilowatt (kWh,) whereas the cost per kWh of coal power generated in 2008 was 5.5 cents/kWh (OPG annual report).

Renewables: five times more costly

In short, the collective cost of electricity supplied by renewables and their back-up (gas) to replace coal generation turned out to be five times more which clearly raised the cost of the “frill,” but our Premier(s) and Energy Ministers were apparently unaware** costs were rising to that extent.

On the latter point the Premier in her statement claims: “But it’s not as if I’ve been unaware of the challenge. I have seen the rising rates. My family and I get a bill like anyone else.”  Premier Wynne’s salary in 2016 was $208,974.00 and in 2006 was $108,031.00 so she has seen a pay increase of 92% in 10 years.  It’s doubtful she was impacted by the $536,84 average annual increase she experienced in her cost of electricity as it represents less than one day’s pay at her current compensation level.

The Premier’s statement blames rate increases on past governments and claims since the Liberals regained power in 2003 they had to engage in “fixing a system that had been structured unwisely”.  Naturally, the 2003 blackout (caused by a fault in Northern Ohio) is blamed for the upgrade by the Premier to obscure their contracting of unreliable and intermittent wind and solar generation at above market prices.  The Premier now claims the “electricity grid” they created “is second to none.” And yet, the AG noted in  her December 2015 annual report that power outages increased 24% and lasted 30% longer!

Later in her statement the Premier notes “But the way we financed those investments was a mistake.”  The disturbing part of the statement about “those investments”, was Premier Wynne’s assertion “In the past few years we’ve invested more than $50 billion in electricity infrastructure — new dams in the south, new towers in the north, $13 billion to refurbish nuclear power plants alone and billions more to ensure new transmission and distribution lines everywhere.”

That part of the Premier’s spin will form the basis of Part 2, in this series, tomorrow.

 

* Wind and solar generation are classified as “base-load” generation whereas coal was strictly used for “peaking” (high demand periods) purposes.

** The writer has consistently sent Premier Wynne and her predecessor along with the various Energy Ministers a link to every article written no matter where it appeared.

CanWEA gets it wrong on energy costs: university professor

University professor in engineering and environment says CanWEA guilty of “willful blindness”; quotes him incorrectly in statement on energy costs

Just a few days ago, I wrote that the Canadian Wind Energy Association (the trade association for the wind power industry, also known as CanWEA) posted a statement by its Ontario representative that people who say wind power is adding to Ontario’s electricity bills are misleading the public. Ms Gianetta referred to University of Waterloo professor Natin Jathwani to support her views.

Professor Nathwani e-mailed me in response to the claims made by Ms. Giannetta’s in her recent post on CanWEA’s website, which I repeated in “Wind power lobby myth buster is busted”.

Professor Nathwani’s email:

Dear Mr Gallant:

In your Blog, you have cited Ms. Giannetta’s post on CanWEA’s website on April 24, 2017 as quoted below:

Her article points to two articles that purportedly support the “myth” she is “busting,” but both require closer examination. She cites Waterloo professor Natin Nathwani’s, (PhD in chemical engineering and a 2016 “Sunshine list” salary of $184,550) article of March 6, 2017, posted on the TVO website, which supports Premier Wynne’s dubious claims of “a massive investment, on the order of $50 billion, for the renewal of Ontario’s aging electricity infrastructure.” Professor Nathwani offers no breakdown of the investment which suggests he simply took Premier Wynne’s assertion from her “Fair Hydro Plan” statement as a fact! It would be easy to tear apart Professor Nathwani’s math calculations — for example, “The total electricity bill for Ontario consumers has increased at 3.2 per cent per year on average” — but anyone reading that blatant claim knows his math is flawed!

First and foremost, the record needs to be corrected since Ms Giannetta’s assertions are simply incorrect and should not be allowed to stand.

If she has better information on the $50 billion investment provided in the Ministry of Energy’s Technical Briefing, she should make that available.

The breakdown of the investment pattern in generation for the period 2008-2014 is as follows:

Wind Energy $6 Billion (Installed Capacity 2600 MW)

Solar Energy $5.8 Billion (Installed Capacity 1400 MW)

Bio-energy $1.3 Billion (Installed 325MW)

Natural Gas $5.8 Billion

Water Power $5 Billion (installed Capacity 1980 MW)

Nuclear $5.2 Billion

Total Installed Capacity Added to the Ontario Grid from 2008-2014 was 12,731 MW of which Renewable Power Capacity was 6298MW at a cost of $18.2 Billion.

