Ontario’s electricity policy disaster: power cost down, consumer rates up says economist

Massive revenue guarantees for a handful of lucky wind power generators, but no appreciable environmental benefit from Ontario’s energy policies says economics professor Ross McKitrick

More turbines means more losses and higher bills, with no environmental benefits [Photo: Gord Benner]
More turbines means more losses and higher bills, with no environmental benefits [Photo Algoma construction site by Gord Benner]
Financial Post, August 10, 2016

You may be surprised to learn that electricity is now cheaper to generate in Ontario than it has been for decades. The wholesale price, called the Hourly Ontario Electricity Price or HOEP, used to bounce around between five and eight cents per kilowatt hour (kWh), but over the last decade, thanks in large part to the shale gas revolution, it has trended down to below three cents, and on a typical day is now as low as two cents per kWh. Good news, right?

It would be, except that this is Ontario. A hidden tax on Ontario’s electricity has pushed the actual purchase price in the opposite direction, to the highest it’s ever been. The tax, called the Global Adjustment (GA), is levied on electricity purchases to cover a massive provincial slush fund for green energy, conservation programs, nuclear plant repairs and other central planning boondoggles. As these spending commitments soar, so does the GA.

In the latter part of the last decade when the HOEP was around five cents per kWh and the government had not yet begun tinkering, the GA was negligible, so it hardly affected the price. In 2009, when the Green Energy Act kicked in with massive revenue guarantees for wind and solar generators, the GA jumped to about 3.5 cents per kWh, and has been trending up since — now it is regularly above 9.5 cents. In April it even topped 11 cents, triple the average HOEP.

So while the marginal production cost for generation is the lowest in decades, electricity bills have never been higher. And the way the system is structured, costs will keep rising.

More wind turbines, bigger losses, higher bills

The province signed long-term contracts with a handful of lucky firms, guaranteeing them 13.5 cents per kWh for electricity produced from wind, and even more from solar. Obviously, if the wholesale price is around 2.5 cents, and the wind turbines are guaranteed 13.5 cents, someone has to kick in 11 cents to make up the difference. That’s where the GA comes in. The more the wind blows, and the more turbines get built, the bigger the losses and the higher the GA.

Just to make the story more exquisitely painful, if the HOEP goes down further, for instance through technological innovation, power rates won’t go down. A drop in the HOEP widens the gap between the market price and the wind farm’s guaranteed price, which means the GA has to go up to cover the losses.

Ontario’s policy disaster goes many layers further. If people conserve power and demand drops, the GA per kWh goes up, so if everyone tries to save money by cutting usage, the price will just increase, defeating the effort. Nor do Ontarians benefit through exports. Because the renewables sector is guaranteed the sale, Ontario often ends up exporting surplus power at a loss.

The story only gets worse if you try to find any benefits from all this spending. Ontario doesn’t get more electricity than before, it gets less.

Despite the hype, all this tinkering produced no special environmental benefits. The province said it needed to close its coal-fired power plants to reduce air pollution. But prior to 2005, these plants were responsible for less than two per cent of annual fine particulate emissions in Ontario, about the same as meat packing plants, and far less than construction or agriculture. Moreover, engineering studies showed that improvements in air quality equivalent to shutting the plants down could be obtained by simply completing the pollution control retrofit then underway, and at a fraction of the cost. Greenhouse gas emissions could have been netted to zero by purchasing carbon credits on the open market, again at a fraction of the cost. The environmental benefits exist only in provincial propaganda.

An ordeal for people forced to live with wind power projects

And on the subject of environmental protection, mention must be made of the ruin of so many scenic vistas in the province, especially long stretches of the Great Lakes shores, the once-pristine recreational areas of the central highlands, and the formerly pastoral landscapes of the southwestern farmlands; and we have not even mentioned yet the well-documented ordeal for people living with the noise and disturbance of wind turbines in their backyards. We will look in vain for benefits in Ontario even remotely commensurate to the damage that has been done. …

Read the full story here.

