Ontario gives away $4.5B in ratepayer dollars; Energy Minister Chiarelli persists in directive to add more intermittent, expensive wind power
Electricity costs up 97 percent in Ontario: power surplus exports rising
February 8, 2016. Reposted from Wind Concerns Ontario
The GA or Global Adjustment first made its appearance on IESO’s Monthly Market Report in January 2007. As noted in the chart below, that year, the GA finished 2007 at $3.95 per megawatt hour (MWh) which means it cost Ontario’s electricity ratepayers about $600 million for the full year. In, 2015 the GA was just shy of $10 billion.
To be fair, the GA includes the price of “contracted” power, less the value given to it on the hourly Ontario electricity price (HOEP) market. As a result of Ontario’s high surplus of generating capacity and the intermittent presentation of wind and solar in periods of low demand, has resulted in the HOEP showing declining values. Despite declining values the cost of a kilowatt hour (kWh) of electricity increased from an average of 5.43 cents/kWh to 10.7 cents/kWh from November 1, 2007 to November 1, 2015 — up 97%. The upsetting part, and a driving force behind the 97% increase is surplus generation sold to our neighbours. We sell excess output to New York and Michigan, etc. without inclusion of the GA. The GA lost on those sales is charged to Ontario ratepayers and has become increasingly large. The chart indicates the “intertie flows” (exports/imports netted) initially cost Ontario ratepayers $20 million for 2007, but that has increased, and representing more $1.3 billion for 2015.
It is anticipated the annual cost of subsidizing surplus exports will continue to climb.
Scott Luft notes results for January 2016 are 20% higher than January 2015 for the cost of electricity as the HOEP was lower despite what Ontario’s Liberal government says about pricing stabilizing. With plans to add 500 MW of capacity for wind and solar, the climb will continue for at least another two years. Energy Minister Bob Chiarelli recently stated: “Our government’s focus is now on preparations for the next long term energy plan and the ways in which we can continue to drive down costs for Ontarians”. (Note to the Minister: a 97% increase does not “drive down costs”!)
Further reference to the chart points out addition of more wind and solar over the past nine years has driven up the percentage of renewables exported. The “Net Intertie” (net exports) increased from 19.6% in 2007 to over 57% in 2015.
What the Energy Minister needs to accept is this: we don’t need more intermittent and unreliable power.
That message is not getting through, despite evidence presented by the Auditor General of Ontario on several occasions and by numerous critics in the media.
Costing ratepayers $4.5 billion in after-tax dollars to help our neighbours is what’s happened. Perhaps Minister Chiarelli could suggest to Finance Minister Charles Sousa, that the money extracted from ratepayers provides no benefits to Ontarians. Perhaps a tax receipt is in order — that would help cash-strapped citizens, but there is a better idea.
The Energy Minister needs to immediately recall his directive to the IESO to acquire another 500 MW of contracts for intermittent wind and solar power.
100-MW North Kent wind farm posted despite surplus power in Ontario
Ontario electricity customers pick up the tab for unneeded power development, again
The huge, 100-megawatt North Kent 1 wind power project proposed by the Samsung-Pattern Energy consortium was posted yesterday on the Ontario Environmental Registry. The announcement comes despite the Ontario Auditor General’s report in 2015 that Ontario has a significant oversupply of electrical power, and that Ontario ratepayers are paying too much for “renewables.”
In just the first eight hours today, the day after the announcement for North Kent 1, the Independent Electricity System Operator or IESO curtailed about 11,000 MWh of wind generation alone. It could have provided power for 1200 average households; instead it has cost Ontario electricity ratepayers $1.5 million … for nothing.
The power developers claim the power produced from this project during its 20-year agreement with the province will generate “electricity equivalent to the annual electricity needs of 35,000 homes.”
Their use of the wording “equivalent to” is interesting because with Ontario’s current and significant surplus of power, the electricity generated from this project will almost certainly NOT go to Ontario electricity customers, but instead will be sold at a discount to neighbouring jurisdictions like Michigan and New York State.
