Monday, June 13, 2011

Searching For Value in Ontario's Electricity System

I'm constantly amazed how difficult it is to underestimate the value of generation from industrial wind turbines.

I have queried hourly generation data by source 'fuels' to demonstrate the 'value' of the various sources. I was inspired to do so while writing my previous post, which calculated average hourly rates of imports/exports for different jurisdictions. Quebec was much more expensive power to import, but that was because we imported from Quebec at more expensive times. I concluded that was because Quebec could run off cheap imports at night to run as little water through the hydro turbines as possible, and run their hydro turbines during more expensive daytime periods for . Using the same process, with another data set, wind is demonstratively the least valuable source in Ontario.

I've collected hourly generation data for recent months, and combined it with the Hourly Ontario Energy Price (HOEP) to find the average price paid on the market over periods of one month. Some background on these figures is helpful.1 I'd expect nuclear to be average, because it runs most efficiently with consistent output2, I'd expect hydro to be above average by a bit, because it has a large component that runs constantly but also a significant load matching capacity. I would expect gas to receive more than hydro, because while it does have some generators running 24X7, it has far more capacity that should run to match demand (in Ontario or for export), and the expectation would be for coal to be the most valuable because it is used sparingly, and presumably solely to meet demand. Wind I expected to be around where nuclear is. It isn't though:

I can think of two explanations for pricing indicating wind is the least valuable of these generation sources. Wind is almost always simply treated as 'extra' supply in Ontario, so when it is windy the price is depressed (more supply for the same demand). Wind may also be more productive at times when demand is lower. Regardless of the reasons, wind is the least valuable production, in the market pricing sense of value.

I've previously estimated the costs of each generation source, as $57.50/MWh for nuclear, $37.50 for hydro, $100/MWh for gas, $135/MWh for wind, $35 for coal, and around $64 on average.3 Subtracting the realized HOEP prices from these, we see the most heavily subsidized generation sources, per MWh, are wind and gas.
I believe the data indicates a number of issues that the Ontario Power Authority (OPA) seem determined to ignore as they go through the procedural motions to produce an Integrated Power System Plan that has little chance of being useful. That process has noted the IPSP is intended to be a living document, with this one building on 2007's effort (despite that effort never going to the Ontario Energy Board for approval as the provincial blueprint).   I doubt that is so.  Clearly the actions of the past 5 years have constantly lessened the value of Ontario's hydro legacy assets, and that has primarily been done to subsidize the wind/gas machine.  

Many Ontarians genuinely hope for wind, and solar, to succeed.  But there are no Ontarians that would approve of the rapid subsidization increases to the natural gas industry.  Wind and gas accounted for about 17% of Ontario's generation since February 1st, 2011, but my estimates are that they comprise closer to 40% of the difference between the contracted charges, and the market recoveries.  Gas alone is likely contributes about 31% of the total 'subsidy' while providing only about 14% of the generation (I previously commented on gas here).  This isn't good for Ontario.  Perhaps if the government, and the OPA, had the common sense to remove the 'stakeholder' soapbox for Calgary-based organizations we could get back to Ontario policies that benefit Ontario.

In Ontario, there are professionals suggesting ways to increase the value of our nuclear assets.  Let's hope they are taken seriously.  If the IPSP is to be of any value, it must address concerns raised by Donald Jones here, and by the Ontario Society of Professional Engineers at the IPSP Stakeholder sessions, in ensuring refurbishments of nuclear units account for maneuverability concerns, notably demonstrated by the repeated use of steam bypass at Bruce B units, in the requirements specified for the refurbishment projects.  They should consider further maneuverability abilities, including load following, in any new build concerns.  While nuclear is a cheaper source per MWh, we can make it more valuable by making it more responsive, despite the cost increase that may cause.  
The OPA should also get serious about replacing coal with sources that could actually replace coal - including innovative storage projects and utilizing biomass in existing generation assets.  The value analysis shows a source which can be geared to peak demand is far more valuable than the intermittent sources we have been emphasizing.

1I have omitted the “other” category as it contains some 24X7 generation that had rates which behaved, as expected, as nuclear did - and it contains Lennox, which is essentially our emergency reserve, and it would behave as coal does. Solar has no particular data and my past attempts to estimate it have not been very helpful.
2 Donald Jones has contributed excellent material to on common sense actions the OPA should be taking to ensure this statement becomes less true as nuclear becomes more adaptable in the future
3Taken from this post. I will justify those if requested in the comments. I have omitted some calculations on “other”, and the $64 looks low compared to an average rate charged, which averages around $72, due to the impact of exporting heavily being subsidized through the global adjustment.


  1. You should have a look at my analysis here

    Also, biomass has no where near the ERoEI that coal has, biomass may not even be positive, hence not a viable option to replace coal. ERoEI is everything.

  2. Hello Richard. I have visited your site a number of times in the past. Many, not just Ontario, talk about replacing coal. I question that, but I'm not arguing the point here. Regardless of the technology chosen, the replacement needs the availability attributes of coal. ERoEI is not everything - it is a very important consideration for costing a system. But coal provides a tiny portion of our supply now, and my point is it would have been far better to replace it with a source that could produce when demand required it, as opposed to one that can't be expected to do so. Cost is secondary. Pumped storage wouldn't have a great ERoEI - but as we are currently dumping 2-3000MW, 6 or 7 hours a day, in export markets, in my opinion that isn't the primary concern. Availability for peak demand periods is.

  3. There are only two alternatives to coal, hydro and natural gas. One possible future replacement source, if we get off our butts and get going on it, is Liquid Fluoride Thorium Reactors. But alas, we may import one of those made in China too.

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