Small Hydro and Co-incidental Smells

On May 19, 2011 Northern Ontario Business announced that Xeneca Power Development Inc. was awarded 19 small (under 10 MW) hydro-electric projects under the Ontario Power Authority’s (OPA) Feed-in Tariff (FIT) program. Under the FIT program for small hydro projects Xeneca were guaranteed 13.1 cents per kWh for any power delivered to the grid. Small hydro-electric power is clean, its variable; meaning it can be used for peak needs or shut down (spilled water or damned) when not needed, so it is much more desirable and useful then wind or solar generation.

The article also indicated that Xeneca was in the running for an additional 14 small hydro-electric projects and that the 19 contracts awarded represented about half (72 MW) of all (small) hydro generation in the province. The spokesperson for Xeneca was Mark Holmes, VP, Corporate Affairs, who is also named as the lobbyist for the company in the Ontario Lobbyist Registry,

Reviewing the information Mr. Holmes submitted when registering as the lobbyist one notes under; “Section G.1. Government Funding”, the response to the question; “Is your client funded in whole or in part by any government?” that Xeneca declared that the “Northern Ontario Heritage Fund” provided $732,000.

One would presume those funds would go a long way to determine the feasibility of these projects providing Xeneca with a distinct advantage over any competing bidders who would perhaps be reluctant to spend the cash necessary to qualify. Why was Xeneca provided with that funding by another arm of the Provincial government when we would presume other potential developers would have interests in the attractive rates being offered by the OPA for these small projects? Was the playing field slanted to favour Xeneca and were there any competitive bids?

Looking further into Xeneca their management list includes Arnold Chan, VP, Legal Affairs. Mr. Chan prior to joining Xeneca in 2010 was aligned with the Ontario Liberal Party and served as Chief of Staff in the Ministry of Revenue under Minister Michael Chan. During Chan’s tenure as Chief of Staff, Colin Andersen was the Deputy Minister as disclosed in the Ministry of Revenue’s March 2007 Organization Structure. Mr. Andersen was on the Ontario “Sunshine List” and showed earnings of $307,729 for 2007. In September 2008 he was appointed the CEO of the OPA and his earnings for that year when reported in the Spring of 2009 had jumped to $458,153. Mr. Andersen got a 49% increase in earnings for leaving his Deputy Minister’s post to become the CEO of the OPA. The OPA was set up by Energy Minister Dwight Duncan as a “temporary” agency of the province to develop an Integrated Power System Plan (IPSP) in 2004 which we are still waiting for.

Arnold Chan, left his Provincial employment position in 2010 to join Xeneca. His prior connections with the ruling Liberal Party, in my humble opinion, may have assisted Xeneca in gaining access to that Government Funding of $732,000 from the Northern Ontario Heritage Fund, and along with his indirect responsibility as the Revenue Minister’s Chief of Staff overseeing Colin Andersen may have provided some leverage in the awarding of the contracts. Mr. Chan appears to have contributed funds to the Liberal Party in 2011 as did Xeneca ($10,000) prior to the run-up for the election in October 2011. Needless to say I have personal suspicions but that is for others to pontificate about!

One of the concerns I had was related to an earlier article about the Town of Bancroft who were chasing a dream only to have the OPA haul out their rule book and deny them the right to obtain the 13.1 cents per kWh for their little 600 kWh run of river hydro-electric project placing their local town owned company in jeopardy. At present the Town’s, wholly owned subsidiary is forced to sell their hydro generation at the hourly Ontario energy price (HOEP) which has averaged 2.16 cents a kWh since the start of the current year. It seems bizarrely strange that a town owned generating unit is producing power for the Ontario grid but earns 11 cents a kWh less then a for profit company that has a former Ontario ministerial Chief of Staff on their payroll. At the same time the Town of Markham has installed 250 kilowatts of solar panels on the roof of their offices and will be paid 70.3 cents a kWh. The Province also kindly provided Markham with $2.4 million to finance the installation of those solar panels.

I am sure it is purely co-incidental that Michael Chan is the MPP for Markham-Unionville; that Xeneca obtained $732,000 from the Northern Ontario Heritage Fund; that Arnold Chan wound up as the VP, Legal Affairs for Xeneca and they received those 19 contracts, and that Colin Andersen became the CEO of the OPA in September 2008 and then received a 49% year over year increase in his remuneration for that year–the year of the financial crisis!

