Wind power continues to affect Ontario electricity bills

Eulogy for the wind power industry is premature … unfortunately.

Wind turbines near SS Marie (National Post photo)
Wind turbines near SS Marie (National Post photo)

December 15, 2016

Parker Gallant in today’s Financial Post

The Day Ontario’s wind tyranny ends, there will be dancing in the streets

The editor of the magazine North American Windpower, recently marked the demise of Ontario’s wind industry. His article was titled “Eulogizing Ontario’s Wind Industry.” Apparently the eulogy was a result of Ontario Energy Minister Glenn Thibeault’s announcement of Sept. 27 that he was “suspending” the acquisition of 1,000 MW (megawatts) of renewable energy under the previously announced LRP ll (Large Renewable Procurement).

Thibeault explained that “IESO (Independent Electricity System Operator) had advised that Ontario had a robust supply of electricity over the coming decade to meet projected demand.” Thibeault didn’t express surprise at this sudden turn of events or explain what led to the realization. To put some context around the suspension, only a few months earlier former Energy Minister Bob Chiarelli had issued the directive to acquire the 1,000 MW that Thibeault shortly after “suspended.”

The Windpower article opens with: “Ladies and gentlemen, we are gathered here today to pay our respects to Ontario’s utility-scale wind industry, which has passed away from unnatural causes (a lack of government support).”

If Ontario’s wind industry had truly passed away, the celebrations among hundreds of thousands of Ontario ratepayers would have rivaled the scale of celebrations exhibited in Florida by Cuban exiles after hearing that Castro died. As it is, Ontarians are hardly celebrating. We will be forced to live with and among industrial wind turbines for at least the next 20 years. The “government support” alluded to in the eulogy isn’t dead. It continues to get pulled from the pockets of all Ontario ratepayers and has caused undue suffering.

The wind industry rushed to Ontario to enjoy the largesse of government support via a government program that granted above-market payments for intermittent and unreliable power. Industrial wind turbines have so driven up electricity prices that Ontario now suffers the highest residential rates in Canada and the fastest growing rates in North America. The Ontario Association of Food Banks in its recent 2016 “Hunger Report” noted: “Since 2006, hydro rates have increased at a rate of 3.5 times inflation for peak hours, and at a rate of eight times inflation for off-peak hours. Households across Ontario are finding it hard to keep up with these expenses, as exemplified by the $172.5 million in outstanding hydro bills, or the 60,000 homes that were disconnected last year for failing to pay.”

Beyond that, the cost of energy affects businesses and, as noted by the Canadian Federation of Independent Businesses, “fuel, energy costs” ranks for their Ontario members as the second-highest “major cost constraint” behind “tax, regulatory costs.”

Until the day we actually see Ontario electricity consumers dancing in the streets one day, the eulogy for this province’s wind-power tyranny is unfortunately premature.

Parker Gallant is a former bank executive who looked at his power bill and didn’t like what he saw.

Wind cannot meet power demand: new report on Ontario’s power mix

“The significant increase in wind capacity is questionable …”

