This past week, Zoomer Media hosted a panel discussion on Ontario’s growing electricity rates which the media organization (affiliated with the Canadian Association of Retired Persons/CARP) says is adversely affecting seniors and others on fixed incomes.
Energy analyst Tom Adams was one of the panel members, who called on the government to rescind the Green Energy Act, which he says is at the core of the problems today. Wind power produces only 6 percent of the Ontario supply, he said, but at 30 percent of the cost.
Wind: 6% of the power for 30% of the costs
McMaster University professor Marvin Ryder agreed that expensive contracts were a problem but he said the damage has been done, and it will be 10 years before Ontario can climb out of the hole.
NDP leader Andrea Horwath said she still supports the Green Energy Act, but suggested creating subsidies for everyone having problems paying their electricity bills. (The cost of that would be …. added to the bills…)
The Ontario government awarded five contracts for new wind power generation in 2016, including two in the Ottawa area. The cost of these projects is about $1.3 billion. If the projects proceed (they do not yet have Renewable Energy Approvals/REA), the cost will be a further addition to Ontario electricity ratepayers’ bills.
Wind power is produced out-of-phase with demand in Ontario, so the Wynne government is forced to export the surplus. The government claims this brings in revenue but the truth is, it costs Ontario ratepayers. How much? And how does that cheap power benefit others? Parker Gallant comments on his Energy Perspectives blog.
September 6, 2016
The state of Michigan is outperforming Ontario. That’s according to a recent study by the Fraser Institute. Since the end of the “’Great Recession” Michigan has out performed Ontario, increasing their GDP in 2013 by 2.8% versus Ontario’s growth of only 1.3%. Unemployment levels in Michigan are currently at 4.6% versus Ontario’s 6.4%. Those are two very important economic indicators.
That news plus the fact Ontario has become a “have not” province in Canada, it seems policies adopted by the Ontario Liberal government to “build Ontario up” is having the opposite effect.
One of those policies resulted in Ontario’s electricity sector focusing on acquisition of renewable energy from industrial-scale wind turbines, solar panels and biomass. The passing of the Green Energy Act (GEA) in 2009 resulted in adding intermittent and unreliable renewable energy that is unresponsive to demand (wind power is produced out-of-phase with demand in Ontario). This had the effect of driving down the price of electricity.
The free market trading (HOEP) of electricity has resulted in Ontario exporting a rising percentage of our generation to buyers in Quebec, NY and Michigan, with the latter the biggest buyer. In 2015 Michigan purchased 10,248 gigawatts (GWh) or enough to power1.1 million “average” Ontario residential households. We sold it at an average of 2.36 cents per kilowatt hour (kWh) and were paid $242 million, but it cost Ontario’s ratepayers just over $1 billion.
Michigan doesn’t have to pay the Global Adjustment. You do.
Michigan appears delighted to be able to purchase our cheap subsidized electricity. Now they are seeking further transmission links to Ontario with an eye on the grid out of Sault Ste Marie. Hydro One earlier this year announced they “entered into a purchase agreement to acquire Great Lakes Power Transmission LP from Brookfield Infrastructure for $222 million in cash plus the assumption of approximately $151 million in outstanding indebtedness.” One has to wonder, did Hydro One know about this, and see it as an opportunity to increase transmission revenue?
This new transmission line could send both cheap hydro and expensive bio-mass generation to Michigan.
Ontario Power Generation (OPG) operates 11 hydro stations with 680 MW of capacity and also two bio-mass facilities (Atikokan and Thunder Bay) converted from burning coal and now using wood pellets with a combined capacity of 358 MW in the region. The latter two facilities were focused on by the Auditor General (AG) in her November 2015 report. In the case of Thunder Bay, the report indicated the cost of generation was “$1,600/MWh—25 times higher than the average cost at other biomass facilities in Ontario.” For Atikokan the AG had this to say: “The plant is expected to generate 140,000 MWh for $74 million per year, putting the cost of electricity from this facility at $528/MWh—about eight times higher than the average cost of existing biomass from other facilities in Ontario.” Industrial wind turbines have also invaded the beautiful landscapes painted by the Group of Seven.
