Tag Archives: Ontario economy

Ontario’s “Rollback” surplus power sale: $4B in 3 years

21 Wednesday Jan 2015

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Here from former bank VP Parker Gallant, now VP of Wind Concerns Ontario, a review of Ontario’s green energy policy which has resulted in a surplus of power produced when we don’t need it, and the government’s sell off to neighbouring jurisdictions.

Ontario’s power system is “exactly like Walmart” Bob Chiarelli says

Electricity: on sale every day, cheap, in Ontario
Electricity: on sale every day, cheap, in Ontario

Anyone reading an excerpt from the November 18, 2014 Standing Committee on Estimates text of Energy Minister Bob Chiarelli might have trouble discerning what his message was.  And, specifically, what his answer had to do with MPPRandy Hillier‘s question on whether Ontario loses money exporting surplus electricity.

Chiarelli had danced around the question, claiming Ontario needed “surplus generation,” but Hillier kept hounding him and finally, Chiarelli responded.

Mr. Randy Hillier: “Listen, I understand that we want to have a margin of surplus. We all can understand that, because you don’t know specifically and exactly how much is going to be needed at any particular point in time. But let’s get back to the question. What are our estimated losses—do you have an estimate—for this year and next year, cumulatively, in our losses of trades?”

Hon. Bob Chiarelli: “Can I ask you to give me 30 seconds without interruption? Just a few seconds, okay?”

Mr. Randy Hillier: “Well, if you can answer the question—60 seconds.”

Hon. Bob Chiarelli: “Walmart buys snow blowers. They expect to sell X number of snow blowers in a winter. At the end of the winter, if they haven’t sold those snow blowers, they sell them at a discount. They’re selling them for less than their costs. That’s part of doing business.

The electricity system is exactly the same as Walmart. Why do they have sales? Why do they sell a product that is worth X number of dollars in November for less when they’re selling it in March or April? Why do they do it? They’re giving it away. They’re losing money. How much have they lost?”

Walmart. Ontario’s electricity system is “exactly the same” as Walmart.

Here’s what the Ontario Auditor General’s report for 2011 said about what Ontario lost by exporting electricity surpluses.

 “Based on our analysis of net exports and pricing data from the IESO, we estimated that from 2005 to the end of our audit in 2011, Ontario received $1.8 billion less for its electricity exports than what it actually cost electricity ratepayers of Ontario.”

The losses highlighted in the AG’s report are related to the creation of the Global Adjustment or GA.  The buyers of our surplus electricity only pay the HOEP (hourly Ontario electricity price) and Ontario’s consumers pick up the difference between the contracted price for generation and the HOEP.  It was that difference, the GA, that the AG’s report highlighted.

Ontario has seen three more years of generation since that report and each one has meant increasing costs to Ontario’s electricity consumers.  For 2012, IESO reported our exports were 14.6 terawatt hours (TWh) and generated an average price of $24.1 million/TWh, but the costs to Ontario’s consumers for that generation included the GA which was an additional $49.6 million/TWh—that resulted in a cost of $724 million.  2013 was worse: Ontario exported 18.3 TWh generating $26.5 million/TWh with  the GA cost at $59.0 million/TWh for a cost of $1.007 billion. 2014 was slightly worse again, with exports of 19.1 TWh generating $36.0 million/TWh, costing ratepayers $53.5 million/TWh for the GA, creating a loss of $1.022 billion.

So, those three years cost ratepayers $2.75 billion for the 52 TWh (11.3% of total generation of 459.8 TWh) of exported power we didn’t need, bringing losses since creation of the GA to $4.550 billion.

Ontario’s ratepayers might be much better off if Walmart really was running the electricity system in Ontario. At least Walmart isn’t continually running at a loss.

©Parker Gallant                                                                                                            January 21, 2015

Does conserving power in Ontario save us money? (No.)

16 Friday Jan 2015

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Here is a precis of an analysis of the Ontario government’s conservation efforts prepared by local economist Robert Lyman, based on research by Parker Gallant.

Here are the numbers.