High hydro rates now a ‘crisis’ for Ontario says social aid agency

If 30 children were sick with measles, it would be a public health crisis, says United Way executive director Francesca Dobbyn. So why isn’t it a crisis when more than 60,000 Ontario families have been cut off from electricity service? And in rural Ontario, no power means, no water. Meanwhile, the Wynne government announces it is spending millions on a network of electric car charging stations between southern Ontario cities.

Rural Ontario ‘in crisis’ due to high hydro rates, local United Way head says

By Denis Langlois, Sun Times, Owen Sound

Soaring hydro costs have created a crisis situation in Ontario that is especially concerning in rural areas like Grey-Bruce, says the head of one of the local agencies that is helping people to keep their lights on.

Francesca Dobbyn, executive director of the United Way of Bruce Grey, which has released a report on utility assistance provided to households in the region over the past year, pointed to national news reports that quote the Ontario Energy Board as saying nearly 60,000 residential customers were disconnected in 2015 from hydro services due to non-payment. That number was confirmed by The Sun Times Friday.

“If we had 30 kids in Ontario with the measles, we’d have a health crisis. With 60,000 households in Ontario who were disconnected from hydro, that’s a crisis. And in rural Ontario, when that disconnection means you can’t use your well, that’s a public health crisis,” she said in an interview.

The local United Way’s report found that from July 1, 2015, to June 30, 2016, the United Way, along with Bruce and Grey counties, Y Housing and the Salvation Army in Wiarton distributed nearly $750,000 to help people with hydro or natural gas arrears or to purchase wood, oil or propane to heat their homes.

That figure rises to more than $1 million, the report says, when factoring in the staff time and resources provided by the agencies.

Dobbyn said while that number alone is startling and points to a “crisis brewing in our region,” it doesn’t include the financial assistance provided to people by other sources, such as churches or other organizations or by family members or friends.

The report says electricity costs have climbed by 100 per cent in the past decade.

Rural residents have been hardest hit, Dobbyn said, because they are charged higher delivery costs by utility companies.

Rural residents, on average, pay almost double the delivery rates compared to households in “urban high density” areas, according to the United Way report.

An average household in a low-density area is charged about $84.46 for delivery, distribution, connection, network and other fees, the report says, while homes in high-density areas pay about $44.50. And that’s without using any energy at all, it says.

Homes that use baseboards for heat pay about $80 a month in hydro rates on top of the delivery fees.

“And that’s before turning on a light or using a microwave or any other source of electricity,” Dobbyn said.

The numbers, she said, show that even while conserving energy in the home, people in rural areas are still facing high monthly hydro bills.

“Our clients, our families are not wasteful. They do everything they can to reduce consumption, they unplug everything and we often advise them to turn breakers off in an effort to reduce their bill,” she said.

Dobbyn said for some families in Grey-Bruce who live in geared-to-income housing with baseboard heaters, the cost of hydro is more than the price of rent.

The new Ontario Energy Savings Program, which gives qualifying consumers $30 to $50 per month relief, is not enough to prevent disconnections, she said. And those disconnections can have far-reaching consequences, she added.

Facing or experiencing a disconnection can affect a person’s mental health, she said, and cause incredible stress, which can make them sick. That puts a further strain on Ontario’s health care system and can lead to lost time at work.

Dobbyn said she has heard from many people who have become obsessed with keeping their energy use low. They frequently check their hydro usage online and unplug devices like coffeemakers, microwaves, televisions and computers right after using them. Dobbyn said she would like to see more measures put in place to help reduce hydro costs for rural residents. She would like to see, for example, delivery fees spread evenly among all hydro users in Ontario, as is done in Quebec, so rural residents aren’t shouldering such high costs.

“What we have now is a user-pay system and that’s not fair,” she said.

