Energy policy in Ontario: botched planning and bad forecasting
Ontario, you just can’t win, says Parker Gallant
One would think that recent revelations such as from Germany where it was stated “Wind Farms Paid €500 million-a-year-to-stand-idle” and China where they have put “a Chill on New Wind Energy Projects” would give Energy Minister Bob Chiarelli pause.
Instead in his luncheon speech at the CanWEA Spring Conference he announced Ontario would seek another 600 MW of wind capacity. Maybe it was a way to obtain donations to the Ontario Liberal Party (OLP) from CanWEA and its members before rules on political donations are amended to the detriment of his party.
But if Minister Chiarelli had waited or inquired of the Independent Electricity System Operator (IESO) he might have discovered that wind played a big role in the unwelcome announcement from the OEB about the electricity rate increase that came into effect May 1, 2016.
The 2016 first quarter results, compared to 2015, might have opened his eyes. Alas, there was no pause, his eyes are not open, and Ontario ratepayers will feel the effects of his wind power announcement in the future.
Looking at 2016’s first quarter compared to 2015 shows wind generation from grid-connected and distributor-connected sources, coupled with curtailed generation (see above on the cost to Germany’s curtailment), in Ontario increased by 26.3% (772,500 megawatt hours [MWh] to 3.7 million MWh). This jump occurred as Ontario ratepayers were curtailing their demand, reducing consumption by 6.2% (2,308,000 MWh) or enough to supply one million average ratepayer households.
You might think Minister Chiarelli would tout his “2013 Conservation First” document as the reason for the drop in demand, but instead, he blamed the milder winter as compared to the prior two as the reason for the latest increase in electricity rates. Because Ontario ratepayers didn’t use as much electricity, there was a shortfall in the forecast of revenue.
It is worth a look at the revenue generated in the 2016 first quarter versus the 2015 comparable quarter:
In the first quarter of 2016, Ontario Demand, as recorded by IESO, was 35,159,000 MWh and the cost of that power based on IESO’s record of both the HOEP (hourly Ontario energy price) plus the Global Adjustment (GA) paid out $3.847 billion for that demand.
The first quarter of 2015 saw Ontario Demand of 37,467,000 MWh and the cost of that power, HOEP plus the GA, paid out by Ontario’s ratepayers was $3.276 billion.
Those who can’t get the point of “paying more for less” will quickly note, in spite of consuming 6.2% less power in 2016, it cost $571.1 million more. Quick math shows revenue jumped 17.4% despite the consumption drop, but it apparently wasn’t enough, hence the increase come May 1, 2016. Had Ontario demand matched 2015, the cost to ratepayers would have been $875 million higher for the three months.
The other missing ingredients include: the 13% HST collected on the additional revenue which put $50 million into Minister of Finance Charles Sousa’s coffers, and the second benefit was he no longer had to budget for the 10% Ontario Clean Energy Benefit — that reduced the cost of the electricity line in 2015 by $328 million reducing our electricity bills by a like amount while increasing the provincial debt.
Wind power generation played a significant part in the cost to ratepayers producing power surplus to Ontario demand. The cost of wind’s generation in 2016 was about $494 million versus $391 million in 2015, an increase of $103 million. Its generation in 2015 of 2,941,000 MWh grew by 26.3% in 2016 to 3,713,000 MWh and represented 60.1% of Ontario’s gross power exports, up from 46.2% in 2015. Ontario’s exports in 2015 generated revenue of $270.1 million in 2015, but only $67.3 million in 2016. The cost to ratepayers to produce those exports in 2015 netted out to $280 million and grew to $609 million in 2016, an increase of $328 million or 117.2%.
What the first quarter clearly demonstrates: there is no need for more intermittent and unreliable industrial wind turbines producing out-of-sync with demand electricity, adding to ratepayer costs.
It also demonstrates the Wynne government’s conflicted messaging. Wynne and Chiarelli both insist their policy is “conservation first” but when we comply, Chiarelli he blames rising prices on lower consumption. Ontario, you can’t win.
It is time Mr. Chiarelli examined the obvious: botched planning and bad forecasting by the agencies his Ministry directly manages or controls. The public is not being served.
© Parker Gallant
May 2, 2016
The opinions are those of the author and do not necessarily represent Wind Concerns Ontario policy.