In 2009, local electricity distribution companies in Ontario provided 124,206,032 megawatt-hours (MWh) for 4,748,577 households, a monthly average of 2,180 kilowatt hours (kWh).

In 2013, they provided 125,306,563 MWh for 4,944,488 households, a monthly average of 2,112 kWh. Average consumption fell by 3.3%, or 875 kilowatts annually between 2009 and 2013. For the average home, that is a monthly reduction from 800 kWh to 774 kWh (317 kWh per year).

In 2009, the cost of a kWh of electricity delivered averaged 6.15 cents and the “commodity” cost (just the electricity portion) for the full year was $590. By reducing annual consumption by 317 kWh, the savings should have been $19.50.

In 2013, the commodity cost had risen to 9.2 cents per kWh, or $854 per year. Not only did the $19.50 savings disappear, but also, the average household paid an additional $264 annually. That represents an additional cost to all ratepayers in the province of $1.2 billion annually. That does not include the $2 billion cost of installing smart meters.

The average household would have had to reduce its annual consumption by 33%, or 3,200 kWh, in order to have simply matched its cost for electricity consumption in 2009.

The Independent Electricity Systems Operator (IESO) is required to maintain an operating reserve of generating capacity of between 1,300 and 1,600 MW for contingencies. Since 2009 the available surplus has been between 4,000 MW and 5,900 MW. The IESO expects these surpluses will continue until at least the later part of this decade. Thus, while the official rationale for smart meters, time-of-use pricing and “conservation” programs is to avoid the addition of expensive new generation capacity, the province has continued to add that capacity even in the face of a substantial surplus.

What’s next? Current Energy Minister Bob Chiarelli has set new targets for both reductions in peak demand and “conservation” in his long-term energy plan. The target set for reducing peak demand is 10% (2,400 MW by 2025) and for “conservation” is 16% (30 TWh) by 2032. These will be combined with continuing large additions in industrial wind turbine and solar power generators at substantial premiums above most current generation. As a result, despite the lower consumption, ratepayers will be expected to dig deeper into their pockets.

Ontario’s $16-million Christmas power giveaway

31 Wednesday Dec 2014

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Ontario’s $16-million Christmas power giveaway

Wind power half of surplus power sold off cheap

Ontario's energy policy: gifts for somebody---just not you

Christmas was great day for Michigan and New York, courtesy of Santa Claus Ontario and wind power: Ontario exported 16.5 % (about 66,000 MWh) of our total demand for power on Christmas Day, and those two neighbours got $500,000 in cash along with the 56,000 MWh of power we gave them.  Power generated from wind energy was 36,000 MWh or 51% of total exports—if the curtailed wind production was included that would be 77% of the surplus power exported, so the wind power developers must be happy with their Christmas presents from Ontario, too.

In fact, Ontario’s electricity ratepayers picked up the cost of the cash payments to Michigan and New York, along with the actual cost of the production which was $7 million.  And, we paid about $2 million for “curtailed” wind (17,000 MWh), close to $3 million for “steamed off” nuclear (49,000 MWh) and more than $3 million to the gas plant generators for their “net revenue requirement” while the gas power plants idled.  That’s $16 million… and it doesn’t include the cost of Christmas Day “hydro spillage” as the Independent Electricity Systems Operator or IESO doesn’t report on it.

Total demand for power in Ontario Christmas Day was only 325,000 MWh, perhaps due to mild weather or maybe everyone barbecued their turkeys.  The hourly Ontario energy price (HOEP) value of the total demand of 390,000 MWh was negative (-$2,900,000) based on the average negative price of $7.45/MWh, but Ontario ratepayers still paid the $40 million needed to produce that power.

So our Premier and her chief Elf in the Energy portfolio, Bob Chiarelli, rewarded Ontario’s ratepayers with lumps of coal on Christmas day while doling out goodies to our neighbours!

©Parker Gallant

December 26, 2014

Contact Wind Concerns Ontario at 1-855-517-0446 or

windconcerns@gmail.com

Reprinted from Wind Concerns Ontario

You may also listen to a 45-minute podcast of Parker Gallant on the Dale Goldhawk radio show here.