December 14, 2016
As part of the Long Term Energy Planning process, a report that contains information that is highly critical of wind turbines’ role in generating electricity has been produced in response to the Ontario government’s consultation process on the LTEP in the context of the government’s climate change initiatives.
The report, titled Ontario’s Emissions and the Long-Term Energy Plan, is available at this link:
The author is Marc Brouillette of the strategic consulting firm Strategic Policy Economics; the report and analysis was funded by Bruce Power, the Organization of Canadian Nuclear Industries, Powerstream and the Power Workers Union.   The report documents the case for nuclear as the long-term stable solution for electrical generation in Ontario and as a cost effective solution to reach the Liberal government’s carbon emission goals.
Expanding Ontario’s wind power generation capacity is “questionable” the authors say, for three reasons:
  • Wind generation has not matched demand since its introduction in Ontario;
  • Over 70% of wind generation does not benefit Ontario’s supply capability: and,
  • Wind generation will not match demand in the OPO Outlook future projections as 50% of the forecasted production is expected to be surplus.
It has been well documented that wind turbines generate power that is out of sync with Ontario’s power demands.  This report provides data on the extent of this problem confirming its statement that over 70% of wind generation does not benefit Ontario’s supply capability (page 20).
The report goes on to confirm that when wind generation is available it causes “curtailment (waste) of both nuclear and hydro, exports of wind generated electricity at prices well below the cost of production and reduction of natural gas fired generation” (page 21).  This situation may improve going forward, but still, the report concludes, over 50% of wind generation in Ontario is not productively used by Ontarians” (page 22). Further, “it could be viewed as wasted through curtailments and/or via uneconomic exports to neighbouring jurisdictions.”
Cancel the contracts
Wind Concerns Ontario and now more than 116 municipalities as well as other stakeholders and interest groups have repeatedly called for the cancellation of wind turbine contracts. The information in this detailed report supports the case for cancelling the contracts under Large Renewable Procurement I (LRP I)  and halting LRP II and FIT 5.0 as well as all wind power projects not yet in commercial production (e.g., White Pines, Amherst Island, Fairview).  The government of Ontario will find it difficult to justify these contracts in the context of this data, and in the context of what the Energy Minister has said is an existing “robust” supply of power in Ontario at present.
Parker Gallant in his role as an energy observer estimated that wind power, which has an average contract price in the range of 13.3 cents, actually ended up costing the Ontario electrical system about 30.9 cents over the first six months of 2016.
These data, plus information from the 2015 report by the Ontario Auditor General,  indicate that there is substantial benefit for the people of Ontario in cancelling wind power contracts.
The report includes the recommendation that the Ontario LTEP should “seek out the lowest cost, emission-free energy solutions that reflect the integrated costs of generation, transmission, and distribution.”
Wind Concerns Ontario will continue its call to cancel the wind power contracts; our response to the Long-Term Energy Plan will be published shortly.
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The real cost of wind power

Ontario's Auditor General said Ontarians overpaid billions for renewable power; then Energy Minister Bob Chiarelli said that wasn't true. Parker Gallant details the costs.
In 2015, Ontario’s Auditor General said Ontarians overpaid billions for renewable power; then Energy Minister Bob Chiarelli said that wasn’t true. Parker Gallant details the costs.

December 6, 2016

Most electricity ratepayers in Ontario are aware that contracts awarded to wind power developers following the Green Energy Act gave them 13.5 cents per kilowatt (kWh) for power generation, no matter when that power was delivered. Last year, the Ontario Auditor General’s report noted that renewable contracts (wind and solar) were handed out at above market prices; as a result, Ontario ratepayers overpaid by billions.

The Auditor General’s findings were vigorously disputed by the wind power lobbyist the Canadian Wind Energy Association or CanWEA, and the Energy Minister of the day, Bob Chiarelli.

Here are some cogent facts about wind power. The U.K. president for German energy giant E.ON stated wind power requires 90% backup from gas or coal plants due to its unreliable and intermittent nature.  The average efficiency of onshore wind power generation, accepted by Ontario’s Independent Electricity System Operator (IESO) and other grid operators, is 30% of their rated capacity; the Ontario Society of Professional Engineers (OSPE) supports that claim.  OSPE also note the actual value of a kWh of wind is 3 cents a kWh (fuel costs) as all it does is displace gas generators when it is generating during high demand periods.  On occasion, wind turbines will generate power at levels over 90% and other times at 0% of capacity.  When wind power is generated during low demand hours, the IESO is forced to spill hydro, steam off nuclear or curtail power from the wind turbines, in order to manage the grid.  When wind turbines operate at lower capacity levels during peak demand times, other suppliers such as gas plants are called on for what is needed to meet demand.

Bearing all that in mind, it is worth looking at wind generation’s effect on costs in the first six months of 2016 and ask, are the costs are reflective of the $135/MWh (+ up to 20% COL [cost of living] increases) 20 year contracts IESO, and the Ontario Power Authority awarded?

As of June 30, 2016, Ontario had 3,823 MW grid-connected wind turbines and 515 MW distributor-connected. The Ontario Energy Reports for the 1st two quarters of 2016 indicate that wind turbines contributed 4.6 terawatts (TWh) of power, which represented 5.9% of Ontario’s consumption of 69.3 TWh.

