McGuinty Thinks This is Fun?

There is a clip on YouTube of Premier McGuinty, with a loyal Dwight Duncan at his right hand, refuting claims that have been made on this blog.

The Premier says some things in it that I need to rebut. 35 seconds in he says "Last year we had some extra electricity."  This is true.  As it was in 2009, and 2008, and 2007, and 2006.  The trend deserves the most attention.
About a minute in the Premier states, "“If you had to choose between having too much electricity, and too little electricity, I’m for having too much electricity.”   This is a common refrain we've been getting from his team - and it is not intelligent.  We export because you can't choose to have too much or too little (Donald Jones provides some electrical engineering insight on this here).
This is the meat of the issue.  Mr. McGuinty's perspective appears to be that we should always order 10% more than we need.  We pay for the full amount, and if export markets pay even 1 cent for the other 15,000,000 MW, it is money in the bank.  $300 million for 15TWh is 2 cents/kWh.  I assume Mr. McGuinty means that on Net Exports (exports less imports), we ended up $300 million ahead by exporting a little under 9TWh less than we imported (which brings exports close to 3.5 cents/kWh as opposed to the 6.5 we paid in Ontario).

I'd point out my first article that gained some attention, by costing out exports for a single day, did compute on net exports.  Mr. McGuinty says in the video clip; “I know there’s some fun, and some excitement, associated with the stories that have been in the media lately, but I think it’s really important to tell the full story.  Net we are ahead by $294 million dollars.  I haven’t seen, written yet, that we’ve been paid to take Michigan electricity.”  
There's two reasons for that.  I don't have any data on Michigan, and I don't think Ontario's populace is concerned about Michigan subsidizing them.  I do think my concern that we are increasingly paying producers to produce unnecessarily, and that our friendly neighbours, with whom we compete for industry, are benefiting from that at the expense of Ontario's residential, commercial, and industrial consumers of electricity, should concern most, if not all, Ontarians.

Months of argument are chronicled here, but I'll attempt a summation.  I'll also emphasize that the reason I can blog on these issues, and they do get to the mainstream press, and critics in the opposition parties, is that the data is public - the text (.csv) feeds, and figures for the global adjustment, are directly from the IESO site.  I don't provide any unique data, nor do I deliberately write things that can't be verified.

Mr. McGuinty is the person in the province most entitled to his opinion.  He was elected for it to be relevant.
But nobody is ever entitled to their own facts.

There is a market for electricity, and that market has seen the price move depending on the balance between supply and demand.  This graph shows that, in 2005, when demand and supply balance, there was a market price(the red bars).  As our methods of procuring power increasingly results in production exceeding our consumption, the HOEP drops accordingly.

The discussion regarding the cost to Ontarians of exports relates to the blue bars in this graph - which is the Global Adjustment.  If you consume electricity in Ontario, your price is, either directly or indirectly, the HOEP plus the Global Adjustment.  Outside of Ontario, it's likely only the HOEP that gets paid.  We can therefore calculate the figures for how much less external users pay for Ontario electricity than Ontario users do - it's exports at the Global Adjustment rate, and I've graphed it as a 12-month running total:

When the NDP critic, Mr. Tabuns, speaks of exports and subsidies, one could quibble with the vocabulary, but not the meat of the argument.
We have fallen into being an exporter concurrently to becoming a high cost producer.  Neither strikes me as good - together they seem bad.

Dwight Duncan should know better - regardless of the Premier's delusional opinions.

A Train Derailment in Severn Falls - Again: What you Should Know.

People love a train wreck ... from afar.

The Barrie Examiner is close to the action, and their latest report starts "CP Rail trains are expected to roll through Severn Falls by Friday morning after crews worked 24/7 to clear the tracks."

Which begs some questions:
Should they be allowed to?
What branch of the government should allow it?
Who has the final say on starting the trains back up?


That all sounds very alarmist to most who noticed a train derailed in Severn Falls.

I understand that based on the reporting thus far people would think these things just happen., but I've got a piece of information that might give you pause to think about it. 
The train derailed in the same spot a train derailed in 2006. 
There's a joke about an engineer driving a train.- instead of designing a track!

The National Post has an article on it's site stating:  "CP Rail spokesman Mike LoVecchio said the derailed cars were part of an eastbound freight train that was passing a westbound freight train waiting on a siding. The derailed cars struck the westbound freight, he said."  The article notes "This is the third derailment for the company in 2011, but Mr. LoVecchio said that record is better than it was at this time in 2010."