Conservation programs “that actually have an impact,” can also help, she said, such as those that cover the cost of window replacements and insulation to make homes more energy efficient. However, Dobbyn cautioned that hydro conservation has been known to lead to increases in the costs of electricity.

For example, the Ontario Energy Board said one of the main reasons for the increase to hydro rates last May was because Ontarians consumed less electricity over the recent milder winter, so Regulated Price Plan prices did not recover the full cost of serving RPP customers. …

Read the full story here.

Renewable energy economic promises fall short: university study

A University of Wyoming professor has conducted an economic study of the real results of “green” energy policies in 12 states, including Wisconsin, and come up with the conclusion that any gains fall far short of promises … and that there are real economic costs related to higher electricity bills for consumers and business.

Former Ontario Energy  Minister Chiarelli promised Ontario a bright green future. Turns out, it's all downhill.(Photo Chris Abbott/PostMedia)
Former Ontario Energy Minister Chiarelli promised Ontario a bright green future. Turns out, it’s all downhill. (Photo Chris Abbott/PostMedia)

Study: Renewable Energy Mandates Come Up Short On Economic Promises

July 7, 2016By Chris Rochester
MacIver Institute Director of Communications
With data provided by Dr. Timothy Considine
The University of Wyoming

Executive Summary
Do renewable energy mandates foster new industry and create waves of high-tech jobs, as many advocates claim? New research debunks this claim, indicating that the mandate’s costs far outweigh its benefits.

The new research, “Evaluating the Costs and Benefits of Renewable Energy Portfolio Standards,” was conducted by University of Wyoming professor Dr. Timothy Considine, who evaluated 12 separate states with a Renewable Portfolio Standard (RPS), including Wisconsin.

The research describes the direct cost of the RPS to the Wisconsin electricity industry and therefore to electricity consumers. Wisconsin’s RPS forces consumers to pay higher electricity costs – $474 million in 2016 alone. By 2025, the increased cost paid by Wisconsinites attributable to the RPS is projected to increase to almost $500 million.

Increased electricity rates caused by renewable energy mandates also result in approximately $1 billion in lost economic activity in Wisconsin each year. Job losses attributable to the RPS are 7,000 to 10,000 jobs below employment levels without RPS mandates, even after factoring in the meager number of new “green” jobs.

Contrary to claims made by environmental advocates that RPS mandates lead to large numbers of new “green” jobs and new economic growth, the real costs in economic activity and lost jobs attributable to RPS mandates far outstrip any negligible gains in the renewable energy industry.

Key Takeaways:

    • Renewable energy mandates cost Wisconsin taxpayers and ratepayers nearly half a billion dollars per year.
    • Renewable energy mandates cost Wisconsin around 10,000 jobs per year, far more than the “clean energy” jobs created.
    • Losses in economic activity hover around $1 billion per year as a result of renewable energy mandates.

 

See the report and link to the study here.

State of crisis in Bruce Gray over electricity bills, says United Way

The addition of renewables such as wind power has added to Ontario citizens’ electricity bills substantially. This news release tells the story of what the Ontario government’s policy means for rural communities

2015-16 Utility Report for Bruce and Grey Counties

For Immediate release; 2015-2016 Utility Report – Rural Ontario in Crisis

UWBG Utility Assistance Report 2015-16

The United Way of Bruce Grey wanted to get a larger picture of energy poverty in our region and acknowledge the other organizations who also take on the task of keeping people warm and their lights on.

The United Way was able to access additional data from both Counties, Y Housing as well as the Salvation Army in Wiarton.

The numbers are startling and a crisis is brewing in our region

Almost $700 000 in direct dollars were spent to pay down utility bills. If staff time and resources were factored in, over $1 million has been spent in the last 12 months on utility arrears.

Utility Assistance by organization

Electricity continues to be a challenge as we note that costs have increased 100% in the past 10 years. Rural residents are hit with massive delivery costs and conservation efforts are negated by annual increases due to reduction in demand. “Our clients, our families are not wasteful, they do everything they can to reduce consumption, they unplug everything and we often advise them to turn breakers off in an effort to reduce their bill.” said Francesca Dobbyn Executive Director of the United Way of Bruce Grey.

