New report numbers the IESO days, shows wind impacting Ontario rates

A new report on Ontario's daily electricity sector demonstrates the shortcoming of reporting of the sector's costs that contributes to the poverty of intellect in much too common communication on the sector.

The new report is from me, and it is to provide consumers, and other critics, with a more intelligent summary than the little noticed "Daily Market Summary" produced by the province's system operator (IESO). I hope some readers will work through the additional numbers as they can demonstrate the broad themes driving pricing in Ontario - and if some that do the work join a chorus calling for some transparency and meaningful reporting from the IESO,  my work in creating the reporting will be somewhat justified.

If one were to have no other information than the IESO Daily Market Summary reports for November 10th, and 12th, they'd think a little less demand - 187 megawatt-hours (MWh) - resulted in the price dropping $27.59/MWh to essentially free.

Ontario's demand for electricity did not change. The IESO's "demand" is not Ontario's consumption, but the demand for supply from generators in the IESO's market.

There are qualitative issues with the IESO report.
The HOEP price is the Hourly Ontario Energy Price. The weighted average is arrived at using hourly "Ontario Demand" and hourly HOEP - if one wanted to competently establish the "Value of Market Demand" they would not do it as the IESO does in this report. The weighted average price of exports has always been different, but since the IESO prohibited negative-priced exports the difference can be enormous.

Beyond the qualitative issues with the IESO's report is the absence of any attempt at costing the procured supply (their "demand"). With the global adjustment mechanism driving prices, this renders the report essentially worthless

A line and the race for expensive Electricity

"Powerline to nowhere: $100M powerline costing taxpayers millions" was a provocative title for a CTV news story last week. The network reported their investigation indicated a transmission line without transmission wires wasn't transmissioning electricity, which didn't surprise me - what did surprise me is the video segment on the report implied "it had never been needed at all." The reality is far different than CTV's viewers would understand: the inability to "Install two new 230 kV circuits between Allanburg TS and Middleport TS" to "Increase import capability on Queenston Flow West," has cost many, many times more than the $50 million reported by CTV.[1]

The line was built to improve transmission to the Niagara area partly designed to complete in time to support increased capacity at the Beck generating stations of Ontario Power Generation (OPG). The completion of a $1.5 billion tunnel project  was to get more water to turbines, with an estimated increase in power generation of 1.6 terawatt-hours (TWh). The primary reason given by Hydro One, in 2005, for the "Niagara Reinforcement - Transmission Line Project was, "Facilitate new generation development in the Niagara Falls area." [2]

The need for that was apparent to all who read the Buffalo New in 2011, as it reported on the international agreement regulating the water usage from the Niagara river. Prior to the completion of the tunnel OPG was unable to utilize their full allotment of water for power generation and an agreement allowed the U.S. side to generate power with the unused quota.

October revealed flaws in Ontario's rate and electricity market designs

October 2015 provided a unique opportunity for analysis of Ontario's electricity supply system as the Darlington nuclear power station was unproductive due to a planned vacuum building outage. During the previous October Darlington generated 2.5 million megawatt-hours (MWh) of electricity, which was 23% of what the province consumed during the month. 2015's October therefore provides a glimpse of what Ontario's sector will be like in a few years, as the Clarington Transformer Station is completed and Pickering Nuclear Generating Station is closed.

Vacuum building outages are scheduled for the lowest demand periods of the year, and October is one of those month. October 2014 saw a glut of power and concluded with a $1+ billion estimate of the global adjustment (the difference between what the system pays suppliers and what is recovered through the sale of power at market prices). With the rise of solar (largely unreported in the province) Ontario regularly exceeded $900 million during the sunnier months of this year's second quarter, but 12 months ago $1 billion was a stunning, unprecedented number. Parker Gallant and I published an analysis of 2014's October noting:

• the record high global adjustment total
• the record global adjustment rate for the 90% of consumption that can be considered "Class B"
• the record low Hourly Ontario Energy Price (HOEP) the market determined
• the record low price for exports
• the high level of curtailed generation (contracted supply the system could not take)
• record supply from wind and solar generators.

Figure from IESO June 2015 18-Month Forecast

Ontario's system operator, the IESO, would include a graph of curtailments in June 2015 that showed Parker and I were close, if a little enthusiastic, in this claim:

During October, 2014, the IESO curtailed more than 500,000 MWh of production. While wind power accounted for 100,000 MWh directly, much curtailment at nuclear and non-utility generators (NUGs) and import cuts occurred due to bloated supply levels during periods of windy weather. If one combines the curtailed production with the exports for October, it is obvious that Ontario dumped more than 21% of the province’s procured (and paid-for) supply

October 2014 exports totaled 1.8 million MWh, dumped at an average price of about half of one cent per kilowatt-hour ($5/MWh). The 2.3 million MWh total, from exports sold at an enormous loss and supply simply curtailed, is only slightly off the 2.5 million MWh reduction in Darlington's production the following October. Ontario's demand was little changed from 2014's October to 2015's.[1]

It might surprise readers that much of Darlington's missing generation was replaced with generation from other sources, as exports dropped only 300 thousand MWh.