One must assume the smell emanating from the Northern Ontario Business article must come from the dead fish caught in the turbines and not the co-incidences highlighted!

Parker Gallant,
March 27, 2012

Ontario’s Power Trip: Not a FIT review

Ontario’s Power Trip: Not a FIT review | FP Comment | Financial Post:

By Parker Gallant

The long anticipated Ontario Feed-in Tariff (FIT) two-year review report was sent to the current Minister of Energy, Chris Bentley, this week. The ministry released its position on the “report” only three days later and basically endorsed the recommendations found in it.

The FIT review avoids discussion of the impact on electricity ratepayers. To the Minister`s doubtless embarrassment, a submission Wednesday to the Ontario Energy Board by Aegent Energy Advisors reveals what the review report does not. The Aegent report, produced on behalf of five parties, including diverse groups such as the Canadian Manufacturers and Exporters and the Vulnerable Energy Consumers Coalition, forecasts double-digit increases through to 2016. At the low end affecting large direct consumers, the submission estimates rate increases of a minimum of 36% and as much as 48%. Residential consumers face rate hikes up to 58%. The Aegent report is consistent with other forecasts of similar rate increases over the next few years.

In contrast to the Aegent report, which shows soaring power prices, the FIT review pretends that the province runs a tight ship that will become tighter still. It recommends, for example, reducing prices paid to wind and solar developers nominally by 15% and 20% respectively. Yet the new prices will still leave Ontario leading the way in respect to subsidizing those two unreliable and intermittent sources of electricity generation compared to most G20 countries.

The FIT review, prepared by Fareed Amin, deputy minister of agriculture, isn’t much to look at. It could have been pieced together by simply referencing past press releases issued by the former and current energy ministers. It contained no surprises. It’s a Liberal “stay the course” report.
Read Parker Gallant’s full article at the Financial Post site

WCO: BUSINESS AS USUAL FOR CORPORATE WIND DEVELOPERS UNDER NEW SUBSIDY

March 22, 2012
It’s business as usual for huge corporate wind power developers in Ontario, in light of recommendations in the two-year review of Ontario’s Feed In Tariff subsidy program, released today by the Ontario government.
Subsidies for industrial-scale wind power projects have been reduced by only 15 per cent–that’s still too expensive and for power that’s not needed, says Wind Concerns Ontario (WCO).
The coalition of community groups had called for a complete cancellation of the FIT subsidy program.
“The extra power that was produced and exported in January and February cost Ontario millions,” says vice-president Parker Gallant, a former banker.  “Why do we need FIT when the truth is we’re wasting cheap, clean hydro power and spending millions on new transmission capacity for wind power?”
The renewed FIT program will continue to cause electricity rates to rise, which will be bad for consumers including Ontario businesses.
“In Europe, the countries that used this type of subsidy for renewable power sources saw job losses due to the high cost of power. We’re already seeing Ontario businesses say they may have to close or move away,” Gallant explains.
Gallant also noted that rural communities are being turned into electrical power factories, with falling property values and other negative effects. “People are being made ill because of the environmental noise. This government doesn’t care about the misery it’s causing.”
“FIT is a failure,” he concludes. “It is not the path to a solid financial future for Ontario.”
________________

 Contact Wind Concerns Ontario at windconcerns@gmail.com

Ontario’s Power Trip: Wind wastes water — and your dollars

Ontario’s Power Trip: Wind wastes water — and your dollars | FP Comment | Financial Post:

Hydro generation gives way to costly wind
By Parker Gallant and Scott Luft

Ontario Power Generation (OPG) is the province’s premier electricity power generating firm, a government-owned utility whose future has long been hooked to government policy. Today, in the green hands of the Dalton McGuinty’s Liberal government, OPG appears to be in decline. That decline was confirmed a few days ago when the company issued its 2011 annual financial results. It’s a decline that is likely to continue even if, as expected, the government changes its green-energy regime next week.

First, the company reported declining revenue, down 5.7% to $5-billion. Profits fell 35.9% to $416-million. The company produced less electricity: 84.7 terawatt hours (Twh), down 3.9 Twh or 4.4%. OPG’s share of the province’s electricity market is now less than 60%, off from 72% in 2003.

