Thursday, September 22, 2011

Industrial Wind, SBG, $3.3 billion ... and more

This is the third post in a series inspired by a UKStudy that concluded a “truism” for natural gas in the coming decades is ‘want wind, need gas.’”

 One of my goals is to determine the need for peaking capacity if more Industrial Wind Turbines (IWT’s) are added, but another is to provide a better accounting of the costs of the Ontario government’s grand experiment, inserting wind into a supply mix already dominated by a large contingent of baseload nuclear and non-reservoir hydroelectric generation.  My first post in the series showed the planned IWT capacity is essentially planned as excess capacity, and illustrated wind’s variant output, especially it's lowest output period, of summer, coinciding with the peak supply/demand requirement.  The second post developed the concept of ‘baseload’ supply in Ontario, based on summary estimates of daily output.  My definition of baseload included supply we were contractually obligated to take (or to pay not to take).  Today I’ll start putting price tags on the choices our government has been making for us.

SBG, for surplus baseload generation, entered the vocabulary in 2009.   The system operator (IESO) has become very proficient in taking actions to reduce supply, which keeps the electricity grid functioning.  It also keeps the issue out of the news.  This spring I charted methods the IESO uses to reduce supply: steam bypass at Bruce B reactors (usually #6 and/or #7); simply letting water bypass turbines; and having non-utility generators (NUG’s) cut supply.  I surmised we paid for each of those things, and in fact May did achieve both the highest commodity charge of the year and the highest Global Adjustment charge ever.  Undeterred by the economics that dictate this approach is lunacy, Ontario continues to plan additional capacity that lacks load-following ability.  The system operator, recognizing the increasing danger of too much supply to the grid, has now settled on the structure of a centralized forecasting solution – seemingly to allow payment to IWT generators when their output cannot be accepted onto the grid.   I am yet to see any estimate on how much generation we may pay to prevent occurring.
I'll provide one!

This chart indicates the actual demand figures up until this month.  The graphics shown today are based on some historical data on production and consumption, some future forecast taken from government bodies and industry lobby groups, and the modeling of all these pieces into an hourly data set from January 1st 2003 to December 31st 2022.

While these annual figures show some room for error, more so than the daily graphs of my last post, it is deceptive when the data is broken down to the level of one hour.  

Here is one summary view of my model - note the rise in SBG with 2009's drop in demand, the coming rise due to more generation - but especially how short-lived the decline is in 2015 as nuclear units enter refurbishment phases (and SBG not inclusive of the wind component all but disappears).  As a percentage of demand, the baseload (in this scenario) peaks in 2014, yet growing wind drives back up the SBG levels almost immediately:

Fiscal Year SBG MWh
(No Wind)
(With Wind)
# of Hours
(No Wind)
# of Hours
(With Wind)
SBG Hours Attributed To Wind SBG MWh Attributed to Wind Cost of Wind Attributable SBG
(@ $135/MWh)
2003 89,896 89,896 17 17 0 0 $0
2004 0 0 0 0 0 0 $0
2005 219 219 4 4 0 0 $0
2006 1,284 1,858 7 8 1 574 $77,545
2007 3,397 4,006 16 16 0 609 $82,153
2008 6,066 13,252 20 40 20 7,186 $970,098
2009 271,530 439,453 575 793 218 167,923 $22,669,631
2010 296,706 569,535 499 842 343 272,829 $36,831,902
2011 180,288 476,452 393 742 349 296,164 $39,982,176
2012 420,200 1,319,718 746 1508 762 899,518 $121,434,904
2013 623,584 1,776,563 908 1746 838 1,152,979 $155,652,227
2014 604,177 2,721,354 977 2227 1250 2,117,177 $285,818,898
2015 43,588 1,268,642 147 1254 1107 1,225,054 $165,382,247
2016 23,438 1,937,528 95 1536 1441 1,914,090 $258,402,181
2017 23,959 2,293,184 74 1638 1564 2,269,225 $306,345,340
2018 30,558 3,034,608 92 1920 1828 3,004,050 $405,546,731
2019 50,512 2,785,410 151 1890 1739 2,734,898 $369,211,273
2020 28,836 3,153,603 98 2036 1938 3,124,767 $421,843,505
2021 51,792 3,117,714 161 2069 1908 3,065,922 $413,899,424
2022 4,475 2,485,944 29 1645 1616 2,481,469 $334,998,341


$3.3 billion dollars is the first cost, if all goes according to my plan, which, failing an error, is simply calculating the outcomes of the government's choices.
The first cost is by no means the only cost.  The model that computes these figures has not yet accounted for the remainder of our hydro (only for the portion we've modeled as baseload).   There is a lot more unnecessary production than I've indicated thus far.  I will extend the model to account for the emissions-free hydro supply.  That will be the next cost.

Then there is the cost of gas-fired generation capacity that is seldom utilized.  I'll model the gap that needs to be filled, and estimate the utilization rate of the needed capacity

NEXT:The Cost of Wind Generation: Bumping Hydro and Duplicating Capacity


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