For the sake of Ontario ratepayers, one hopes Michigan will not access electricity from either of the two biomass plants as it will fall on us ratepayers to pick up the costs in excess of the HOEP price. In the case of Thunder Bay the cost to ratepayers could approach $1.60/kWh and for Atikokan it would be 55 cents/kWh.
Maybe the Ontario government staffers in communications should change their PR Slogan to “Building Michigan up”!
Replacing coal in Ontario: what the government really did
There is so much mythology now around Ontario’s coal plants for power generation, it really is time to set the record straight on what really happened, how much it cost, and what was actually achieved. This is the first in a two-part series by Parker Gallant.
Back in 2011, Ontario had coal plant capacity of 4,484 MW but the plants really operated only occasionally, producing 4.1 terawatts (TWh) of power — just 10.5% of their capacity. The 4.1 TWh they generated in 2011 represented 2.7% of total power generation in Ontario of 149.8 TWh. The cost per TWh was $33 million or 3.3 cents/kWh, making the ratepayers’ bill for those 4.1 TWh $135 million.
As most Ontarians know, those coal plants were either closed (Lambton and Nanticoke) or converted to biomass (Atikokan and Thunder Bay). We were continually told closing or converting those coal plants would save Ontario’s health care system $4.4 billion, based on a study completed while Dwight Duncan was Ontario’s Energy Minister. Duncan’s claim was a fictitious interpretation of the actual study, but it was repeated so often by Liberal ministers and MPPs that they all believed it and presumably felt the public believed it, too.
Good PR but … the truth?
Whether one believes the Duncan claim, the fact is the coal plants were closed or converted and the ruling Ontario Liberal government made a big deal of it even to the point of obtaining an endorsement from Al Gore as the first jurisdiction in North America to end coal fired power generation.
The government never disclosed how much it cost the ratepayers/taxpayers of the province to close or convert those coal plants, and we certainly haven’t seen any improvement in our healthcare system since it happened, as one would expect from saving billions. So, was the claim of savings a falsehood? And what did closing the plants really cost?
Let’s start with looking at our electricity consumption level in 2011 and compare it to 2015. In 2011 Ontario generated 149.8 TWh and consumed 141.5 TWh. In 2015 we generated 159.6 TWh, including 5.9 TWh of embedded generation, and we reportedly consumed 137 TWh, not including the 5.9 TWh of embedded generation consumed within the confines of your local distribution company (LDC).
The difference of 8.3 TWh in 2011 and 16.7 TWh in 2015 was exported.
Replacing coal-fired generation
As noted, coal capacity was 4,484 MW in 2011 and in 2015 was zero — so what did we replace it with? According to the Independent Electricity System Operator (IESO) Ontario Energy Report for Q4 2015, since the end of 2011 we have added:
Nuclear supply increased by 1,532 MW (Bruce Power)
754 MW of hydro
Natural gas generation increased 602 MW
2,580 more MW capacity of industrial wind turbines (IWT)
Solar up by 2,078 MW
Bio-mass increased by 481 MW (principally conversions of Atikokan and Thunder Bay from coal)
“Other” increased by 10 MW
As well, residential ratepayers conserved 1.184 GWh1. , equivalent to 450 MW of wind turbines operating at 30% of capacity (generating electricity intermittently and out-of-phase with demand).
So altogether, Ontario added 8,037 MW of capacity to cover the loss of 4,484 MW of coal which, in 2011, operated at only 10.5% of capacity.
Ratepayers also reduced consumption by 6,553 GWh with residential ratepayers representing 1,184 GWh of that reduction.
It would appear the variations of long-term energy planning emanating from the Ontario energy portfolio continually overestimated future demand by a wide margin. Their numerous ministerial directives to the Ontario Power Authority (merged with IESO January 1, 2015) with instructions to contract more and more unreliable intermittent wind and solar generation with “first-to- the-grid” rights at high prices produced surplus energy.
This stream of directives and the acquisition of excess capacity resulted in increasing electricity costs for ratepayers due to surplus generation and payment guarantees for displaced generation.
They also added other expensive policies such as conservation initiatives that simply piled on unneeded costs.
