Wind Concerns Ontario is a province-wide advocacy organization whose mission is to provide information on the potential impact of industrial-scale wind power generation on the economy, human health, and the natural environment.
It’s official! The cost of exporting Ontario’s surplus electricity paid for by electricity ratepayers actually exceeded the prize up for grabs in the U.S.-based “Powerball” lottery. In this case, prize winners were neighbouring states, New York and Michigan and a few other lucky Ontario neighbours. The other big winners were the wind and solar developers in Ontario who were busy generating surplus unreliable and intermittent electricity.
The Independent Electricity System Operator (IESO) released the “2015 Ontario Electricity Data”, and buttered it up with verbiage that made it sound like everyone in the province won — but they didn’t. Everyone who uses electricity for their daily needs actually lost a lot of money; the current year will simply make it worse.
Let’s have a look at some of the data. IESO told us Ontario demand fell by 2% to 137 terawatts (TWh) The press release tells us the drop in demand “can be attributed to conservation initiatives, increases in embedded generation, mild weather and broader economic shifts”. They don’t say what those “broader economic shifts” were, but they do sort of comment in respect to “embedded” generation. They tell us that embedded generation grew by 20% last year to 3,000 megawatts (MW,) but they don’t tell us what they produced meaning we are not being told if demand actually fell by the 2% claimed. If it didn’t fall the claim about those “conservation initiatives” would be false. We will never know because IESO won’t disclose what embedded generation produced. That doesn’t sound very “transparent” despite IESO first “Mission Statement” which is to operate the “electricity system and market in an effective and transparent manner.”
Other data released indicates Ontario exported 22.618 TWh (enough to power about 2.4 million1. average Ontario households for a full year) and those exported 22,618,000 MWh generated average revenue of $23.60/MWh each, meaning Minister Chiarelli would claim we made a profit of $534 million. Well, we didn’t make a profit! The data in the IESO release indicates the average hourly Ontario energy price (HOEP) for 2015 was $23.60/MWh (2.36 cents per kilowatt hour) and the GA or Global Adjustment added another $77.80/MWh to the costs of producing that exported surplus power bringing the all-in cost to $101.40/MWh. Our U.S. neighbours don’t pay the GA!
The total cost of producing those 22,618,000 exported MWh was therefore $2,293 million. Now, if we deduct Minister Chiarelli’s “profit” of $534 million, the “Powerball” number picked up by Ontario’s benevolent ratepayers was $1.759 billion.
The press release also told us that power generation from wind reached a record 9.0 TWh in 2015 (without accounting for constrained generation). The average cost of those 9 TWh was approximately $125/MWh or $125 million per TWh, so if we had had no wind turbines in the province producing electricity intermittently and out of phase with demand, we could have reduced the “Powerball” number by $1.1 billion. That would have saved the average ratepayer $223.
To many Ontario ratepayers, saving $223 in electricity costs would have been a “win” but instead, we all lose.
The Canadian Wind Energy Association (CanWEA) had this greeting on their website over the holidays: “The industry reached a milestone of over 10,000 megawatts of installed capacity this year, and during the holiday season more than ever, our thoughts turn gratefully to all of you who have made our progress possible.”
Ontario is home to almost 50% of those 10,000 megawatts (MW) of industrial wind turbines (IWT) and CanWEA is right: they should be grateful. They should be grateful to the ratepayers of the province who have no choice but to pay for intermittent and unreliable wind power as it gets “first to the grid” rights, ahead of reliable power sources like hydro, nuclear and gas.
The source of the problem
The reason for CanWEA’s gratitude is evident when one reviews the Independent Electricity System Operator’s (IESO) 18-month Outlook for January 2016 to June 2017. Due to low demand for electricity in Ontario, particularly during the spring and fall, IESO frequently experiences “surplus baseload generation” or SBG. They note this as follows: “Ontario will continue to experience surplus baseload generation (SBG) conditions during this Outlook period. The magnitude of SBG is trending higher with the addition of new renewable generation and decline in grid demand due to conservation and distribution-connected generation. SBG is expected to be effectively managed through existing market mechanisms, which include inter-tie scheduling, nuclear maneuvering or shutdown and the dispatch of grid-connected renewable resources.”
