Conservation of energy, Ontario style

Ontario's "smart meter": failed to achieve even its basic objective says the Auditor General
Ontario’s “smart meter”: failed to achieve even its basic objective says the Auditor General

Conservation was a solution that came up frequently in last year’s stakeholder consultations held by the Ontario Power Authority. Let’s save power, citizens, community groups and other stakeholders said; if we do, we will all save money. Parker Gallant takes a look at how that’s working for us.

The Ontario government has stated that one of its goals is to promote conservation of electricity use in the province. Ontario’s electricity ratepayers are obliged to pick up the tab for hundreds of millions of dollars every year (2014 budget for the Ontario Power Authority [OPA] was $483 million) to achieve conservation objectives set by the Premier of Ontario and the appointed Energy Minister.

So, how is the government doing? Premier Kathleen Wynne and Energy Minister Bob Chiarelli were recently put on the hot seat by the “smart meter” audit released December 9, 2014 by the Ontario Auditor General. Auditor General Bonnie Lysyk’s report was critical of expenditures on smart meters: the program cost ratepayers almost $2 billion without any apparent benefit.

The Energy Minister says that smart meters allowed time-of-use (TOU) pricing, which was expected to have two results: they would encourage “time shifting” in power use by consumers, and encourage conservation. Time shifting was seen as a way to provide a leveling of Ontario’s peak demand which can vary by as much as 10,000 megawatts (MW) in 24 hours falling to base-loadNB or lower during the night, and rising by 10-12,000 MW during the day.  Reducing consumption was sought via programs aimed at energy efficiency, educating consumers about bad energy habits (leaving lights on when you leave a room) and “on-peak, off-peak” pricing.

Did Time of Use pricing get the

 job done? The AG says, “No.”

 Achieving these two objectives would lead to a reduction in the need for capital investments in new generation and/or the need to refurbish existing generating plants.  So the question is, did TOU pricing achieve the objectives?

The AG’s audit report claimed it did not.

The following excerpt from the Auditor General’s report sums up the findings nicely:

“In 2013, separate studies released by the Ontario Power Authority and the OEB indicated that   TOU pricing had a modest impact on residential ratepay­ers, reducing their peak demand by only about 3%, but a limited or unclear effect on small businesses, and none at all on energy  conservation.”   [My emphasis]

Just eight days after the report was released, on December 17, 2014, another report was issued about the success of the program to get Ontario’s ratepayers to conserve electricity. This one came from the Ontario Energy Board (OEB).  In the Executive Summary is this claim:

“Results from 2013 programs indicate that distributors have achieved 5,139 GWh of cumulative energy savings, or 86% of the overall energy (kWh) savings target of 6,000 GWh and 639 MW of demand savings1, or 48% of the peak demand (kW) savings target of 1,330 MW.”

The conflict is immediately obvious in that the OPA and OEB’s “studies” had “indicated that TOU pricing had a modest impact on residential ratepay­ers, reducing their peak demand by only about 3%, but a limited or unclear effect on small businesses, and none at all on energy conservation”— yet here they were touting their success.

The question: who should we believe?  The inclination is to favour the AG’s report as it is independent.  In fairness, I undertook an audit based on information available from the OEB’s own website.   I visited their Yearbook of Electricity Distributors and set about examining the statistics annually presented by the monopolies, those 73 local distribution companies or LDCs who send us our hydro bills.  The yearbook contains all information needed except for Class A (large industrial) consumers.  The report represents an appropriate measure for conservation but not peak demand.  I first went to the year-end report for 2009 knowing this was the big starting point on the push for conservation and demand management.  That push came from the Energy Minister’s directive of March 31, 2010 to the OEB and was cited in the OEB’s December 17, 2014 report.

The reported “Total purchased supply” by LDCs for 2009 in the OEB Yearbook was 124,206,032 megawatt hours (MWh) and the “Total customer households reported” was 4,748,577.  Average monthly consumption for the year ended March 31, 2009 was 2,180 kWh (kilowatt hours) or 26.18 MWh annually.  Note the consumption totals include households and most small- and medium-sized commercial entities, referred to as Class B customers.

The 2013 Yearbook revealed that average monthly consumption had dropped to 2,112 kWh (68 kWh) or 816 kWh annually, and total purchased supply was 125,306,563 MWh (125.3 TWh).  The customer base was reported as 4,944,488.

Has TOU pricing been effective in triggering “conservation” and shifting “peak demand” as hoped for?

The other important issue is, has the cost of those directives the Ontario government imposed (via the OPA and the OEB) on Ontario’s ratepayers and the billions spent provided value for money?

