Wednesday, November 30, 2016

Ontario Energy Minister Previews Long-Term Energy Plan Themes

"I've really come to respect the enormous complexity of the energy and electricity system in Ontario."

Ontario's rookie Minister of Energy, Glenn Thibeault, is now confident enough of his grasp of the province's energy system that he unveiled themes for an upcoming Long-Term Energy Plan in a speech to the Empire Club:
  1. Nature and style of procurement should be technology agnostic
  2. Ontario's electricity market renewal/reform to provide better value
  3. Empowerment of consumers
These are ambitious themes. Unfortunately Minister Thibeault didn't display an understanding of the institutional barriers to change, and he's going to need to confront the demons of the sector before meaningfully advancing any of these goals.

He seems to expect the barriers to deliver change.

Tuesday, November 22, 2016

something about electricity rates: the Premier's mistake

Premier Kathleen Wynne is calling high electricity prices her “mistake,” begins a report on her speech at the Ontario Liberal Party's annual general meeting. The statement would appear sincere if accompanied by an explanation of exactly what she thought her mistake was. As a political tactic, as I think it is, it's a good move in positioning the Liberal party for the election coming in 2018.
...a contrite Wynne told 850 Liberal delegates at the party’s annual general meeting here that her “government made a mistake” by allowing rates to soar.
“It was my mistake and I’m going to do my best to fix it,” she said...
Tactically, I think the move is based on two things:
  • the political rule that the electorate's anger is not sustainable
  • most expensive electricity contracts have now entered service and, combined with OPG's poor rate application, upward pressure on rates was, and is, planned to be less severe over the next couple of years.
These realities may allow the Premier to now position herself as responsive to people concerns. Adrian Morrow's report shows how she'd like to end up positioned for the 2018 campaign:
“I will do my very best to listen, to respond, to lead, and to serve you and the people of Ontario better,” she said. “I will be right there with you: As premier, as leader, I’ll be there with you as Kathleen, a proud mother and grandmother.”
These are the factors that put some wind in the sails of Wynne's Liberal ship. An article by Robert Benzie notes some of the content presented to the assembled Liberals by master strategist and Liberal campaign chief David Herle:
Even though [opposition leader] Brown publicly broke with social conservatives in August — saying he supports abortion rights, same-sex marriage, and the modernized health lesson plan — Herle’s findings suggest the Liberals plan to paint him as one.
Simply put, the Ontario Liberal Party is positioning the party for a culture war - with a caring grandmother running against a jerk.

It's a promising but risky tactic.

Wednesday, October 26, 2016

Ontario Electricity – The Liberals Giveth and Taketh Away

This is a guest post, by Bruce Sharp.
The post first appeared on Linkedin.

Ontario Electricity – The Liberals Giveth and Taketh Away

The big energy splash in the Ontario Government’s September 12 throne speech was rebating the provincial portion of the HST to certain electricity users. This group will include mainly voters and is estimated to cost about $ 1 billion per year, with the cost being born by provincial taxpayers. In a September 14 Linkedin post, I commented on the merits of the move.

Another electricity move announced that same day was the expansion of the Industrial Conservation Initiative (ICI), otherwise known as the Global Adjustment (GA) Class A.

Ontario’s GA is the electricity market mechanism for collecting and allocating above-market generation and conservation and demand management costs. Prior to 2011, there was a single GA class, with all consumers paying for GA costs based on a uniform, postage-stamp rate. Starting in 2011, we had two classes: A and B, with the classes’ shares of GA costs determined in different ways. This program did not initially have a name but at some point was dubbed the Industrial Conservation Initiative. Class A now pays significantly less than they would have, had we still had one GA class. The result is a transfer of costs from Class A to Class B, i.e. a cost decrease for Class A’s mostly large industrial consumers and a cost increase for Class B -- residential and most other Ontario electricity consumers.

In an April 14 Linkedin post, I provided an update on that cost transfer. Given the recent news, I thought I’d provide another update, estimate the additional transfer that will occur as a result of the expansion of Class A and look at the economics of the initiative.

For the period of October 2015 through September 2016, total GA costs were $12.1 billion. If there had still been a single GA class, the uniform rate would have been $ 86.20/MWh.

With the two classes, there was a cost transfer from Class A to B of $ 940 million. Class A paid an average of $ 52.50/MWh or 39% less than they would have had we still had a single GA class. Class B -- by virtue of its larger total energy consumption -- paid $ 94.60/MWh or 9.7% more. For the residential consumer with losses-inclusive, annual consumption of 9.5 MWh, that represents an added cost (inclusive of HST) of $ 90/year.

The expansion of Class A will take place either July 1, 2017 or July 1, 2018. One source I’ve spoken to says the government will want to do this sooner rather than later. It will likely involve removing baffling restrictions to the 3 – 5 MW eligibility and a reduction of the overall average monthly demand threshold to 1 MW. A thousand businesses are to be newly eligible,

The result will be an additional cost transfer – from the new Class A consumers to the remaining Class B consumers.

How much will it be?

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.