So, an official admission: Ontario’s power surplus “is trending higher” due to renewables!
In 2014 6.8 terawatts1. (TWh) of power was generated from wind turbines, and during 2014 OPG was forced to “spill” 3.2 TWh of clean hydro, while Bruce Nuclear was forced to “steam-off” 1.3 TWh of clean CO2-free nuclear (September 2014 to October 2015). At the same time, the turbines were curtailed from producing about 500,000 megawatt hours. All of the generated, spilled, steamed-off and curtailed generation was paid for by Ontario’s ratepayers along with the losses on our exports of surplus generation.
The costs of the 6.8 TWh and the curtailed 500,000 MWh was approximately $930 million (7.3 TWh at an average price of $125/MWh); spilled hydro’s costs were $179 million (3.2 TWh at an average price of $56/MWh), and the 1.3 TWh of steamed-off nuclear added another $87 million to the bills of Ontario’s ratepayers. That brought the cost of those 6.8 TWh of production from IWTs to almost $1.3 billion. That alone translates to a cost per kilowatt hour (kWh) of over 19 cents — before charges for transmission, delivery, the Debt Retirement Charge2. etc. and before picking up the losses for surplus export generation. In 2014 that cost ratepayers $1.2 billion, and will end up at close to $2 billion in 2015.
The poor get poorer in Ontario
By November 2015 end, wind had already exceeded 2014 generation, at 7.9 TWh. Add its costs to constrained, curtailed, spilled and steamed-off power and the cost of electricity will continue its climb despite the false claim made by Ontario’s Energy Minister reported in Maclean’s in December 2013: “Looking to the future, we expect that rates will continue to increase, but we have taken very significant steps to mitigate those rate increases.”
Mitigation of rate increases is not in the immediate or near future: we just got hit with an increase effective January 1st, 2016 of 10% with the removal of the Clean Energy Benefit and a new charge to support the almost 600,000 Ontario households living in “energy poverty.” We can also expect a further increase May 1, 2016 to pay for the costs associated with more renewable energy coming on stream (700 MW of wind and 300 MW of solar) in the next 18 months, exacerbating SBG and the cost of dealing with it.
CanWEA’s members certainly had a merry Christmas, but all the Dom Perignon was on you.
Math lesson # 2 for Bob Chiarelli—Calculating the cost per megawatt hour of Ontario’s power
January 5, 2016
Open “Tongue in cheek” letter to:
The Honourable Bob Chiarelli, Minister of Energy, Queen’s Park, Toronto
Dear Minister Chiarelli:
First, I hope you and your family had a Merry Christmas and a Happy New Year.
Second, I hope you found the time to make it through the exercises I described in my recent letter so you now understand the difference between “profit” and “loss” in respect to the energy portfolio.
With that behind you, I believe it’s time for a second math lesson. We will again use the chart for November 12th, 2015 prepared by my friend Scott Luft. See below.
This lesson is focused on allowing you to understand how the cost per megawatt hour (MWh) by generating source can be calculated using the chart Scott prepared versus the IESO daily summary which is not at all as transparent as Scott’s.
Let’s start! Note the second portion of the chart with the subject line “IESO Transmission (Tx)”. The first heading “Nuclear” is a reflection of the generation source and on this day it provided 58.1% of all generation. How to get that calculation is simple. Look at the first line; add the “Ontario” column of the generation of 429,668 MWh to the 2nd line “est. Distribution (Dx)1.” giving you 447,177 MWh. Divide it into Nuclear total of 259,444 MWh and you get 58%! Including curtailed it becomes 61.8%.
Now let’s calculate the cost of each megawatt hour of Nuclear generation. We will include “est. Curtailed” in our calculations as it is generation that could have been delivered, but because IESO was concerned with the grid crashing it was “curtailed” i.e., not produced. Bruce Nuclear has the ability to “steam off” and that is what they were told to do, because wind/solar was generating too much power at a particular point in the day. Now the total of nuclear generation plus the curtailed (steamed off) nuclear is 276,301 MWh and that should be divided into the last line “Cost ($000s)” of $18.062 million —which demonstrates each MWh of nuclear cost $65.37/MWh. Still with me, I hope!