August 28, 2016
Interestingly, the OEB in a revision to the “average” residential ratepayers monthly consumption reduced it from 800 kWh to 750 kWh, yet suggests conservation achieved (2011 to 2014) was 1,184 gigawatts (GWh). The total number of residential ratepayers suggests that consumption has declined by 2,739 GWh (4,564,835 residential ratepayers at December 31, 2015 X 50kWh [montly] X 12 = 2,739 GWh) since 2009.
NEXT: The second in this series will examine the additional costs associated with the various policies applied and how generation additions to Ontario’s energy mix continue to drive up Ontario’s electricity costs
[Reposted from Wind Concerns Ontario and Parker Gallant Energy Perspectives]
Wind gets first-to-the-grid (which we pay for) meaning spilled or wasted hydro (which we also pay for). [Photo: OPG]
OPG spills hydro and $150 million goes “down the drain”
OPG released their 2015 annual report Friday March 4, 2016; it confirms that 3.2 terawatts (TWh) of water that could have been used for power was spilled last year. (This is similar to the spilled amount in 2014 year.)
How much is 3.2 TWh? Enough to supply about 350,000 average Ontario households with electricity for a full year … but it didn’t!
Here is what OPG’s annual report had to say:
“Baseload generation supply surplus to Ontario demand continued to be prevalent in 2015. The surplus to the Ontario market is managed by the IESO, mainly through generation reductions at hydroelectric and nuclear stations and grid connected renewable resources. Reducing hydroelectric production, which often results in spilling of water, is the first measure that the IESO uses to manage surplus baseload generation (SBG) conditions. During each of 2015 and 2014, OPG lost 3.2 TWh of hydroelectric generation due to SBG conditions.”
The principal reason we have surplus baseload is due to wind and solar being granted “first to the grid” rights. And, because wind and solar are intermittent (and unreliable) OPG is forced to spill clean renewable hydro power.
While spilling hydro in itself is disturbing in Ontario, especially considering our hydro-electric history, the fact we are now obliged to pay for the spilled hydro at the same time we are paying wind developers 13.5 cents a kilowatt hour (kWh) and solar generators as much as 80 cents a kWh simply adds more costs to our monthly hydro bills.
OPG received $47 million per TWh (4.7 cents/kWh) for the spilled hydro. That means electricity ratepayers’ pockets were picked for over $150 million, or about $31.00 per ratepayer. Our reward for absorbing that cost was zero.
This month, Energy Minister Bob Chiarelli, will likely announce that Ontario will add even more intermittent, unreliable wind and solar generation. Your pockets are not safe yet.
A report from energy analyst Scott Luft, released today, shows that curtailment of wind power in Ontario reached record levels in 2015. If the government proceeds with its plans to contract for 300 more megawatts of wind power under the Large Renewable Procurement (LRP) plan for 2015, and another 200 megawatts in 2016, this disastrous trend will continue.
A 2015 year-end review of my hourly estimates indicate the curtailment of output from industrial wind turbines (IWTs) soared in 2015. I show total curtailment exceeding 1 million megawatt-hours, which I assume Ontario ratepayers paid ~$127 million for regardless.
I show the potential supply curtailed rising to 10% from 6%.
The increase in curtailment in the Bruce region is galling as an examination of output from one IWT location there revealed that during the peak electricity demand of summer it was often a net consumer of grid power rather than a contributor to supply.
Note in the above graphic that only the Northwest breaks a trend that sees higher curtailment equate to lower market valuation of the output of the zone’s IWTs, with a doubling of curtailment in the Bruce region matched by a halving of market value of production.
The increase in curtailment in 2015 is particularly relevant because the Large Renewable Procurement which the IESO (operator of the system) intends to proceed with in 2016 used about 6% as the level of curtailment it anticipated.
If more IWTs are added, they’ll be increasingly wrong.
In 2015 potential output from IWT’s could have increased by about 2,500 gigawatt-hours (GWh), while I estimate curtailment increased by about 575 GWh – which indicates 22% of new supply ended in curtailment of wind.
There are other reasons curtailment would change, particularly in 2016. Up until January 1, 2016 flexible nuclear at Bruce Power was dispatched previous to IWTs, but the rules have now been rationalized.
We may look back at 1 million MWh of wind curtailment as the good ol’ days. …
The September 2015 summary report from IESO demonstrates that once again, Ontario ratepayers picked up additional costs for exporting surplus power. The September results, gleaned from examination of the “monthly summary” indicates it cost $100 million to subsidize Ontario-generated electricity exports to New York, Michigan, etc., in September.