Missing something important

Not mentioned in those reports is the “curtailed” wind. The cost of curtailed wind (estimated at $120 per/MWh) is part of the electricity line on our bills via the Global Adjustment, or GA.  Estimates by energy analyst Scott Luft have curtailed wind in the first six months of 2016 at 1.228 TWh.

So, based on the foregoing, the GA cost of grid-accepted and curtailed IWT generation in the first six months of 2016 was $759.2 million, made up of a cost of $611.8 million for grid-delivered generation (estimated at $133 million per TWh) and $147.4 million for curtailed generation. Those two costs on their own mean the per kWh cost of wind was 16.5 cents/kWh (3.2 cents above the average of 13.3 cents/kWh).  The $759.2 million was 12% of the GA costs ($6.3 billion) for the six months for 5.9% of the power contributed.

But hold on, that’s not all. We know that wind turbines need gas plant backup, so those costs should be included, too. Those costs (due to the peaking abilities of gas plants) currently are approximately $160/MWh (at 20% of capacity utilization) meaning payments to idling plants for the 4.6 TWh backup was about $662 million. That brings the overall cost of the wind power contribution to the GA to about $1.421 billion, for a per kWh rate of 30.9 cents.   If you add in costs of spilled or wasted hydro power to make way for wind (3.4 TWh in the first six months) and steamed off nuclear generation at Bruce Power (unknown and unreported) the cost per/kWh would be higher still.

So when the moneyed corporate wind power lobbyist CanWEA claims that the latest procurement of IWT is priced at 8.59 cents per kWh, they are purposely ignoring the costs of curtailed wind and the costs of gas plant backup.

22% of the costs for 5.9% of the power

 Effectively, for the first six months of 2016 the $1.421 billion in costs to deliver 4.6 TWh of wind-generated power represented 22.5% of the total GA of $6.3 billion but delivered only 5.9% of the power.  Each of the kWh delivered by IWT, at a cost of 30.9 cents/kWh was 2.8 times the average cost set by the OEB and billed to the ratepayer.  As more wind turbines are added to the grid (Ontario signed contracts for more in April 2016),  the costs described here will grow and be billed to Ontario’s consumers.

CanWEA recently claimed “Ontario’s decision to nurture a clean energy economy was a smart investment and additional investments in wind energy will provide an increasingly good news story for the province’s electricity customers.” 

There is plenty of evidence to counter the claim that wind power is “a smart investment.” But it is true that this is a “good news story” — for the wind power developers, that is. They rushed to Ontario to obtain the generous above-market rates handed out at the expense of Ontario’s residents and businesses. The rest of us are now paying for it.

[Reposted from Parker Gallant’s Energy Perspectives blog.]

Suggestions for Ontario’s power bill crisis

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Global TV News published a summary of opinions by several commentators on how the Government of Ontario might deal with the crisis in electricity bills, which is causing unprecedented energy poverty.

Wind Concerns Ontario was pleased to be asked to contribute to the special news feature found here and excerpted below.

The following is by both Parker Gallant, a retired banker who now analyses Ontario’s energy sector and is the author of the blog “Energy Perspectives” as well as Jane Wilson, the president of Wind Concerns Ontario.

The Ontario government undertook its program to add renewable power without proper cost-benefit or impact analysis.

Now we have electricity bills that are the fastest rising in North America. The rich contracts awarded to huge corporate wind power developers are a factor.

Here’s what we suggest:

Immediately cancel Large Renewable Procurement (LRP) II that is currently “suspended.” With its target of acquiring 1,000 megawatts (MW) of more renewable capacity — it’s not needed and will further add to consumers’ power bills.

Cancel the five wind power contracts awarded in 2016 under LRP I and save electricity customers about $65 million annually or $1.3 billion over 20 years. Cancellation costs will amount to a small fraction of the annual cost. Cancelling approved but not yet built wind power projects and the new FIT 5.0 program will also save money.

Cancel “conservation” spending of $400 million annually. Ontario has already cut back on power use by more than 12 per cent since 2005 when consumption was 157 tWh to 2015 when it had fallen to 137 tWh. Do this and save immediately on electricity bills.