The decline in the company’s output and share of market since 2003, when it produced 109.1 Twh of electricity, tells the story.  Under government directive, the company has been forced to shut down its coal plants. Fossil fuel production was 3.7 TWh versus the 39 TWh produced in 2003 for a 95% reduction. The reduction in coal was offset by increased nuclear and natural gas-fired generation and a drop in overall demand.

Annual Wind and Unregulated Hydro (graphic added on WCO)

If OPG is producing less electricity, somebody else is producing more. That would be wind power, produced by scores of wind operators that have popped up around the province under the McGuinty government’s green-energy plan. In fact, OPG’s production decline of 3.9 Twh for 2011 was offset by 3.9 Twh of wind production.

If OPG had lost that market share in a competitive market, so much the better. It would have been a sign that it did not deserve to be producing electricity if it could not match the prices and supply levels of alternative sources of power. But that is not the case.

  Read the full article at the Financial Post site

Wind’s cost to ratepayers is $135-million per Twh, or about $526-million for the 3.9 Twh wind delivered to Ontario in 2011. According to OPG’s annual statement, it sells nuclear power into the market at $55-million per Twh and unregulated hydro power from places like Niagara Falls for $32-million per Twh. The math is simple: Had OPG used its hydro facilities to deliver the same amount of power supplied by wind, the cost savings to Ontario’s ratepayers would have been the difference between the $32-million per TWh hydro price and the $135-million paid for wind. The 3.9 Twh of wind power that cost Ontario ratepayers $526-million last year could have been bought from OPG for $125-million — a potential saving of $400-million and delivered $125 million in additional revenue for OPG.

What’s going on here should be obvious. Under government regulation, expensive wind power is being forced down the system, displacing inexpensive hydro power. As a result, unregulated hydro power is operating at ever lower levels below capacity. Since the advent of wind power, hydro’s operating rate has declined from about 45% of capacity to 36% in 2010.

Graphic added on WCO

Since wind first presented itself in Ontario it has generated in excess of $1.3-billion dollars for wind developers (principally out-of-province corporations) while costing ratepayers approximately $900-million more than they would have paid for unregulated hydro. At the same time it has had the undesired effect of reducing OPG’s revenues by $400-million. That money could have either reduced the stranded debt or gone to reduce taxpayers’ liabilities.

As wind’s capacity levels increase (beyond the current 1,800 megawatts) to the 8,400 MW contemplated in the Long Term Energy Plan, the cost to ratepayers will climb and revenue and profit at the taxpayer-owned OPG will fall further, reducing its value and extending repayment of the stranded debt. All this will be happening while OPG absorbs the costs of its $1.6-billion Big Becky expansion at Niagara Falls, its $2.6-billion Mattagami hydro project and the yet unknown costs of the Darlington refurbishment. Those costs will find their way to ratepayers’ bills.

Wind has other costs. Wind power is now being exported out of Ontario at below-cost prices, which means that Ontario ratepayers are paying U.S. states to take surplus wind — which blows when no power is needed — out of Ontario.

Some costs are non-financial. Many people claim significant health effects of these industrial wind behemoths. Some people have been forced to abandon their homes and farms. The effects have been felt throughout rural Ontario, causing a myriad of other problems. Wildlife impacts certainly exist, as 40- to 50-storey turbines have been placed in the path of migratory birds.

The McGuinty government is expected to alter some elements of its green energy program, primarily by reducing the high price it forces consumers to pay for wind and solar power. But how much of the program will be grandfathered to become a permanent feature of a power system that is undermining the government-owned OPG at the cost of billions of dollars to taxpayers and ratepayers?

  View the article, and related comments, at the Financial Post site

Wind Turbines Displace Hydro

Wind Turbines Displace Hydro: how OPG is spending $4.2 billion to avoid Blackouts

OPG was directed by the Liberal Ministry of Energy to spend billions on hydro projects as evidenced by both Big Becky ($1.6 billion) and the Lower Mattagami projects ($2.6 billion). Big Becky adds no new capacity it will simply make existing production at Niagara more efficient whereas the Lower Mattagami project will supposedly add 440 megawatts (MW) of new capacity to OPG’s hydro fleet. These projects are still some way from completion so it is likely those budgeted estimates will be exceeded. Only a few years ago the estimate for Big Becky was $1 billion and for Mattagami $1.5 billion. The other issue surrounding those two engineering miracles is that they are being built at a time when Ontario has a huge surplus of power. With Bruce Power expected to hook up refurbished nuclear plants this year our surplus will increase further.

