Monday, August 26, 2019

Henvey Inlet provides opportunity for RIckford to address declining performance in Ontario's electricity sector

It's shaping up to be the worst year in some time for Ontario's electricity sector.

The useful structures planned during the previous government are falling apart during the implementation stage, and the current Minister of Energy, et cetera, has appeared - well, infrequently. It's still early in the sophomore year for the Honourable Greg Rickford, but he's shaping up to be the worst energy minister since Brad Duguid.

Duguid could have saved Ontarians billions if he'd stuck to his druthers and implemented the solar rate cut the Ontario Power Authority decided on in 2010, but he didn't. He succumbed to lobbying from an industry not to reduce rates, and eventually, as those high-priced contracts entered service, Ontario became a global laughingstock for contracting solar capacity at an average price well above $400/megawatt-hour (MWh).

A feed-in tariff (FIT) contract for the 300 MW Henvey Inlet wind project was announced eight-and-a-half years ago on February 24, 2011. From the standard FIT contract during February 2011 (version 1.4):

2.5 Milestone Date for Commercial Operation
The Supplier acknowledges that time is of the essence to the OPA with respect to attaining Commercial Operation of the Contract Facility by the Milestone Date for Commercial Operation set out in Exhibit A. The Parties agree that Commercial Operation shall be achieved in a timely manner and by the Milestone Date for Commercial Operation.
The date for commercial operation was generally 3 years from the contract date. Later it was extended to 4 years for many contracts.
Henvey Inlet, at some point, received extra special consideration and it's date for commercial operation was extended to February 25, 2018 (according to IESO contract list). Today being August 26, 2019, is more than 1 and half years from the date for commercial operation.

Section (9.1), "Events of Default by the Supplier", includes:
(j) The Commercial Operation Date has not occurred on or before the date which is 18 months after the Milestone Date for Commercial Operation, or otherwise as may be set out in Exhibit A.
I don't know for certain what this contract's Exhibit A says, but it should say either nothing or August 25, 2019.

The contract's "Requirements for Commercial Operation" include:
(C) the Contract Facility has been constructed, connected, commissioned and synchronized to the IESO-Controlled Grid, a Distribution System or a Host Facility, as applicable, such that at least 90% of the Contract Capacity is available to Deliver Electricity in compliance with Good Engineering and Operating Practices and Laws and Regulations...
There is no evidence Henvey Inlet has met the requirements of its contract. The system operator (IESO) data for generator output and capability showed some activity at partial capacity levels in April and May, and then nothing until very recently. Peak output was 75 MWh - far from the 270 requisite for commercial operation.

The cost to Ontario ratepayers, or taxpayers, is not trivial. At a 32% capacity factor the contract would yield $125 million a year, and $2.5 billion over the 20 year contract period.

I have written on the Henvey Inlet project a number of times in the past - and I'll conclude with links to some of that material after re-iterating: the project utilizes the same industrial wind turbines as projects contracted in Alberta at "a weighted average bid price of $37/MWh." Ontarians have done nothing to deserve paying 4 times more than Albertans for output from the same machines.

Today is a good day for Minister Rickford to do the right thing, and exercise the provincial/IESO right to revoke the contract as the supplier is in default on their obligations.


According to the 2019 Ontario budget "Electricity Cost Relief Programs" rose from a $426 million cost in 2016-17 to $2.834 billion in 2017-18 and an interim $4.293 billion for 2018-19. The current government deserves credit for moving the [un]Fair Hydro Plan costs to the budget from the sleezy bond scheme to push costs out to future ratepayers, but not if they ignore cost reduction opportunities while spending $4.3 billion on reducing costs for, mostly, residential ratepayers.

See also:

Ontario's rotten wind era at its end | August 2018
Henvey Inlet area on fire because… |July 2018
Clement/Thibeault $billion negligence: Henvey Inlet Wind | July 2016

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