OK, so let’s calculate the cost per MWh for hydro: that was 86,965 MWh + est. Distribution (Dx) of 1,867 MWh and curtailed (spilled) of 208 MWh for a total of 89,040 MWh. Divide that into the “Cost” of $4.671 million and you will see the cost per MWh was $52.46. Hydro contributed 20.2% of Ontario’s total generation (ignoring curtailed generation) this day, so combined with nuclear those two sources generated or curtailed/steamed off 78.2% (365,341 MWh) of all electricity generated in the province, and 100.4% of total Ontario demand (refer IESO daily summary) of 363,960 MWh.
Hope you are paying attention Bob. Here’s why: our exercise up to now doesn’t include generation from wind, solar, gas, biomass or biofuel sources, yet they were were completely CO 2 free! Worth pondering, eh?
Now, time to look at costs of those other sources of generation. Let’s start with gas and its role in providing “peaking power”! On this day, gas provided 5.5% of Ontario generation (including “est. Distribution (Dx).” The calculation: 24,511 MWh divided by 447,177 MWh = 5.5%. The cost of those megawatt hours is simply: divide the “Cost” of $5.360 million by 24,511 MWh, giving a shocking total of $218.68/MWh!
Contracting for gas plants is to back up wind and solar generation when the wind doesn’t blow and the sun doesn’t shine!
Here is an example that requires some math calculation so read this carefully before trying the calculations. Specifically let’s review the TransCanada 900-MW gas plant (planned but canceled) for Oakville (most of the $1.1 billion cost) and moved to Bath! The OPA contract (negotiated by the OPA) will pay them $15,000 per MW per month to be “at the ready.” The annual cost of the 900 MW is $162 million (900 MW X $15,000 X 12 = $162 million).
Bob, what the foregoing means is that if that plant produced just one (1) megawatt hour of electricity in a year, the cost would be $162 million.
Now let’s do a “what if” exercise: assume it will operate at 10% of rated capacity of 900 MW which means it will produce 788,400 MWh (10% X 900 MW X 8760 [hours in a year] = 788,400 MWh). Actual generation costs from the gas peaking plants are based on the cost of the natural gas fuel plus a small mark-up but we will ignore those latter two costs in the next calculation just to keep it simple. Here we go: if you divide the annual cost of $162 million by 788,400 MWh, your answer should be $205.50/MWh. Pretty expensive, eh?
The requirement to back up industrial wind turbines is old news as noted in a Memorandum submitted to the U.K. Parliament which stated: “Dr Paul Golby CEO of E.On UK, says 90% whilst Mr Rupert Steele of Scottish Power says, “Thirty Gigawatts of wind maybe requires twenty-five GW of backup.” In other words, that means, if you contract for 1,000 MW of industrial wind generation you need a 900 MW gas plant to “back-up” its capacity!
So, doing math is important: you can see that you are almost doubling up on the cost of producing a single MWh of electricity.
That brings us to the actual cost of wind generation on the chosen day in November.
On November 12, 2015 (refer to Scott Luft’s chart) wind produced 63,203 MWh, i.e., the lines “IESO Transmission (Tx)” + “est. Distribution (Dx)” equals 63,203 MWh. On this day wind produced 14.1% of Ontario’s generation at a cost of $153.55/MWh (based on the calculations applied above) —or at least this is what one would assume. That is an assumption you shouldn’t make though, Bob, and I will try to explain why. Adding curtailed wind production (13,500 MWh) to the 63,203 MWh produced would reduce the per MWh cost to $126.52/MWh, but, and it’s a big but—it doesn’t include gas back-up costs. Now pay attention!
The outstanding contracts for gas generation total about 9,000 MW of capacity and the contracts guarantee them (including the 2,100 MW of Lennox owned by OPG) a monthly price similar to the TransCanada contract mentioned above. So, knowing that, let’s assume the “average” contracted price is only $10,000 per MW per month. Bearing that in mind the backup for wind (solar to a lessor extent) is costing Ontario ratepayers $1.080 billion annually to be on “standby”! In other words, if they produced one (1) MWh in a year the cost would be $1,080,000,000. Shocking eh? If operated at 100% of rated capacity (which they can’t) they would produce almost 79 TWh (terawatts2.) or over 50% (9,000 MW X 8760 hours in a year) of Ontario’s annual consumption.
