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Tag Archives: Ontario’s electricity system

Parker Gallant on energy ministry: aiding the fortunes of … Quebec!

21 Monday Oct 2013

Posted by ottawawindconcerns in Ottawa, Renewable energy, Wind power

≈ 1 Comment

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Bob Chiarelli, Kathleen Wynne, Ontario economy, Ontario electricity bills, Ontario's electricity system, Quebec power

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

 chiarelli1.jpg.size.xxlarge.promo

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
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The Auditor General’s report on gas plants: a summary

09 Wednesday Oct 2013

Posted by ottawawindconcerns in Ottawa

≈ 1 Comment

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Bonnie Lyserk, cost of power Ontario, gas plant cancellations Ontario, Ontario's electricity system, power demand Ontario, Robert Lyman

Here from Ottawa economist Bob Lyman, who specializes in energy issues, is what you need to know about the Auditor General’s report, and why the losses mounted up to over $1 billion for both the Oakville and Mississauga gas plants.

ONTARIO AUDITOR GENERAL’S REPORT  ON OAKVILLE POWER PLANT CANCELLATION COSTS:  SUMMARY AND BRIEF COMMENTARY

Introduction

On October 8, 2013, Bonnie Lysyk, Auditor General of Ontario, released a Special Report on the costs that have been incurred and are likely to be incurred by the public as a result of the cancellation of a natural gas-fired electricity generation plant in Oakville Ontario. In the period leading up to a provincial election, the Liberal government announced the cancellation of this plant on October 7, 2010. As a result of the cancellation, the Ontario Power Authority (OPA) was required to negotiate arrangements for the construction of alternative power generation facilities in Napanee, Ontario. Thus, the objective of the Auditor General Office’s review was to determine the costs of both the cancellation of the Oakville plant and the relocation of the power generation facilities to Napanee.

Background

The need for a natural gas electricity generation plant in the Southwest Greater Toronto Area was first identified by the OPA in its 2007 Integrated Power System Plan. In response to the plan, the Minister of Energy and Infrastructure directed the OPA in 2008 to procure a combined–cycle natural gas generation facility in the area with a capacity of up to 850 megawatts (MWs), to begin operating no later than December 31, 2013.

In September, 2009, the OPA awarded a contract to TransCanada Energy Ltd. (TCE) to build the facility in Oakville. There followed significant local opposition from groups in the Oakville area, including the Town of Oakville. The government cancelled the project. Soon after, OPA and TCE began to negotiate a settlement on a replacement project. TCE had already incurred significant costs and was facing the loss of revenues it would have received if the original contract had been honoured. The negotiations were difficult. The Premier’s Office intervened, without consulting OPA, to assure TCE that it would be compensated for the financial value of its contract for the Oakville plant. The Minister of Energy instructed OPA to contract with TCE to build a new plant in Napanee. Finally, the Province and OPA agreed to an arbitration framework (for determining damages to be paid to TCE if no settlement was reached) that favoured TCE and waived the protections that OPA had under the original Oakville contract. In December, a deal was reached to relocate the plant to Napanee.

Cancellation Costs

 The Special Report lists two types of costs that resulted from the plant cancellation -the costs already incurred and the estimated future costs.

The costs already incurred include reimbursing TCE for its initial purchases of gas turbines for the Oakville plant and the modifications made to them ($210 million), sunk operating costs relating to the Oakville plant ($40 million) and legal fees ($3 million).

The estimated future costs essentially relate to the cost of constructing the Napanee plant, of increased gas connections to get natural gas to the Napanee plant, the costs of new gas pipelines to move gas to Napanee and new electricity lines to move electricity from Napanee to the GTA, the penalty associated with the use of less efficient gas turbines, and the cost of replacement power to make up for the non-availability of the Oakville plant’s power for some time. The Auditor General’s Office estimates these costs to be $859 million.

The total costs incurred plus estimated future costs are thus $1,112 million (i.e. $1.1 billion).

Estimated Future Savings

 In return for taking on a portion of the costs that TCE would have incurred, OPA was able to negotiate a lower price for the power from the Napanee plant than it would have had to pay for the power from the Oakville plant. This results in an expected savings of $275 million. There is also a delay in the commencement of payments to TCE compared to what would have occurred under the Oakville contract because the Napanee plant will come into operation later. The OPA and Auditor General disagree on both the dates when the Oakville plant would have come into operation and when the Napanee plant will come into production. As a result of these disagreements, the Auditor General estimates the present value of the savings to be $162 million, and OPA estimates it to be $539 million.