For the complete investment pattern from 2005 to 2015, please see data available at the IESO Website.

In sum, generation additions (plus removal of coal costs) are in the order of $35 billion and additional investments relate to transmission and distribution assets.

I take strong exception to her last statement suggesting that the 3.2 percent per year (on average) increase in total electricity cost from 2006 to 2015 in real 2016$. The source for this information is a matter of public record and is available at the IESO website.

Ms Giannetta’s assertion is complete nonsense because she does not understand the difference between electricity bill and generation cost. Let Ms Gianetta identify the “blatant flaw.”

As for the electricity bill that the consumer sees, there is a wide variation across Ontario and this is primarily related to Distribution.

The Ontario Energy Board report on Electricity Rates in different cities provides a view across Ontario:

For example, the average bill for a for a typical 750kWh home Ontario comes is $130 per month.

In Toronto it is $142, Waterloo at $130 and Cornwall at $106. On the high side is Hydro One networks is $182 and this is primarily related to cost of service for low density, rural areas.

Your Table 2 Total Electricty Supply Cost is helpful and correctly highlights the cost differences of different generation supply.

Only wilful blindness on Ms Giannetta’s part would suggest that wind and solar are coming in at a low cost.

Warmest regards,

Jatin Nathwani, PhD, P.Eng

Professor and Ontario Research Chair in Public Policy for Sustainable Energy Executive Director, Waterloo Institute for Sustainable Energy (WISE)

Faculty of Engineering and Faculty of Environment Fellow, Balsillie School of International Affairs (BSIA)

University of Waterloo, Waterloo, ON

Energy Minister Thibeault manipulates public health data

The reason given by the McGuinty and Wynne governments for their ambitious (and now seen as economically disastrous) green energy program, instituted without any cost-benefit analysis, is the need for clean air in Ontario.

Energy Minister Glenn Thibeault was interviewed in his home riding recently, and had this to say in defence of the program, and to boost his party’s record to voters: “There’s lots of positives that are happening that we need to start talking about. Even, for example, when I talk about energy, we don’t [talk] about the fact we haven’t had a smog day in three years. Our air pollution hospitalizations are down by 41 per cent, deaths are down 23 per cent.

Deaths down 23 per cent”?

That statement seemed dramatic to me and a few others who regularly analyze and comment on energy in Ontario. So, I queried the Minister in an e-mail about his source of the information.

What I received back was a link to a charity called “Toronto Foundation” and a 265-page report they called “Toronto’s Vital(R.) Report” which contained this statement:

“Premature deaths and hospitalizations as a result of air pollution have dropped by 23% and 41% respectively since 2004.[16]

The figures Minister Thibeault used during his interview were apparently taken from that line in the report and the referenced link “[16]” to the actual source of the information which was a Toronto Public Health (TPH) report of April 2014.

What it actually said had nothing to do with the Energy Minister’s spin.

Here is that section from the TPH report:

Findings

Based on the most current information available, TPH estimates that air pollution in Toronto from all sources currently gives rise to 1,300 premature deaths and 3,550 hospitalizations annually (see Table 1). These estimates include the impact of pollution originating in other parts of Ontario and the United States and represent a decrease of 23% in premature deaths and 41% in hospitalizations as compared with 2004 estimates. Air pollution in Toronto comes mainly from traffic, industrial sources, residential and commercial sources, and off-road mobile sources such as rail, air, and marine sources. Of these sources, traffic has the greatest impact on health, contributing to about 280 premature deaths and 1,090 hospitalizations each year, or about 20% of all premature deaths and 30% of all hospitalizations due to air pollution.

The report contained no reference to the coal plants or their closing as Minister Thibeault’s “energy” inference suggests as the source of either causing premature deaths or hospitalizations!

As Guelph University economics professor Ross McKitrick recently reported, “Turns out Ontario’s painful coal phase-out didn’t help pollution—and Queens Park even knew it wouldn’t”.

It is a very serious matter when the government of the day manipulates public health data to suit its public relations agenda.

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!

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.