How to save $2 billion a year in Ontario on the energy file: Parker Gallant
Re-posted with permission from Parker Gallant Energy Perspectives.
If I were the new Minister of Energy …
On June 8, after the Ontario election, Ontario’s new premier – whoever that is – will be thinking of selecting a new Minister of Energy. With the challenges in that portfolio, the immediate question for anyone considering accepting the job would be, how can one fix the electricity side of the portfolio after the damage done over the previous 15 years by my predecessors?
Here are a few “fixes” I would take that to try to undo some of the bad decisions of the past, if I were the new energy minister.
Green Energy Act
Immediately start work on cancelling the Green Energy Act
Knowing Ontario has a large surplus of generation we export for 10/15 per cent of its cost I would immediately cancel planned conservation spending. This would save ratepayers over $433 million annually.
Wind and solar contracts
I would immediately cancel any contracts that are outstanding, but haven’t been started and may be in the process of a challenge via either the Environmental Review Tribunal) or in the courts. This would save ratepayers an estimated $200 million annually.
Wind turbine noise and environmental non-compliance
Work with the (new) MOECC Minister to insure they effect compliance by industrial wind developers both for exceeding noise level standards and operations during bird and bat migration periods. Failure to comply would elicit large fines. This would save ratepayers an estimated $200/400 million annually.
Change the “baseload” designation of generation for wind and solar developments
Both wind and solar generation is unreliable and intermittent, dependent on weather, and as such should not be granted “first to the grid rights”. They are backed up by gas or hydro generation with both paid for either spilling water or idling when the wind blows or the sun shines.
The cost is phenomenal.
As an example, wind turbines annually generate at approximately 30 per cent of rated capacity but 65 per cent of the time power generation comes at the wrong time of day and not needed. The estimated annual ratepayer savings if wind generation was replaced by hydro would be $400 million and if replaced by gas, in excess of $600 million.
Charge a fee (tax) for out of phase/need generation for wind and solar
Should the foregoing “baseload” re-designation be impossible based on legal issues I would direct the IESO to institute a fee that would apply to wind and solar generation delivered during mid-peak and off-peak times. A higher fee would also apply when wind is curtailed and would suggest a fee of $10/per MWh delivered during off-peak and mid-peak hours and a $20/per MWh for curtailed generation. The estimated annual revenue generated would be a minimum of $150 million
Increase LEAP contributions from LDCs to 1 per cent of distribution revenues
The OEB would be instructed to institute an increase in the LDC (local distribution companies) LEAP (low-income assistance program) from .12 per cent to 1 per cent and reduce the allowed ROI (return on investment) by the difference. This would deliver an estimated $60/80 million annually reducing the revenue requirement for the OESP (Ontario electricity support program) currently funded by taxpayers.
Close unused OPG generation plants
OPG currently has two power plants that are only very, very, occasionally called on to generate electricity yet ratepayers pick up the costs for OMA (operations, maintenance and administration). One of these is the Thunder Bay, the former coal plant converted to high-end biomass with a capacity of 165 MW. It would produce power at a reported cost of $1.50/kWh (Auditor General’s report). The other unused plant is the Lennox oil/gas plant in Napanee/Bath with a capacity of 2,200 MW that is never used. The estimated annual savings from the closing of these two plants would be in the $200 million range.
Rejig time-of-use (TOU) pricing to allow opt-in or opt-out
TOU pricing is focused on flattening demand by reducing usage during “peak hours” without any consideration of households or businesses. Allow households and small businesses a choice to either agree to TOU pricing or the average price (currently 8.21 cents/kWh after the 17% Fair Hydro Act reduction) over a week. This would benefit households with shift workers, seniors, people with disabilities utilizing equipment drawing power and small businesses and would likely increase demand and reduce surplus exports thereby reducing our costs associated with those exports. The estimated annual savings could easily be in the range of $200/400 million annually.
Niagara water rights
I would conduct an investigation into why our Niagara Beck plants have not increased generation since the $1.5 billion spent on “Big Becky” (150 MW capacity) which was touted to produce enough additional power to provide electricity to 160,000 homes or over 1.4 million MWh. Are we constrained by water rights with the U.S., or is it a lack of transmission capabilities to get the power to where demand resides?
MPAC’s wind turbine assessments
One of the previous Minister’s of Finance instructed MPAC (Municipal Property Assessment Corp,) to assess industrial wind turbines (IWT) at a maximum of $40,000 per MW of capacity despite their value of $1.5/2 million each. I would request whomever is appointed by the new Premier to the Finance Ministry portfolio to recall those instructions and allow MPAC to reassess IWT at their current values over the terms of their contracts. This would immediately benefit municipalities (via higher realty taxes) that originally had no ability to accept or reject IWT.
Do a quick addition of the numbers and you will see the benefit to the ratepayers of the province would amount to in excess of $2 billion dollars.
Coincidentally, that is approximately even more than the previous government provided via the Fair Hydro Act. Perhaps we didn’t need to push those costs off to the future for our children and grandchildren to pay!
Now that I have formulated a plan to reduce electricity costs by over $2 billion per annum I can relax, confident that I could indeed handle the portfolio handed to me by the new Premier of the province.