Utility type

The introduction of the Ontario Energy Savings Program in November could give qualifying consumers $30 to $50 per month relief, and while appreciated, for many families it’s simply not enough to prevent disconnections.

We are still seeing large bills from 2013 when billing and meter issues created large “catch-up” bills. A new partnership with Credit Canada can assist families with longer repayment schedules.

When a disconnection does happen, the Bruce Grey team swings into action to gather as many supports as possible to reconnect the family.  From finding additional dollars, advocacy and negotiation the whole team works together.

For more information on this report please contact the United Way or the appropriate agency and staff listed below:

United Way of Bruce Grey – Francesca Dobbyn – 519 376 1560

Grey County Housing – Anne Marie Shaw – 519 376 5744

Bruce County Social Services – Christine MacDonald – 519 881 0431

Y Housing – Joan Chamney – 519 371 9224

Salvation Army Wiarton – Mary Miller – 519 534 0353

Cancel new wind power directive: advice to Ontario’s new Energy Minister

While concerns about Ontario’s electricity bills mount, with families increasingly finding it hard to pay the “hydro bills,” Ontario’s new Energy minister revealed in a Global TV interview that he doesn’t know that the situation is a crisis … in fact, he doesn’t know much about the entire portfolio. Here’s a fact: wind power in Ontario is less than 5% of the power supply, yet accounts for 20% of the bills. And, Ontario is exporting huge amounts of power while paying wind power generators to “constrain” production.

Parker Gallant this week sent a letter to the new Energy Minister Glen Thibeault, with an earnest offer to help, as a private citizen.

Parker Gallant: cancel the directive to add 600 more megawatts of intermittent wind power
Parker Gallant: cancel the directive to add 600 more megawatts of intermittent wind power

The Honourable Glen Thibeault, Minister of Energy,

Legislative Building,

Queen’s Park,

Toronto ON

M7A 1A1

Dear Minister Thibeault:

I was intrigued with your interview by Shirlee Engel of Global National and your humble admission that you still have much to learn about the portfolio that Premier Wynne handed you.   Just to somewhat set your mind at ease I have been observing the Ministry of Energy and its complexities for six years and I too, on occasion, have doubts of my knowledge and understanding of the sector.

One thing I noted during the interview was your responses were not always factual perhaps reflecting your belief that your predecessors or the Ministry staff were, and still are, always correct. For example, you answered one of the questions on electricity rates by saying our “rates will rise 1.7% over the next 15 years”.

You may or may not be aware that when George Smitherman held the “energy” portfolio and shortly after he introduced Bill 150, the Green Energy and Green Economy Act (GEA), he appeared before the Standing Committee on General Government in 2009 and said this:

“We anticipate about 1% per year of additional rate increase associated with the bill’s implementation over the next 15 years.”

The Ontario Energy Board (OEB) says the “average” rate as of May 1, 2009 for electricity alone was 6.07 cents per kilowatt hour (kWh) and today, the OEB reports the “average” rate seven years later, as of May 1, 2016 was 12.10 cents/kWh. The increase of 6.03 cents/kWh is a 99.3% increase — not the Smitherman forecast of 7% for that period.   In respect to delivery costs, Hydro One’s have increased by over 100% since 2009, and all of those increases were approved by the OEB.

Your predecessor Minister Chiarelli also made predictions. A year ago in an interview with the Windsor Star he said, “Rates are going to continue to go up everywhere. There was a blip in rate pressures because of the investments that we made, but starting in 2016 that will be flatlined very significantly.”

The electricity rate actually increased by 10% since his prediction …

Read the full letter here: Open letter to Energy Minister Thibeault July 2016

Wind power industry claims Canada needs more wind power–with a hefty price tag for electricity customers

Wind industry trade association study says Canada needs more wind power. Well, they would, wouldn’t they? Problem is, it doesn’t help anything, least of all the environment, says Parker Gallant. But it does plenty to hurt your pocketbook.