As an example, Samsung-Pattern’s Armow wind project just began operation this week, and energy analyst and blogger Scott Luft commented: “the only drivers of price in Ontario are excess supply and supply rate increases (primarily at OPG). Samsung’s announcement states ‘Armow Wind is expected to generate enough clean energy to power approximately 70,000 Ontario homes each year’, but … it’s unlikely it will have the opportunity to power a single one — it will power American homes or nothing at all.”
Energy commentator Parker Gallant also remarked: “The power [from the Armow project] delivered to Ontario will be charged to all average ratepayers at 13.5 cents/kWh whereas the power (probably about 50% of production) will be charged out to those NY & Michigan ratepayers at about 2.5 cents/kWh. Ontario ratepayers will pick up the difference between the 2.5 cents the surplus is sold for and the 13.5 cents/kWh the Armow owners will be paid.”
Although the project may be appealed (almost every wind power project in Ontario has been) Samsung-Pattern confidently announce that construction on the project will begin later this year, and operations will begin early in 2017.
Comments on the project are accepted by the EBR in writing or online until March 18. Comments must relate to environmental impact.
What would your family have done with the money you paid–and the government wasted on its green energy policy last year?
January 23, 2016
This “Op-Ed” appears in the current edition of Ontario Farmer. It is not available online.
Good money after bad: how mismanagement of Ontario’s power system affects you
By Parker Gallant
It’s been several months now since the Auditor General of Ontario released her 2015 report, in which she levelled scathing criticism of how the Ontario government has mismanaged the electricity sector. In what will be her last report to include the management of Hydro One because the government has partially privatized the electricity distributor, Auditor General Bonnie Lysyk condemned the planning and policy implementation processes that have resulted in Ontario’s electricity consumers paying too much for power.
The report made specific mention of the fact that Ontario has a surplus of power, a situation that is likely to continue, if the government continues to give out expensive contracts for “renewable” power sources wind and solar, which provide only a small amount of Ontario’s power and then only intermittently.
The Auditor General said, “The Ministry’s attractive guaranteed prices program has been one of the main contributors to the surplus power situation Ontario has faced since 2009, in that it has procured too many renewable projects, too quickly, and at too high a cost.” The Auditor General’s office also found that Ontario paid “double the current average cost” in North America for wind power.
Her estimate was that Ontario’s electricity customers paid out $9.2 billion just for wind and solar contracts. Worst of all, perhaps, is the fact that Ontario is paying top dollar for renewables –and then selling the power at bargain bin prices—because of the power surplus.
Readers may recall that in most parts of Ontario, we had a very windy Christmas Eve. That breezy situation cost us plenty; because we are forced to buy wind power even when we don’t need it, wind power makes up a substantial portion of the surplus power we sell off. On Christmas Eve, that was about $9.4 million, which is not counting what we paid Bruce Nuclear to “steam off” power, or what we paid some wind power producers to limit or “curtail” power production.
What would your local hospital have done with even a small part of that $9.4 million?
What could Ontario have done with the $339 million the Auditor General says we paid for curtailing surplus electricity between 2009 and 2014?
What would you have done with the $360 extra you paid last year (assuming you use only 800 KwH per month of power)?
It’s official! The cost of exporting Ontario’s surplus electricity paid for by electricity ratepayers actually exceeded the prize up for grabs in the U.S.-based “Powerball” lottery. In this case, prize winners were neighbouring states, New York and Michigan and a few other lucky Ontario neighbours. The other big winners were the wind and solar developers in Ontario who were busy generating surplus unreliable and intermittent electricity.
The Independent Electricity System Operator (IESO) released the “2015 Ontario Electricity Data”, and buttered it up with verbiage that made it sound like everyone in the province won — but they didn’t. Everyone who uses electricity for their daily needs actually lost a lot of money; the current year will simply make it worse.
