ignore those promoting a death date for natural gas in Ontario's Electricity System

The last contracting of a new and significant natural gas-fired generating station in Ontario happened 12 years ago.

It's been 7 months since my previous post. Among the reasons for my blogging hiatus is the prominence of the future of natural gas as discussed in the mainstream media, at municipal councils, and at the province’s electricity system operator (IESO). This has put me in the uncomfortable position of advocating for Ontario’s natural gas generating capacity, which I do unenthusiastically, but responsibly must in advocating for consumers. My previous post was titled ‘Ontario’s electricity system has not yet passed gas.’ This post will provide background on the building of natural gas-fueled generating in Ontario with the intent of altering the popular perception of expertise on environmentalism and electricity.

11 years ago I began communicating that the extremely generous feed-in tariff contracts (FITs) being awarded had to result in steep increases in electricity rates. I demonstrated what must, and consequently did, happen in writing driven by my research and data work. Today most ‘experts’ say there were obvious flaws in the procurement of electricity supply in Ontario a decade ago that any idiot could see, but I assure you few idiots, and only a tiny minority of allegedly ‘expert’ ones, did at the time. My target market in writing was primarily the people working in government who had to sit around a table listening to spectacularly poor direction from a Minister or Premier to arm them with better information than the politicians and lobbyists in the hopes of allowing public servants the weaponry to resist those people and actually serve the public. Today the situation is considerably different: the IESO has produced a solid report in response to calls, from lobbyists and politicians, for natural gas to be phased out by 2030.

It’s been several years since direction from the provincial government was obnoxiously poor.

The problems today are elsewhere.

The Ontario Clean Air Alliance (OCAA), led by Jack Gibbons, has seized the opportunity to return to the limelight in Ontario’s energy discourse in calling for “a complete gas plant phase-out by 2030,” an idea it’s actively working to get municipal councils to endorse and commit to desiring. The campaign has had some success as municipalities join on, but phasing out gas has long been a desire of the provincial legislature. Want is not the issue.

Here’s how the OCAA began its response to the system operator’s report:

Yesterday the so-called “Independent” Electricity System Operator (IESO), under the helm of climate denier Joe Oliver, released a report that seems more like a pre-Halloween prank than a serious analysis of how Ontario can lower its climate pollution by phasing out gas-fired electricity generation.

Jack Gibbons is not one who should be talking about emissions in anything but an apologetic manner - as is true of many people the press considers both environmentalists and experts in Ontario electricity policy.

Ontario's electricity system has not yet passed gas

Ontario's electricity system has not yet passed gas 1 Ontario’s electricity system includes generators fueled by natural gas. This is suddenly a hot topic as a campaign lobbying councils to say no to this type of generation moves through municipalities. The “no gas” lobbying appeals to a desire to reduce greenhouse gas emissions, exploiting predictions of increased use of natural gas in generating electricity in the province. This article will explore what entities have been the key drivers of emissions in Ontario’s electricity system, the credibility of the body being cited predicting increased generation fueled by natural gas and, if all goes well, convince the reader they are not willing to decrease global carbon emissions at any cost.

Background on the IESO’s pretend market

My previous post reconstructed a method to estimate losses on electricity exports out of Ontario. The measure does not indicate Ontario would be better off if it didn’t export its excess, but that Ontario would be better off with data discipline and consistent metrics capable of informing, and influencing, the managers of the system. Most years we pay more, per unit of electricity, and receive less from exporters of that electricity. It’s a bad trend, but not one Ontario’s electricity system has been structured to notice.

In Ontario the system is operated by the IESO. The IESO’s system includes what should be called a pretend market - it was called a hybrid market when introduced in 2005 after a collapsed attempt at a real market, but it’s deteriorated significantly since then. From a recent report:

...Over 98% of Ontario’s generation costs are controlled through either regulation or contracts, and even the fixed costs of most of the assets that trade on the market are contracted. As a result, less than 2% of the total system costs are actually price-exposed and influenced by the market (the dark blue area)

The creation of a market for electricity in Ontario revealed itself as a fantasy in four acts:

1. the freezing of the market price shortly after its birth in 2002 killed any chance of merchant generation getting built;
2. the introduction of the global adjustment mechanism (2005) separated the contracting of new generation from a need for revenue from sales into the market, and was accompanied by regulating rates for public Ontario Power Generation (OPG) nuclear and very large hydroelectric generators;
3. the introduction of contingency payments to keep coal generators operating after the market collapse of 2008, and,
4. Regulating the rates for the remainder of OPG’s hydro-electric facilities for 2015.

Ontario lost a record $1.8 billion dumping excess electricity in 2020

$1.8 billion dollars: that’s how much Ontarians lost selling electricity to neighbours in 2020 once the revenues earned from the sale are subtracted from the cost of producing the power.

By one accounting, which I’ll show is an Auditor General’s.

It’s been a while since my last post, during which period this blog turned 10. A decade ago, this month, a Premier noted some people think discussing losses on exports is fun, and at the same time lectured, “what you want to do of course is try to manage your system as best as you can so that there's as little extra electricity as possible.” Looking at the longer trend with the benefit of hindsight will be fun (of course), and as an added benefit it will provide a measure of the quality of the system’s managers.

Last month I was contacted by a friend looking to update claims from the 2015 Annual Report of the Office of the Auditor General of Ontario (the Auditor), including:

From 2009 to 2014...Ontario exported 95.1 million MWh of power to other jurisdictions, but the amount it was paid was $3.1 billion less than what it cost to produce that power

From a statistics viewpoint the biggest part of this challenge is figuring out what that $3.1 billion claim was based on. It turns out it’s demonstrated by Figure 10 in that 2015 report - and now we descend into the sordid world of Ontario’s electricity data to determine the origins of the numbers visualized in that graphic. 

I’ve added a tabular table which shows the figures I transcribed from the Auditor’s Figure 10 - not a precise process but one that provides valuable estimates for what is visualized. The difference between the cost of production and revenues in the graphic equal $3.1 billion. Before discussing the “cost of producing Exported Power...as estimated by [Office of the Auditor General of Ontario]” I will note both figure 5 and figure 10 in the 2015 Auditor’s report cite the IESO (Ontario’s hybrid electricity system operator) as the source of revenue from exports: figure 5 prints the figure for 2014 as $636 million while my transposition of the graphics - -done as it’s clearly not that - puts the figure a little below $750 million.

Same source, same measure, same year: two numbers. I’ll revisit this after I discuss a methodology behind the cost of producing exported power that reproduces the results graphed in the Auditor’s Report.