Read More: Kingston Hydro cuts off single mom who chose groceries over utility bill

Move the Ontario Electricity Support Program to the Ministry of Community and Social Services, where this social assistance program really belongs. Electricity customers should not bear the burden of its costs. The move would create a budget shortfall so we recommend the following action:

Levy a tax on wind (and solar) power generation. The auditor general reported that 20-year wind and solar contracts exceed those in other jurisdictions — the tax would help correct that.

Last, reduce the Time of Use (TOU) off-peak rate. This would encourage the shift of power consumption from peak to off-peak time in order to flatten daily demand, with less waste of hydro and nuclear power, and intermittent wind.

Let’s stop adding expensive, intermittent power to our system and stop punishing Ontarians.

Cancel the contracts, Minister Thibeault (we’re asking again)

It’s been quite windy the last few days in Ontario, as it often is in the fall. Temperatures have been mild, too — all that stacks up not only to a beautiful fall but a very expensive few days for Ontario’s electricity customers, already hard-hit by their power bills which are the fastest rising in North America.

Parker Gallant has done the analysis on a single day last week, November 10, which he says points out everything that is wrong with Ontario’s electricity policy. Too much power produced when we don’t need it means cheap exports to our neighbours and more expense for Ontarians.

Here’s an excerpt from his recent blog posting:

November 10th serves as a perfect example of what’s happening to electricity customers in Ontario: that day, the government’s electricity policy shows we reward huge corporate wind power developers and it also highlights the intermittent nature of power generation from wind — it is out of phase with demand.

November 10 should be the basis of a message to the Minister of Energy, Glenn Thibeault on the Large Renewable Procurement (LRP) program: Ontario should cancel both the LRP I contracts awarded last April and cancel the now “suspended” LRP II process.  The Minister has already admitted our electricity supply is more than adequate for the next 10 years (“robust” in fact, he says) so acquiring more wind generated power (and solar) should be immediately suspended. It does nothing other than drive up the costs for “average” households.

The $9.4 million of ratepayer dollars handed out November 10 neither reduced emissions nor provided useful electricity. Time for a complete overhaul of electricity policy in Ontario, starting with those contracts and the LRP process.

When the subject of cancelling contracts (which is government’s right) comes up, the immediate response from the influential wind power lobby is that to do so will incur lawsuits, and wreck Ontario’s reputation in the business/investment world. The fact is, anyone knows that building your business on a subsidy program is not good planning; it’s also true that the Ontario government included “off-ramps” in the latest contracts, so that it could change its mind if the power is not needed, and pay out the power developers’ documented expenses.

Here are the details for the five contracts awarded by the IESO last spring.

Project name Capacity MW 20-yr cost $ Max payout liability $
Otter Creek 50 218 million 500,000
Romney Wind 60 261 million 520,000
Strong Breeze 57 250 million 515,000
Eastern Fields 32 139 million 464,000
Nation Rise 100 436 million 600,000

Source: data from IESO contracts

So, in the case of Strong Breeze, for example, in the community of Dutton Dunwich which resoundingly expressed its Not A Willing Host status but got a wind power project anyway, the government could get out of a $250-million contract by paying, at most, $515,000. Similarly, Nation Rise, in another unwilling host community, could be cancelled for a maximum liability of $600,000 and save Ontario electricity ratepayers from having the $436 million cost added to their bills.

Let’s go farther! Among the projects with Renewable Energy Approvals (REAs) but not yet operating, are the much contested White Pines in Prince Edward County and the Windlectric project on Amherst Island, both of which are in legal battles and both are in danger of not meeting their contracted Commercial Operation date. Cancelling them would save a lot of wildlife and also save Ontario electricity customers almost $1 billion.

Mr Gallant says that November 10 is emblematic of what’s wrong with Ontario’s electricity policy; we add, why buy more power Ontario doesn’t need and inflict more damage on the natural environment and Ontario’s rural communities, when the answer is so simple.

Cancel the contracts, Minister Thibeault.

Cancel the contracts, Minister Thibeault

Energy Minister Glenn Thibeault: more power we don't need soon to come to the grid ... and your hydro bill
Energy Minister Glenn Thibeault: more power we don’t need soon to come to the grid … and your hydro bill

September 30, 2016

Energy Minister Glenn Thibeault was busy this past week dancing around issues plaguing his portfolio. The issues are: rising electricity bills, energy poverty and polls showing falling voter approval of the Ontario Liberal Party. In an effort to stem the bad news Minister Thibeault announced the suspension of his predecessor’s directive to IESO ordering up another 600 megawatts (MW) of wind and 300 MW of solar.