Let’s have a look at some of the data. IESO told us Ontario demand fell by 2% to 137 terawatts (TWh) The press release tells us the drop in demand “can be attributed to conservation initiatives, increases in embedded generation, mild weather and broader economic shifts”. They don’t say what those “broader economic shifts” were, but they do sort of comment in respect to “embedded” generation. They tell us that embedded generation grew by 20% last year to 3,000 megawatts (MW,) but they don’t tell us what they produced meaning we are not being told if demand actually fell by the 2% claimed. If it didn’t fall the claim about those “conservation initiatives” would be false. We will never know because IESO won’t disclose what embedded generation produced. That doesn’t sound very “transparent” despite IESO first “Mission Statement” which is to operate the “electricity system and market in an effective and transparent manner.”
Other data released indicates Ontario exported 22.618 TWh (enough to power about 2.4 million1. average Ontario households for a full year) and those exported 22,618,000 MWh generated average revenue of $23.60/MWh each, meaning Minister Chiarelli would claim we made a profit of $534 million. Well, we didn’t make a profit! The data in the IESO release indicates the average hourly Ontario energy price (HOEP) for 2015 was $23.60/MWh (2.36 cents per kilowatt hour) and the GA or Global Adjustment added another $77.80/MWh to the costs of producing that exported surplus power bringing the all-in cost to $101.40/MWh. Our U.S. neighbours don’t pay the GA!
The total cost of producing those 22,618,000 exported MWh was therefore $2,293 million. Now, if we deduct Minister Chiarelli’s “profit” of $534 million, the “Powerball” number picked up by Ontario’s benevolent ratepayers was $1.759 billion.
The press release also told us that power generation from wind reached a record 9.0 TWh in 2015 (without accounting for constrained generation). The average cost of those 9 TWh was approximately $125/MWh or $125 million per TWh, so if we had had no wind turbines in the province producing electricity intermittently and out of phase with demand, we could have reduced the “Powerball” number by $1.1 billion. That would have saved the average ratepayer $223.
To many Ontario ratepayers, saving $223 in electricity costs would have been a “win” but instead, we all lose.
Math lesson on power costs for Minister Bob Chiarelli: Parker Gallant
January 5, 2016
Open “Tongue in cheek” letter to:
The Honourable Bob Chiarelli, Minister of Energy, Queen’s Park, Toronto
Dear Minister Chiarelli:
First, I hope you and your family had a Merry Christmas and a Happy New Year.
Second, I hope you found the time to make it through the exercises I described in my recent letter so you now understand the difference between “profit” and “loss” in respect to the energy portfolio.
With that behind you, I believe it’s time for a second math lesson. We will again use the chart for November 12th, 2015 prepared by my friend Scott Luft. See below.
This lesson is focused on allowing you to understand how the cost per megawatt hour (MWh) by generating source can be calculated using the chart Scott prepared versus the IESO daily summary which is not at all as transparent as Scott’s.
Let’s start! Note the second portion of the chart with the subject line “IESO Transmission (Tx)”. The first heading “Nuclear” is a reflection of the generation source and on this day it provided 58.1% of all generation. How to get that calculation is simple. Look at the first line; add the “Ontario” column of the generation of 429,668 MWh to the 2nd line “est. Distribution (Dx)1.” giving you 447,177 MWh. Divide it into Nuclear total of 259,444 MWh and you get 58%! Including curtailed it becomes 61.8%.
Now let’s calculate the cost of each megawatt hour of Nuclear generation. We will include “est. Curtailed” in our calculations as it is generation that could have been delivered, but because IESO was concerned with the grid crashing it was “curtailed” i.e., not produced. Bruce Nuclear has the ability to “steam off” and that is what they were told to do, because wind/solar was generating too much power at a particular point in the day. Now the total of nuclear generation plus the curtailed (steamed off) nuclear is 276,301 MWh and that should be divided into the last line “Cost ($000s)” of $18.062 million —which demonstrates each MWh of nuclear cost $65.37/MWh. Still with me, I hope!
OK, so let’s calculate the cost per MWh for hydro: that was 86,965 MWh + est. Distribution (Dx) of 1,867 MWh and curtailed (spilled) of 208 MWh for a total of 89,040 MWh. Divide that into the “Cost” of $4.671 million and you will see the cost per MWh was $52.46. Hydro contributed 20.2% of Ontario’s total generation (ignoring curtailed generation) this day, so combined with nuclear those two sources generated or curtailed/steamed off 78.2% (365,341 MWh) of all electricity generated in the province, and 100.4% of total Ontario demand (refer IESO daily summary) of 363,960 MWh.
