I sent some numbers to Parker Gallant the other day, along with a question on political donations, and within days the prolific Mr. Gallant produced, "Constraining wind power in Ontario: Making your head spin..."
Before I introduce the figures behind that column, I'll provide some background on the Ontario Liberal party's approach to contracts.
Another election campaign in Ontario is underway, and some of it is a repeat of the previous election campaign; the Progressive Conservatives (PC) claiming they can better control costs and the incumbent Liberals claiming the PCs will renege on contracts. Contracts bind participants to obligations: the Liberal government has failed to protect the people's side of green energy contracts a couple of times since 2011's election - where there is a benefit to their party to do so.
First, there was the Korean Consortium (KC, aka Samsung). In April 2013 I wrote on how they weren't meeting contract requirements, or investing significant amounts of their own funds. The KC deal, which PC leader Tim Hudak had stated, in 2011, he would kill, was re-written 2 months after I pointed out the Koreans weren't honouring the contract, but not killed.
The government claimed savings of $3.7 billion - money that they'd campaigned on not being possible to save in 2011. Worse, the contract renegotiated - because the proponent had not kept it's initial contract commitments - guaranteed the KC a base price of 29.5 cents per kWh for the still contracted solar capacity; that's a price far exceeding what it would cost for, as one example, the public generator to provide grid-scale solar capacity.
So it looks like I saved Ontario $3.7 billion, but I could have saved far more if the Liberals had the decency to cancel a contract because contract obligations were not fulfilled by the proponent - instead of providing expensive plums to the negligent proponents in order to avoid having Tim Hudak be shown to be correct.
Parker's post today relates to a cost issue I'd written on a year before outing the Samsung disinterest in meeting contract terms. I got some technicalities wrong in "Billions at Stake In Feed-In Tariff Contract Fine Print" - like the contracts in question pre-dated the feed-in tariff program - but the gist of the article was correct. A collection of generators (pre-FIT) were not contractually obligated to be paid for potential generation the grid was unable to accept, and a separate collection of potential generators (FIT) were in danger of not getting their projects built for a variety of reasons, including the ability to finance construction being partially dependent on a government willing to ignore enforcing the original contract terms.
The point was moot until the system operator had the ability to curtail that output, which occurred in September 2013. Generators who had no claim on being paid for curtailments had been appealing to the Ontario Energy Board to save them from their contracts, but the Wynne government ended that by simply agreeing to pay them for the supply the grid couldn't accept (in March).
I wrote on this in December's Big Thunder is a Big Mistake, and it's not the only one (comments are a useful read too), which brings us to Parker Gallant's article today. I ran the queries I'd developed for the Big Thunder article, and found the biggest beneficiaries of Wynne's decision to pay generators for curtailed supply:
- Enbridge - the energy giant, with the big winter gas bills
- Brookfield - also the main private-sector owner/operator of private hydro contracts in Ontario
- TransAlta - another energy giant, particularly notable for its coal-fired generation
- IPC/GDF Suez - the company run by former President of both provincial and federal Liberal parties
Parker collected some political contribution data in building his article (along with other Enbrige news); the numbers I'd sent him are shared in this google speadsheet.
Constraining wind power in Ontario: Making your head spin or, how Ontario’s energy sector is regulated | Wind Concerns Ontario
Enbridge Gas Distribution recently received the blessing of the Ontario Energy Board (OEB) for a 40% hike in what they charge Ontario’s consumers for distributing natural gas, claiming, because of the high demand during a cold winter they were forced to purchase it at a high market price. The OEB granted the approval despite many objections by various interested parties who pointed out that Union Gas had requested a smaller increase.
This note was in the OEB’s approval: “This means that Enbridge plans for lower storage deliverability requirements and transportation capacity” requiring gas purchases at higher spot prices on the open market. One wonders why Enbridge is not required to maintain a larger storage capacity, which would have allowed them more prudence in purchasing the supply of gas, but that is presumably a question for the OEB to ask!
While the OEB was weighing their decision, another arm of Enbridge was constraining their production of wind-generated electricity. That was to allow the Independent Electricity System Operator (IESO) to protect the grid and prevent blackouts or brownouts by requesting constraint.
Constraining wind power—and paying for it—started September 11, 2013. Since then Enbridge has been paid for notproducing about 83,500 megawatt hours (MWh), which should have generated close to $9 million.
Enbridge was not alone: Brookfield didn’t produce over 29,000 MWh and IPC/GDF Suez (where the CEO is Mike Crawley) didn’t produce 12,800 MWh, and TransAlta didn’t produce 17,100 MWh. In total about 161,000 MWh were constrained since IESO started paying wind developers—that means ratepayers picked up the $16 million cost. And that cost doesn’t include what ratepayers pay for remote meteorological stations to ensure wind developers don’t lie about what they may have produced.
Interestingly enough if one checks out Elections Ontario to determine what those wind developers contributed to the three major political parties in 2010, 2011 and 2012, you find that the NDP received nothing, the Ontario PC party received $1,080 from Enbridge and the Ontario Liberal Party or OLP received $8,000 from Enbridge, $14,840 from Brookfield and nothing from the rest. The CEO of IPC did donate a total of $555 to the OLP.
The wind power lobby organization Canadian Wind Energy Association (CanWEA) contributed $16,620 to the OLP over the last three years and zero to the NDP or the Ontario PC party. I wonder why?
This situation is a win-win for some of the parties involved, but a hit to the pocketbook of the average ratepayer.