Minister Thibeault issued a news release, delivered a speech to the Ontario Electricity Association, and held a press conference. He looked somewhat embarrassed to be claiming that, because the Large Renewable Procurement or LRP II was not proceeding, the average electricity ratepayer will not have to pay an additional $2.45 per month in the future. About 4 million of those average ratepayers, however, will have to pay from $6-$8.00 more per month if they use gas as a source of warmth (gas furnace) or hot water to cover the costs of the cap and trade tax starting January 1, 2017. Those same ratepayers will also see the benefits of the removal of the 8% provincial sales tax and a drop of $6-8.00 in their monthly electricity bill meaning they shouldn’t see an increase in their energy costs. Or will they?

Let’s examine the ministerial pronouncements about “suspending” LRP II to see if the actions will really stop rate increases.

First, put the suspension of 600 MW of wind and 300 MW of solar in context. A look at the 2016 Ontario Power Generation (OPG) 2nd Quarter report helps. If wind operated at 30% of capacity and solar at 15% they could have produced 986,000 MWh of intermittent electricity or enough to supply about 220,000 average Ontario households for the six months in that report. That in itself is interesting but it doesn’t highlight what else was happening with existing generation facilities.   For example, “During the six months ended June 30, 2016, OPG lost 3.4 TWh of hydroelectric generation due to SBG [surplus baseload generation] conditions, compared to 1.5 TWh during the same period in 2015.”

In other words, 3.4 terawatts hours of electrical power was dumped because we had too much.

$150 mil wasted

If it hadn’t been “spilled,” (the technical term) that steady reliable hydroelectric power could have supplied 750,000 average households with power for six months. And even though the power was “spilled,” ratepayers were charged for it at a rate of 4.4 cents per kilowatt hour — at a cost of $150 million for the 3.4 TWh! Ontario’s 4.5 million ratepayers picked up an annual cost of $33 for spilled power, while Minister Thibeault was suggesting those same ratepayers would “save” future rate increases of about $30 annually!

What about even more spilled hydro, increasing amounts of curtailed wind, and steamed off power coming from Bruce Nuclear?

As we ratepayers continue our conservation efforts and demand for power remains flat, or falling, wind and solar generation contracted but not yet constructed will enter service producing more surpluses. The spilled, curtailed and steamed off power will be added to our bills once again driving rates higher.

Minister Thibeault should cancel any unbuilt wind and solar projects, and complete a cost-benefit study before launching the revision of the long-term energy plan (LTEP) as Premier Wynne has instructed him in her recent Mandate Letter.

Ratepayers would be delighted to experience a year or even six months without a rate increase.

(C) Parker Gallant

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

How to save $500 a year on hydro bills: cancel wind

wind contract banner

Parker Gallant has put up a list of recommendations on his Energy Perspectives blog which he says, if they were enacted by the  Wynne government, would save the average Ontario electricity customer $500 a year.

Chief among them is the cancellation of wind power contracts — the older ones that have missed or are about to miss key contract dates — and halting the new Large Renewable Procurement II process, which is, incredibly, still set to begin next year.

As an example of contracts that could be cancelled, the Amherst Island project for 26 turbines on the tiny island, where migratory birds stop over and Bandings turtles live, has no hope of meeting its Commercial Operation date. Cancelling it would save Ontario $500 million.

Cancelling the wind power contracts and the next bid process would stem the tide of surplus power, which Ontario sells at “fire sale prices” Gallant claimed recently in a radio interview on CFRA, and save millions.

So would cancelling Ontario’s egregious conservation program in which customers are urged (shamed?) by a comprehensive advertising campaign to cut back on electricity use. The campaign costs $300 million a year and what happens when consumers do cut back? (As we have.)  The rates go up anyway.

Good advice.

We’ll see if the Wynne government is actually interested in positive action and in helping people.

 

Michigan’s economy benefits from cheap Ontario power

Two Auditors General in Ontario have noted that the government never did any cost-benefit study on its renewable energy program; moreover, wind power is produced out-of-phase with demand in Ontario, and is a significant portion of the surplus power the province is forced to sell off cheap. Parker Gallant comments on who is really benefitting from Ontario’s energy management policies.