Hope you are paying attention Bob. Here’s why: our exercise up to now doesn’t include generation from wind, solar, gas, biomass or biofuel sources, yet they were were completely CO 2 free! Worth pondering, eh?
Now, time to look at costs of those other sources of generation. Let’s start with gas and its role in providing “peaking power”! On this day, gas provided 5.5% of Ontario generation (including “est. Distribution (Dx).” The calculation: 24,511 MWh divided by 447,177 MWh = 5.5%. The cost of those megawatt hours is simply: divide the “Cost” of $5.360 million by 24,511 MWh, giving a shocking total of $218.68/MWh!
Contracting for gas plants is to back up wind and solar generation when the wind doesn’t blow and the sun doesn’t shine!
Here is an example that requires some math calculation so read this carefully before trying the calculations. Specifically let’s review the TransCanada 900-MW gas plant (planned but canceled) for Oakville (most of the $1.1 billion cost) and moved to Bath! The OPA contract (negotiated by the OPA) will pay them $15,000 per MW per month to be “at the ready.” The annual cost of the 900 MW is $162 million (900 MW X $15,000 X 12 = $162 million).
Bob, what the foregoing means is that if that plant produced just one (1) megawatt hour of electricity in a year, the cost would be $162 million.
Now let’s do a “what if” exercise: assume it will operate at 10% of rated capacity of 900 MW which means it will produce 788,400 MWh (10% X 900 MW X 8760 [hours in a year] = 788,400 MWh). Actual generation costs from the gas peaking plants are based on the cost of the natural gas fuel plus a small mark-up but we will ignore those latter two costs in the next calculation just to keep it simple. Here we go: if you divide the annual cost of $162 million by 788,400 MWh, your answer should be $205.50/MWh. Pretty expensive, eh?
The requirement to back up industrial wind turbines is old news as noted in a Memorandum submitted to the U.K. Parliament which stated: “Dr Paul Golby CEO of E.On UK, says 90% whilst Mr Rupert Steele of Scottish Power says, “Thirty Gigawatts of wind maybe requires twenty-five GW of backup.” In other words, that means, if you contract for 1,000 MW of industrial wind generation you need a 900 MW gas plant to “back-up” its capacity!
So, doing math is important: you can see that you are almost doubling up on the cost of producing a single MWh of electricity.
That brings us to the actual cost of wind generation on the chosen day in November.
On November 12, 2015 (refer to Scott Luft’s chart) wind produced 63,203 MWh, i.e., the lines “IESO Transmission (Tx)” + “est. Distribution (Dx)” equals 63,203 MWh. On this day wind produced 14.1% of Ontario’s generation at a cost of $153.55/MWh (based on the calculations applied above) —or at least this is what one would assume. That is an assumption you shouldn’t make though, Bob, and I will try to explain why. Adding curtailed wind production (13,500 MWh) to the 63,203 MWh produced would reduce the per MWh cost to $126.52/MWh, but, and it’s a big but—it doesn’t include gas back-up costs. Now pay attention!
The outstanding contracts for gas generation total about 9,000 MW of capacity and the contracts guarantee them (including the 2,100 MW of Lennox owned by OPG) a monthly price similar to the TransCanada contract mentioned above. So, knowing that, let’s assume the “average” contracted price is only $10,000 per MW per month. Bearing that in mind the backup for wind (solar to a lessor extent) is costing Ontario ratepayers $1.080 billion annually to be on “standby”! In other words, if they produced one (1) MWh in a year the cost would be $1,080,000,000. Shocking eh? If operated at 100% of rated capacity (which they can’t) they would produce almost 79 TWh (terawatts2.) or over 50% (9,000 MW X 8760 hours in a year) of Ontario’s annual consumption.