OK, now back to Scott’s chart of November 12 and let’s figure out the full cost. On November 12, gas generators operated at around 11.3% of capacity (79 TWh divided by 365 days in a year = 216,438 MWh and 24,511 MWh divided by 216,438 MWh = 11.3%). The cost of that day’s gas generation combined with wind generation would be $171.75/MWh, i.e., combined cost of $15,065,000 divided by combined generation of 87,714 MWh (ignore the curtailed generation) = $171.75/MWh. Now that cost coupled with the losses of $7.9 million from our exports of 74,352 MWh (cost of $108 per/MWh3.) Nov. 12th, produces a combined cost of $279.75/MWh or 4.3 times the cost of nuclear generation.
At this point, Bob, I hope you have grasped the math so I won’t go through the exercise for Scott’s other headings of biofuel, solar etc. I will leave you to work those out on your own.
I certainly hope this exercise gives you sufficient math skills to at least understand the basic steps you should go through before making either rash remarks or issuing directives to IESO telling them what to do. Instead perhaps you could instruct them to produce information similar to what Scott Luft produces. The latter would also back up your leader’s wishes or intent to be “transparent” for the taxpayers and voters in Ontario.
Good luck with the math exercises and with demonstrating your Ministry’s intention to become more transparent.
Figures on exports of surplus power show wind isn’t needed, yet the government plans on adding more
November once again had Ontario ratepayers picking up the bill for subsidized electricity exports to our neighbours in New York, Michigan, etc. With the Canadian dollar in a depressed state the costs to our U.S. neighbours was considerably less than the $230 million CAD subsidy1. provided, but nevertheless, it removed about $45 after-tax dollars from the average Ontario ratepayer’s pocket.
Total generation from Ontario’s various sources was 12.4 terawatts (TWh) for November, but Ontario’s demand was only 10.6 TWh, so the surplus was exported. That brought exports for the 11 months ended November 30, 2015 to a record 19.6 TWh, and that power was sold at an average of $24.72 million/TWh (based on the IESO November year-to-date Monthly Summary). Total revenue (or “profit” according to Energy Minister Bob Chiarelli) to Ontario ratepayers for those 19.6 TWh was about $483 million. According to the IESO summary those exported TWh cost on average $115.16 million/TWh, another record (net of the DRC)—gross revenues for their sale was $485 million while the cost to ratepayers was $2.257 billion.
Ontario’s energy policy cost you about $360 for 11 months in 2015
So the cost for the average Ontario ratepayer, assuming 800 kilowatt hours monthly, is about $360 each for the first 11 months of 2015.
The Global Adjustment (GA) of $1.119 billion was also a record,as was the allocated costs of the GA to Class A shareholders at $136.7 million, a record and to Class B shareholders at $982.6 million setting another record!
Wind power was 40% of exports—clearly, we don’t need it
Up to this date in 2015, wind has produced intermittent record power of 7.933 TWh and represents over 40% of total exports; it is clearly power we didn’t need. IESO exports our surplus production to ensure the electricity grid doesn’t crash and excess generation from wind, in particular, is noted for its unruly fluctuations. Without the excess wind production the hourly Ontario energy price (HOEP) would clearly have been “bid higher” meaning costs to Ontario’s ratepayers would be less for the remaining exports.
Despite the obvious, our Energy Minister Bob Chiarelli has plans to add additional wind capacity to Ontario’s grid. A further 300 megawatts in contracts will be announced early in 2016. The continued flagellation of Ontario’s ratepayers should be recognized by the Minister as something that he has the power to stop.
Minister Chiarelli, we the ratepayers of Ontario appeal to you to cancel the acquisition of more unreliable, intermittent and expensive industrial wind generation capacity! Do the right thing!
The sale price (HOEP) for November averaged just $10.34 million/TWh so revenue was about $20 million whereas the costs of generation for the exported 1.9 TWh was $250 million ($129.53 million/TWh net of the DRC).
The views expressed are those of the author and do not necessarily represent Wind Concerns Ontario policy.
EDITOR’S NOTE: The standard response from the Minister of Energy is that wind power is needed for when Ontario’s nuclear units go offline for refurbishment; the truth is, wind cannot replace nuclear, which supplies baseload power.
