Thursday, January 3, 2013

2012 Ontario Electricity Statistics Show increased use of Fossil Fuels

Postscript, added January 12th, follows original post of January 3rd.

A first look at 2012's electricity statistics yields the surprise conslusion that prices charged to Ontario ratepayers were far more stable in 2012 than anticipated, and that the Green Energy Act darlings of wind and solar generation contiued their growth while demand did not grow.  Closer looks show these may be rather meaningless stats - hiding increasing emissions, and increasing shifting of the costs of our electricity from the ratepayer to the taxpayer.

Growth in wind and solar generation in Ontario's electricity system was accompanied by growth in coal and natural gas-fired generation.
Greenhouse gas emissions likely rose along with coal and natural gas-fired generation, despite wind output growing a little under 20%, and solar growth I estimate above 60% (~540 GWh).
Solar figures are necessarily estimates because none exists in IESO's reporting, as it is all embedded (as is, in all likelihood, a significant amount of wind production).
The cost of the additional solar generation in 2012 I estimate in the $100 million range.

The IESO will likely report a very small decrease in Ontario demand for electricity in 2012.  That will be true only because the IESO reports Ontario demand as the sum of generation that is on the IESO controlled grid plus imports - meaning the growth in embedded generators is not reflected in IESO figures for demand.

In summarizing 2011 the IESO claimed, "Ontario's wind generators are playing an increasingly important role in meeting demand for electricity."  The passage of time makes that statement increasingly nonsensical.  Again in 2012, net exports rose - and again, the rise was similar to the rise in wind generation.  Net exports spiked during the dramatic drop in Ontario's demand in 2008/09, but the trend since 2006 is evident.

The increase in wind output in 2012 was primarily from 3 generating stations with only partial reporting in 2011: Enbridge's Comber facility, Brookfield's Greenwich, and IPC's Pointe-Aux-Roches.  Assmuming Brookfield's Greenwich project received the same $135/MWh rate as the feed-in tariff (FIT) contracts of the other 2 projects, the ~700 GWh of increased 2012 production at these facilities, constructed during a period of surplus, cost Ontarian's $80 million more than the market valued it at (~$20.19).

All additional generation capacity added during a period of surplus has additional costs to the bulk of Ontario's ratepayers, as it serves to lower the Hourly Ontario Energy Price (HOEP) while driving up the global adjustment charges that recover the other costs of generation (note [3] comments on December's global adjustment estimates).

The average Hourly Ontario Energy Price in 2012 was ~$24.11/MWh, down $7.35, or 23%, from $31.46 in 2011.  For Ontario's ratepayers, the decrease in the HOEP was more than offset by the rise in the global adjustment mechanism - which I estimate added ~49.82/MWh to the commodity charge on the bills of class B customers (up ~$9.64 from 2011), and an average of $30.64/MWh to the bills of Class A customers (Ontario's largest users - up from ~$23.96).  Export customers don't pay a global adjustment charge, so they did realize cheaper prices in 2012.

Aside from the industrial wind facilities I noted experiencing their first full year of hourly reporting in the IESO system, the only new generators in the IESO's 2012 data are the 393MW York Energy Centre and 1500MW of nuclear in the return of newly refurbished Bruce A nuclear units 1 and 2.  The impact of the Bruce units remains to be experienced, as they returned late in the year.  It is notable the 2 units should produce over 10TWh annually, but due to the attributes of the technology, it is unlikely that generation will replace 2012's 4.3TWh of coal-fired generation.

In 2012 the total cost of all generation to all customers I estimate as little changed from 2011, at approximately $66/MWh [2].  Segments of the consumer market saw bigger swings because of the distribution of costs to different categories of customer - as export customers paid less, domestic customers must pay more.  The global adjustment mechanism recovers that full cost of generation from Ontario's ratepayers - the cost of paying suppliers $66/MWh to export power at ~$24/MWh rose to approximately $452 million in 2012 (from $341 in 2011 - see Note [1]).

Adding the increased losses in exporting to the increased costs of renewables I've estimated ~$280 million in costs.  These costs were largely cancelled out by reducing payments to Ontario's forgotten renewable generation - hydroelectric.  Ontario Power Generation (OPG) is the only generator in Ontario exposed to the HOEP rates through it's unregulared hydro division, with the estimates for all hydroelectric generation being pulled down by the reduced payments for OPG's hydro output.

The average price for the bulk of Ontarians will be closer to $74/MWh.  In addition to the average cost of $66, the cost of subsidizing exports will add ~$5.30/MWh, and the cost to most ratepayers of the savings realized by Ontario's largest, Class A, consumers of electricity will add about ~$2.60/MWh.  Combined, the cost of dumping supply, and of offering lower rates to large users (introduced in 2011), now exceeds the amount of the debt retirement charge added to Ontarian's bills.