OK, now back to Scott’s chart of November 12 and let’s figure out the full cost. On November 12, gas generators operated at around 11.3% of capacity (79 TWh divided by 365 days in a year = 216,438 MWh and 24,511 MWh divided by 216,438 MWh = 11.3%). The cost of that day’s gas generation combined with wind generation would be $171.75/MWh, i.e., combined cost of $15,065,000 divided by combined generation of 87,714 MWh (ignore the curtailed generation) = $171.75/MWh. Now that cost coupled with the losses of $7.9 million from our exports of 74,352 MWh (cost of $108 per/MWh3.) Nov. 12th, produces a combined cost of $279.75/MWh or 4.3 times the cost of nuclear generation.
At this point, Bob, I hope you have grasped the math so I won’t go through the exercise for Scott’s other headings of biofuel, solar etc. I will leave you to work those out on your own.
I certainly hope this exercise gives you sufficient math skills to at least understand the basic steps you should go through before making either rash remarks or issuing directives to IESO telling them what to do. Instead perhaps you could instruct them to produce information similar to what Scott Luft produces. The latter would also back up your leader’s wishes or intent to be “transparent” for the taxpayers and voters in Ontario.
Good luck with the math exercises and with demonstrating your Ministry’s intention to become more transparent.
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?
CanWEA’s Hornung: his definition of ‘reliable’ is a bit off
Wind power: unreliable, and costly
Re-posted from Wind Concerns Ontario, with permission
Robert Hornung, president of the Canadian Wind Energy Association (CanWEA), frequently uses the word “reliable” when expounding on the purported benefits of generating power from wind. Here are a couple of them: “Wind energy is meeting Canada’s demand for new electricity in a clean,reliable and cost-competitive way,” says Hornung. And this one: “Wind energy provides reliable power”.
Hornung’s use of the word “reliable” is not the same as Webster’s defines it: “to be relied on” and “giving the same result on repeated trials”. His use of the term “cost-competitive” fails the same test!
Some recent events offer contradicting evidence on the issue of wind’s “reliability” as a power source.
On October 5, 2015 wind production for the full 24 hours was 2,636 megawatts (MW) averaging 110 MW per hour—that represented just 0.5% of Ontario’s average demand of 16,394 MW per hour. Now measured against Ontario’s average hourly demand of October 19, 2015 at 14,997 MW is an interesting contrast. Ontario’s industrial wind turbines (IWTs), with an IESO1. reported capacity of 3,427 MW, were producing an average of 2,474 MW per hour, and in 24 hours cranked out 59,389 MWh, representing 16.5% of the average hourly demand. The lower demand day of October 19th (9.4% less than October 5th) saw those IWTs producing power at very high levels, which coincidentally resulted in average hourly exports 760 MW higher per hour.
The connection to high wind power generation and higher exports is obvious, as is the lower average of the hourly Ontario energy price (HOEP). October 5th that was $30.99 per MWh, but only $21.62 (30% lower) on October 19th.
What does it mean? Ontario’s ratepayers subsidized wind on the higher demand day by picking up the cost of $252K (2,626 X $127/MWh2. = $333K – $81K [2,626 X $30.99/MWh] = $252K). Compared to the subsidy picked up by Ontario’s ratepayers on October 19th , however, that was a bargain. On the latter day the cost was considerably more at $6.2 million (59,389 MWh X $127= $7.5 million – $1.3 million [59,389 MWh X $21.62/MWh] = $6.2 million).
Mr. Hornung and CanWEA may consider “reliable” to mean Ontario’s ability to supply our neighbours in New York, Michigan and elsewhere with power that is “cost-competitive.” It’s just not in his best interest to express it that way.
CanWEA needs to find new talking points that deal with the facts: power generation from wind is totally unreliable and anything but cost-competitive!
IESO do not report the full capacity until the IWT are commissioned by them, whereas the full capacity may be considerably higher.
The OEB estimates the average cost of wind generation at $127/MWh.
P.S.: Hour 18 on October 24, 2015 saw a new record for wind generation in Ontario with 3,123 MWh meaning IWT were operating at over 91% of capacity, and the HOEP (hourly Ontario energy price) was $13.36— subsidies were $350K for just that hour.
