Losing time: everybody can't win Ontario's Electricity game

November's main electricity commodity rate in Ontario averaged $123.54/MWh, a full 10% higher than the previous record price. This post examines why.

Demand in November was very low, but almost identical to demand the previous month. The main electricity rate in Ontario is the Class B commodity rate comprised of the weighted Hourly Ontario Energy Price (HOEP) and the Class B global adjustment rate. It rose 23% from October to November. This makes a comparison of October and November very compelling.

The rate was the highest because data shows Ontario spent more on generation, and whatever else the system's operators felt related to generation, than any previous month.

There's been a lot of words about Ontario's electricity costs following the latest annual report from the Auditor General of Ontario, most from men in Ontario's electricity establishment claiming the female Auditor was unfair in noting the growth of the global adjustment. Today I am looking at the global adjustment only to estimate the total spend on electricity generation - and whatever else the system's mandarins feel is related to electricity generation - each month.


The graph's message is clear: total supply cost is rising. In November, Ontario spent more on electricity supply than ever before, despite demand levels near lows. Note the chart runs 49 months: November 2015 total supply cost is 53% higher than November 2011, while "Ontario Demand", as defined by the IESO, is down.[1] I don't want to dismiss the fact the price increase is seen entirely as a rise in the global adjustment, as that has very important cost implications in distributing system costs disproportionately across consumer segments. One result of growth entirely being in the global adjustment is the rise in the main, Class B, commodity rate is 77% over the 49 months - 24% higher than the increase in total systemic supply costs.

Why did the system's costs rise $240 million from October to November?

Don't believe happy presentations of Ontario's renewables pain

In January Ontario's government is introducing a new price support program to help poorer households with electricity costs. The planning for the program reveals an expectation that 1 in 10 Ontario households can not longer bear rising electricity rates.

I am inspired to write by two events of November 30th:

1. Ontario's electricity system mandarins released an astronomical estimate indicating November rates will be 20% higher than ever before.
2. CBC's flagship news program broadcast a poorly researched segment, "Canada's clean energy race."

Examining the Samsung numbers for high-priced November might provide a simple explanation of what the global adjustment is, but some background is necessary to judge the value Samsung has delivered.

Chris Brown's CBC report included segments interviewing Tim Smitheman, once a public servant, now an employee of Korea's Samsung further aiding that company in siphoning money out of Ontario. Brown celebrated Samsung, but any investigation would have revealed he could not have picked a better subject to display the failure of Ontario's green energy foibles.

A brief history lesson is necessary to communicate how poorly Samsung has performed for Ontario. In 2008-09, Minister of Energy George Smitherman and his boss Dalton McGuinty wanted to make a big splash to kick off the glorious renewables future German politicians and David Suzuki had convinced them was imminent. In January 2010 the government inked a deal with a Korean Consortium that included Korea's electricity experts, KEPCO (since departed the Consortium), and Samsung. The deal, "would see the consortium receive preferential treatment from the province, in the form of priority access to the energy grid and higher-than-market rates for the renewable energy it creates as part of Ontario’s new feed-in-tariff (FIT) program." 

“It’s now a race to see which clean technologies will dominate, and wind and solar are off to a strong start” - Chris Brown, CBC, November 30, 2015

The Samsung deal has been a disaster. Hopes that expertise in LCD displays would lead to breakthroughs in solar panel manufacturing tech Samsung would base in Toronto disappeared, as did hopes expertise in shipbuilding would translate to breakthroughs in wind turbine design to be based in Ontario.
All those things were sub-contracted out.