While the reduced payments to OPG helped hold the line on pricing for many individual Ontario ratepayers in 2012, accounting for the health of Ontario's public generator, OPG, and the management of Ontario's electricity sector debt, the outcome is not as appealing for Ontario's current and future taxpayers.
The Ontario Clean Energy Benefit continues to pull approximately $1 billion a year from taxpayers to subsidize electricity ratepayers - meanwhile the electricity ratepayers continue to pay approximately $1 billion a year to retire an otherwise neglected debt.

The debt is supposedly managed by the Ontario Electricity Finance Corporation (OEFC).

2012 did provide a first; it was the first year the OEFC didn't even bother with issuing an annual report.


Table from IESO release on 2012 data

The IESO issued their year-end summary on January 11th.

The figures they report for generation differ from my figures in this post (they have nuclear producing 0.4 TWh more, hydro 1.4TWh, gas 0.2 less and other is 0.1 less).  While some difference is not unexpected, the IESO figures, by the rules they have historically used, contain at least one error.

The proof of the error is complicated, but the recognition of the error is not.  The total generation the IESO is reporting, plus the imports they are reporting, exceeds the sum of the Ontario demand and exports (as they report them).  Put simply, the IESO summary indicates more supply than demand.

The IESO's monthly reporting has long defined demand by supply:
The IESO calculates Total Market Demand by summing all output from generators registered in the Market plus all scheduled imports to the province...
The IESO calculates Ontario Demand by subtracting exports from the Total Market Demand quantity 
Under these definitions it's clear demand cannot exceed supply.

The IESO is an exemplary governmental organization in sharing non-critical data, and provides weekly updates of text files reporting hours for demand, and import export schedules, back to market inception in 2002.  Summarizing the figuers in these files yields the same figures for demand, imports and exports as reported in the IESO's 2012 data summary news release.

It's important to note that calculating the supply from only the two text files (for demand and import/export) won't yield the same figure as totalling the supply from the Hourly Generator Output and Capability Report.  Ignoring relatively minor data issues, such as rounding, the IESO notes "The Hourly Generator Energy Output and Capability Report presents the Energy output and Capability of each generating facility in the IESO-administered energy market with a maximum output capability of 20 MW or greater."  This means that summarizing the data from the Hourly Output and Capability report (figures I report are from my capture and manipulation of data in these files) should yield a total supply that is lower than that calculated by subtracting imports from the total market demand (from the two text files noted earlier).  Reviewing the data for the past 5 years, and summing the generation totals from the IESO's 2012's data release, reveals that up until 2012 the calculated production does exceed the generation totals showed by the IESO.

2011's growth in what I've called "unreported generation" made sense to me as many new generators are increasing smaller than the 20MW capacity, and therefore the amount of "unreported generation" should be increasing.

The IESO's reported figures for 2012 are clearly wrong under the rules they have always used before, but that does not mean they are wrong - they may be communicating something different under new rules.

The additional 0.4 TWh of nuclear could be showing the 'deemed' generation that Ontario's ratepayers will pay for despite the production being curtailed; the 1.4 TWh added for hydro could be showing spillage, and output sent directly onto Quebec's grid.

However, under the IESO's definition if supply curtailment is to be considered suppy then it must also be considered demand.

Ontario's Long-Term Energy Plan calls for 7100MW of supply capacity to be provided by conservation.  Put bluntly, much of our supply is to come from curtailing demand.

It logically follows that much of our demand could come from curtailing supply.


[1] In estimating the costs of exporting, I've calculated the average price of all electricity in the total market (including imports and exports) and valued imports and exports hourly, at the HOEP rate - this model shows a profit on imports, and a loss on exports.  I have updated figures using a format I used in following up on an article Parker Gallant and I had in the Financial Post in July 2010.  The approach is very conservative in that it assumes without the export losses, the profits on imports would not be possible; looking only at losses on exports the 2012 caculation is $628 million.

 [2] I regularly update supply costs estimates on my data site

[3] The IESO's 2nd estimates of the global adjustment, for December, I have ignored - if they were taken seriously, January would have the cheapest commodity charge (Class B) since September of 2010.  I have used my estimate which is ~$85 million higher.  Over the course of the enitre year the difference is minimal - and if the global adjustment is adjusting for prior months, as it looks to have also done in November, it would not be surprising.
It is surprising the province attempts hourly pricing for it's smallest consumers without being able to properly calculate monthly charges for the global adjustment, which is 2/3rds of the commodity charge.


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