That totals $1.5 billion for the first nine months of 2015. The 16.2 terawatts exported in those nine months could have supplied power to 1.7 million average Ontario households for the full year.
What’s really annoying is finding out that our neighbours in Buffalo are engaged in an industry attraction effort that is meeting with some success. A recent article about the NY government subsidized building ($750 million) of SolarCity’s “gigafactory” in Buffalo to manufacture solar panels indicates they are on the comeback trail and attracting investments. One of the reasons is because they are able to offer a “huge benefit: the electricity rate for manufacturers averages just 4.79 cents per kilowatt-hour, which is possible because of cheap hydroelectric power generated from Niagara Falls.”
Because some of our power generated from Niagara Falls1. and other sources in September was sold as surplus power for just 3.19 cents per kilowatt-hour (kWh), we’re actually helping Buffalo offer those attractive electricity rates.
This fact should remind all Ontarians of the promises made to us by the Ontario Liberal government when it enacted Bill 150, the Green Energy and Green Economy Act (GEA). The April 8, 2009 Standing Committee on General Government transcript on Bill 150, with the then Ontario Energy Minister George Smitherman on the stand, elicited this response to a question posed about the effects of the GEA on electricity prices:
“We anticipate about 1% per year of additional rate increase associated with the bill’s implementation over the next 15 years. Our estimate of cost increases is based upon the way that we actually amortize costs in the energy sector.”
Let’s look back to September 2009, the year the Legislature passed the GEA, when Ontario demand for electricity was 10,932,000 megawatt hours (MWh) and compare to September 2015 when Ontario demand was slightly higher (+3.8%), reaching 11,362,000 MWh. IESO’s monthly summary for September 2009 indicates the “average weighted cost” (all-in) to consumers was $82.73/MWh whereas the “average weighted cost” for September 2015 was $125.35/MWh.
That translates to an increase of $42.62/MWh or 4.26 cents per kilowatt-hour (kWh), and cost ratepayers $453 million extra for just one month. Looking at this in a slightly different way, the extra MWh we consumed for September 2015 versus 2009 came at a cost of $1,196 each or $11.96 per kWh, had generation and delivery costs remained the same through those six years.
It is clear costs to ratepayers have already become a multiple of the Smitherman promise … and we still have nine years left in his forecast.
The Auditor General pointed out the Energy Ministry failed to complete a cost/benefit study before implementing the GEA. There was never any acknowledgement or accounting for the intermittent nature of renewable energy, the fact power is produced when it’s not needed, and the need for renewables to be backed up with other generation (along with transmission line costs to bring it to where it’s needed) was apparently never considered.
And now, in spite of the evidence of the past six years, the march continues to add more wind and solar to the Ontario grid, which means Buffalo and other jurisdictions will reap the rewards.
As Buffalo adds manufacturing jobs, Ontario is shedding them. Ontario’s electricity ratepayers are wondering, what will the next nine years bring?
Peter J. Thompson/National Post Electricity bills for all segments of businesses and households are now a drain on the economy versus an attraction for new business and the jobs they might create.
Over the past several months there has been a constant din of noise from all business segments in Ontario about the high price of electricity and its effects. Electricity prices have risen as they have absorbed the high costs of 20-year contracts for renewable energy in the form of wind and solar as additions to Ontario’s electricity grid. Ontario currently has a huge surplus which results in as much as 20 per cent of our generation exported at fire sale prices. Couple that with a drop in demand, annual spending of $400 million on conservation messages, smart meters that allow time of use (TOU) pricing and the Hydro One, OPG and other Ministry of Energy employees enjoying wages and benefits that outstrip the private sector means electricity bills for all segments of businesses and households are now a drain on the economy versus an attraction for new business and the jobs they might create.