T’was the day before Christmas when all through Ontario
the wind was ablowing without great demand
The turbines were spinning and generating power
and some were found to be curtailing in hope
Chiarelli would still pay them and not be considered a dope
The ratepayers were all snuggled in bed
and the Christmas lights were out because of the dread
that would surely come with the hydro bill
and make everything a whole lot worse than a little chill
The children were tucked in bed in winter gear
because their parents were so full of fear
the heat from the furnace would cause the meter to spin
driving up the bill and cause them to send more money to Wynne
The hydro was spilling, the nuclear steamed off,
the gas plants weren’t moving for fear of the racket
that might come to discredit Dalton and others caught sacking
e-mails and records meant to show their defects
and the way they harmed ratepayers and created negative effects
Excuse the poetry but it does highlight the mess we found ourselves in on December 24, 2015. To wit:
Ontario’s demand for electricity on December 24th was low based on IESO’s “Daily Market Summary” reaching only 315,336 MWh and “Total Demand” was 385,704 MWh. The hourly Ontario Energy Price or HOEP market, priced it in a negative way valuing it at -$543,843. What that means is the 72,336 MWh we exported cost Ontario’s ratepayers an extra $102,000 based on the weighted average HOEP price per MWh of -$1.41. The average cost of production of those exports based on the IESO November average price of $129.53 (net of the DRC) means the 72,336 MWh exported rang up a cost of $9.4 million to be borne by Ontario ratepayers.
That’s not all the costs though! IESO instructed Bruce Nuclear to steam off about 35,000 MWh at an estimated cost of $60.00/MWh or $2.1 million and curtailed 23,500 MWh of wind generation at a cost of around $120.00/MWh adding a further $2.8 million to the day’s costs for ratepayers.
The cost of the exports (negative HOEP of $100 thousand) plus production costs of $9.4 million, steamed off nuclear of $2.1 million and curtailed wind of $2.8 million means just one day cost Ontario’s beleaguered ratepayers $14.4 million without factoring in HST costs.
Premier Kathleen Wynne, her predecessor, Dalton McGuinty, and her Minister of Energy Bob Chiarelli are responsible for delivering those lumps of coal we found in our stockings Christmas morning.
Ho, ho, ho!
(C) Parker Gallant
December 26, 2015
The opinions expressed are those of the author and do not represent Wind Concerns Ontario policy.
The CKWS Newswatch team reported that “Loyalist Township stands to rake in some big bucks once 26 wind turbines are built on Amherst Island.”
Two key agreements with Windlectric have been authorized by the township related to the 74.3 MW (megawatt) project that will see 26 turbines erected on the island. While the project has been authorized by the Ministry of the Environment and Climate Change (MOECC), the Association to Protect Amherst Island has appealed the approval. The start date is therefore unknown as the developer must await the ruling of the ERT (Environmental Review Tribunal) which is not expected until the early Spring of 2016.
The term “big bucks” is relative to the size of the project and, perhaps, to the recipient of those “bucks”! In this case the community benefit agreed to is $500,000 annually for the next 20 years. On the surface it sure sounds like big bucks, but the really big bucks will wind up in the pockets of Windlectric’s shareholders.
If the 74.3 MW capacity development operates at the expected average of 30% of its rated capacity, it should produce almost 2 million megawatt hours (MWh)of electricity and deliver that to Ontario’s grid — whether it’s needed or not. The math is simple:74.3 X 30% X 8760 (hours in a year) = 1,952,604MWh.
We should assume the Windlectric contract was executed prior to the slight downward movement in the feed-in-tariff (FIT) pricing, so for each MWh produced, Windlectric will be paid $135.00/MWh. If you do the math on what their annual revenue will be you might be surprised at the really “big bucks” they will receive! The gross revenue for Windlectric will be about $26.4 million annually (1,952,604 MWh X $135 = $26,396,010) which most of us would consider “big bucks”!
Loyalist’s ‘big bucks’ is not even 2% of the developer’s revenue
The township will get $500,000 of the $26.4 million which amounts to 1.9% of the takeaway by Windlectic. If the Amherst Island residents are, as the Deputy Mayor suggested, put “at ease” they shouldn’t be; council should have bargained much harder.