Economist summary of the A G report on “smart meters”: astounding incompetence

31 Wednesday Dec 2014

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Ottawa-based economist Robert Lyman, who specializes in energy issues, has provided us with a summary of the highlights of the recently released Auditor General report, on the energy sector in Ontario. The government’s handling of this portfolio is astounding for its mismanagement, and wasted taxpayer and ratepayer dollars.

Read the summary from Mr Lyman Here: Ontario Auditor General Report on the Smart Metering Initiative

Ontario’s $1B electricity month: wind surplus significant

05 Wednesday Nov 2014

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October 2014 Breaks Record for Ontario Electricity Costs and Losses

Cost to consumers of government energy policies for one month reaches $1 billion

TORONTO, Nov. 5, 2014 /CNW/ – The Ontario government’s policy of pursuing “renewable” sources of power at a premium and selling off surplus at a loss has resulted in a record-breaking month of expenses and losses for Ontario’spower consumers.

In a document prepared by former bank vice-president and Wind Concerns Ontario executive Parker Gallant and energy analyst Scott Luft, figures from the Independent Electricity System Operator (IESO) show that the Global Adjustment for Ontario power customers hit $1 billion.

The Global Adjustment is the difference between market rates for electricity, and what the government pays power generators. In the case of wind power, which has first right to the grid in Ontario, Ontario is buying high and selling low, says Gallant. “In the spring and fall every year, demand for power is low, but wind production is at a high—that is the problem with wind power: it is produced out-of-phase with demand. Because of the contracts the government has with the developers, we  pay top dollar for the power and when we don’t need it, sell for bargain-basement prices.  We pay about 13.5 cents per kilowatt hour for wind, and sell it off far below that; in October it was below 0.7 cents.

“This is economic disaster for Ontario,” Gallant adds.

Consumer power bills rose again on November 1st, and the government will also launch its new procurement process for wind and solar this month.

Wind Concerns Ontario has been opposed to the development of large-scale wind power in Ontario’s communities in part because it is an expensive yet unreliable source of power. The record-breaking October  figures should spur the government to halt its wind power program, says president Jane Wilson. “Any decision to approve one more wind farm, or to launch the new procurement process  for more contracts this month as planned, is completely unsupportable,” she says.  “Wind power doesn’t work, and Ontario can’t afford this experiment any longer.”

Ontario has contracts for 43 wind power projects not currently operational, which will cost consumers $16 billion over the next 20 years.

http://www.windconcernsontario.ca/october-2014-breaking-ontarios-record-for-electricity-costs/

SOURCE Wind Concerns Ontario

Canada News Wire November 5, 2014, 1:21 PM

Ontario electricity policies hamper economic growth: Fraser Institute

06 Monday Oct 2014

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Here a commentary from Ottawa-based energy economist, Robert Lyman:

In May 2014, the Fraser Institute, based in British Columbia, published a report authored by Professor Ross McKitrick and PhD candidate Elmira Aliakbari of the University of Guelph. The report, Energy Abundance and Economic Growth, endeavoured to answer an important question in economic research: does economic growth cause an increase in energy consumption or does an increase in energy availability cause an increase in economic activity, or both?

The question has important implications for government policy. Suppose GDP (i.e., national income) growth causes increased energy consumption, but is not dependent on it. In this view, energy consumption is like a luxury good (like jewelry), the consumption of which arises from increased wealth. If policy makers wanted to, they could restrict energy consumption without impinging on future economic and employment growth. The alternative view is that energy is a limiting factor (or essential input) to growth. In that framework, if energy consumption is constrained by policy, future growth will also be constrained, raising the economic costs of such policies. If both directions of causality exist (i.e., if economic growth causes increases in energy consumption and increases in the availability, and use of energy causes economic growth), it still implies that restrictions on energy availability or increases in energy prices will have negative effects on future growth.

