Wednesday, May 1, 2013

In Ontario, A Preference for Fraud

Yesterday the Chief Executive Officer of the Ontario Power Authority provided an updated estimate of the cost of bungling the Oakville Generating Station (OGS) in the morning; in the afternoon the current Premier of Ontario appeared before a committee investigating the gas plant boondoggles.

The Premier is described in one paper today as being "in the finest traditions of Sgt. Schultz," and yet from her words we can learn something, even when they are mainly communicating that she knows nothing.

"If we don't learn from the situations in Misssissauga and Oakville then we have failed those residents all over again," Wynne says     — (@AdrianMorrow) April 30, 2013

To Schultz/Wynne it's still only about the votes in Liberal-friendly ridings.
OPA Chief Andersen delivered a document on "The Costs of Relocating the Oakville Generation Station" - a document prepared for the OPA by yet another consultant (NERA).  I didn't read through that document having already reviewed the presentation slides used by Andersen [1], by pulling up the estimates written by star electricity analyst Bruce Sharp over 6 months ago (also here).  While the numbers vary a little, Sharp's methodology seems to be, once again, vindicated.

The most significant difference I perceived, between Sharp's estimates and those of whatever consultant punched in the OPA's, is the OPA's show a "Savings from Time Deferral of Payments from 2014 to 2019" of $539 million.  Without that $539 million, the estimated relocation costs would be $849 million (not far from Sharp's updated estimates when providing testimony to the same committee in March).

$539 million by not building 900MW of supply until 2019... and that's firm supply - heck, it was even made clear yesterday the plant, when constructed, won't be efficient even by 2012 standards as the turbines were customized for rapid ramping.
This plant is to provide flexible, firm, supply.

If firm supply isn't needed, intermittent supply that is not expected to contribute to meeting peak demand periods cannot be needed either.
What would delaying unreliable intermittent generation by 5 years save - under this accounting?
  • 900MW of wind at a 30% capacity factor and the $135/MWh FIT = $1.6 billioin
  • 900MW of solar at a 14% capacity factor and a $500/MWh FIT = $2.7 billion
Why just nix 900MW?  If we don't need 900MW of firm capacity, we don't need any of the contracted, but not yet constructed, intermittents:
  • 3000MW of wind at a 30% capacity factor and the $135/MWh FIT = $5.3 billioin
  • 1500MW of solar at a 14% capacity factor and a $500/MWh FIT = $4.6 billion [2]
Compare this with nuclear, where under these rules Bruce Power just saved us a frick'n fortune by being years behind schedule in completing the Bruce 1 and 2 refurbs (2 Bruce units have been unexpectedly removed from service in the past 4 days concurrent with Ontario's struggles with the spring glut of supply).[3]

Tom Adams' Ontario Electricity System Operational Update #7: Green Energy, Cold Feet shows costs are, in fact, trending well below expectations, presumably from the delay in implementing poor long term energy plans.

Select projects aren't being delayed.

Three new industrial wind factory farms have recently appeared on the system operator's "Output and Capability Report" - the first since Pointe Aux Roches appeared (as PAROCHES) in November 2011.  2 of the 3 factories [4] are the properties of GDF Suez/International Power Canada - the company ownership shuffles around frequently, with the constant being the President and CEO, who is Mike Crawley, the former President of the Liberal Party of Ontario and the current President of the Liberal Party of Canada.
The fourth project to be added to the report is Nextera's Summerhaven - Nextera having broken into the ranks of feed-in tariff contract holders in July 2011 shortly after hiring former Liberal Premier David Peterson to lobby for them (here and here).

The government was attempting to change the messaging in the press away from the gas plant scandal to a focus on their plan to lower insurance rates by up to 15% [5] .
The strategy would build on the success of the government’s 2010 reforms and a series of fraud prevention changes in January 2013. It also addresses additional recommendations proposed in the final report of the Auto Insurance Anti-Fraud Task Force and builds on actions the government has already taken to combat fraud and protect consumers.  -news release
The plan to appease the New Democratic Party's demands for to lower insurance rates, by ~15%, is to address fraud.

Almost a decade after acquiring power, the implication is that addressing fraud is necessary only as a matter of political expediency.

Otherwise, given the choice of between Ontarians having costs controlled or allowing fraud to continue, continued fraud is preferred.


[1]  As with all things gas plant scandal related, Tom Adams has been diligent in posting base documents at
[2] The calculations aren't without some support - if only by way a tweet:
[3] The nuclear situation in New Brunswick is even brighter, where they still haven't started significantly utilizing into the lifetime running hour of Point Lepreau - Point Lepreau back online at 35% power
[4]  Pointe Aux Roches is also IPC - the newer 2 are East Lake [St. Clair], and Erieau
[5]  Based on the press coverage it doesn't look as though they succeeded.


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