Using the Auditor General’s figures, the net cost to the public will be $675 million.

Impact of Potential Toll Increase

 TCE’s parent company will also benefit from the fact that under the Napanee agreement a section of the pipeline route owned by TransCanada Pipelines Limited (TCPL) effectively must be used to transport gas to Napanee. This section does not now have the capacity to transport the amount of gas that will be needed by the Napanee plant. Accordingly, TCPL will need to make additional capital investments and recover these costs through increased toll charges, which will get passed on to electricity ratepayers. Tolls could increase by up to 50% in the first three years; if so, over the 20-year term of the contract for the Napanee plant, the cost of gas delivery would increase by $140 million.

Special Observations

The Special Report makes some observations that raise concerns about the way the Ontario government managed this issue.

  • Throughout the initial procurement process for the Oakville plant, including prior to the awarding the contract to TCE in September 2009, OPA provided the government with “off ramps” not to proceed. Despite the public controversy and the firm opposition of the Town of Oakville, the government declined to take any of these off ramps.
  • The contract for the Oakville plant contained protection to relieve both TCE and OPA of any financial obligation if events beyond their control (force majeure events) caused the plant’s commercial operation date to be delayed by more than 24 months. Given Oakville’s strong opposition to the plant, including Oakville’s stated intention to fight the matter all the way to the Supreme Court of necessary, it may well have been possible for the OPA to wait it out, with no penalty and at no cost. In other words, if the Premier’s Office had not intervened to guarantee TCE compensation, there might have been no cost to the Crown.
  • The Minister of Energy agreed to locate the new plant in Napanee, hundreds of miles from the market for the power, and with no consideration of the potential opposition of people in Napanee.

I would also observe that the need for additional natural gas generating plants is closely linked with the Ontario government’s commitment to add significant additional generating capacity from “green” energy sources, mainly wind turbines and solar power equipment. These intermittent sources of power require much more conventional energy sources to back them up for periods when they produce little or no electricity.

In reality, Ontario already has significant surplus electrical generating capacity, a situation that seems likely to continue until 2018 at the earliest. The problem seems to be one that is entirely of the government’s own making.

Robert Lyman

Ottawa

Ottawa economist on 10 years of power mismanagement in Ontario

23 Tuesday Jul 2013

Posted by ottawawindconcerns in Health, Ottawa, Renewable energy, Wind power

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Tags

Bob Chiarelli, Bob Lyman, cost benefit wind power, cost-benefit renewable power, Dalton McGuinty, electricity rates Ontario, Feed In Tariff Ontario, Green Energy Act, Kathleen Wynne, Ontario by-elections, Ontario Ministry of Energy, Ontario Power Authority, Ontario's electricity system, Ottawa wind concerns, Parker Gallant, power bills Ontario, Robert Lyman, Wind Concerns Ontario

You’ve read Bob Lyman, an economist specializing in energy issues, on these pages before.

In his latest work, he has written an overview of the last 10 years of energy policy as it relates to electricity in Ontario, and come up with the very worrying conclusion: the whole thing has been grossly mismanaged.

The question now is, can Ontario ever get out of this hole? That’s tough when Ontario keeps approving big, expensive wind power projects on the order of one a week this summer, despite not having a current long-term energy plan.

Here is Bob Lyman’s latest:

Ten Years of Liberal Mismanagement of Ontario’s Electricity System

A Layperson’s Summary

On July 16, 2013, Parker Gallant, a retired banker who for about six years has written about Ontario electricity policies, wrote an article to mark the forthcoming tenth anniversary of the Liberal Party’s tenure as government of Ontario. Mr. Gallant’s article can be found at the following link:

http://www.freewco.blogspot.ca/2013/07/ontario-liberals-10-years-of.html

This article is of great importance for Ontario residents who want to understand what has been happening to electricity supply, demand and prices over the past decade and, perhaps more importantly, how they should weigh these developments as they contemplate forthcoming elections in the province. Shortly, there will be five by-elections in different parts of Ontario that may swing the balance of power in the legislature. It is also likely that there will be a general election in Ontario within the next two years.

Voters need to understand what the fuss is all about and how it affects them. Unfortunately, Mr. Gallant’s article, as wonderfully insightful as it is, might be difficult to understand for the average citizen who does not follow electricity matters on a regular basis. The objective of this note is to offer a somewhat simplified version of the story people should know. …

Read the whole document here: Ten Years of Liberal Mismanagement of Ontario’s Electricity System

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