Measuring Success

Peak Demand

As noted in the quote from the OEB’s report, the target set by Brad Duguid when he was the Energy Minister for the reduction of “peak demand” (1,330 MW) has been elusive, and furthermore, unlikely to be achieved.  The target set reflected a “peak demand” reduction of about 3.5 % based on generation capacity of 35,500 MW so it may have seemed a reasonable assumption.  TOU pricing, however, has not achieved that objective but what it did was shift peak demand from near the end of the working day to the time immediately following TOU “on-peak” pricing’s shift to the “off peak” rate at 7 PM.  Peak daily demand now often occurs at 7 or 8 PM.  TOU pricing has also exacerbated “peak demand” swings during a typical day: the addition of wind turbines to the system means we sometimes have too much power, particularly during spring and fall when high/low peaks are relatively close, compared to peaks during summer and winter.  These “base-load” additions (wind gets first to the grid rights) cause wholesale prices to drop — Ontario ratepayers pick up the losses on those sales.

Examining how the government might act to achieve “peak demand” targets is cause for concern.   If LDC were placed in a position to remotely control households and businesses in the province (using smart meters) and could re-set thermostats, stoves, refrigerators, etc., they could reduce peak demand during the hottest days of summer or the coldest days of winter and use that control to decide what peak demand should be!   So far, the government hasn’t gone that far but peaksaverPLUS® offered by the LDC for free  does allow the power supplier to remotely adjust: your thermostat, your water heater, and your pool pump without consultation!

Unless we blindly all sign up for peaksaverPLUS or are forced to do so, targets set will continue to elude the government.  The view of the OEB is that the targets set in 2010 will not be achieved as noted from this excerpt in their report:

“Currently, only one distributor has achieved at least 100% of its peak demand (kW) target,          while two others have achieved at least 80%. Distributors reiterated that the main issue with the peak demand (kW) targets could be that they were too high when they were initially set.”

Conservation

Comparing the 2009 and 2013 numbers from the OEB’s Yearbook reveals that “average consumption” has fallen by 875 kilowatts annually, or 3.3%.

For an average1 household, that is 317 kWh annually and a monthly reduction from 800 kWh (9,600 kWh annually) to 774 kWh (9283 kWh annually).  In 2009 the cost of a kWh averaged 0.0615 cents/per kWh and the cost of the raw commodity (electricity) for the full year was $590.   By reducing annual consumption by 317 kWh, the savings should have been $19.50.

In 2013, the cost of the commodity for the average 9,283 kWh consumed per household at the average price of 0.09.2 cents/kWh produces a commodity cost of $854.

The average household would have

had to reduce annual consumption by 33%

just stay at the same rate as 2009

So, not only did that annual savings of $19.50 disappear, but the average household paid an additional $264.00annually.  The $264 increase paid by the 4.6 million households extracts an additional $1.2 billion dollars from ratepayers each year; it’s an increase that continues to grow.   The average household would have had to reduce their annual consumption by 33% or 3,200 kWh in order to have simply matched the cost of their electricity consumption for 2009, yet the target set for conservation was only 4.8%.

What’s next? The current Energy Minister Bob Chiarelli has reset the targets for both peak demand and conservation in his Achieving Balance long-term energy plan.  The target set for reducing peak demand is 10% (2,400 MW by 2025) and for conservation is 16% (30 TWh by 2032).   Both of these are larger than the prior targets so ratepayers are expected to dig even deeper into their pockets, unless they drop their consumption levels by 75%.

Conclusion

TOU pricing has failed to generate the conservation targets, and time shifting in power use, which was promised to consumers as a way to save money, will actually continue to cause rates to increase. The alternative for ratepayers is to move out of their homes but Ontario lacks sufficient caves to accommodate all of us!

©Parker Gallant

January 5, 2015

NB:  Base-load is the minimum level of demand on an electrical supply system over 24 hours. Base load power sources are those plants which can generate dependable power to consistently meet demand.

  1. The OEB in reviewing rate increases requests uses monthly consumption of 800 kilowatts as their standard.

Comments

thebiggreenlie
Reply

Everything that this Government has done since it’s inception has been a dismal failure EXCEPT ONE THING…………………….anyone who is part of their “Old Boys Club” has made off “like a bandit in the night” with OUR money!

Jay Shepherd
Reply

So let me get this straight, Parker. From 2009 to 2013, the number of customers went up more than 4%, but the electrical consumption went up less than 1%. The average monthly consumption for all customers but Class A dropped by 3.1% (2112 kwh vs. 2180 kwhr). That implies that aggressive conservation is working. Anyone can see that.

Tying this into TOU pricing is disingenuous. Conservation programs and TOU pricing are different programs, and one may work, while the other does not. If the hordes of “baby economists” at the AG think that TOU has not worked (which may be true), that says nothing about whether the OPA programs are working or not.