Wind turbines near SS Marie: power supply sell-off  (National Post photo)
Wind turbines near SS Marie: power supply sell-off (National Post photo)

Michigan outperforms Ontario. And why not? They have our cheap power

Parker Gallant Energy Perspectives

September 6, 2016

The state of Michigan is outperforming Ontario. That’s according to a recent study by the Fraser Institute. Since the end of the “’Great Recession” Michigan has out performed Ontario, increasing their GDP in 2013 by 2.8% versus Ontario’s growth of only 1.3%.  Unemployment levels in Michigan are currently at 4.6% versus Ontario’s 6.4%. Those are two very important  economic indicators.

That news plus the fact Ontario has become a “have not” province in Canada, it seems policies adopted by the Ontario Liberal government to “build Ontario up” is having the opposite effect.

One of those policies resulted in Ontario’s electricity sector focusing on acquisition of renewable energy from industrial-scale wind turbines, solar panels and biomass. The passing of the Green Energy Act (GEA) in 2009 resulted in adding intermittent and unreliable renewable energy that is unresponsive to demand (wind power is produced out-of-phase with demand in Ontario).   This had the effect of driving down the price of electricity.

The free market trading (HOEP) of electricity has resulted in Ontario exporting a rising percentage of our generation to buyers in Quebec, NY and Michigan, with the latter the biggest buyer.   In 2015 Michigan purchased 10,248 gigawatts (GWh) or enough to power1.1 million “average” Ontario residential households. We sold it at an average of 2.36 cents per kilowatt hour (kWh) and were paid $242 million, but it cost Ontario’s ratepayers just over $1 billion.

Michigan doesn’t have to pay the Global Adjustment. You do.

Michigan appears delighted to be able to purchase our cheap subsidized electricity. Now they are seeking further transmission links to Ontario with an eye on the grid out of Sault Ste Marie.

Read the entire article here.

Overkill: Ontario actions to replace closed coal plants cost billions every year

The annual cost of closing Ontario’s coal plants 

Part II of Parker Gallant’s series on how Ontario continues to mismanage the energy file.

The cost of over-replacing the limited capacity of coal power generation blows away the supposed health care savings
The cost of over-replacing the limited capacity of coal power generation blows away the supposed health care savings

The previous article in respect to Ontario’s decision to close our coal plants examined the MW (megawatt) capacity and the type of generating capacity added to our electricity grid since 2011. The added capacity replaced the 4,484 MW of coal-fired generation at the end of 2011 in anticipation of increasing demand.

What I’ve done is approximate the costs of the added capacity versus the 4.1 TWh generated by the 4,484 MW of coal-fired plants, which cost only $135 million (3.3 cents/kWh) in 2011. 

Nuclear instead of wind and solar

As an example, the 1,532 MW of emissions-free Bruce Nuclear refurbished generation, at a capacity factor of 90% supplying 12.08 TWh, easily covered the loss of 4.1 TWh of coal-fired generation and left 8.7 TWh for added demand due to its flexibility to steam off or bypass the turbines. The 12.08 TWh could have supplied most of the 2015 solar generation of 3.04 TWh and the 10.2 TWh of wind, which proved to be unneeded.   The latter two alone in 2015 added an additional $2.7 billion to generation costs before curtailment (wind) costs of $88 million.

Bruce Power supplies from the 1,532 MW would have cost ratepayers $800 million, reducing the ratepayer burden by almost $2 billion annually.  Additionally “nuclear maneuvers” (reductions),  of 897 gigawatt hours added about $60 million during surplus baseload periods, caused mainly by (unreliable) intermittent power generation from wind.

Too much gas? 

