Sunday, October 23, 2016

Fixed: Ontario's electricity relationship with Quebec

Ontario's government, keen to appear responsive to public anger at electricity pricing, has announced an agreement to fix one aspect of the supply system currently working well.

Ontario and Quebec announced an electricity agreement guaranteeing Ontario 14 million megawatts-hours of imports from Quebec over the next 7 years. Compared to Ontario's other electricity contracts, this deal looks attractive at first glance. Looking closer the deal is less attractive,and putting the deal in the context of Ontario's move away from public power, at cost, to what was intended to be a competitive market system, it may be the most ridiculous contract of all.

The agreement, according to Ontario's press release, is for:
  1. energy capacity,
  2. trading electricity, and
  3. energy storage.
All 3 aspects of the agreement exist already, due to the realities of electricity supply and demand in the two provinces, and previous initiatives connecting the systems.

The capacity arrangement, securing rights to supply for peak demand hours, is technically convenient. Quebec has a very high winter peak demand, due to electric heating. They have a system designed to do that - but more capacity on the coldest days is desirable. Ontario's demand peak is usually in summer - and more capacity for that is desirable. Since April 2011 I've captured hourly intertie movements - and looking at each subsequent season's top 10 daily peak hours, its evident Ontario is a net importer from Quebec during the highest demand summer days, and usually an exporter during the highest demand winter days. While this relationship has existed, and would continue to exist, without an agreement, there are capacity reserve tests requirements enforced by the North American Electric Reliability Corporation (NERC), and this formal agreement should be useful in meeting those requirements.

Increased electricity ties with Quebec have long been recognized as having benefits. Significantly, late in 2006 an agreement was made to expand the connections between the two provinces by 1,250 megawatts, and the completion of the work allowed for greater trade by 2009.

Monday, September 12, 2016

Communication, Politics, Money: Wynne's electricity/electoral strategy

The Premier of Ontario launched a campaign advertising her concern about the impact of high electricity rates in proroguing the legislature, which allowed for a New Speech from the Throne setting government priorities. The speech announced a new policy for residential electricity consumers, re-implementing an old policy but providing an excuse to discuss the communication strategies impacting the electricity narrative in Ontario - among the political parties, and allegedly public servants.

A brief reverse timeline on tax policies and electricity in Ontario:
  • September 12, 2016 the Wynne government announces the provincial portion of the Harmonized Sales Tax (HST) will be rebated on residential and small business consumer bills as of January 1, 2017;
  • January 1, 2015 the Wynne government removes the Ontario Clean Energy Benefit (OCEB) that deducted 10% of residential electricity bills
  • January 1, 2011 the McGuinty government (same party) introduced the OCEB
  • July 1, 2010 the McGuinty government adds 8% to residential electricity bills when the Provincial and Federal sales taxes are harmonized as the HST
Let's not pretend that today's announcement is creative or terribly meaningful, but uncover the limitations that prevent the Premier from doing something meaningful to control costs - or allow her to let rates rise higher.

David Herle is an influential political strategist notable for co-chairing the Premier's successful 2014 election campaign. In February (2016) Mr. Hearle delivered a presentation to the Canadian Nuclear Association (CNA). The first point Mr. Hearle had on his slides was:
Rates are an increasingly major concern in Ontario. The cost of electricity is not just seen to be unreasonably high, it is widely seen as damaging to the provincial economy. 
  • Slowing rate increases is critical. 
  • Electricity is a necessity not a luxury.
A conservative strategist, Nick Kouvalis delivered a similar presentation to the Ontario Energy Association in the fall of 2015. That presentation also showed survey results indicating economy and jobs topped concerns, with energy prices not far behind.

Mr. Hearle noted some characteristics of public opinion that now drive Ontario Liberal Party public speaking on electricity. People like:
  • the elimination of coal
  • improved reliability
  • conservation
  • renewable energy (many remain positive on industrial wind - and most on solar)
Hearle, it seems to me, indicates a communication strategy that recognizes people don't want to blame cost hikes on things they like, and therefore Liberal policy is to challenge people to associate increased rates to the achievement of outcomes they desired - specifically coal's elimination in the generation of electricity, and alleged improvement to system reliability.1

Saturday, July 23, 2016

The growing subsidy of wind and solar in Ontario

I was recently asked the amount of subsidies paid to wind and solar generators in Ontario, and felt answering deserved a blog post. I will show that from the introduction to Ontario's transmission grid of the first industrial wind turbines in 2006 up to June 30, 2016, subsidies to wind and solar generators have been approximately $6.4 billion.
More important than the figure, are the trends in annual magnitude and composition.

I have tried not to use the word "subsidy" in recent years - having been guilty of using poorly in the past. However, it's increasingly clear to me that avoiding the "subsidy" discussion has been harmful to Ontario's ratepayers.

