Ontario’s Hydro: Losing a Legacy

Privatized generators are to see price reductions as the public generator's pricing soars

Ontario’s electricity system operator recently announced a Northern Hydro Program (NHP), calling it, “another critical component to the IESO’s strategy to meet unprecedented forecasted demand through the use of the Resource Adequacy Framework.”

The NHP will secure over 1,000 megawatts from approximately 26 large, hydroelectric generating facilities in Northern Ontario, providing considerable value for ratepayers with expected savings to re-contract facilities at rates 20 per cent below those under previous contracts compared to extending current contract terms. The program is intended to support the continued operation of these facilities with new 20-year contracts…

This news, while positive, is not as clear a win for ratepayers as it appears. The hydro sites to be re-contracted, under the NHP, are those contracted under a previous program known as the Hydroelectric Contract Initiative (HCI). A little over 6 years ago, the IESO posted a directive on the wind-down of the HCI program, noting, “The HCI program is the IESO’S last active electricity generation procurement program. The HCI program allowed existing hydroelectric facilities without electricity contracts to obtain 20-year contracts…”

The HCI-to-NHP transition isn’t the first re-contracting of the gluttonous green energy procurements that occurred around 2010, but they may be the first 20-year extensions.

Sites contracted under the HCI program

Ford government contracts new solar (and wind) generators

 Yesterday Ontario’s electricity system operator (IESO) announced its first procurement of grid-scale solar, and wind, generators in over a decade. The reported average price of $87.80 per megawatt-hour is presented as attractive in a historical context, but analysis reveals a far different trend for wind and solar within Ontario.

The government’s press release following the IESO publishing results of its “Long-Term 2 Energy Supply (Window 1)” procurement (LT2) includes:

Unlike the former government, Ontario is following the Auditor General’s recommendation on competitive procurements resulting in a 73 per cent cost reduction for ratepayers when compared to the previous Feed-in-Tariff contracts and 21 per cent lower than the Large Renewable Procurement (LRP). These results have proven more affordable than similar procurements in comparable jurisdictions across North America…

There’s a few reasons to wince at this boasting. Regarding pricing across places and time, it is not unimportant that the federal government introduced Investment Tax Credits (ITCs) and Accelerated Capital Cost Allowances (ACCAs), benefiting the latest pricing. More notably, if the results are 73% below the awful Feed-in-Tariff (FIT) contracts of 16ish years ago, but only 21% below the LRP of a decade ago, that’s a pretty good indication the previous Wynne government had acted on pricing.

Shortly after achieving power the current governing party, under Premier Doug Ford, cancelled the contracts from the previous government’s last procurement (LRP-Large Renewable Procurement). From the March 2016 announcement of the LRP results:

five wind contracts totalling 299.5 MW, with a weighted average price of 8.59 cents/kWh;

seven solar contracts totalling 139.885 MW, with a weighted average price of 15.67 cents/kWh; and

four hydroelectric contracts totalling 15.5 MW, with a weighted average price of 17.59 cents/kWh.

Yesterday’s announced price is 8.78 cents/kWh, which is quite similar to 8.59 cents/kWh: although they come a decade apart, and there is a time-value adjustment that ought to be made, there is also the increase in federal incentives for project developers. Wind pricing is little changed.

Whatever the government wants: The only explanation for Ontario electricity costs in Premier Ford’s 3rd term

 I hastily posted some nasty thoughts on X today after looking up an obscure “Final RPP Variance Settlement Amount”. It will take some work to explain what that is, and why it affirmed my worst thoughts of some people in current government and the formerly public service areas of the energy regulator (OEB), and perhaps the electricity system operator (IESO).

Here’s the OEB’s description of the RPP Variance Settlement amount (the amount):

This amount will reflect the consumer’s share of any accumulated variance between the actual price paid to generators and the forecast price paid by RPP consumers. If consumers have been paying more for electricity than was paid to generators, this amount will be a credit. If consumers have been paying less, it will be a charge. 

The best I can do to estimate and evaluate the amount posted on February 18, 2026 is to use figures for January. To use the OEB’s method: If the $128/MWh regulated price plan is more than the average of approximately $98/MWh class B commodity rate for the month, there is a credit.

There is not a credit: there is an increase of $343 million.

The timeframes don’t line up and it’s only one month: but applying my estimation method and the OEP’s reported amounts back to 2000, it is a month that is exceptional in a way my most cynical self anticipated. For the statistically inclined, the average difference between my method’s estimates and the OEB’s reported variance change was a little under $6 million prior to yesterday, but the standard deviation was about $75 million – which indicates the expected inability to line up timeframes but most months the moves are directionally the same, and larger deviations correct in the following months. This monthly the difference in my estimate is $545 million, breaking the  previous record of $211 million in what is a 4-sigma event; probability of which is 1 in 15,787.

But I expected something like this.

 

Much ado about Ontario’s new export charge on electricity

Ontario’s Ford government directed the electricity system operation (IESO) to begin levying a $10/MWh ‘surcharge’ on electricity exports to the United States. The official news release states that, “At this level, the surcharge will generate revenue of $300,000 to $400,000 per day, which will be used to support Ontario workers, families and businesses.” All other factors holding unhanged, that would be true, but the other factors involved in Ontario’s electricity pricing make it extremely unlikely that the move will generate any revenue.