What wind power is really all about: not the environment
What wind power is really all about: not the environment

The Canadian Wind Energy Association (CanWEA) press release of July 6, 2016 was headlined “Canada can integrate large amounts of wind energy reliably, cost-effectively, says report” followed by the industry trade association’s assertion that “Canada can get more than one-third of its electricity from wind energy without compromising grid reliability – and at the same time realize economic and environmental benefits”.

The claims were based on a study they undertook (using a chunk of taxpayer dollars to co-fund the study) which GE (General Electric), a major manufacturer of industrial wind turbines, executed.

I recall the story that a wise engineer recounts. A senior research engineer gave him this advice when he joined a large electricity generating company’s “research studies” sector: “Remember to always ask your client what answer they expect to get before you start the experiment. You will need to know that information so you can carefully design the experiment to ensure it will not produce results that prove the opposite.”

One should expect with the objectives of CanWEA and GE so closely aligned the conclusions reached in this study did not produce results that prove the opposite. 

Interestingly, only days before, the IESO (Independent Electricity System Operator) posted their 2016-2020 nine-page Strategic Plan which said the opposite of the CanWEA/GE study and its claim about not “compromising grid reliability.”   Specifically, “Increasing variable generation, integration of distributed energy resources, and changing demand and supply patterns are creating operability challenges with respect to regulation, voltage control and flexibility.” 

So, variable generation (wind and solar) are creating challenges and what CanWEA/GE propose in this study is to add more wind capacity and to urge Ontario to increase its industrial wind to 16,124 MW … and then back that capacity up with 2,500 MW of combined cycle and 600 MW of single cycle gas.

Based on the study’s suggestions we would expect the HOEP (hourly Ontario energy price) market to show further deterioration and the GA (Global Adjustment) to jump higher with exports increasing and ratepayers picking up those GA costs.

The experience of two recent July days makes this very point. Canada Day, July 1st was a moderate demand day for Ontario, but a relatively high generation day for Ontario’s 3,900 MW capacity of industrial wind turbines (IWT), operating at about 38.5% of their capacity.   As a result, the combined cost of IWT (output and curtailed) generated payments to the IWT operators was almost $4.7 million.  The HOEP averaged a miserly $4.21 per megawatt hour (MWh), meaning the 53,500 MWh exported, generated revenue of only $225,000. Meanwhile ratepayers were required to pay the GA ($113.03/MWh average as at May 31, 2016) which created a subsidy for New York, Michigan, and others of $5.8 million.

In short, the 4.8 million Ontario electricity ratepayers got dinged for about $1.20 each for those exports for that one day.

One week later, July 7th was a relatively high demand day and a typical summer generation day for those 3,900 MW of IWT operating at only 7.5% of their capacity.   The cost of the MWh generated by the IWT dropped to about $650,000 for the day, and the HOEP averaged $35.95/MWh, meaning the cost of exports for Ontario ratepayers for that day was $1.5 million or only 30 cents each.

What this means is, simply, power from wind is intermittent and unreliable. It is also not needed and has a bad habit of driving down the value of the HOEP. The effect of the latter simply increases the subsidy Ontario’s ratepayers pay to cover the GA costs of our surplus exports.

Here’s the bottom line: More industrial wind turbines will compromise grid stability and will not result in economic and environmental benefits, contrary to the claims in the partially taxpayer-funded study.

Here’s what Ontario’s new Energy Minister, Glen Thibeault, needs to understand: Ontario doesn’t need to acquire another 600 plus MW of new wind power generation, and he should cancel the recent Chiarelli procurement directive, to save ratepayers the associated expense of over $200 million every year.

© Parker Gallant,

July 15, 2016

 

The opinions expressed are those of the author and do not necessarily represent Wind Concerns Ontario Policy.