As one resident suggested, the “big bucks” may not be sufficient to even repair the damage to Amherst Island’s infrastructure after construction. And that doesn’t even consider the devaluation1. of property close to the turbines, destruction to migratory birds, plant and animal life, and of course to the 15 to 20 % of people who may feel the effects of the audible and inaudible noise on their health.
900 Bay Street, 4th Floor Hearst Block Toronto ON M7A 2E1 Canada
Dear Minister Chiarelli:
I have noticed on several occasions that you seem to have some difficulty understanding the time and place to use the word “profit”. The most recent occasion occurred December 3, 2015 during Question Period in the Legislature when you used it to again claim the export of Ontario’s surplus electricity to our neighbours in New York, Michigan, etc. generated a profit.
I’m not sure why the questions related to selling our surplus electricity causes you this failure but perhaps over the holidays you might consider spending some time analyzing what I have included in this letter. I expect you were taught some basic mathematics skills in school but perhaps because of a lack of usage those skills may have been forgotten. Hopefully this letter will refresh your memory and you may even get a grasp of how an actual “market system” works.
The intention of this letter is to focus on only one day in the life of our electricity system and the day chosen is November 12, 2015.
Visiting the Independent Electricity System Operator’s “Daily Market Summary” for November 12th you find a document that may be the cause of your confusion. That summary shows “Market Demand” averaged 18,210 megawatts (MW) per hour for total demand of 437,040 MWh (24 hours X 18,210 = 437,040 MWh). Ontario Demand was much less averaging 15,165 MW or 363,960 MWh for the 24 hours. The difference of 73,080 MWh represents Ontario’s net exports for the day.
Now what IESO don’t include in their summary is MWh curtailed (principally wind), or spilled (hydro) or steamed off (nuclear). This curtailed, spilled, etc. power can be significant and cost ratepayers as payment to all generators include undelivered production. In the case of gas plants it contains “idling costs” to back up wind and solar.
Bob, hopefully you are still with me to this point so I will carry on.
By looking at IESO’s summary you would not be aware of the above costs, nor would you know the actual cost of production (Market Demand) if you simply looked at what they refer to as “Energy Prices ($/MWh)”! On this particular day the latter averaged (weighted) 0.17 cents per MWh. This may be where you are having your problems as you may have assumed the costs of producing the “Total Demand” for the day was only $82,796.80, i.e., 487,040 X 0.17 cents = $82,796.80 — but that is the wrong assumption! The HOEP (Hourly Ontario Energy Price) referred to is really what the “traders” valued Ontario’s production at for this day. In other words, the demand for our power on November 12th wasn’t very valuable in the market so prices offered were low.
As you have probably been told, the actual price ratepayers are charged for power includes what one of your predecessors referred to as the “Provincial Benefit”. It turned out to not be a “benefit” so the term was changed to the “Global Adjustment Mechanism” (GAM). GAM reflects contracted prices for the various generation sources and they can be very high in comparison to the HOEP. As one example you or your predecessors contracted for rooftop solar at $702.00/MWh and on the day in question even though they were paid that amount IESO were only able to sell it for the .17 cents/MWh contained in their summary. Hope you are still with me but to clarify we might have paid say IKEA $702.00 for one MWh of generation which we then sold for .17 cents meaning we lost $701.83 for that MWh. Hope you get that?
Now in an effort to help you to better understand the math behind your Ministry’s rather confusing arrangements, I contacted my good friend Scott Luft and asked if he could produce a one-page summary estimating contracted costs for November 12th. He did and I have attached his summary1. (too bad IESO couldn’t do this) and while the production numbers are out by a few MWh (equivalent to about five minutes of demand) as compared to IESO it reflects actual costs including: contracted prices, costs for curtailed, spilled, steamed off power and embedded production (IKEA is the example as noted above) which Scott refers to as Distribution (Dx). As you will note, Scott’s estimate of the cost of the day’s electricity (he excludes conservation, transmission, IESO’s costs, etc.) comes to $39.5 million, i.e., the “cost” of the GAM of $39.3 million and the “HOEP” of $ .2 million.
OK, we are now ready to complete the final math on this exercise! Using the actual cost of generation from Scott’s summary you will note the per MWh cost of “Ontario Demand” of 363,960 MWh is approximately $108.00/MWh. The math exercise is simple: divide the $39.5 million by the 363,960 MWh!