These two hydro projects will be available to back up wind and solar which by 2018 are expected to have a capacity of about 10,000 MW. At the same time demand in Ontario continues to drop as industries leave and high prices are having the desired effect of curtailing demand. The intermittent delivery of electricity to the grid by wind and solar generators will create problems for IESO in managing the grid and they will use hydro to balance it. Unregulated hydro from OPG will bear the brunt of their management efforts as wind and solar cycle up and down. While Ontario only has about 1800 MW of wind installed at present, IESO’s use of unregulated hydro has already presented itself and is costing ratepayers dearly.
The following chart shows the production and sale of unregulated hydro power by OPG in terawatts (TWh) since 2004 and where available shows prices received for that power. So far in 2012 the wholesale price has dropped a further 1 cent a kWh and if that holds OPG will receive even less for unregulated hydro in 2012 then they did in 2011.

Production of Unregulated Hydro by OPG 2004 – 2011
Year 2004 2005 2006 2007 2008 2009 2010 2011 (9 mths)
Unregulated Sold (TWh) 16.8 14.1 15 13.8 17.6 16.8 11.7 8.1
Price per kWh received N/A N/A N/A N/A N/A 3.2 3.7 3.3
Income before interest and income taxes ($M’s)
732 736 329 508 209 129
Total hydro capacity (MW) 6835 6982 6956 6972 6963 6944 6996 6996
Total hydro sold (TWh) 35.7 32.6 33.3 31.9 36.4 36.2 30.6 22.3
Unregulated (%) 47.1 43.2 45 40.2 48.3 46.4 39.6 36.3
NB: All information came from OPG’s “Fact Sheets” and Annual Reports!

Should OPG’s production and sale of unregulated hydro continue at the same rate for the last quarter of 2011 the TWh sold will be 10.8 TWh or 6.8 TWh lower then 2008. The value of that lost production based on the average received (9 months) for 2011 translates to $224 million in lost revenue to OPG and a further loss to the Provincial coffers for the payment of “water rental”. According to the Ministry of Natural Resources “Conditions Report”, 2011 was a relatively good year for water flow compared to 2007 which was considered a low water level year. Despite that; production and sale of unregulated hydro by OPG will likely come in at 3 TWh less for 2011 then 2007 when wind contributed 1 TWh. Co-incidentally wind reportedly contributed 3.9 TWh in 2011 which would indicate it is displacing hydro, not coal, as promised by the Ministry of Energy.

Wind and solar power has displaced cheap, clean hydroelectricity at a cost to the ratepayers of a minimum of $300 million in 2011 for the 3 plus TWh it took away from OPG’s unregulated hydro production-more if the costs of transmission lines built to hook up those wind turbines are included. That $300 million alone will add about $70.00 to each ratepayers bill for the year and also extend repayment of the “stranded debt”. The Drummond Commission highlighted the fact that the Government controls OPG and it’s direction to OPG influences the payments in lieu (PIL) of taxes which are directed to pay the “stranded debt”. The spilling of clean green hydroelectric power therefore flies in the face of his recommendation to maximize profits in that entity.
The $4.2 billion that OPG is spending represents almost $1,000 per ratepayer household and will be paid back through rate increases. The amortization period will be long (40/50 years) but it will still drive up bills significantly. The other 6/7,000 MW of wind slated to come on stream by 2018 will further exacerbate those increases causing OPG to spill clean hydro meaning the value for the billions spent will be even less. Worth noting is that Mattagami will likely produce most of its available power in the Spring and Fall when wind also tends to produce at higher levels. Those two seasons are traditionally Ontario’s lowest demand periods so we are simply doubling up production when we need it least. Ontario electricity prices will be the highest in North America by the middle of this decade making the province a very unattractive place for any type of industry.
Ontarians should accept the fact that we will remain a “have not” province for years to come even if McGuinty and the other parties agree to enact all of the Drummond Commission’s recommendations. The hidden debt burden on Ontario’s future generations created with those long term wind and solar contracts will increase our social costs by creating energy poverty and will keep employment levels lower then the rest of Canada.
Parker Gallant,
February 29, 2012