Comment on the Draft Supply Mix Directive

I will comment on the directive, in this blog and anywhere else possible, but the title is directed at the reader. The last section of the directive notes a 45-day period for commenting started November 23^rd, and public input is considered. I emphasize this as the Long Term Energy Plan , in Appendix Two, notes 2500 online responses were made as it was being formulated, between Sept 21^st and Nov. 18^th.

Thoughts on the Long Term Energy Plan

I read through the Long Term Energy Plan on Tuesday. I've felt I should have strong opinions on it, but there was very little new it.

The plan is only about electricity, and contains no discussion about discouraging the use of natural gas, gasoline, or any other form of energy. That may be nitpicking , but immediately any truly environmental efficiency programs built around increased efficiency from more central heating/cooling servicing for new communities, combined heat and electricity, and electrification of transit seem off of the radar.

Supply Mix Impact on the Global Adjustment Mechanism

I've previously posted the graph indicating any price/MWh increase during the recession, and anemic recovery, was due to the global adjustment mechanism.

Demand decreases, so does the Hourly Ontario Energy Price (HOEP) at the system operator (IESO), but production is propped up by the guaranteed contracts at inflated rates, which are paid for by global adjustment (the difference between the contracted and market price).

Working with the IESO data,

The Economics Lab Blogs on Market Distortions

Assume I'm an economist.

I'd expect as demand dropped for a product, such as electricity, the price of that product would drop – as demand went up, so would price. Like this (HOEP is the Hourly Average Energy Price as per the IESO, which is the Independent Electricity System Operator):

 

If a province were to guarantee a rate to most of its suppliers, regardless of demand, I would expect supply wouldn't drop as significantly as demand would during an economic downturn. In Ontario the mechanism to recover the full charges paid to suppliers, from wholesale customers, is referred to as the Global Adjustment (by the IESO, which uses the shorthand GAM for the Global Adjustment). 

The Current and Future State of Electricity, as the OCEB comes to Ontario

Big news yesterday as the Finance Minister Duncan announced the Ontario Clean Energy Benefit (OCEB), which will bestow a credit of 10% of our bill upon us. The release by the government indicated the move to cleaner energy has been expensive, and would be so for another 5 years, so this should alleviate some of the pain being felt due to this noble endeavor; "Over the next five years, residential electricity prices are expected to rise by 46 per cent, after which price increases are expected to moderate as Ontario will have largely completed the transition to a cleaner, more reliable system."

I'm skeptical. Somebody said if you want to know where you are going, you need to know where you are, and where you've been. Seems like a good time for a big picture overview, a review of the current price drivers on the consumer side, on the industrial side, and to take stock in whether the government has any credibility in implying there is a planned destination, and a plan for arriving at it, in 5 years time.