The conclusion, Bob, is Ontario ratepayers paid about $7.9 million for the net exports of 73,080 MWh (73,080 MWh X $108. = $7,892,640) and sold them for .17 cents each generating $12,424 (73,080 X .17 cents = $12.424).
So we ratepayers paid $7.9 million for the exports but got only $12,000 from our friends — that, Bob, is a loss of $7.9 million, not a profit of $12,000.
If you have trouble with any of the numbers I would be pleased to sit down with you and review them again but hopefully I have spelled it out sufficiently for you to understand.
In the meantime I certainly hope you and your family have a Merry Christmas but please do remember to do your very best to only turn your Christmas lights on during “off-peak” periods to support conservation and to “saveonenergy”.
P.S. The next lesson will be in respect to the cost per MWh by generating source followed by a special session on how “conservation” drives the costs up for ratepayers.
Please note Scott has produced these daily summaries, so far, for November 1, 2015 to December 12th.
The opinions expressed are those of the author and do not represent Wind Concerns Ontario policy.
On December 11, 2015 Michael Gravelle’s ministry Northern Development and Mines, issued a press release announcing a renewed Mineral Development Strategy (MDS) and, as is generally done with those provincial press releases, it contained a “Quick Facts” section. Also as usual, you only see the positive ones.
As an example, one of the “Quick Facts” listed in the release states: “The value of mineral production in 2003 was $5.7 billion. In 2014, the value of mineral production was a record $11 billion.”
On examination of that fact via data from the Mining Association of Canada’s (MAC) 2014 report you learn that in 2003, Ontario produced 28.3% of the value of all Canadian mining production, but by 2013 the “value” had dropped to 22.5%. If you then look at the value of the three highest valued minerals mined in Ontario, you see they are gold, copper and nickel. The value of those three minerals increased by 142% in the 2003/2013 period, from $5.7 billion to $13.9 billion. So, in other words, the claim made in the Quick Facts shows an increase of 92%, which is considerably less than the commodity price increase.
One could easily surmise the drop in Ontario’s percentage values of all Canadian production was caused by a reduction of investments (Ontario ranked 4th) in mining and processing/refining activities — but that wouldn’t make for a snappy positive “quick fact”.
For example, the “Ring of Fire” got the Ontario government plenty of media attention because of their lack of commitment to infrastructure spending. That resulted in the exodus of several large and small mining companies seeking to develop mines in the region. Nothing in the Mineral Development Strategy suggests anything will change!
As a coincidence to the Ministry’s press release and the MDS, the Ontario Mining Association (OMA) a week prior had posted on their website a “welcome” release to a report from the Ontario Chamber of Commerce (OCC) titled Digging Deeper: Strengthening Ontario’s Mining Advantage, which carried the following message deemed worth repeating on the OMA post:
“In recent years, however, the sector has struggled due to both global factors, including economic uncertainty and lower demand for mineral products, and Ontario-specific challenges. These challenges include rising costs, particularly electricity rates as well as regulatory uncertainty and a lack of essential infrastructure.”
The message in the MAC 2014 report was similar but wasn’t specific to Ontario:
“Canada’s processing facilities operate in a global arena, where China and other countries are expanding their capacity and competing fiercely for raw materials. The cost of electricity is also a factor in some Canadian jurisdictions. Given the energy-intensive nature of these value-added processes, high-cost power jurisdictions dampen the competitiveness of existing operations and can deter future investment.”
The Ministry’s response on the issue of high-cost electricity was contained in one of their “10 point action plans” in the MDS, released days after the OCC report: “Improve our cost competitiveness by reviewing current energy programs and providing ongoing assistance to mining and processing operations to ensure competitiveness.” Which means, another review!
While the mining sector endorses the use of renewable energy they note the high capital costs associated with both wind and solar power generation and the need to continue to generate their electricity with diesel fuel, due to the lack of grid connection availability in many mining and processing locations.