Let’s look at the gas plant addition of 602 MW:  In 2011 the 9,549 MW of gas generation produced 22 TWh,  operating at a capacity factor of 26.3%.  Fast forward to 2015: the 10,151 MW generated 15.5 TWh  operating at a capacity factor of 17.5%.  Gas plants are quite capable of operating at a capacity factor of 40% to 60% (combined or single cycle).  In either case, they are regarded as peaking plants and for that reason investors know they will be called on when needed. Their contracts pay them for simply being “at the ready.”  Those costs vary but generally payments are $7,000 to $15,000 per MW per month.  The additional 602 MW of gas added about $100 million annually to the costs.  With gas generation falling from 22 TWh in 2011 to 15.5 TWh in 2015, ratepayers were burdened with the costs of the drop of 6.5 TWh at a cost of approximately $100 million per TWh, raising the cost of gas generation by $750 million since 2011.

Adding costly hydro

The bulk of the 754 MW added to the grid since 2011 came from the Niagara tunnel, (“Big Becky”) with a promise of 150 MW, and the Mattagami expansion added 438 MW of run-of-river hydro. Both of these projects by OPG were hugely expensive, costing ratepayers $4.1 billion plus interest on the money borrowed to fund the projects. If one amortizes those costs over 50 years it adds about $80 annually to ratepayer bills and the interest costs annually add about $120 million at 3% per annum. So that is $200 million for those two projects, without adding their OMA (operations, management and administration) costs.

As well, OPG is frequently forced to “spill” water under SBG (surplus baseload generation) periods mainly due to excessive intermittent wind and solar generation. In 2015 the latter was 3.4 TWh which cost ratepayers $150 million.  The other event affecting hydro costs was an amendment to change “unregulated” hydro to regulated pricing.  This change added $474 million to ratepayers’ bills for 2015 for the 30.4 TWh generated by OPG versus 2011.  So hydro costs in the four years from 2011 jumped from a cost of $37.7 million/TWh to $53.3/TWh.  The total additional costs of hydro (OPG only) in 2015 was therefore over $800 million.

Coal conversion 

The Ontario Energy ministers also issued directives instructing conversion of the 200-MW Atikokan and the 300-MW Thunder Bay coal plants operated by OPG.  A 2005 directive from Dwight Duncan was the first and told OPG to convert Thunder Bay “to operate using a fuel source other than coal”.  Later on when Brad Duguid sat in the energy chair he ordered it converted to gas but in the end it became a shareholder direction from Bob Chiarelli, ordering it to be converted to “advanced biomass” and agreed to cover the annual $30 million operating costs.  As disclosed by the Auditor General, if Thunder Bay produces any power, it will cost $1,500 per megawatt hour (MWh).  In respect to the conversion of Atikokan it may produce cheaper power in the 20 cents/kWh range but will probably operate at 10% of capacity and generate an annual cost of about $35 million.  So collectively, both of these conversions will produce almost no power but will add approximately $65 million annually to ratepayers’ bills.

Conservation is expensive 

The long-term conservation budget for 2015-2020 is $2.6 billion, meaning IESO will allocate spending of $433 million annually to local distribution companies (LDC) to reduce consumption by 7 TWh.   Should the LDC be successful, their delivery revenue will drop.  Assuming the delivery charge represents about 35% (on average) the revenue drop for all LDC would be approximately $300 million.  Then the LDC will be entitled to apply for a rate increase based on the drop in revenue, meaning the $300 million may be fully recovered.  Adding that to the monies spent annually convincing us to reduce our electricity consumption via the “conservation budget” adds another $483 million annually ($433 million + [$300/6 years = $50 million] = $483 million).

$4 billion … a year

So the cost of replacing the 4.1 TWh of coal generated at a cost of about $135 million in 2011 is in excess of $4 billion annually.

Confirmation of the foregoing cost can be simply calculated. If one reviews the “average” cost of a kWh on the OEB “Historical Electricity Prices” as of November 1, 2011 was 7.57 cents/kWh versus 10.70 cents/kWh on November 1, 2015.  The increase of 3.13 cents/kWh (+41.3%) translates to an increase of $31.3 million per TWh and applied to the 143.6 TWh consumed in 2015 provides an annual cost increase of $4.5 billion to ratepayers since 2011.

The cost blows away the purported healthcare costs supposedly caused by coal generation.   At the same time, it removes about $1,000 of after-tax money from the pockets of the 4.5 million ratepayers in the province every year.

This is a sad commentary on what the Ontario Liberal government has done to Ontarians.

Parker Gallant,

August 29, 2016

Also available at Parker Gallant Energy Perspectives.

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