First, we are absolutely committed to ensuring an affordable electricity system for families, seniors and small businesses.I have long-standing concerns about exports.My first blog post to garner significant attention, and spur mainstream stories bringing comments from then Premier Dalton McGuinty, reported on the high exports and negative pricing of January 1st, 2011. “A full decade later I was still writing estimates on losses incurred on exporting electricity, which grew rapidly along with the growth in supply spurred by McGuinty’s Green Energy Act. This post is going to build off of another discussion on losses on exports in the context of “affordable electricity for families”, using a presentation I’ve added to reporting built on basic data shared from the system operator (IESO)..
Second is the expansion of clean-energy generation for the people of Ontario. We already have one of the cleanest grids on the continent. The vision is to continue to generate more as our population increases, our industry expands and our manufacturing electrifies.
Third is to help build out Ontario as a clean-energy superpower, able to export our energy – as we already do. We’re already a net exporter to New York and other places. We want to strengthen our clean-energy advantage and export technology and electricity around the world, particularly in the United States. [emphasis added]
The last time I wrote specifically on exports I utilized a methodology to estimate losses from the Auditor General of Ontario . The methodology I now use is built on the IESO’s hourly data for: output by fuel (type), demand, intertie (import and export), and HOEP (market rate). Fuels are grouped by emission levels: trivial (nuclear, hydro, wind, solar and biomass) and fossil fuels (natural gas and, previously, coal). When trivial-emission supply exceeds Ontario Demand[2], essentially the condition that ought to have been referred to as Surplus Baseload Generation (SBG), that excess is considered exported. I’ll return to this to argue it was a key driver of electricity becoming unaffordable for “families, seniors and small businesses,” but the other categories deserve mention too. After SBG/trivial-emission supply is calculated in determining exported supply, imports are considered wheeled through Ontario to be exported. Exports that are neither due to SBG or wheeled import-export transactions ought to be from fossil generation.
Calculating the average HOEP (market rate) for each of these three types of exports provides evidence the methodology is sound. Imports being wheeled through Ontario have the highest average value, fossil fuel exports track the average HOEP/market rate closely (both should correlate with the price of natural gas), and excess trivial-emission supply has been of little value when exported. In the past decade and a half exported trivial-emission supply had an average value, Adding to the denominator's dumped exports supply that was curtailed altogether, the average market value of exported and dumped trivial emission supply drops to 0.45 cents/kWh.
Summarizing the data results in more astonishing figures. From 2008 through 2023 approximately 52.6 billion kWh (52.6 TWh) of excess supply from trivial-ghg suppliers was dumped on export markets bringing a market revenue of only $466 million (in real 2023, dollars). Additionally, reports from the system operator (IESO) and Ontario Power Generation indicate another 66.5 TWh of potential, and paid for, supply was simply curtailed. For context, the amount of supply dumped or curtailed over the past 15 years is very similar to the amount of electricity generated by industrial wind turbines over the period…at a cost of over $15 billion, more than 33 times the meagre revenue from export markets.
This is not to say all power dumped is wind power, but it is true that much of our wind, and to a lesser extent solar, capacity was procured under a Green Energy strategy initiated to reinvigorate the provincial economy during a recession that was rapidly dropping electricity consumption in the province. The Premier, Dalton McGuinty, sold that policy early in 2009 as a job creator, claiming Ontario was well-suited for leading in renewables due to having already brought wind online and initiated a building out of solar (under earlier Renewable Energy procurements). While today’s Ontario government, under Premier Ford, has recognized the waste of that period in removing $3.2 billion a year from electricity ratepayers’ bills, adding the expense to the provincial treasury, it seems to have forgotten how such wasteful spending originates - in good intentions with wild wishing replacing intelligent planning.
It took a few years following the procurement frenzy that was kicked off during the 2008/09 recession for supply to enter service - and by the time it did around 2012 two nuclear units, previously contracted, were returning to service. I’ve looked at the impact of the incremental trivial-emission supply by using 2011 as a baseline (ie. figures are change from 2011). 60% of the increase in trivial-emission supply, over the past 11 years, was exported (for trivial-rates) or curtailed altogether. That’s the history of contracted supply now required to meet provincial demand.