In Ontario the word "subsidy" is often quantified by the amount paid for electricity by consumers above the price of that electricity in Ontario's market. The method of recovering that amount is the global adjustment mechanism. The complicated system with huge figures (on track to hit $12 billion in 2016) meant great attention was paid when the Auditor General of Ontario reported, "[from] 2006 to 2014, electricity consumers have already paid a total of $37 billion, and they are expected to pay another $133 billion in Global Adjustment fees from 2015 to 2032." 

However, with all generators in Ontario now recovering some of their costs outside of the market rate, the global adjustment has become a poor tool for defining subsidy. Treating the global adjustment as a subsidy ignores that Ontario's weak electricity market isn't intended to recover all the costs of generation. When the market functions to provide any indication of generator cost, it is usually only the fuel portion of a natural gas-fired generator's expenses. This makes the global adjustment a poor definition of a subsidy - although it's a fine indicator of the poor quality of Ontario's electricity market.

Sunday, July 10, 2016

New wind study provides a good argument for nuclear power

Last Wednesday I posted my critique of a wind-water-sun (WWS) fantasy for Canada, which unknowingly coincided with the Canadian Wind Energy Association (CanWEA) release of a Pan-Canadian Wind Integration Study (PCWIS) 1. The PCWIS, primarily prepared by a branch of industrial wind turbine manufacturer General Electric, contains statistical work that should be of interest to those looking at capacity valuation, and its impact on electricity supply mixes. However, the basic data discipline indicated by the study is poor. Unfortunately a rather deep read of PCWIS is necessary to realize how unimpressive the expected impacts of adding industrial wind to Canada's generation mix are.

The main conclusion of the study is that building out the wind industry in Canada does very little to reduce greenhouse gas emissions in Canada.

The study was mostly paid for by Canadian taxpayers via Natural Resources Canada:
 "The project’s primary goal was to obtain insight into the challenges, opportunities, mitigation measures and operational tools needed to efficiently integrate wind energy into the grid. This has been accomplished by undertaking an integration study approach, which involves matching time series modelled wind energy production data with electricity demand data, and evaluating how this influences the rest of the electricity grid."
I'll evaluate the data work for Ontario, although some claims the study makes for other provinces also demand comment.

Wednesday, July 6, 2016

Wind Water and Sunlight: Jacobson's sorcery

Dreams of a future powered by wind, water and sunlight (WWS) have been spread by Stanford professor Mark Jacobson. Jacobson's work is more optimistic about the contributions to come from WWS than other projections, which may explain an infectious political appeal. In my country the allure of a WWS power supply is impacting Canada's most left political party, the NDP.

SK Premier Wall and Lead Leaper Klein exchange tweets
I've looked at the the WWS work and will demonstrate its shortcomings in Ontario, with the expectation that can be extended to all northern jurisdications. One inspiration for looking at the viability of WWS is opportunistic: Ontario, with a new Minister of Energy, is initiating another Long-Term Energy Plan (LTEP) process. The WWS work provides a test case to run through a data model I created for the previous LTEP planning, and refine my work as necessary.

I won't concentrate on Jacobson's work to nearly the extent of Jani-Petri Martikainen's convincing and entertaining Why does Mark Jacobson hate Finland? or multiple insightful articles at the "A Chemist in Langley" site, including the most recent, Debunking the Leap Manifesto’s 100% Wind, Water and Sunlight Annual Energy, Health, and Climate Cost Savings. I'll attempt to limit myself to briefly discussing how the WWS paper arrived at its supply mix for Canada, and testing that mix within an hourly model - the only way a mix can be rigorously tested.

The April 2016 draft paper from Jacobson and others, 100% Clean and Renewable Wind, Water, and Sunlight (WWS) AllSector Energy Roadmaps for 139 Countries of the World, concluded, "The study finds that the conversion to WWS is technically and economically feasible. The main barriers are still social and political." It's a grand claim for a draft exercise that claims only to,
"[calculate] the number of generators of each type needed to power each country based on the 2050 power demand in the country after all sectors have been electrified but before considering grid reliability and neglecting energy imports and exports."
WWS does not present itself as attempting any hourly modelling of an electricity system, building requirements solely based on total energy requirements for a calendar year.

Sunday, July 3, 2016

Ontario's electricity sector performance halfway through 2016

The year-to-date average unit cost for electricity for the typical Ontario consumer (class B) is up 16% from a year ago, while the average market rate (weighted) dropped to only $12.03/MWh.

I've posted less than usual thus far into 2016, but spent more time on database work and related pages at my data site. A lot of that work is for myself, allowing me to take in the latest data in a scroll through a weekly, or monthly, report, but I thought I'd use the halfway mark of 2016 to pull some interesting statistics together that I hope will communicate why I added some graphics, based on more speculative data, to those reports.

