October 2014: Ontario’s breath-taking, record-breaking month for electricity bills

Wind power significant in surplus power sell-off

Special report by Parker Gallant and Scott Luft

Summary:

New figures reveal that in October, the Ontario government paid $1 billion more for electricity than the electricity market value of that power. Numbers released by the Independent Electricity System Operator (IESO) show the Global Adjustment for the month of October topped $1.0 billion for the first time ever. This estimate exceeds the September estimate by more than $200 million.

The record-breaking month will eventually affect all electricity users, but the immediate direct impact is on any electricity user holding a retail contract. In November, they will be charged an additional 10.1 cents per kWh on top of their contracted price, likely in the range of 4 – 6 cents per kWh. For an average household using 800 kWh per month, this would mean an extra charge of $80. For industrial or agricultural users, the added cost would be much higher.

The situation has developed as a result of Ontario’s rush to incorporate renewable energy in the form of wind, solar and biomass into the grid without proper planning on how this new capacity would align with demand. The result is that during the spring and fall seasons, when demand is lower, IESO has a surplus supply capacity of over 100% during many hours of the day. Through the Global Adjustment fund, Ontario’s electricity consumers pay contracted generators to idle or curtail generation of thousands of megawatts .

In October, wind power generators produced almost 600,000 MWh of electricity at a cost of $81 million and additionally were paid for another $11 million for 100,000 MWh that they could have produced, but were asked not to add to the grid. Due to the glut of power in October, Ontario sold this power to neighbouring jurisdictions at an average of 4.31 per MWh or $2.6 million, meaning a loss of almost $90 million for Ontario electricity users.

This estimate does not include the amounts paid to Bruce Nuclear for 400,000 MWh of “steamed off” nuclear production. As wind power is guaranteed priority access to the grid under the Green Energy Act, other sources of production must be reduced in the event of surplus wind and solar power generation.

Despite this situation, Ontario continues to push for an expansion of unreliable wind power capacity. Currently there are over 700 megawatts of capacity under construction, in the approval process, or the subject of various appeal procedures. In each of these cases, the Ontario government has options to do the sensible thing and end these projects, saving Ontario electricity consumers from a 20-year commitment to the green energy folly. Instead, the Ontario Power Authority has plans to issue an RFP for an additional 300 MW of on-shore wind capacity in early 2015.

Parker Gallant and Scott Luft

See the full paper Gallant-LuftRecord-breakingOctoberNov5