The situation for many small business owners is dire
The foregoing recently manifested itself in a report from the Ontario Chamber of Commerce entitled: “Empowering Ontario: Constraining Costs and Staying Competitive in the Electricity Market.” The report stated soaring electricity prices would cause one (1) in 20 Ontario businesses to shut their doors within the next 5 years. The report didn’t suggest how much electricity those 5 per cent of businesses consume or how many jobs would be lost but it should represent a concern to the ruling Liberal Party of Ontario. Should the scenario play out it would also result in a revenue drop for generators, transmitters and local distribution companies. Due to how the electricity sector operates in Ontario a revenue drop results in rate increases to all remaining Ontario businesses and residential households.
The Chamber was not the first to note the problems with high electricity costs, as the Association of Major Power Consumers of Ontario (AMPCO) raised its concerns in a May 2015 release of its “Power Market Outlook” and the president was quoted in the media referencing large Ontario industrial concerns: “Not only are they paying very high costs for the commodity but they’re paying some of the highest delivery rates … so it’s not just a commodity cost problem, it’s not just a renewable energy or coal phase-out problem.”
The above concerns were expressed despite the fact AMPCO members qualify as “Class A” ratepayers, meaning they get a break on their rates as part of the Global Adjustment which finds its way to residential and small businesses (Class B ratepayers) who subsidize the reduction of Class A rates.
A mid June 2015 C. D. Howe study, noted: “Class B consumers are paying more in GA charges so that Class A consumers can pay less. The panel estimates that the new GA formula resulted in Class A consumers paying $422 million less in 2012 than they would have paid under the former formula. From a policy perspective, the relevant question is – is society better off?”
The Canadian Federation of Independent Business (CFIB) also expressed its concern in relation to electricity prices on “small businesses” in April, noting: “The situation for many small business owners is dire, said CFIB’s Ontario vice president Plamen Petkov. The advocacy group, which represents 42,000 small and medium-sized business, has been asking the provincial government to provide relief for businesses for years.”
The Canadian Manufacturers and Exporters in their January 29, 2015 “pre-budget” report submitted to the ruling Wynne-led Ontario government also expressed concern about electricity rates:
“Competitive electricity rates are fundamental to the success of Ontario’s manufacturing sector and our economy. Despite progressive reforms including the demand based allocation of the global adjustment for large volume users, Ontario has among the highest electricity rates in North America.”
The CME further stated: “The only path forward for Ontario is to adopt a manufacturing action plan with an industrial/electricity rate as a core component.”
Another association referencing the cost of electricity to their activities is the Ontario Mining Association which on May 11, 2015 reported: “Jurisdictions with higher mining tax rates have lower electricity prices and government cost-sharing on infrastructure. A recent report indicates that exploration and mining costs are particularly inflated in the North, where companies need to invest in lacking, but essential infrastructure such as ports, power plants, winter and permanent roads, and accommodation facilities.” And the Ontario Forest Industries Association in its January 9 pre-budget submission to the Ontario government noted: “As a primary resource industry, forestry is an energy-intensive and trade exposed sector. The government has introduced a number of programs that have provided some relief from the steady rise in electricity pricing. However, given the government’s own projections in the recent Long Term Energy Plan these benefits are quickly being erased, along with the small competitive advantage they bring.”
Parker Gallant is a former banker who didn’t like what he was seeing in his Ontario electricity bills.
April 2015: surplus wind power costs Ontario millions
Energy Minister hiding his head over consumer losses due to surplus power, lots of it wind
Electricity exports cost heading for $2 billion in 2015
The continued costs to Ontario’s ratepayers for the oversupply of electricity generation in Ontario continued in April 2015; we exported another 2 terawatts (TWh) of power to our neighbours. April’s exported TWh brings exports for the first four months of 2015 to 8.65 TWh — that’s enough to supply 900,000 average Ontario ratepayers with power for a full year.
Surplus exports represented over 19% of Ontario’s total demand for the month; that figure doesn’t include curtailed wind, steamed-off nuclear or spilled hydro.
The cost (Hourly Ontario Electricity Price + Global Adjustment) to ratepayers for exported power in April was $223 million. We sold it for 1.57 cents per kilowatt hour, thereby generating only $32 million. Ontario’s electricity ratepayers had to eat $191 million in losses that will find their way to the Global Adjustment pot and the “electricity” line on our bills.
As noted in a prior article, the first quarter of the current year generated losses (costs to ratepayers) of $437 million. So now, with the April figures, those costs to date are $608 million or $135 per ratepayer.