The main contribution of the report, in terms of economic theory, is that it shows how new statistical methods have been developed that allow for investigation of whether the relationships between economic growth and growth in energy use are simply correlated or are causal in nature. The theoretical and methodological discussion in the report is quite complex, even for a trained economist, which is probably why the report received very little public attention. The clear conclusion of the analysis, however, is that growth and energy either jointly influence each other, or that the influence is one-way from energy to GDP. Further, of all the OECD countries studied, Canada shows the most consistent evidence on this, in that studies under a variety of methods and time periods have regularly found evidence that energy is a limiting factor in Canadian economic growth.

In other words, real per-capita income in Canada is definitely constrained by policies that restrict energy availability and/or increase energy costs, and growth in energy abundance leads to growth in Canadian GDP per capita.

The report concludes with a reference to Ontario’s electricity policies.

“These considerations are important to keep in mind as policymakers consider initiatives (especially related to renewable energy mandates, biofuels requirements, and so forth) that explicitly limit energy availability. Jurisdictions such as Ontario have argued that such policies are consistent with their overall strategy to promote economic growth. In other words, they assert that forcing investment in wind and solar generation systems – while making electricity more expensive overall – will contribute to macro-economic growth. The evidence points in the opposite direction. Policies that engineer energy scarcity are likely to lead to negative effects on future GDP growth.”

One can read the entire Fraser Institute report at:

http://www.fraserinstitute.org/uploadedFiles/fraser-ca/Content/research-news/research/publications/energy-abundance-and-economic-growth.pdf

Robert Lyman

Ottawa

Tough questions on spending for Energy Minister Chiarelli from Parker Gallant

13 Wednesday Aug 2014

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Stipula_fountain_pen

Parker Gallant has written a letter to Ontario Minister of Energy Bob Chiarelli, as a concerned citizen of Ontario. He has included a series of pointed questions on the energy portfolio in Ontario, specifically what value there is for taxpayers and ratepayers, and what the effect will be on the Ontario economy.

Sample questions:

Why does the Ontario Power Authority claim it will pick up old refrigerators for “free” when the truth is, everyone is paying for that service?

Why does Ontario list “conservation” as a source of power when you can’t exactly plug a toaster into it.

Why does Ontario hand out grants of $650 to people buying energy-efficient air conditioners but only give $400 to less than 1% of Ontario’s citizens who are suffering from “energy poverty” and can’t pay their electricity bills? (And don’t get him started on the huge grants to people buying expensive Tesla electric cars…)

Read the full letter here! Letter to Energy Minister with questions

(Originally posted at http://www.windconcernsontario.ca )

Achtung Ontario! Renewables are a money pit

12 Tuesday Aug 2014

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Germany, the model for Ontario’s wind and solar developments, now regrets its spending spree

Brady Yauch, Financial Post, August 12, 2014

Germany – the country on which Ontario modelled its approach to renewable energy development – has a $412-billion lesson for Ontario. That’s the amount the country has spent on subsidies in support of solar and wind energy, among other renewables, over the past 20 years, all in the push to wean the country off fossil fuel and nuclear generation.

On the surface – and according to many news sites – the program has been a success, and not just because of the 378,000 people renewables now employ.

By the end of 2012 (the most recent year for data), wind and solar provided about 13% of all German electricity consumption. Adding in hydro and biomass, renewables provided more than 23%. And in May, headline writers around the world proudly trumpeted that renewable energy provided 75% of the country’s total electricity consumption.

Not what it seems

But scratch a bit below the surface and an entirely different picture emerges – one with households being pushed into “energy poverty” as renewable subsidies lead to soaring power bills, handouts to the country’s big businesses and exporters so they can avoid paying for those subsidies and a systematic bankrupting of traditional utilities. As for that one day in May when headlines celebrated that 75% of power generation came from renewables, well, it was a Sunday when demand for power is at its lowest level.

