Wednesday, August 1, 2012

Rebuttal to Ontario Clean Air Alliance (OCAA) Latest Paper on Closing Public Power Plants

Rebuttal to Ontario Clean Air Alliance (OCAA) “Ontario’s electricity surplus: an opportunity to reduce costs

The introduction to the OCAA report notes that demand is likely to continue to decline, both in annual consumption and peak consumption.  Parker Gallant and I wrote on where previous declines were - and they were largely in the loss of Ontario’s largest power users, also known as industry.  The OCAA cites page 335 of the North American Electric Reliability Corporation’s 2011 Long-Term Reliability Assessment (November 2011)  in claiming that Ontario’s electricity consumption and peak demand will continue to fall until at least 2021.     
Page 338 states that growth rates to 2021 are expected to average -0.1%, but reality notes the peak demand exceeded the IESO's expectations in 2011 and 2012.  

“I don’t know” is as valid a forecast as any, and page 343 shows the ability to meet NERC’s on-peak reserve margin requirements will be strictly conceptual in the near future.

The OCAA report states “According to the Independent Electricity System Operator (IESO), our electricity generating capacity will exceed our forecast normal weather peak demand this summer by 48%.”  The IESO’s current 18-month outlook contains a number more important to system requirements than capacity, which is the “Forecast Capability at Summer Peak” (which might be referred to as capacity value).  Of the 28406 MW the IESO forecast as being available to be available at peak, 2100MW  is from the Lennox GS, which is really an emergency reserve (it’s why the IESO category is oil/gas, and it has a very large heat rate).  And with our dry summer, the 5662 MW of hydroelectric capacity expected was not realized, with hydro peaking almost 1000MW below that.   Our demand, excluding the Lennox units, peaked at 24630 which was, in fact, close to our practical capability without getting into reserve margins.

It’s important to note that wind has little capacity value.  Spain’s government is cutting back subsidies because their generating capacity is approaching 300% of their peak demand.  If you have capacity which lacks capacity value, that happens.   

On page 3, the OCAA notes a “Nuclear Debt Retirement Charge”  There is no such thing.  The Debt Retirement Charge still exists entirely because Ernie Eves siphoned mony out of OPG to fund a rate freeze for consumers, and the McGuinty government’s over-procurement of supply coincident with the recession has seen the residual stranded debt rising over recent years, despite nuclear doing nothing but producing 50-60% of Ontario’s power and receiving rates for it far below what Ontarians were paying to consume it (with the difference - or grift - going to many of the companies funding the OCAA).

The Global Adjustment (GA) is not a subsidy.  That aside, the OCAA claims that 45% of GA revenues went to nuclear and 34% went to natural gas-fired generation (between 2006 and 2011).  2007-2011, inclusive, nuclear production was ~417TWh and gas ~88TWh.  The OCAA’s fiddling with GA figures shows nuclear received 32% more of the GA pot than the natural gas industry did; and the nuclear industry received that 32% more for producing 370% more output.

From the earlier errors, it’s easy to see why the OCAA would misinterpret what  “superfluous electricity generating stations” are, as it does when discussing how to reduce rising electricity costs.  They are the generating stations that are unnecessary - meaning the ones that have no capacity value.

The OCAA claims options to the higher cost existing generation are sources “such as hydro imports from Quebec or comgbined heat and power plants.”  Here are statements from a Mr. Jennings of Ontario’s Ministry of Energy at the Darlington New Nuclear Power Plant Porject Joint Review Panel hearing on April 7th, 2011.

it is often suggested that combined heat and power is very cost effective, very easy to do and there iis a lot of potential for it. This competitive RFP was for 1,000 megawatts. They ended up only getting 414 megawatts of responses, so those were all taken. In terms of the cost in that plan, they ranged. The cost of the products procured ranged from about 11.5 cents up to about 24 cents a kilowatt hour, so these are quite expensive projects.
an industrial customer in Quebec might pay 4.5 cents a kilowatt hour for electricity. They wouldn’t sell us the power at 4.5 vrntd, they would be looking at natural gas what they could sell it in New England for.
The “lower-cost and more flexible” option of CHP is not lower-cost.  

The price of importing from Quebec should be the price of production in New England.

The OCAA says that closing the coal plants could save $367 million a year, but the payments OPG receives for Lambton and Nanticoke are about the same, per kWh of output, as private natural gas plant operators receive for keeping the new gas plants available (I wrote this on capacity payments only 9 days ago).  I don’t like capacity payments, but they are not fine for the goose and not for the gander.

Pickering A has only two operational units and the ScottMadden Inc. benchmark study did put it high above other nuclear facilities for cost/kWh.  But it was still at 9 cents/kWh - cheaper than what the OCAA argues it should be replace with.  Pickering B has 4 units and the benchmarking put it around 6 cents/kWh (I referenced these figures in an entry I wrote the last time this nonsense was being written about in the Toronto Star).

When the OCAA write costs are multiples more than the “market price of electricity” they means the 2 cents/kWh HOEP, and when he says “approximately equal to the fuel and operating costs of our new gas-fired generating plants”, he forgets the massive Net Revenue Requirements that push those costs even beyond Pickering A’s benchmarked 9 cents/kWh

The OCAA’s conclusions now are the same as they always are: shut down public power to buy really expensive private power.

It is nonsense... so you can read about it in the Toronto Star.

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