We still have eight months left in the year: at the current pace, our bill to support surplus exports will amount to over $400 for the average ratepayer.
Wind power generation for April represented 39% of the exported volume as it produced about 850,000 MWh (megawatt hours) at an average of $123.50 per/MWh, meaning its cost of $104 million represented almost 50% of total export costs.
Energy Minister Bob Chiarelli doesn’t seem to notice our growing surplus*; however, he has directed the IESO to acquire another 500 MW of renewable energy from wind and solar in 2015, and mandated conservation of another 7 TWh by 2020.
The views expressed are those of the author and do not represent Wind Concerns Ontario policy.
Editor’s note: speaking at a wind power information evening in Finch, Ontario, on May 6th, Ontario Federation of Agriculture president Don McCabe said there is no surplus of power in Ontario. This is a lot of lost power and a lot of losses to electricity consumers—including farmers—to deny.
Provincial government, Hydro One both to blame for the mess
West Carleton Review
To the Editor:
Your April 9 edition of the West Carleton Review contained a number of articles and letters to the editor regarding our sad state of affairs with regard to Hydro in Ontario.
Hydro in the last century has become one of our essential services, and as the ice storm of 1998 demonstrated, our lives revolve around electricity to power everything in our homes and even the gas stations that fuel our vehicles.
However, in Ontario the distribution, sale and production of hydro is treated as a political spectator sport with boondoggles, lies, smart meter errors, overpaid employees and corruption being the order of the day.
Even the Auditor-General (AG) has taken this government to task regarding hydro, but the Minister, Bob Chiarelli, tries to shame the AG by stating that it is a complicated file and she doesn’t have the knowledge required to ascertain the problems at hydro, let alone recommendations on how to fix them, a fact that was quickly debunked when we found out that the AG used to work for Manitoba Hydro.
I feel it is the minister that is “out of his league” on this file.
And now the same minister and government want to implement a low-income plan to help pay for the most expensive electricity in North America by further increasing the cost of electricity to the millions who will not qualify for this subsidy since the bar has been set so low as to be mostly ineffective and unavailable to most customers of hydro. This certainly appears to be nothing else but a PR exercise on the part of the government.
There is no good reason why we should have installed so many wind turbines or solar farms, both of which need an alternative back-up source of electrical power, since both wind and sun are unreliable sources of continuous energy available on demand.
The fact that there is no available mechanism to store surplus electrical power produced by wind or solar, Hydro One sells it on the open market at a substantial loss. Unfortunately, the current government has tied their hands for quite a few more years with multi-billion dollar contracts to foreign companies to supply either the turbines or the solar panels.
In my estimation, the only solution to the mess created by this government is to buy power from reliable and affordable sources of electricity producing jurisdictions, such as Quebec Hydro or Manitoba Hydro.
Hydro One cannot be trusted to produce the required amount of affordable power required and this government, regretably, has created most of the current (no pun intended) mess it finds itself in on the hydro file.
After “boasting” that projected electricity bill increases will result in $120 more on electricity customers bills a year yesterday in Toronto, Ontario Energy Minister Bob Chiarelli is a guest on CFRA’s The Home Page at 1 p.m.
Morning show host Steve Madely disputed Chiarelli’s math on his CFRA show this morning, saying by his calculation, the increase in electricity bills will be at least $140…and that Ontario consumers can ill afford it.
Chiarelli acknowledged that the increases are due to Ontario’s “investment” in “green” energy.
That doesn’t make economic sense, says Ottawa Wind Concerns Chair Jane Wilson. “Wind power which is today less than 4% of Ontario’s power capacity, actually represents 20% of the utility cost,” she says. “And because Ontario has a surplus of power, we are exporting a significant part of that at a loss to the United States, while we are paying wind power developers billions. Yet consumers are being asked to pay more–this is just nuts.”
Ontario opened its new contracting process for large renewable power projects on March 10; it is not clear whether a large wind power generation project will be proposed for the rural Ottawa area. The City passed a resolution in 2013 saying it did not support a wind “farm” in North Gower, and demanded a return of local land use planning powers that were removed by Ontario’s Green Energy Act.
Call in to the radio station at 613-521-8255, and listen at 580AM in Eastern Ontario, or live online at cfra.com