The Toronto Star noted Randy Marsh of CP Rail indicating " the entire 21-car wreck could be cleared by Thursday night"

The Barrie Examiner article ended :
"The public is asked to stay back from the site, Lovecchio said.
"I think there is always a certain fascination when you have an incident site such as that for the public to look at; it's understandable," he said.

The public hasn't derailed trains there twice in 5 years.
Maybe CP should stay back.

A Bitterly Cold Emphasis on a New Year’s Problem

The figures are in for January 24^th, and they show the highest winter electricity consumption in over 2 years – for both the daily hourly average Ontario demand, 20036MW, and the hourly maximum of 22733, at 7pm.

The average Hourly Ontario Energy Price (HOEP) was $38.98/MWh for the day.  It peaked at $45.66/MWh (it did peak at 7pm, along with demand).

Foreign purchasers should get it at the market rate - presumably the HOEP, which average about $40/MWh.

Ontario users will pay about $68/MWh,
or 6.8 cents/kWh.  That is about the average paid under the Regulated Price Plan (RPP), it should also be about the average on the TOU plan, and because the IESO shows the Global Adjustment at 2.88 cents/kWh ($28.8/MWh), all roads point to the same price for Ontario purchasers of electricity. 

So for those who dismissed the New Year’s Day figures, let’s do the math estimating the cost to Ontarians of yesterday’s exports.

The Daily Market Summary shows an average hourly export of 3123MW.   Each hour we exported electricity for about $87,000 less than we paid suppliers to purchase it.  On the highest domestic demand day in over 24 months, that is about $2,100,000 over the course of the day.

Visiting another IESO page, we see the production breakdown by source.  Let’s look at the 19^th hour, which had the 22733MW of Ontario demand (output first / capacity second):

·         Nuclear                  10797/11033

·         Coal                        2695/3577

·         Natural Gas            5921/6863

·         Hydro                     5208/6708

·         Wind                         398/1250

·         Other                        147/2722

·         TOTAL                25310/31718

Production of 25310MW looks like it is less than capacity, and maybe it is, but there are only 3 days when production peaked above 25310MW.  September 1^st, 2010 (production maxed at 25420MW, demand at 24444MW), the day before that, August 21^st (25818MW and 24917MW), and August 1^st, 2006, which has the all-time high demand of 27005MW, and had production of only 25475.

Previous discussions have centred on supply mix issues.  But clearly yesterday’s production isn’t related to how much wind is on the grid, or how many nuclear reactors are operating.  Yesterday’s over production was deliberate.

The text from a January 11^th 2011, Speech by Paul Murphy , President and CEO, IESO, to the Ontario Energy Network includes “… finally for the first time they are beginning to be charged the true cost associated with when they use it.

The alternative, and this is what we have lived with for years, is to have those who consume less in the peak hours continue to subsidize those who use more. How fair is that?”

This is a question of secondary importance.

Yesterday, Ontarians were coping with cold temperatures, and dinner, while paying 9.9cent/kWh, reportedly to discourage consumption, while we were subsidizing electricity exports – from peaking, GHG emitting, production.

The important question is, when did the IESO decide it should function to service suppliers at the very direct expense of Ontario consumers?

Cooking up Energy Policy, With The Star

You cannot charge the Global Adjustment on Exports.

A couple of months ago I thought I’d take up blogging to work on my communication skills.  I had some interests – one of which was electricity policy, and another one is data.  I’ve been working on my cooking skills too.

I’m a harsh self critic, but things seem to be going pretty well.  Slow-cooking a small turkey went fabulously, and nothing says comfort quite like a pot roast with my Staub La Cocotte cookware.  For the blog, aside from improving my ability to communicate, I’d hoped to incite some curiousity, and hopefully some debate, about things I feel are impacting people.  And I have.

I wrote about some electricity records on January 3^rd, and they hit the mainstream press about a week later.  John Spears ran with a spin, at the Star, on one of the records on the 11^th.

I wrote a bratty response to the delayed media focus which I thought had been on the records, instead of the issues, as well as a follow-up attempting to display those records in the light of a long-term context, on the 18^th, and Mr. Spears wrote on similar topics following on the 20^th, and again on the 21st.