Germany’s decision to support renewable energy at all costs has, ultimately, cost the country’s ratepayers billions of dollars and led to a doubling of monthly electricity bills over the past decade. Households now pay the second highest rates for electricity in the EU – second only to Denmark, the world leader in wind turbines. The country’s feed-in tariff program – which offers renewable energy producers a guaranteed rate for their power – has already cost $412-billion, but could, according to one estimate from the former Minister of the Environment Peter, produce an $884-billion price tag by 2022. Germany will hand out $31.1-billion of renewable energy subsidies in this year alone.

The price of electricity paid by German households has increased from 14 cents (euro) per kilowatt hour in 2000 to 29 cents per kilowatt hour last year – marking a 107% increase, while inflation over that time period was about 22%. The biggest reason for that increase is the renewable energy subsidy, which amounted to 1.4% of the total bill when it was first introduced in 2000, but now accounts for 18%. That renewable levy now costs the average household in Germany more than $320 a year.

Electricity now a luxury

Rising electricity prices for households led Der Spiegel, one of the country’s most respected magazines, to warn that electricity was becoming a “luxury good.” More than 300,000 households each year are being left in the dark because they can’t afford electricity.

German households are being hit particularly hard by the cost of renewable subsidies because the country’s largest businesses – many of them exporters and in energy-intensive sectors – have been exempt from paying for them. Regulators and politicians – fearing that that high electricity prices would hurt the economy and result in job losses or plant closures – gave big business a free pass and instead shifted the costs to households.

The renewable subsidies have distorted Germany’s power market to such an extent that traditional utilities are being pushed to the brink of collapse. Electricity generated from solar and wind has no relationship with the market. Because the price the producers receive is guaranteed and is not based on demand, they dump their output whenever it is produced. This glut of power has, at times, pushed the price of wholesale power below zero – meaning the utilities need to pay someone to use it. This has skewed the price to such an extent that traditional generators can’t economically produce power – they simply stop producing when the price goes too low.

While the answer would seem to be to close those uneconomic generators, that’s not possible since renewable energy is intermittent – at times it will produce no power, while at others it will produce too much – and traditional generators are needed to provide a secure, reliable source of power. Utilities are being asked to keep producing power even though the economics of it don’t make sense anymore. To prevent utilities in Germany from pulling out of the business of generation, the government now offers more than billion dollars in “balancing payments” – sometimes 400 times the price of power – to stabilize the grid.

Renewable producers still can’t survive without subsidies

The rise of renewable power has also led to coal making a comeback. The amount of generation from coal actually increased from 43% of all output in 2011 to nearly 45% in 2012. Electricity generation from lignite, a cheaper and dirtier form of coal, has also been on the rise because, according to one Germany utility, it’s the only thing that can compete with subsidized renewable energy.

The energy situation in Germany has become so disruptive and politically untenable that the government has recently done everything it can to pull back on subsidies and other support for renewable energy, much to the dismay of renewable producers that still can’t survive on their own.

Far from being a success, Germany’s rush into renewable energy has crushed households, taxpayers and utilities. Ontario needs a better model.

Brady Yauch is an economist and the executive director of Consumer Policy Institute.

Read the full article here.

Ontario’s massive debt: what voters didn’t want to hear

02 Wednesday Jul 2014

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Here from Ottawa economist Robert Lyman, a review of Ontario’s debt situation: it isn’t pretty.

ONTARIO’S DEBT – THE STORY ONTARIO VOTERS REFUSED TO BELIEVE 

Several pundits have commented on the reasons for the major victory by the Liberal Party in the Ontario provincial elections held on June 12. Many have judged that voters were simply unwilling to believe the Progressive Conservative message that fiscal responsibility required reductions in spending, including where necessary reductions in the number of public service positions and programs. Voters said that the debt was not a problem that they wanted to worry about.

Even after the event, it is may be a good idea to examine exactly what the facts are with respect to the financial situation of the provincial government and what this may mean to the people who live in Ontario in future.