On the face of it, there is an issue with whether the cost of the OPA programs is worth the benefit. At the current all-in cost per kwhr (maybe 10 cents), the pre/post measured benefit is $6.80 per month per customer, or just under $82 per year. For the 4.94 million customers, that bill reduction totals about $403 million, but the cost of the programs is $483 million. Unless there are some ongoing benefits, or other factors at play, this is an issue that has to be addressed.

Of course, all of this is 100% meaningless, because unless you adjust your comparative data (i.e. 2009 vs. 2013) for both weather and economic conditions, that data tells you nothing at all about energy conservation. All of the numbers above could easily be the result of lower economic activity, more favourable weather (cooler summers), or a combination of those and similar factors. There are empirical ways of adjusting for those key variables.

Anyone seriously wanting to draw conclusions from the data would adjust for those independent variables. Since you have not, your conclusions have no merit, and don’t help us.

I too have concerns about whether $483 million in OPA spending on conservation is producing sufficient value for money. That case is not made, however, if you use specious data to produce useless conclusions.

Scott Luft
Reply

Recent demand numbers make it easy to claim that “aggressive conservation” is working, but I think it’s highly unlikely.
Demand is doing precisely what I expected 5 years ago, which is continuing a trend of over half a century – the trend displayed initially as slowing growth in demand, then as declining per capita consumption.
That trend is not unique to Ontario.

Consider this illustrative scenario: with current gasoline usage regulations (CAFE) spreading from international regulations, assume the government regulates price increases, introduces 9% increases every year, and mails out coupons for $1 off a car that’s more efficient than the one you need to replace.
That coupon program is basically what Mr. Shepherd implies would reduce gas consumption.

The measurement of a program – and the OPA did try to measure the success of programs – should be the incremental change it makes.

The wrongest message in Mr. Shepherd’s chirp relates the cost of the Ontario Power Authority’s spending on conservation to a benefit valued with the average cost of power. This is ridiculous.

As with the point on demand, the question is what is the impact: in this case not the alteration of the trend, but on the total spending on electricity. Without conservation spending the overall cost is down by about the amount of conservation spending. In 2013,
-OPG reports spilling 1.5TWh of potential hydro generation,
-Bruce B we know curtailed .6 TWh (from CAMECO reporting),
-and probably ~0.9 TWh from Bruce A (estimating a total of ~1.5TWh off IESO graphs),
-there was also some wind curtailed after September
-14 TWh more were exported than imports, at ~2.4 cents/kWh.

If the conservation didn’t occur while all that was going on, Ontario’s ratepayers also spend somewhere around $700 million upfront on natural gas plants so that when they do run it is essentially only the cost of the fuel they pay – making it nearly impossible for the avoiding cost of conservation spending to justify anything above 2-2.5 cents/kWh.

The OEB’s 5,139.1 TWh (5.1 TWh) “net energy savings” from conservation Parker sites were “cumulative” over 3 years, not from one year’s $483 million.The benefits are shown by the OEB as 1.2 TWh is the final year, when the budget was nearly $500 million, down from 1.5 TWh when the budget was a little over $300 million … which was down from 2.4 TWh when the budget was also a little over $300 million.

What might you claim is implied by declining results on increased spending?

There could be an argument for peak saving except experts who audit – which apparently earn only the contempt of lawyers who obfuscate – show we spent $1 billion delaying about twice the generating capacity as conservation programs claimed to have removed the need for.

You say “Anyone seriously wanting to draw conclusions…”

Serious people reached valid conclusions years ago – while others still await more data.

Parker Gallant
Reply

Jay: Adjusting for weather conditions or for the economic climate today versus 2009 will not likely change the conclusion in any meaningful way. We are all aware that Ontario’s high priced electricity has driven businesses out of the Province and that unemployment levels have remained stagnant.

By the same token the $82 you suggest we are saving has not reduced anyone’s electricity bill unless they are consuming more than 33% less electricity than they did in 2009–no matter the weather.

TOU pricing was certainly meant as a signal to shift usage and I completely agree with those “baby economists” you reference at the AG’s office. The high/low pricing was also seen as a way to compress peaking but hasn’t worked either as the OEB report has noted.

The suggested collective bill reduction of $403 million for ratepayers has been easily offset by the spending of $1.2 billion for the years 2010 through 2013 (not counting the $483 million for 2014). Picking up that old unplugged fridge from the garage for free, the $4. coupons to purchase a CFL bulb, the free energy displays and those free programmable thermometers all are not free as we have learned nor have they made a significant contribution to conservation. Hell they could have used the money to buy us all 4 LED light bulbs and we would be further ahead.

I don’t regard my data either “specious” or my conclusions “useless” but you are certainly entitled to your opinion.

Barbara
Reply

How has the loss in value of the Canadian dollar affected the amount of money that Ontario receives from selling its” surplus” electric power to the States?

Ontario electricity an even better bargain now for the U.S.?

