Monday, March 15, 2021

Ontario's electricity system has not yet passed gas

Ontario's electricity system has not yet passed gas 1 Ontario’s electricity system includes generators fueled by natural gas. This is suddenly a hot topic as a campaign lobbying councils to say no to this type of generation moves through municipalities. The “no gas” lobbying appeals to a desire to reduce greenhouse gas emissions, exploiting predictions of increased use of natural gas in generating electricity in the province. This article will explore what entities have been the key drivers of emissions in Ontario’s electricity system, the credibility of the body being cited predicting increased generation fueled by natural gas and, if all goes well, convince the reader they are not willing to decrease global carbon emissions at any cost.

Background on the IESO’s pretend market

My previous post reconstructed a method to estimate losses on electricity exports out of Ontario. The measure does not indicate Ontario would be better off if it didn’t export its excess, but that Ontario would be better off with data discipline and consistent metrics capable of informing, and influencing, the managers of the system. Most years we pay more, per unit of electricity, and receive less from exporters of that electricity. It’s a bad trend, but not one Ontario’s electricity system has been structured to notice.

In Ontario the system is operated by the IESO. The IESO’s system includes what should be called a pretend market - it was called a hybrid market when introduced in 2005 after a collapsed attempt at a real market, but it’s deteriorated significantly since then. From a recent report:

...Over 98% of Ontario’s generation costs are controlled through either regulation or contracts, and even the fixed costs of most of the assets that trade on the market are contracted. As a result, less than 2% of the total system costs are actually price-exposed and influenced by the market (the dark blue area)
The creation of a market for electricity in Ontario revealed itself as a fantasy in four acts:
  1. the freezing of the market price shortly after its birth in 2002 killed any chance of merchant generation getting built;
  2. the introduction of the global adjustment mechanism (2005) separated the contracting of new generation from a need for revenue from sales into the market, and was accompanied by regulating rates for public Ontario Power Generation (OPG) nuclear and very large hydroelectric generators;
  3. the introduction of contingency payments to keep coal generators operating after the market collapse of 2008, and,
  4. Regulating the rates for the remainder of OPG’s hydro-electric facilities for 2015.

Friday, January 8, 2021

Ontario lost a record $1.8 billion dumping excess electricity in 2020

$1.8 billion dollars: that’s how much Ontarians lost selling electricity to neighbours in 2020 once the revenues earned from the sale are subtracted from the cost of producing the power.

By one accounting, which I’ll show is an Auditor General’s.

It’s been a while since my last post, during which period this blog turned 10. A decade ago, this month, a Premier noted some people think discussing losses on exports is fun, and at the same time lectured, “what you want to do of course is try to manage your system as best as you can so that there's as little extra electricity as possible.” Looking at the longer trend with the benefit of hindsight will be fun (of course), and as an added benefit it will provide a measure of the quality of the system’s managers.

Last month I was contacted by a friend looking to update claims from the 2015 Annual Report of the Office of the Auditor General of Ontario (the Auditor), including:
From 2009 to 2014...Ontario exported 95.1 million MWh of power to other jurisdictions, but the amount it was paid was $3.1 billion less than what it cost to produce that power

From a statistics viewpoint the biggest part of this challenge is figuring out what that $3.1 billion claim was based on. It turns out it’s demonstrated by Figure 10 in that 2015 report - and now we descend into the sordid world of Ontario’s electricity data to determine the origins of the numbers visualized in that graphic. 

I’ve added a tabular table which shows the figures I transcribed from the Auditor’s Figure 10 - not a precise process but one that provides valuable estimates for what is visualized. The difference between the cost of production and revenues in the graphic equal $3.1 billion. Before discussing the “cost of producing Exported Power...as estimated by [Office of the Auditor General of Ontario]” I will note both figure 5 and figure 10 in the 2015 Auditor’s report cite the IESO (Ontario’s hybrid electricity system operator) as the source of revenue from exports: figure 5 prints the figure for 2014 as $636 million while my transposition of the graphics - -done as it’s clearly not that - puts the figure a little below $750 million.

Same source, same measure, same year: two numbers. I’ll revisit this after I discuss a methodology behind the cost of producing exported power that reproduces the results graphed in the Auditor’s Report.

Sunday, October 18, 2020

Changes: choosing Time-of-Use or Tiered billing

The Ontario Energy Board recently announced Regulated Price PlanS (RPP) for the winter (November-April). New for this year is consumer choice: Time-Of-Use (TOU) pricing will remain the default option, but individuals can opt to switch to the tiered pricing structure that many will be familiar with from before they were forced onto TOU pricing. Some have asked my opinion on switching - which I'd given without thinking it worthy of blog post. Now that I've heard others opine I offer a blog post to defend my very simple advice - and comment on the choices in the context of cleaner energy policy.