That latter issue is obvious to Southern Ontario’s rural communities saddled with the industrial wind turbines connected to the grid to supply intermittent power to large urban communities such as Toronto and grids to export surplus power to our neighbours in New York, Michigan, and others who purchase it for cents on the dollar. Selling surplus power at a huge discount penalizes not only residential ratepayers, but also our mining sector which estimates the cost of electricity/fuel is their second highest expense at over 60% of labour costs on a Canada-wide basis.
It’s about time for some real facts from Ontario’s Ministries!
Ontario news releases are not really “news” says Parker Gallant
Wow! Signing up to receive updates from the Government of Ontario apparently means your e-mail in-box will pile up with a myriad of announcements that, on the surface, seem focused on making one believe the Ontario Liberal government is creating a utopia for everyone.
On December 7 three media messages popped up in my in-box: the first was all about putting HOT (high occupancy toll lanes) on the QE to relieve congestion. The Province’s oldest divided highway has apparently not been paid for yet, even though it opened in 1939; hence we need to put in toll lanes!
The second message was all about how Ontario, Quebec and Manitoba had signed a MOU (memorandum of understanding) “to facilitate their intent to link the cap and trade programs in Ontario, Québec and Manitoba under the Western Climate Initiative, further strengthening North America’s largest carbon market.” I was a little confused about what “ to facilitate their intent to link the cap and trade programs” actually meant until I read Premier Wynne’s quote which said: “Greenhouse gas emissions do not recognize borders, so climate change cannot be fought by individual governments alone. The new MOU on climate change among Ontario, Quebec and Manitoba commits us to collaborating on a broad range of initiatives, including cap and trade, to address climate change and meet emission targets. We can accomplish much more when we work together — only through our continued cooperation can we succeed in building a sustainable and prosperous world for future generations.”
Energy Minister, Bob Chiarelli, at question period (just after minute six) in the Ontario Legislature on December 3, 2015 once again demonstrated his ability to obfuscate was lacking as he was attacked and eventually reverted to the ridiculous suggestion once again, that selling surplus energy to our neighbours was profitable!
To call his bluff all one needs to do is review the October monthly “Market Summary” from the IESO website. Couple the October summary with the prior nine summaries and you will see that Ontario’s Class B ratepayers (average consumers and small businesses) continue to see rate increases. Those increases are partially caused by Ontario’s surplus capacity and our continuing need to either export those surpluses at a loss to our neighbours or to curtail production. Either option (as noted in the recent Auditor General’s report) will raise the cost of electricity for Ontario’s consumers and small businesses.
Once again exports in October were large at 1.5 terawatts (TWh) or enough to satisfy the needs of 800,000 average Ontario households. Total exports for the 10 months ending on October 31st now total 17.7 TWh — that’s enough to provide power for the full year to 1.8 million average Ontario ratepayers. It also represents about 13.8% of Ontario generator’s total production for those nine months. The 17.7 TWh were sold via the market for an average of $26.1 million per TWh generating about $460 million in revenue, but cost Ontario’s ratepayers $2.017 billion, generating a loss close to $1.6 billion.
If Ontario was selling that surplus at a profitable rate, the effect on ratepayers would result in favourable contributions to reduce rates but, alas, that is not what happened, despite Minister Chiarelli’s obfuscation. The cost to produce that 1.5 TWh of exported power in October set ratepayers back about $175 million and it was sold for $38 million (a “Chiarelli profit”) meaning the loss for the month was $137 million! The loss for October brings the cost of export sales to about $350.00 per “average” ratepayer for the 10 months beginning January 1, 2015.
Wind power generation played a role in both, increasing our surplus and causing the hourly Ontario electricity price (HOEP) of $25.07/MWh (2.5 cents per kWh), to remain well below the cost of “contracted rates.” That is a matter of fact and common sense but seems to escape Minister Chiarelli.
According to another IESO webpage, wind produced 1.08 TWh in October and would represent 72% of Ontario’s surplus exports. Couple that 1.08 TWh of reported generation with the DX1. (distributor generated) wind production of 139,000 MWh, curtailed production of 73,000 MWh and what do you get? Wind alone could be held responsible for 86% (1.3 TWh) of our exports. The output from wind generators in October (a low demand month) was almost equal to their production for the combined months of June, July and August all of which are higher demand months.
With wind power costing ratepayers $1.6 billion so far in the current year, it seems strange our Energy Minister still claims it generated a “profit”.