Greg Latiak
Reply

TOU pricing may seem like a nice idea over drinks but fails in the real world precisely because peaks in consumption are driven by working schedules. Small businesses work to a certain schedule — little the government does will make them move their hours from day to night. My grandkids must be fed and bathed to a schedule determined in part by their parents work and the schedules of schooling. And putting the highest prices in precisely these windows needlessly punishes working families.

Being retired means we have no such burdens. We can do laundry on the weekends, heat our water in the wee hours of the night. We cook with gas but have resisted moving to (not so clean) wood heat as have many of our neighbors. South-facing windows are our friends.

Have often thought how much better it might have been if the incentives were for local power and heat as has been done down south, Instead we have a system of growing complexity and cost (and one suspects vulnerability) that ties everything together in one unmanageable tangle.

Problem I have with all of this is that it is no longer clear what problems are being solved (save perhaps excess prosperity). We burn more fossil fuel, generate power we cannot use, seemingly have more outages and pour our limited resources into the hands of foreign investors. All while being abused by our so called leaders to suck it up and pay even more.

Barbara
Reply

Greg, where is down south?

Greg Latiak
Reply

The US and many of the US states have had subsidy programs to encourage individuals and businesses to purchase and use for their own energy needs solar panels, wind turbines and heaters. Magazines like ‘Home Power’ have carried stories about these — often with business cases and similar analysis. Many of these projects include storage batteries to even out the erratic power output. Besides the obvious climate impact this approach was chosen to reduce load on the grid and provide a measure of local power independence. One suspects this approach is more cost-effective than the Ontario ‘one grid to rule them all…’ where power (and billing complexity) all feeds into one big power quagmire.

There must be some additional backdoor incentives here in Ontario as if you tell a solar installer you are doing this for yourself and not for FIT they might just hang up on you. And of course in Ontario there are always the benefits for the government of working with large, deep pocket companies with well established lobbying skills.

Barbara
Reply

STAR TRIBUNE, Jan.7, 2015

‘Owners of two Minnesota wind farms filed for bankruptcy court protection’

About 360 farmers and other landowners who invested in two small wind farms more than a decade ago have filed for bankruptcy.

The turbines need extensive repairs and the company, MINWIND Energy, can’t afford the upkeep.

http://www.startribune.com/business/287867471.html?page=all&prepage=1&c=y#continue

Tom
Reply

Back about ten yrs ago I saw a TV program about a wind farm in Minnesota that was “giving” the turbines to the landowners once they had been in service for thirteen years. The landowners interviewed all thought that all their Xmases had come at once , talk about suckers, it was so obvious that the company didn’t expect the units to last more than 13 yrs. I wonder if this is the same projects.

Barbara
Reply

U.S. Federal Energy Regulatory Commission, Washington, D.C.
Docket No. EL 15-5-000
Nov.17, 2014
Minwind Energy
P.3
“Petitioners state, however,that the wind turbines have experienced main bearing failures and ice damage over the past two years,requiring major equipment repairs. Petitioners explain that the repairs have become so costly that Petitioners began soliciting buyers for their wind turbines.”

GOOGLE:
EL 15-5-000 [PDF]- Federal Energy Commission.
Or search Minwind Energy Bankruptcy

rob
Reply

ummm, jay, cost of kwh, all-in, is closer to 22 or 25 cents than 10 cents. just figure in the delivery cost, etc on your bill and add it into the ‘so-called’ cost of the electricity. On my bills, the ancillary costs are usually more the electricity \I used…

Barbara
Reply

OSEA Community Power Guidebook, 2006

Scroll down to p. 87: CASE STUDY, Minwind energy project, Minnesota
“The two LLCs were structured so that at least 85% of the shares were farmer owned, while local investors could purchase the remaining shares. 66 investors purchased all of the available shares in less than two weeks, providing all of the necessary equity for this U.S.$3.5 million project. Both Minwind l & ll are built on land owned by project members.”

http://www.smallbusinesshuron.ca/publications/community_power_guidebook.pdf

Barbara
Reply

Subsidies are paid for by all ratepayers & taxpayers. While in some cases individuals are able to install and use renewable energy others can’t for various reasons.

Why should those who can’t install renewable energy pay for those who can? And many don’t want a basement full of batteries.

There are risks involved in installing and using renewable energy and the public should pay attention to these risks. If you want to take the risks and stay off the grid then OK.

Lorraine M
Reply

Anything this gov;t does is a dismal failure…..all at the taxpayers expense!

Khris
Reply

Has any one found out the cost to remove the concrete and rebar base of one wind turbine. If the corporation goes bankrupt the land owner may own one great liability. That or the corparation just goes underground and hides behind lawyers. Based on access $100,000 would cover the below ground plus $100.000 If the turbin has not crashed to the ground. When this time comes you will see more government agents and paper work all at a cost.

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