Ontario’s electricity exports have relatively recently become dominated by supply from natural gas generators, unlike the exports over the previous decade which were driven by an excess of committed, trivial-emission, supply from nuclear, hydro, wind and solar. One way the switch is visible is in the increased average cost of exports. The simplest measure of costs is the Hourly Ontario Energy Price (HOEP). The average HOEP for exports to the US over the past 3 years isn’t quite $40/MWh, but it’s close enough that the government can excused for using a $10/MWh surcharge to carry out a threat of a 25% increase.

simple rubbish told around the world: an anti-nuclear data story

Australian energy policy personality Simon Holmes à Court posted to X, “the simple fact is *every* new nuclear power project in ontario’s history went way over budget.” I think ‘fact’ needs to be examined. The facts in his post are a distortion of what was, for the most part, delivered much more truthfully 37 years ago.

In Ontario this month the Canadian Nuclear Safety Commission (CNSC) is holding public hearings on an application by Ontario Power Generation (OPG, the public generator), “for a licence to construct one BWRX-300 reactor at the Darlington New Nuclear Project Site (DNNP).” Regulator hearings are an income opportunity for groups permitted to act as intervenors. The anti-nuclear Ontario Clean Air Alliance (OCAA) is one such intervenor, and it is from their presentation at the hearing relayed to Australia as “simple fact.”

Many online quickly observed an issue with this table in its disregard of real values in adjusting currency values for time. I will explore that after checking the data sources noted in footnotes.

on building nuclear to create hydrogen

The head of the IESO, the operator of Ontario’s electricity system, recently delivered a speech at an event organized by both the Ontario Energy Association and the Association of power Producers of Ontario (APPrO). I read the notes as it’s always interesting when the contractor speaks to the potentially contracted. Being a nuclear advocate this jumped out at me:

“We continue to work with Bruce Power and Ontario Power Generation to assess the feasibility for 17,800 MW of new nuclear in the province – consistent with our Pathways to Decarbonization report”

As a nuclear advocate, and a consumer advocate, and as a commentator whose supply mix suggestions following a procurement orgy from 2009-2011 closely match where we ended up today, I felt obliged to follow up. It’s not feasible, but it is fashionably ridiculous.

The Pathways to Decarbonization is a report delivered by the IESO to the Ministry of Energy, at the request of the Minister, intended to, “evaluate a moratorium on new natural gas generation in Ontario and to develop a pathway to zero emissions in the electricity sector.” I didn’t pay much attention because I think those are facile topics, but seeing it cited as a reason for 2-3 times more nuclear, it was now worth ctrl f’ing the document.

There’s some lovely bar charts, with related data tables, displaying capacity that exists and is planned to still be operating in 2050, along with new capacity needed and the totals for both. The figure for capacity includes the 17,800 MW “New Capacity Online by 2050.” What slowed my enthusiasm was the energy number expected from this 17,800 MW: 63 TWh.

That’s very low. Upon checking, the only years of nuclear output below that level, since 1985, came when we’d deliberately idled the 5,000 MW of capacity a Pickering A and Bruce A (1998-2003), which would have put active capacity around 8,200 MW , so getting that same level of output out of 17,800 MW seemed a mistake. Unfortunately, it’s a little worse than that.

This presentation of the data lacks context for those not aware of today’s actual supply, but compared to now this is roughly doubling solar, imports and nuclear (not adjusted for the decreased real capacity due to refurbishment), and nearly tripling wind. Gas is disposed of and replaced, in its capacity role, largely with hydrogen.

Where, oh where, will we get the hydrogen? 

Will the new version of Ontario Energy Minister prove to be Smitherman 2.0?

"Minister Lecce needs to step back and gain knowledge on the existing costs to us Ontarians of our electricity needs instead of charging ahead..." -Parker Gallant

Parker and I have been communicating on Ontario’s electricity sector for over 13 years. We both started due to the wreckage of a brash new minister casting aside the policy of a professional planners to boldly undertake a new direction intended to make Ontario a leader in wind and solar energy. Back in 2009 an Integrated Power System Plan (IPSP) was cast aside and a directive from a freshman Energy Minister, and trusted Deputy Premier, signed an enormous 2,500 MW deal with a Korean consortium that was supposed to kick off the rush to 10,700 MW of non-hydro renewables. There is not, anything certain I wish to communicate today, but I have collected and formatted data throughout, so I thought I’d collect a number of the graphics and data sources I’ve been using on social media to communicate the concerns I have about returning to a GEA-era procurement debacle.

“With energy demand growing rapidly, our government is stepping up by advancing our largest energy procurement in our history.” -Stephen Lecce, Minister of Energy and Electrification  [emphasis added]

I don’t generally focus on semantics, but “energy” is used very poorly in Lecce’s communication. Let’s look for “growing rapidly” in annual electricity supply in Ontario over the past 88 years.

Ford Channels McGuinty in directives to new Energy Minister

Ontario recently swapped Energy and Education Ministers. Early comments from the new Minister of Energy (and Electrification), Stephen Lecce, indicate a type of student we see far too often in the fields of environment and energy; one willing to take direction without putting much thought, or study, into them. Of particular concern are comments on exporting power. In a recent interview[1] Lecce describes ‘three key priorities” in his “marching orders” from the Premier. Presumably the current Premier, Doug Ford, but maybe not.

First, we are absolutely committed to ensuring an affordable electricity system for families, seniors and small businesses.
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]

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)..

screen capture from Power BI reporting