 

The Three Amigos grand power plan for North America: it’s gonna cost you

The Ottawa media was all abuzz with the recent Canada-Mexico-U.S. meetings and the glory days of collaboration ahead, but an interview with U.S. Energy Secretary Eugene Moniz was a little more specific on just what is expected of Canada. Ontario, it seems, could figure significantly in the grand plans for economic prosperity and climate change action. Except, it might come at great cost, says Parker Gallant

Secretary Moniz: Canada has plenty of the clean power we need (and you're selling it cheap!)
U.S. Energy Secretary Moniz: Canada has plenty of the clean power we need (and you’re selling it cheap!)

U.S. Secretary of Energy Eugene Moniz, was interviewed by public affairs channel CPAC in Washington in advance of the tripartite meetings associated with the North American Leaders Summit.  At that summit, the three leaders announced a “joint environmental action plan” aimed at generating 50% of electricity from clean power by 2025.

In the interview, Secretary Moniz specifically mentions building a continental transmission grid to bring renewables from Canada to the U.S., and increasing integration of our respective energy systems. He labeled the latter as a part of “Mission Innovation” which Canada, Mexico and the U.S. have signed onto.  He laughingly referenced his dedication to meeting the Paris COP 21 commitments to reduce emissions (inferred) by attending a meeting in Winnipeg with the two other “energy ministers” when it was 30 degrees below zero.

Presumably Secretary Moniz was aware that Canada, with particular emphasis on Ontario’s ratepayers, is doing all we can to help the U.S. reduce emissions by supplying them with cheap, emission-free electricity on an hourly basis.  The latter is evident based on the Q1 2016 Ontario Energy Report.  The report carries a rather telling chart indicating that out of 6.182 terawatts (TWh) of energy exported in the 1st Quarter of 2016, 4.986 TWh were exported to Michigan (2.557 TWh) and New York (2.429 TWh).

Collectively, those exports represented almost 81% of all Ontario-generated electricity exports in the quarter. Those exports could have supplied over 550,000 average Ontario households with power for a full year. The latter, co-incidentally, is roughly the number of Ontario households (571,000) found to be living in “energy poverty” by the Ontario Energy Board in a 2014 report.

Apparently Secretary Moniz wants more of Ontario’s cheap power. No wonder: we sold it to the U.S. at an average price of 1.1 cents/kWh in the 1st Quarter of 2016, while Ontario electricity ratepayers picked up 11.9 cents/kWh of the costs to generate them, according to the IESO March Monthly Market Report.  In the CPAC interview, Secretary Moniz indicated the goal is to look at moving “renewables over long distances” by expanding the continental grid.   He must assume that this is possible because of the cheap price for which Ontario sells off its surplus energy, which could make up for the significant line losses that will occur.

Those exported TWh to Michigan and New York were subsidized by Ontario ratepayers who picked up the Global Adjustment costs of $593 million towards the contracted production for the three months.

The message from Secretary Moniz is this: don’t send us (the U.S.) your oil by pipeline, but please do build transmission lines to carry wind, solar and hydro power to us … as long as you include a big subsidy, paid for by the ratepayers of Ontario.

© Parker Gallant,                                                                                                                                       July 10, 2016

Sidebar: The writer has wondered for some time why U.S. electricity generators affected by Ontario’s cheap and subsidized electricity exports to the border states of New York and Michigan have not challenged us under the North American Free Trade Agreement. Guess we know why.

More bad news for Ontario electricity customers

As the Independent Electricity Systems Operator announces more Feed In Tariff or FIT contracts for more “variable” power generation (i.e., intermittent or, in a word, unreliable), and still plans to launch its Large Renewable Procurement II program this summer, Parker Gallant says Ontario’s electricity rates are set to keep climbing, with no end in sight.

