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Parker Gallant on Ontario’s Energy Ministry: aiding the fortunes of…Quebec


No, no, don’t confuse me with the facts!

Endorsing fallacies, avoiding realities—Ontario’s Ministry of Energy
Global Adjustment charge jumps from $800 million to $6.5 billion in four years
Watch out Ontario, Quebec is targeting our industry!  That’s the message one gets from the announcement by Premier Pauline Marois that Quebec will use Hydro Quebec’s surplus power to attract job-creating industries to Quebec.  An article in the October 8, 2013 edition of the Financial Post states Hydro Quebec will set aside 50 terawatt (TWh) hours for that purpose.  To put that in perspective, 50 TWh represents 35% of Ontario’s total power demand (141.3 TWh) in 2012, or enough to power five million average Ontario households.
So what is Ontario doing to stave off this aggressive push from Quebec?  Well, since being named Premier, Kathleen Wynne has overseen the Ministry of Natural Resources issue renewable energy approvals for about 811 megawatts (MW) of industrial-scale wind power.  Three of those, including a Samsung contract (Armow Wind for 180 MW), occurred in just the last two weeks!  Her government also announced October 10, 2013 that they will scrap the plan to build 2,000 MW of new nuclear.  That 2,000 MW was part of the Long-Term Energy Plan issued by Brad Duguid in late 2010 when he was Energy Minister.
Here is what Energy Minister Bob Chiarelli had to say about abandoning the new nuclear build:  “We’re in a comfortable (electricity generation) surplus position at this time and it’s not advisable to make the major investments in new nuclear. Some time in the future we might be looking at it.”
To put that into perspective, it would take approximately 7,000 MW of industrial wind turbines to produce the equivalent power of the proposed 2,000 MW of nuclear.  That 7,000 MW would entail the erection of almost 3,500 turbines spread throughout the province, producing power at 29% of their rated capacity.   That same 7,000 MW of wind would produce power 80% of the time when we don’t need it—the middle of the night, during the spring freshet, and in the fall when our demand for power is the lowest.  And, when we don’t need the power we will often pay the wind companies to not produce power. We will also require other power sources to back up those turbines (now expensive gas plants, two of which were moved at a cost of over $1 billion ) so Ontario ratepayers will pay twice for any power we may need.
So what will this cost us?
A report from the Ontario Power Authority (that no longer appears on their website) pegged the Global Adjustment Mechanism (GAM) for the 12 months ended January 31, 2009 at $800 million.  Fast forward just four years to January 31, 2013 and the total GAM had jumped to $6.5 billion for the comparable 12 months.  The GAM looks sure to hit the $8 billion mark by the end of January 2014. That GAM pot principally reflects renewable energy costs along with money spent on getting Ontarians to conserve.
Looking at what the cost of 2,000 MW of new nuclear might be to the Ontario ratepayers and  using the original estimate of $26 billion, you get a capital cost of $43.4 million per TWh (assuming a 40-year lifespan).  That includes a fuel cost of 6.3 million per TWh.  For those who like to equate that to a kilowatt hour (kWh) the cost (without Operations, Maintenance and Administration [OMA]) would be 4.43 cents per kWh and 8.3 cents per kWh when OMA is included both less than recently announced average (8.88 cents) time-of-use (TOU) prices set for the next six months.
Now compare that to the cost of a TWh from wind turbines and assume they will produce at 29% of their rated capacity.   At 11.5 cents per kWh the cost to produce the same power jumps to $115 million per TWh (plus another 20% cost of living increases) without adding in the costs of back-up power from gas turbines, the spilling of clean hydro or “steaming off” nuclear power from Bruce.  The back-up alone adds over $80 million per TWh bringing the cost per kWh to 20 cents.
So how do Ontario’s electricity rates for large industrial customers compare with Quebec?  According to Hydro Quebec energy costs in Montreal at $100 would cost $223 in Toronto and $90 in Winnipeg.
It may be time for Premier Wynne and Minister Chiarelli to do a reality check.  Why didn’t they simply announce that Ontario doesn’t need more electricity production from wind, solar and nuclear “due to our comfortable surplus position” instead of the fallacy that we need more wind?
We certainly don’t need electricity generation that will complete the process of making Ontario the most expensive place to operate energy intensive industry in all of North America.  Stop the spin, stop the fallacy that wind can replace nuclear!
Parker Gallant,
October 21, 2013