If you follow only the numbers the IESO (Ontario's system operator) features on its website, you would find the first six months of 2016 had the lowest total "Ontario Demand" on their records - even using meter data they've made available going back to 1994.

The record low "Ontario Demand" figure is of little real importance, but is useful in illustrating the changes to Ontario's electricity sector. The IESO's "Ontario Demand" is the generation from the suppliers in its system, including generation lost on transmission lines and the consumption of generators themselves. It does not include generation with local distribution systems, and that is the generation growing within Ontario - lessening "Ontario Demand". Better estimates of actual consumption of electricity in the first half of 2016 was down from the same period in 2015 (which was colder - and 2014's winter was colder again), but I find 2016 about equal to consumption in the first half of 2009 through 2013.

Thursday, June 23, 2016

The declining capacity value of solar in Ontario, and beyond

A solar panel added to Ontario, today, has a capacity value of less than 6% and the reality is if solar continues to be added peak requirement for new supply will move to winter evenings and instead of new solar’s capacity value being close to nothing it will be absolutely zero.
I wrote that yesterday and, inspired by an exchange on Facebook, want to support the statement, add industrial wind to it, and argue the relevance of the statement not only to Ontario, but in California where the claim is a nuclear power plant can be closed and the output replaced with negawatts/efficiency/conservation, solar and wind.

Electricity supply is of value to a system in multiple ways. The two I examine are basically the actual watt-hours of output (I'll call this "energy value", and the ability to produce the output when demand calls for it (this I will call the "capacity value"). 

The diminishing value energy value of intermittent generation should not be well known. I was excited to write on the decrease three years ago, but a current work from Lion Hirth (and Simon Müller) explains well why now seems obvious:
In hours of high wind speeds, the additional supply of electricity from wind turbines depresses the price below the level it would otherwise have been. This price drop is greater, of course, when larger amounts of wind power are installed, a phenomenon that has been described as the “self cannibalization effect” (a dramatic term for the simple consequence of increased supply). As a consequence, the market value of wind power declines with its market share.
This post will deal only with "capacity value".

Additional solar, and wind supply, have lower capacity value today because the operator of Ontario's electricity system, the IESO, released an updated outlook showing the capacity of solar panels connected to the IESO's system grew by 240 megawatts (MW) over the past 12 months, but the IESO expected only 14 MW of production from that capacity during the peak demand for generation. Dividing 14 by 240 gives a measurement for the capacity value, of 6%.

Less notably, but likewise moving lower, industrial wind turbine capacity increased 898 MW, with only 105 MW more output expected at peak demand. That's a capacity value of 10.4%, and as with solar, it's worth stressing those are the IESO's numbers, not mine. I'll address whether those figures are valid in a future post.

The reason for the decline is the expected hour of peak demand has moved later in a summer's day. The reason for the move is not a changing consumption patterns, but changes in the electricity supply mix. While this doesn't change the valuation story, it does require some explanation.

Monday, June 20, 2016

OPG's application to hike nuclear power rates harms credibility

The average cost of power from Darlington nuclear units post-refurbishment is estimated to range between $72/MWh and $81 MWh, or 7 and 8 cents per kilowatt hour.
So announced the Ontario government in a January 11th, 2016 news release.
137 days later Ontario Power Generation (OPG) filed an "Payment Amount for Prescribed Generation Facilities" application with the Ontario Energy Board, asking for rates for supply from its nuclear generators to rise to $99/MWh by 2021.
data from OPB_Exl1-1-1_Att1_OPG_RevenueRequirement Work Form_20160527.xlsx filed at OEB
I find the rate application disheartening.

Anti-nuclear forces will find it very useful.

Wholesale reporter Keith Leslie wrote of "a whopping 69 per cent increase...over the next five years" with quotes from his standard go-to Jack Gibbons, who just days earlier had an editorial in the Toronto Star arguing for the closure of the nuclear reactors at Pickering using some of the same arguments he had discredited 2 years ago (by me in June, and by the IESO/OPA in October), and some other sound-bite emotive appeals developed in the 1970's. [1]

Which doesn't mean Pickering shouldn't be closed.

Having a better record with OPG's financial arguments than they themselves do, I feel obliged to see if OPG's management was just inept in formulating a rate hike that I suspect more likely to scuttle the refurbishment of Darlington's reactors than extend the life of Pickering's, so I'll explore the production and revenue requirement totals with some historical context, and review the poorly chosen "smoothed" option.
This rate hike request reveals some things about what OPG has become, and also reveals shortcomings of the Ontario Energy Board (OEB) in regulating Ontario's electricity sector.