Former Energy Minister Chiarelli (centre) and IESO's Campbell (R) with CanWEA president at wind power lobbyist event: more variable generation means higher bills for you
Former Energy Minister Chiarelli (centre) and IESO’s Campbell (R) with CanWEA president at wind power lobbyist event: more variable generation means higher bills for you

 

The IESO (Independent Electricity System Operator) just announced the award of 936 MiniFIT contracts that will add another 241.43 megawatts (MW) of long-term renewable high priced energy contracts to your local LDC (local distribution company) grid.

While most of the awards were for solar power and only 3 MW of wind capacity, the announcement follows former Energy Minister Bob Chiarelli’s April 5, 2016 directive to IESO to acquire another 600 MW of industrial wind turbine capacity. This directive was issued despite his knowledge that Ontario consistently exports surplus production and curtails (and pays) wind power generators, spills cheap hydro, steams off nuclear and pays gas plants to idle.

The IESO announcement means more tax dollars coming out of ratepayers pockets, too: a large percentage (over 30%) of the MiniFIT contracts were awarded to school boards, municipalities, and even a few local distribution companies, etc., to install solar panels on the roofs of their buildings allowing them to generate income for upkeep of the schools, etc.  With the renewable energy subsidies,  Ontario ratepayers are now picking up tax costs that rightfully should be in the purview of the Province who have responsibility for funding primary education and the facilities occupied by the students with our tax dollars.

More ‘variable’ generation forecast—that means, more expense

Just days before IESO’s MiniFIT announcement, the IESO Strategic Plan 2016-2020 was posted. I found this disturbing statement in the nine-page document:

“Operability – With the evolving supply mix, we face new operating challenges in managing the bulk power system. Increasing variable generation, integration of distributed energy resources, and changing demand and supply patterns are creating operability challenges with respect to regulation, voltage control and flexibility. The IESO, with stakeholder input, will develop cost-effective solutions to address these challenges.” 

As Ontario ratepayers know that last sentence hasn’t exactly played out the way IESO suggests it will in the future, with rate increases that have defied reason. Nothing has been “cost-effective”!

For example, a news release referenced as the Ontario Energy Report Q1 2016 has an “Electricity Prices” chart on page 11.   Comparison of the “Commodity Cost (cents/kWh)” discloses all-in costs for Class B ratepayers for January 2016 versus January 2015 were 31.4% higher, for February 2016 were 22.3% higher and for March were 26.5% higher.  If IESO’s display of a “cost-effective” solution means average increases of almost 27%, Ontario ratepayers can only expect things will get a lot worse.

The Smart Grid: a gloomy picture on cost?

Another example is related to IESO’s ability to manage the development of the “Smart Grid.”   As previously noted by Ontario’s Auditor General, the current government failed to produce a cost/benefit study for many of their decisions affecting the energy sector.  It now appears the Ministry of Energy finally commissioned a cost/benefit study which was completed by Navigant and referenced as the “Ontario Smart Grid Assessment and Roadmap”.  While the date on the 135-page “Roadmap” is January 2015, a check on the Document Properties of the file shows it appears to have been modified June 5, 2015.  Did the original document painted a gloomy picture and the Ministry required a tempering of the costs or forecasts?

The “Roadmap” provides an estimate of the costs of development of the smart grid and the estimated payback with the latter offering a best, expected, and worst estimate.   (One should recall that Navigant designed the Global Adjustment but it was originally called the “Provincial Benefit”.  We all know how that turned out!) 

The Navigant Roadmap estimates the cost of development of the smart gridNB:, including the $2 billion cost of smart meters out to 2035 will total $8.3 billion..   The “benefits” they estimate will flow from that investment are $3.8 billion at the low end and $9 billion at the high end.  The “expected” benefit is estimated to come in at $6.3 billion — that’s $2 billion short of the projected costs.

More bad news for ratepayers

So, putting all the bad news together, we should expect higher electricity rates come November 1st , 2016 when the Ontario Board resets the rates based on the big jump year over year in just the first quarter.  We should expect the additional MiniFIT contacts will result in higher prices as they are installed and the contracts click in, and we should expect the “smart grid” costs will grow much higher than forecast and add costs to our bills.