The Ontario Energy Board (OEB) reported their semi-annual bad news via the News Release that always contains depressing announcements about upcoming rate increases. Couched in words meant to assuage the reader, is this statement: “The price is increasing by approximately $4.42 per month on the ‘Electricity’ line, and about 3.4% on the total bill, for a household that consumes 800 kWh per month.”
The OEB doesn’t issue a press release when your local distribution company increases their rates, part of the “total bill,” so that reference is meaningless.
If you look at the actual price rise from November 1, 2014 to November 1, 2015 the increase is considerably more than 3.4%. In fact the increase on the charge for the “Electricity” line is 12.8% excluding the HST applied on that increase. The charge for electricity for the “household that consumes 800 kWh per month” increased by a total of $130.31, not the $53.04 that the OEB infers. Even using the “average” RPP (regulated price plan) posted on their site and comparing November 1, 2014 to November 1, 2015, you get an increase of 12.5%!
Costs from renewables are one-third of the increase
Looking further that what’s in the OEB News Release, we find that they attribute the increase as follows: “Increased costs from Ontario Power Generation’s (OPG) nuclear and hydro-electric power plants make up about 40% of this increase. Costs from renewable generation sources are another driver, representing about one-third of the increase.” I emphasized the last sentence as it doesn’t reflect certain facts about renewable generation (principally wind and solar), including the need to pay OPG for spilled (unused) hydro power, payments to gas plants to idle (ensuring power is available when the wind dies down or the clouds cover the skies), or directions to complete marginal generation (Mattagami’s project cost was $2.6 billion) which produces power when it’s not needed, in the Spring and Fall periods when Ontario’s demand is low.
Millions lost in one day
You need only look back to October 13, 2015, a windy day when the industrial wind turbines were cranking out unneeded power. The reported 3,450 MW of wind capacity was spitting out an average of 2,200 MW per hour, at a cost for the whole day of $6.5 million. Ontario was busy exporting 2,228 MW every hour that day, being paid 1.8 cents a kWh and at the same time, paying wind developers an average of 12.3 cents per kWh—we lost more than $5.5 million. That’s just one day!
Now if the OEB were really transparent, they would bring these issues to the forefront.At a minimum, the people who write news releases for the OEB should also be required to take some remedial math courses!
Ontario electricity customers should demand that the Ontario Energy Board, whose mission is to “regulate prices in the public interest,” demonstrate factual reporting and provide consumers with the truth about rate increases.
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.
The Independent Electricity System Operator’s (IESO) summary report for July 28, 2015 demonstrated how it was an atypical day for Ontario’s industrial wind generators. The Toronto temperature reached 33 degrees Celsius meaning Ontario’s electricity demand was high. Demand averaged 19,515 MWs per hour and peaked at 22,471 MWh.
Wind generators were playing in the sandbox for the whole 24 hours, producing a miserly 2,180 MWh which equaled 2.9% of their (IESO posted) capacity and less than a half percent (½ %) of total Ontario demand of 462,144 MWh. For two of those hours (9 and 10) wind produced less than 10 MWh — that probably meant they were drawing more power than they produced.
Picking up the slack for wind generators fell to Ontario’s 9,200 MW capacity of the gas plants. For several hours those gas plants were running close to their maximums, and in the 24 hours produced 94,386 MWh. That’s slightly more than 20% of Ontario’s total demand.
What this all means is that, on most high-demand, hot summer days, wind can’t be counted on to reduce emissions as wind power advocates claim it does. Those 94,386 MWh of gas generated electricity cranked up Ontario’s CO2 emissions on July 28, 2015 by approximately 47,000 tons, thanks to wind’s absence!
Simply put, this confirms the inability of wind to generate electricity when it is needed.
The time has arrived for the Energy Minister, Bob Chiarelli, to recognize the facts and cancel any further additions to Ontario’s wind turbine fleet. Electricity generated from industrial wind turbines should be recognized as 130-year old technology that simply can’t be counted on when needed.