Ontario continues its buy-high, sell-low policy for electricity by wasting cheap hydro in favour of expensive, intermittent wind. And the government is contracting for more, says Parker Gallant.

Ontario’s economic future: losses by the million

Ontario Power Generation or OPG just released their first quarter 2016 results; while revenue increased 9.1% or $123 million, net income was down from $234 million in the 2015 first quarter — a drop of 47.4%. The blame for the drop in net income was principally laid on the “Regulated-Nuclear Waste Management segment” caused by lower income from the “Decommissioning Segregated Fund.”

But they didn’t blame water spillage for hydroelectric power. Why? Because OPG now are paid for wasting what would cost ratepayers a miserly 4.4 cents a kilowatt hour (kWh) delivered to the grid.

The spillage and waste of cheap hydroelectric power increased from .3 terawatts (TWh) in 2015 to 1.7 TWh in 2016; the OPG quarterly statement makes reference to that stating “Reducing hydroelectric production, which often results in spilling of water, is the first measure that the IESO uses to manage SBG [Surplus Baseload Generation] conditions.”

Bear in mind that power generation from wind which has “first to the grid” rights in Ontario, is the real reason for spilling hydro. That means ratepayers pick up the costs of spilled hydro at $44 million per TWh and at the same time, customers paid for surplus wind generation at $133 million per TWh or $226 million for the spilled 1.7 TWh. Ontario’s benevolent electricity ratepayers also picked up the cost of idling gas plants tasked with backing up wind and solar generation. A rough estimate of those gas plant costs (we pay from $10K to $15K per MW per month) would be 9 cents/kWh, or about $150 million (to back up 1.7 TWh of wind generation). That brings the total cost of wind generation displacing 1.7 TWh of spilled hydro to a cost of $450 million or 26.5 cents/kWh.

Do the math, Bob

Calculations are:

Wind generation cost @ $133/MWh (1.7 TWh @ $133 million per TWh = $226 million)

+ gas generation backup of 330 MW (assuming an average of $12,500 per MW per month and 60% capacity generation per MW) = $150 million

+ the cost of spilled hydro @ $44 million per TWh = $75 million for 1.7 TWh.

The total cost (without inclusion of steamed-off nuclear, cost of solar power, losses of revenue for exports, etc.) is

$451 million for the 1.7 TWh OPG spilled.

Cost to Ontario ratepayers for the 1.7 TWh OPG spilled cost ($451 million/1.7 TWh) = an average of 26.5 cents per kWh.

What this means: the Green Energy Act and its many flaws has created a situation where publicly and privately owned generators suffer no consequences from producing power “out of sync” with demand, and as a result, electricity ratepayers are penalized by paying six times the actual cost for a kilowatt of electricity (including a built-in profit).

Our Energy Minister, Bob Chiarelli appears to lack the ability to apply basic math to the management of his portfolio, as is apparent from his April announcement that he wants another 600 MW of power we don’t need from wind.

© Parker Gallant

May 16, 2016

The views expressed are those of the author and do not necessarily represent Wind Concerns Ontario policy.