Sunday, April 14, 2013

The return of the Ministry of Lies, and other weekly electricity sector news from Ontario

This week a series of reports related to Ontario's electricity sector were released

The most prominent of these was probably a report written by Economics Professor Ross McKitrick released by The Fraser Institute, titled Environmental and Economic Consequences of Ontario's Green Energy Act.  The Canadian Wind Industry (CanWEA), the Environmental Commissioner of Ontario, and Ontario's Minister of Energy Bob Chiarelli all provided responses to McKitrick's study.   
I've already written much of what I'd like to communicate on these topics, but I'll revisit some old posts due to alarm that Chiarelli's comments indicate the grandfatherly figure is installed to return to the structured campaign of lies that his predecessor, Minister Bentley, had the courage to curtail.

McKitrick's report claims 3 main finding:
  1. It is unlikely the Green Energy Act will yield any environmental improvements other than those that would have happened anyway under policy and technology trends established since the 1970s. Indeed, it is plausible that adding more wind power to the grid will end up increasing overall air emissions from the power generation sector.
  2. The plan implemented under the Green Energy Act is not cost effective.  It is currently 10 times more costly than an alternative outlined in a confidential report to the government in 2005 that would have achieved the same environmental goals as closing the coal-fired power plants.
  3. The Green Energy Act will not create jobs or improve economic growth in Ontario. Its overall effect will be to increase unit production costs, diminish competitiveness, cut the rate of return to capital in key sectors, reduce employment, and make households worse off.
These are all plausible claims.  Problematically, the Green Energy Act (GEA) has accomplished very little in the 4 years since it passed, and McKitrick confuses the cost of similar policies introduced starting in 2003 with the GEA.
We do have a data history to support McKitrick's claims, but that data history isn't a result of the GEA.

In a blog post rebutting claims in MKitrick's report, the Environmental Commissioner of Ontario (ECO) states, "the primary purpose of the Green Energy Act was to reduce greenhouse gas emissions..."  
It's understandable that the ECO would think that as the ECO position has responsibilities to report on emissions set out in the Green Energy Act; the ECO is directed to "report annually to the Speaker of the Assembly on the progress of activities in Ontario to reduce emissions of greenhouse gases."

The preamble in the act is less clear:
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 main tool to come out of the GEA was the Feed-In Tariff (FIT) program.  All FIT programs are designed to build stuff.  In Ontario's case, the FIT programs became the tool to reach a goal of 10,700 MW of capacity of "renewable" non-hydro energy, and that is assumed to include ~8000MW of industrial wind capacity and 2500MW of solar capacity.  The GEA exists largely to get that capacity built.  
McKitrick rightly points out that is an entirely different matter than reducing emissions of various types (including CO2, SO2 and NOx).

It is plausible that increasing wind capacity will increase emissions, particularly CO2 emissions.  The GEA is basically dictated by German greens and it is quite simple to see it as a blueprint for displacing nuclear and, consequently, sending Ontario's emissions soaring.  If, as the ECO writes, "reducing the amount of carbon emissions produced by our electricity system was and is the right thing to do," then that would have been the focus, and McKitrick is right on the mark in discussing the poor value Ontario ratepayers are receiving in not making that the focus.

From McKitrick's report:
The focus on wind generation is especially inefficient because production peaks when it is least needed and falls off when it is most needed.  Surplus power is regularly exported at a considerable financial loss.
The Canadian Wind Energy Association (CanWEA) issued a press release which drew heavily from reports I have previously addressed critically, and one I have not:
U.S. EIA data refuting CanWEA's "electricity prices have been increasing across North America "

The CanWEA response isn't meaningful aside from demonstrating the breadth of the coalition looking to inflate, however dishonestly and needlessly, rates in Ontario (see "The politics of renewable energy policies" for a more sympathetic view on the historical coalition building).

The report CanWEA purchased from consultancy whores Power Advisory [1] isn't one I've commented on previously.  The "Introduction and Purpose" removes any motivation to read the rest of the report:
Wind generation is contributing an increasing proportion of the total supply of electricity in Ontario. This increase is in accordance with the policy of the Ontario government to encourage more use of renewable resources for electricity generation, replacing the environmentally damaging coal resources that the province relied on in the past.
Most wind capacity, if 2010's Long Term Energy Plan goals are in fact realized, will come after coal is replaced - and wind has been, at best, a very minor contributor to the reduction in coal-fired generation achieved thus far in Ontario (as I demonstrated here).

Much of the consumer price impact of wind is due to its lack of capacity value (McKitrick is exceedingly generous in claiming that 7MW of wind could replace 1MW of coal capacity).  The duplication of renewable and natural gas capacity greatly increases the cost of production from the less frequently utilized gas plants (under Pembina's scenario, from the report cited by CanWEA, I've calculated the output from natural gas-fired plants would have a cost in Ontario double the production in the United States, where the capacity factor is closer to 50%).

The reason for this post was the appalling performance of  Minister of Energy Chiarelli on Ottawa radio station CFRA on April 11th (the Chiarelli segment runs for about 12 minutes starting at 26:12 here - backup copy here).  Whatever Chiarelli says is far more likely false than true: for instance, wind dispatch is planned in 2013- there's no indication from the IESO it is implemented, and it won't entail not purchasing wind output when it is not needed, as Chiarelli states in the interview.  
The most grating statement he makes, from my perspective, is that the province "Earned a net profit of $2 billion on purchase and sale of electricity."

This is how to get the $2 billion:
  1. From the Market Data page download the "Hourly Import Export Schedules" and "Hourly Ontario Energy Price (HOEP)" files
  2. Pull them into a spreadsheet and align the HOEP record for each hour, starting January 1, 2006, with the import and export data
  3. Calculate the Net Exports (exports - imports)
  4. Multiply that by the HOEP
  5. Total it
  6. Divide by a billion and eliminate decimal places.
$2 billion from net exports since 2006 started (10.6MB spreadsheet can be downloaded)

I know this because I performed the same calculations for 2010 over 26 months ago as I exposed this lie when the former Premier started telling it. The Ministry of Energy made repeating such nonsense a monthly routine and I generally responded (such as here).

The lie is referencing the figure as "net profit" - it would be profit if the 62,577,375 MWh  of net exports didn't cost anything - as that $2 billion equates to an average sale price of ~$32.43/MWh, it isn't net profit - it is supply dumped on export markets for a great deal less than Ontarians would pay for it.  

Estimating the cost of the dumping I may visit separately, but the one point that is obvious is the point that net exports were sold at a rate far below what Ontarians paid.

Less obvious, but likely true, is that the conversations that Ontario's current administration is having ignore, or despise, facts in lobbying for a return to the discredited schemes of 2009/2010.

The Hansard for April 11th records the role of Ontario's Premier in this suddenly renewed campaign of deception:

[1]  McKinsey is another such firm - one that the McGuinty government bought it's dubious "best" schools in the English speaking world" claim from


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