If you use less than the level of usage set for the lower-price tier (1,000 kWh) you should switch to tiered rates.

That's it: no gathering up all your bills, getting your hourly usage by registering on the web with your local distribution company (LDC), and crunching the numbers.

Just switch.

Now for me rambling on to justify that one line if only to justify my simply statement while everybody else I hear is advising researching ...

Tuesday, August 18, 2020

Messages from July's Global Adjustment figures

Ontario's electricity system operator (IESO) released the final July global adjustment figures yesterday. July is the first month of new global adjustment "Peak Demand Factors" for participants in the Industrial Conservation Initiative (ICI), and therefore it's the month that gives an idea how severe the cost shifting from the Class A consumers participating in the ICI to the other consumers in Ontario (Class B).

"To B." - Ontario electricity rate designer.

Collectively class A consumers share of the global adjustment costs shrunk to 16.7% from 17.7%, which had shrunk from 19.2% the previous adjustment period. From July 2019 thru June 2020 the shrunk share for Class A meant $215 million more transferred to Class B consumers - or the taxpayer that subsidize them - and that will increase by about $150 million a year for the next 2 years due to the Ford government's decision to suspend the requirement to reduce consumption during peak periods during the current adjustment period.

Some good news from the global adjustment reporting is Class A consumption is continuing to recover since sharply dropping towards the end of March

Monday, July 20, 2020

Government manufactured high electricity demand should end the ICI

Each day from July 7th to 10th saw an IESO "Ontario Demand" peak higher than any day since July 2013, and July 6th saw the 7th highest peak since 2013's summer. The government had made some announcements that encouraged this month's higher peaks:
  • On Saturday, May 30th, the government announced the suspension of time-of-use (TOU) electricity pricing, replacing it with a flat rate until the end of October, and,
  • On the afternoon of Friday June 26th the government announced, "companies that participate in the Industrial Conservation Initiative (ICI) will not be required to reduce their electricity usage during peak hours"
The second of these announcements was the most impactful in spurring higher peak consumption, but a review of multiply pricing impacts, and our ability to measure them, will provide a perspective for controlling systemic costs.

Sunday, May 3, 2020

Consequences of Ontario's Green Energy Act warn against creating green new deals as stimulus

As economic activity takes a seat way back from the driving priority of halting the spread of COVID-19, recession is looming, and proposals popping up for spending to spur recovery. People, particularly those in Ontario, should be informed on the actions to spur stimulus during the last big recession, for two big reasons. This post will concentrate on the first - which is the cost, and benefits, of the actions initiated by the Green Energy and Economy Act of 2009.  I'll tally up costs incurred due to the electricity procurement than followed, and note the impact on post recession Ontario in quickly noting how those costs have been getting paid - and then I'll conclude with the second reason people need to know this history and its current impacts.

The Green Energy and Green Economy Act (GEA) was introduced to the legislature early in 2009, and received Royal Assent 3 months later. It provided the basis for a contracting orgy that persisted until the fall of 2011 before slowing to occasional carnal encounters. The impetus of the "green energy" push was a waning economy, as described by Karen Howlett and Renata D'Aliesio in 2011:
[Ontario Premier Dalton] McGuinty began looking at where to place his strategic bets during the global economic recession in 2008, when manufacturing jobs were quickly vanishing in Ontario. He solicited many opinions, said a source close to the talks, and the jurisdiction that kept coming up was Germany.
Mr. McGuinty turned to David Suzuki, Canada's best-known environmentalist, to set up a meeting with the father of Germany's green energy revolution, Hermann Scheer, in June of that year. The German parliamentarian arrived in Mr. McGuinty's office in the Ontario Legislature with a blueprint for building a new economy from scratch.
The McGuinty government heeded the now-late Dr. Scheer's advice. George Smitherman, then the new energy minister, adopted the "feed-in tariff" model that Germany used to become the world's first major renewable energy economy, committing to pay above-market prices for green power.
Liberal MPPs learned about their government's push into green energy in the fall of 2008 during a caucus retreat at the Benmiller Inn in Goderich, where Mr. Smitherman talked about the potential to create 50,000 jobs...
Ontario's green energy procurement were far from Keynesian economics. Instead of government borrowing to invest in the infrastructure that would aid productivity and grow wealth in the future, the government avoided borrowing by attracting private capital by offering generous contract terms trusting its existing global adjustment mechanism would allow the costs to be paid by electricity ratepayers. My understanding of economic theory is deficit spending on infrastructure during bad times allows for productivity to jump when better times return - but the GEA's contracting avoided growing government debt in return for making electricity more expensive in better times.
The Government of Ontario is committed to fostering the growth of renewable energy projects, which use cleaner sources of energy, and to removing barriers to and promoting opportunities for renewable energy projects and to promoting a green economy.
...
The Government of Ontario is committed to promoting and expanding energy conservation by all Ontarians and to encouraging all Ontarians to use energy efficiently. -Preamble to Bill 150 2009
The obvious costs from the GEA period are due to contracts awarded under the feed-in-tariff (FIT) program and related Green Energy Investment Agreement (GEIA) - better known as the "Sumsung deal". Less well known are the Hydroelectric Contract initiative (HCI) and Hydroelectric Energy Supply Agreements (HESA). Another stated goal of the Green Energy was the promotion of a 'culture of conservation' - with 'energy efficiency' and 'demand management' prominent phrases being joyously bandied about in and about the legislation. I've pulled the figures for those contracts, and conservation spending, from my database of estimates:


Tuesday, April 28, 2020

Influence Peddling: lobbying in Ontario's electricity system

Prior to COVID-19 arriving here in Ontario, and paralyzing society, I'd read some papers dealing with the electricity system. These papers may seem a trivial topic today, but the last major economic shock saw the Green Energy Act successfully lobbied and implemented by people who'd been laying in wait for a crisis to manipulate.
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In a conversation on January 24, 2020, at an Ontario Energy Network Event, Terry Young, (IESO Vice President Policy, Engagement and Innovation) interviewed IESO President and CEO Peter Gregg.[1] The VP lobbed a question he figured the head of a storage company would ask if she could use the app for questioning, and the President and CEO responded with what a big area of focus the niche was for the IESO.

40 Days after the IESO’s leadership channeled questions for the head of NRStor Inc., with the President acknowledging even if storage wasn’t economic they’d figure out some tricks to make it so, Blackstone, “one of the world’s leading investment firms”, completed the acquisition of NRStor C&I L.P. The head of NRStor congratulated some financial firms on the sale, indicating it was likely the company was being shopped as the heads of the sole contractor of their products were having a conversation pumping their products.

Storage may be important.

Influence definitely is.

Blackstone would not be the first company deciding the way to get into the Ontario market/bonanza is through purchasing existing “stakeholders” - the industry’s preferred euphemism for insiders.

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Three documents I read this year (prior to the COVID-19 pandemic hitting the province) either target the IESO to form policies for the lobby’s technology, or suggest actions that fit into the IESO’s preferences (which are, unfortunately, often dictated by the Electricity Act):
With the likelihood governments will be looking to stimulate economies should we ever exit lock-down mode, and assuming they’ll forget the long-term damage done by the very stupid procurements done in Ontario following the financial crisis, it might be worthwhile to quickly review what’s being pitched.

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Friday, April 10, 2020

the IESO's continuing assault on consumers

The COVID-19 pandemic is affecting most aspects of life, and Ontario's electricity sector is not, and cannot be, exempt. It appears unseemly to discuss electricity hucksterism during a time of crisis, but hucksters came to the fore during the last big crisis (the financial one of 2008/09), so it would also be unwise to passively allow more heists.

A week ago I posted an article on Linkedin: A massive excess of electricity. I really can't say why I didn't post it here on the blog, but I will briefly discuss its origin. There were two announcements that I'd commented on in social media channels (Twitter and Facebook): the IESO noting a steep drop in demand and Ontario Power Generation (OPG) deferring the start of a refurbishment outage at a nuclear reactor. Upon double checking through version of the IESO's daily adequacy reports to confirm Darlington 3 was no longer being removed from service I discovered another nuclear outage has also been cancelled. Each of those things was unfortunate for consumers exposed to Class B electricity pricing in Ontario - and the taxpayers subsidizing the Regulated Price Plan consumers who once were - but combined I wrote the suddenly additional  3,350 MW of excess supply will lead to spectacularly high, record, commodity pricing.

Those things were, in my opinion, unfortunate. With social distancing the increase in personnel on sites required for outage work might not be feasible, and demand is low for reasons that can't be responsibly countered.

Yesterday the head of the I____ Electricity System Operator, (IESO),Peter Gregg wrote a message to, "our market participants," in which he explained the massive excess supply is deliberate:
One of the most important steps we’ve taken in recent weeks has been to work with market participants to minimize the number of generation facilities and transmission elements that are out of service. Although a certain amount of redundancy is essential at all times, this redundancy is especially valuable to provide the flexibility the system needs right now
I read something yesterday that reminded me of that old song: "Hey ho, hey ho, Peter Gregg has got to go."

Don't know it?
You haven't been paying attention.