Minister Lecce also tells the interviewer, ‘the Liberal carbon tax…will further increase costs on people.” Here’s an argument for that: it would drive up industrial electricity pricing sending industry out of the province and reducing the total load causing fixed costs to be spread across a smaller user base increasingly weighted to residential consumers. It’s a tough case to argue, although it’s what was happening the last time a government wanted to expand electricity for a goal as questionable as expanding exports. Ontario’s Industrial Conservation Initiative (ICI) is an industrial pricing policy that relies on a very low market rate (HOEP) to shift costs from large consumers to small ones. I argued a decade ago that a carbon price could exist in Ontario with revenues used to reduce the global adjustment - which would have no impact on overall costs, but would reduce the costs transferred to smaller ratepayers (residential and smaller business) to the benefit of large users (including industry and government). It would also increase the Ontario market rate making exporting gas-fired generation from the province less attractive. It is a difficult-to-convey truism that residential electricity pricing in Ontario is not higher with higher gas prices, but due to other policies it is a fact.
To be fair, Minister Lecce does not simply talk of exporting electricity; he also speaks to exporting our technology and technological expertise. As a nuclear supporter I try to get enthused about that, and hope it is correct. But for it to become correct I think we need to be cognizant of the difficulties involved. Ontario Power Generation (OPG) is working towards building a so-called small modular reactor (SMR) before the end of this decade. At 300 megawatts it is small in comparison to our large reactors, but the promise of SMR’s is, in my opinion, their sizing makes them an option in far more situations. Ontario’s nuclear operators have been delivering large, complex, reactor refurbishments on-time and on-budget, so it does have a workforce better suited to nuclear projects. Nuclear is, I feel, the best way to get northern grids that are not blessed with abundant hydro-electric opportunities to low-emission electricity generation fleets. This project is, therefore, one I can support as advancing the likelihood of cleaner grids in the future. I have two-and-a-half concerns. The half concern is the basic technology is not a CANDU reactor, and that necessitates fueling with an enriched uranium unlike our other reactors. One full concern is while SMR’s are sized for more grids in general, Ontario’s grid is already sized for full reactors, and I see little evidence SMR’s will produce electricity as economically as larger reactors. The more expensive output domestically can make sense if we do grow exports of reactors, and their components, from a supply chain in Ontario. That would require successful builds at pricing other prospective buyers perceive as economical - which is a second concern. When last we showed such ambition, the Green Energy Act raised contracted rates up higher for wind and solar, to encourage a rapid build out of supply that only served to, under the circumstances, advertise the product as expensive and unnecessary.
Ontario has not had an especially poor energy minister for some time. In my opinion we’ve had a good run of Energy Ministers, starting with Chris Bentley’s brief time in the office (during which he resolved, and took the political hit for resolving, the gas plant scandal); followed by the prototypical partisan politics of Bob Chiarelli (who vigorously defended the ridiculous policies of the GEA era while snuffing out any further expansion from them); through Glenn Thibeault’s brief responsible reign; onto Greg Rickford’s stint under Premier Ford and finally to Lecce’s predecessor Todd Smith. Many were far from perfect for the policies I’d like, but none increased the damage done by the last truly poor Energy Ministers (Duguid and Smitherman).
It’s disappointing the new Energy Minister is presenting himself, and his directives, as a throwback to the time of our worst Energy Ministers.
Notes:
[1] The Globe and Mail, Adam Radwanski, “Ontario’s new Energy Minister lays out vision to transform province into ‘clean-energy superpower’” (subscription link)[2] This is as reported by the IESO. It will only apply to the “IESO-controlled grid” (ICG). I do other reporting estimated supply in distribution networks - that type of supply impacts this analysis in reducing demand from the ICG. The most notable impact is from solar embedded in distribution networks reducing midday demand.
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