  • According to the Ontario Financing Authority, the consolidated provincial debt as of June 14, 2014 is $295.8 billion.
  • The debt has grown significantly over the past generation. In 1990, Ontario’s debt was $38.4 billion. It grew to $115 billion by 1998, and has almost doubled again since then.
  • Ontario has only been able to sustain this increase in debt because of interest rates that are at all-time historic lows. Even so, in 2013-2014, annual debt service costs to the provincial treasury were about $10.6 billion, the fourth largest expenditure item after health, education and social services.
  • The 2014 budget that was defeated projected that debt service costs would rise to $12 billion by 2015-16 and $13.3 billion by 2016-17. This is by far the fastest growing item in the provincial budget, growing twice as fast as the health budget.
  • The Liberals are committed to increasing program spending for at least the next four years. This year the $3 billion increase in program spending will increase the annual deficit to $12.5 billion from $11.3 billion last year. The deficit will be much higher if the Liberals’ projection of a 4 % annual economic growth rate turns out to be too optimistic.
  • There are very few reasons to believe the optimistic growth forecasts. Ontario’s productivity growth lags behind that of the United States, as does business investment. The province’s cost competitiveness has eroded, due to higher taxes and fees and much higher energy costs.
  • In the short term, the debt service cost could be increased further if the various investors’ services downgrade the province’s credit rating. Ontario has $250 billion worth of bonds rated by Moody’s Investor Services. The province’s ability to pay back those bonds, known as the debt-to-revenue ratio, is 237.7 %, the worst rating among all Canadian provinces.

Read the full paper here: ONTARIO’S DEBT

Email us at Ottawawindconcerns@gmail.com

No ‘safe hands’ here: 5 ways the Ontario Liberals are messing up the economy

28 Monday Apr 2014

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Five ways the Ontario Liberals are messing with the province’s economy

Scott Stinson, National Post, April 28, 2014

Kathleen Wynne has spoken repeatedly in the past month about how her Liberals are the only party to be trusted with the fortunes of a province that is still unsteady on its economic feet.

Ontario, the Premier has said, needs her “safe hands” to guide it through its recovery, not those “reckless schemes” of the two parties in opposition.

Other Liberals have picked up the thread. In blasting the NDP for its demand of increased corporate tax rates, Transportation Minister Glen Murray last week said the province, “is emerging from the global recession. However, our recovery remains fragile.”

Add a couple of seafaring metaphors about troubled seas, and the comments were perfectly in line with what the federal Conservatives were touting in the 2011 election: now isn’t the time to mess about with our delicate economic recovery.

Except there is a key difference: the Ontario Liberals are furiously messing with the economy.

On Thursday, after the federal Tories announced plans to tinker with public pensions, Ontario Finance Minister Charles Sousa all but rolled his eyes at the proposal and insisted that the province will forge ahead with an Ontario-only enhancement to the Canada Pension Plan. It is fair to say a debate remains over whether a CPP top up is needed, and if so whether a mandatory plan as envisioned for Ontario is the solution. But there is little such debate in the business community.

“It’s going to have a devastating impact,” Nicole Troster, senior policy analyst with the Canadian Federation of Business, said in an interview. Among the key concerns for the CFIB, Ms. Troster said, is that mandatory pension contributions are essentially a profit-insensitive tax. Even struggling businesses would be hit with a new, additional cost. Other business groups have lined up to express concern over the Liberal proposal: the Ontario Chamber of Commerce, the Certified General Accountants of Ontario, the Canadian Chamber of Commerce, among others.

Read the full story here and see the Liberal Party’s new ad.

Excerpt Re: hydro rates:

Hydro rates

The Liberals announced this week that they plan to remove the Debt Retirement Charge from the bills of residential electricity users in 2016. It will remain on those of businesses for another two years after that. Further, while the government is expanding plans to allow companies to switch to time-of-use billing, many of them couldn’t take advantage of the option, even if they were large enough to qualify.

“A lot of our members,” Ms. Troster of the CFIB says, “don’t have a way to switch their energy usage.” Businesses are often neither open nor staffed during non-peak hours, when energy is cheapest. And with hydro rates in Ontario having doubled since 2008, and scheduled to rise further, electricity is “the most important cost concern for our members over the last two years,” she says.

Email us at ottawawindconcerns@gmail.com