More bad news for Ontario electricity customers
As the Independent Electricity Systems Operator announces more Feed In Tariff or FIT contracts for more “variable” power generation (i.e., intermittent or, in a word, unreliable), and still plans to launch its Large Renewable Procurement II program this summer, Parker Gallant says Ontario’s electricity rates are set to keep climbing, with no end in sight.
The IESO (Independent Electricity System Operator) just announced the award of 936 MiniFIT contracts that will add another 241.43 megawatts (MW) of long-term renewable high priced energy contracts to your local LDC (local distribution company) grid.
While most of the awards were for solar power and only 3 MW of wind capacity, the announcement follows former Energy Minister Bob Chiarelli’s April 5, 2016 directive to IESO to acquire another 600 MW of industrial wind turbine capacity. This directive was issued despite his knowledge that Ontario consistently exports surplus production and curtails (and pays) wind power generators, spills cheap hydro, steams off nuclear and pays gas plants to idle.
The IESO announcement means more tax dollars coming out of ratepayers pockets, too: a large percentage (over 30%) of the MiniFIT contracts were awarded to school boards, municipalities, and even a few local distribution companies, etc., to install solar panels on the roofs of their buildings allowing them to generate income for upkeep of the schools, etc. With the renewable energy subsidies, Ontario ratepayers are now picking up tax costs that rightfully should be in the purview of the Province who have responsibility for funding primary education and the facilities occupied by the students with our tax dollars.
More ‘variable’ generation forecast—that means, more expense
Just days before IESO’s MiniFIT announcement, the IESO Strategic Plan 2016-2020 was posted. I found this disturbing statement in the nine-page document:
“Operability – With the evolving supply mix, we face new operating challenges in managing the bulk power system. Increasing variable generation, integration of distributed energy resources, and changing demand and supply patterns are creating operability challenges with respect to regulation, voltage control and flexibility. The IESO, with stakeholder input, will develop cost-effective solutions to address these challenges.”
As Ontario ratepayers know that last sentence hasn’t exactly played out the way IESO suggests it will in the future, with rate increases that have defied reason. Nothing has been “cost-effective”!
For example, a news release referenced as the Ontario Energy Report Q1 2016 has an “Electricity Prices” chart on page 11. Comparison of the “Commodity Cost (cents/kWh)” discloses all-in costs for Class B ratepayers for January 2016 versus January 2015 were 31.4% higher, for February 2016 were 22.3% higher and for March were 26.5% higher. If IESO’s display of a “cost-effective” solution means average increases of almost 27%, Ontario ratepayers can only expect things will get a lot worse.
The Smart Grid: a gloomy picture on cost?
Another example is related to IESO’s ability to manage the development of the “Smart Grid.” As previously noted by Ontario’s Auditor General, the current government failed to produce a cost/benefit study for many of their decisions affecting the energy sector. It now appears the Ministry of Energy finally commissioned a cost/benefit study which was completed by Navigant and referenced as the “Ontario Smart Grid Assessment and Roadmap”. While the date on the 135-page “Roadmap” is January 2015, a check on the Document Properties of the file shows it appears to have been modified June 5, 2015. Did the original document painted a gloomy picture and the Ministry required a tempering of the costs or forecasts?
The “Roadmap” provides an estimate of the costs of development of the smart grid and the estimated payback with the latter offering a best, expected, and worst estimate. (One should recall that Navigant designed the Global Adjustment but it was originally called the “Provincial Benefit”. We all know how that turned out!)
The Navigant Roadmap estimates the cost of development of the smart gridNB:, including the $2 billion cost of smart meters out to 2035 will total $8.3 billion.. The “benefits” they estimate will flow from that investment are $3.8 billion at the low end and $9 billion at the high end. The “expected” benefit is estimated to come in at $6.3 billion — that’s $2 billion short of the projected costs.
More bad news for ratepayers
So, putting all the bad news together, we should expect higher electricity rates come November 1st , 2016 when the Ontario Board resets the rates based on the big jump year over year in just the first quarter. We should expect the additional MiniFIT contacts will result in higher prices as they are installed and the contracts click in, and we should expect the “smart grid” costs will grow much higher than forecast and add costs to our bills.
Finally we should expect the additional 600 MW of wind turbine capacity to be acquired under the Large Renewable Procurement II (set to begin in August) will result in increased costs due to both curtailment and an increase in surplus exports subsidized by ratepayers.
© Parker Gallant,
July 4, 2016
NB: The original cost estimate provided to the writer by IESO related to development of the “smart gird” (without costs of the smart meters) was $1.6 billion and contained in a Financial Post article on July 6, 2010.
The opinions expressed are those of the author and do not necessarily represent Wind Concerns Ontario policy.