Finally we should expect the additional 600 MW of wind turbine capacity to be acquired under the Large Renewable Procurement II (set to begin in August) will result in increased costs due to both curtailment and an increase in surplus exports subsidized by ratepayers.

© Parker Gallant,

July 4, 2016

NB: The original cost estimate provided to the writer by IESO related to development of the “smart gird” (without costs of the smart meters) was $1.6 billion and contained in a Financial Post article on July 6, 2010.

The opinions expressed are those of the author and do not necessarily represent Wind Concerns Ontario policy.

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.

Energy Minister Glenn Thibeault: what will he do about paying for power we don't need, paying for power we don't get, and paying for the economic impact of constant increases?
Energy Minister Glenn Thibeault: what will he do about paying for power we don’t need, paying for power we don’t get, and paying for the economic impact of constant increases?

 

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, 2016.

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

 

 

  1. 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.

North Stormont hopes Wynne government will ‘see the light’ on wind power contracts

More transparency, more respect for municipal governments and communities needed, says council in voting on a resolution for change to the province’s procurement process

NoMeansNo_FB (2)

Cornwall Standard-Freeholder, June 22, 2016

By Lois Ann Baker

BERWICK – North Stormont council has taken a step towards asking the government for tougher requirements for future wind turbine projects.

At its June 7 council meeting, a resolution was brought forward by Amy Doyle, community planner and CAO Marc Chenier with suggestions for the Independent Electricity System Operator (IESO) to consider before awarding any contracts for the large wind turbine developments.

“The resolution that was presented by Margaret Benke on behalf of the Concerned Citizens of North Stormont was a resolution that was to be presented to the IESO as part of their public engagement,” said Doyle.

The resolution contains six suggestions for the IESO to consider when awarding its Large Renewable Procurement contracts. One such contract was awarded to EDP Renewables earlier this year for a 100,000-megawatt wind project in North Stormont.

“This is the feedback we want to give the IESO into their process,” said Doyle. “The major one that has been circulating was the mandatory requirement for support for a project. So basically the whole resolution is just a list of recommendations for the IESO and in no way does it have any bearing on the project that was approved out of the last process. This is strictly commenting on the IESO process.”

The municipality is also sharing the information with other municipalities. Chenier said between 70 and 75 other municipalities in Ontario have already passed similar resolutions calling on a mandatory requirement of municipal support – usually meaning a favourable vote by the local council.

Chenier said the resolution was specifically for the LRP II process, the next phase of renewable energy contracts. Even if a majority of municipalities request the same from the IESO, it doesn’t necessarily mean things will change.

“IESO is the governing body, but the provincial government kind of tied us up. We don’t have any say in anything in the LRP I process,” said Chenier. “We’re just asking them to reconsider their position in the LRP II process. LRP I, we don’t have any choice.

“They changed the legislation and municipalities have no say into it.”

Chenier said the municipality was trying to do as much as it can to provoke things in the LRP II process, hoping the government will “see the light” and allow municipalities to have a lot more power. Chenier said in the past, municipalities were not given much information regarding the awarding of the contracts.

“On the political side of things, it probably brought up a lot of opponents to these kinds of projects because there was no proper co-ordination of information,” he said. “Now there is more co-ordination of the information and people learn a lot more about it. That allows most municipalities to realize instead of fighting the government, they should pressure the government to make changes in the LRP II process.”

Along with the support of a community, North Stormont is also asking the rules to include an open council vote on whether it supports a project, held after the company wanting to build it holds its mandated community meeting. It would also like municipal engagement not to be associated with any municipal agreements and compensations. North Stormont is also requesting the full details of the projects be provided to the municipality and that the point scores and explanations be included in the announcement of which projects have been awarded contracts.

lbaker@postmedia.com

Read the full story here.