Ontario: paying for power not delivered, paying for wasted power, and paying to help with skyrocketing bills
In short, just paying and paying. Parker Gallant reviews the first five months in the electricity sector in Ontario, and asks what new Energy Minister Thibeault will do about the impact of the province’s renewable energy policy.
The Independent Electric System Operator (IESO) a few days ago released the 18 Month Outlook; sifting through the pages one finds some alarming comments such as this one: “The need for greater flexibility is related to our current supply mix. Forecast uncertainty from increased quantities of VG [variable generation] is compounded by demand forecast uncertainty.”
More alarming is this quote: “The need for additional flexibility increases as the VG fleet grows.”
“Variable generation” is of course a reference chiefly to wind and solar which is causing IESO grid management grief; the situation may well lead to blackouts or brownouts as more power generation in Ontario is variable.
Coincidentally, IESO also released a quarterly publication called “A progress report on contracted electricity supply” which highlights that IESO had, as of March 31, 2016, contracted for 5,814 MW of wind generation and 2,490 MW of solar generation. In fact, 1,434 MW of wind and 334 MW of solar were classified as “Under Development”.
Immediately following, IESO released the May 2016 Monthly Market Report which contained some disturbing facts such as disclosure that the “Weighted Average” for the month for Class B ratepayers was $133.81 per megawatt hour (MWh), or 13.4 cents/kWh (excluding the Debt Retirement charge). That is 20.7% above the average price of 11.1 cents/kWh levied by the OEB as of May 1, 2016.
What that means, is we are heading for another significant rate increase commencing November 1, 2015.
With this in mind let’s look at some events in the first five months of 2016.
The Global Adjustment climbed by over $1.7 billion from the same period in 2015 with Class A clients (large industry) seeing an increase of $310 million or 88%, and Class B ratepayers a $1.435 billion increase (43,3%). That happened even though consumption was virtually flat!
Another hit was related to curtailed wind (paid at an estimated $120/MWh) and, according to Scott Luft’s conservative estimates, was 730,000 MWh for the five months of 2016. The cost to ratepayers of almost $88 million is about 44% of the estimated $200 million annual cost for the OESP (Ontario Electricity Support Program) which kicked in January 1, 2016. That means, Ontario ratepayers are paying mainly large foreign-owned wind generating companies to cut back on power production at the same time as we pay to support as many as 571,000 households suffering from “energy poverty”! The irony? Intermittent power generation from wind, produced out-of-sync with demand, is causing households to pay for power not delivered and also pay for power needed by low-income households!
In the first five months of 2016 the average intertie (exports minus imports) was 6.570 million MWh; Ontario generated revenue of $68.4 million from the average HOEP (hourly Ontario electricity price) sale price. The ratepayers in Ontario, however, were obliged to pick up the Global Adjustment costs of $674 million (average GA cost per MWh was $102.61), meaning it cost almost $150.00 per “average” household just to support surplus export sales.
While all this was going on, OPG was also spilling hydro (1.7 million MWh1) as they report in their 1st Quarter results, Bruce Nuclear was steaming off nuclear power, and wind power generators were being paid an average of $133/MWh to produce out of sync with demand intermittent power that is now apparently causing IESO grief in ensuring they can manage the grid.
The waste and expense: does new Energy Minister Glenn Thibeault know that his predecessor instructed the IESO to acquire another 600 MW of wind in the next procurement phase?
One might ask, will Energy Minister Thibeault have the intestinal fortitude to cancel that directive and save Ontarians from paying for power that is clearly not needed?
© Parker Gallant
June 24, 2016
- OPG were paid for spilling the 1.7 TWh of hydro which could have supplied almost all of the low-income households with free power for those five months.