I was delighted to see experts are also busy trying to quantify the cost to Ontarians of exporting so much electricity.  As long as they are working at it anyway, here’s some simple premises I’m unlikely to be able to communicate – maybe the experts would like to try to cook something up on them:

The Global Adjustment figure is a measure of the dysfunction of the competitive market.  Higher figures show greater dysfunction.  Left alone, economic theory dictates the market would correct itself by weeding out the higher cost suppliers. 

These are the suppliers we have a preference for in Ontario.  Which is clearly stated, a clear choice, and I won’t say it is unfair at all.

But a policy that decreasing demand is good, and increasing supply is good, does lead to a dysfunctional market.  For the past number of years, for every 9 watts we needed, we’ve been purchasing 10.  The other we need to get rid of.   Our system couldn’t function without the export capability.

We need to sell the exports, but nobody needs to buy them. 

Mr. Spears opts to end his column with a quote from a Greg Baden, cited as being with an energy consultant;  “The solution is simply charging the global adjustment to the exports. You’ll be getting fair value for your energy.”

There is a market concept of a “fair value”. 

It’s the price.  Ontario can’t impose an additional charge on other jurisdictions!

There is an Ontario government concept of a “fair value” – that’s the issue.

A nice dance, but the problem is our energy supply policies have been cooked up in an Easy-Bake oven.  We are sucking on a raw turkey.

Smartiness: Smart Meters and Smart Grids Without Smarts

An article in Vancouver begins; “BC Hydro is proceeding on the premise that its $930-million plan to install so-called smart electricity meters for its 1.5 million customers will pay for itself through cost savings and not a rate increase, according to its business plan.”  The article explains, “savings are expected to come from the elimination of manual meter reading, reduction in electricity theft and more efficient usage,” and notes “savings are expected to come from the elimination of manual meter reading, reduction in electricity theft and more efficient usage."

My Ontario eyes were shocked.

They have business plans!

Business plans, in responsible jurisdictions, serve a couple of purposes.  For one, they assess costs, and benefits, recognize risks, and include cost recovery mechanisms, sometimes meant to spread that risk between the service providers and the customers.  A Maryland case is particularly interesting from my perspective in Ontario, and I’d encourage the reader to visit the above two links, plus an essay by Scott Hempling for his explanation in summing up the Maryland’s commission reasons for rejecting the initial BGE proposal as:

·         Cost –effectiveness before cost recovery

·         The dog that didn’t bark – ‘future sunk costs’

·         Not snowed by non-verifiable financial claims

·         Just and reasonable decisionmaking

Here, the Ontario Energy Board regulates rates based, in part, on an acceptable Return On Equity.  Theoretically, the more our public Hydro One, and Local Distribution Companies (LDCs), can get approved to spend, the more they can make for their bonus plans.

------

Our initial plan was presented by Premier Dalton McGuinty in the Ontario Legislature on April 19^th, 2004:

“Smart meters, together with more flexible pricing, would allow Ontarians to save money if they run appliances in off-peak hours. That's why we are directing the Ontario Energy Board to develop a plan to install smart electricity meters in 800,000 Ontario homes by 2007 and in each and every Ontario home by 2010.”

I’ve searched for a more developed Smart Business Plan – but I haven’t found one.   Having read an alarming article by Parker Gallant,  I was really excited about finding a coherent business plan that could explain Hydro One’s rapidly escalating Capital Expenditures during a period of decreasing demand:

Hydro One’s 2007 Annual Report pointed me to The Energy Conservation Responsibility Act, 2006.  I’m no lawyer, but the Act seems to repeat a mantra, “consider energy conservation and energy efficiency,” - without consideration of costs.
I was particularly intrigued by; ” Despite subsection 1 (1) of the Ontario Energy Board Act, 1998, for the purpose of a hearing under subsection (4), the Board shall be guided by the objective of promoting energy conservation.”

The referenced subsection refers to ‘rate protection’, but what it means is specified as located under section 79.1 of the Electricity Act, 1998 … I can’t find the phrase “rate protection” in the current version of the Electricity Act.

Moving on from the “rate” protection search, Schedule B of the 2006 law defines “smart metering data” as data derived from smart meters (no kiddin’) including data related to “the consumers’ consumption of electricity.” It’s pretty hard for me to see how the old spinning meter didn’t’ do all that smartly.

Regardless, let’s leave the legal to lawyers, and return to Hydro One’s Annual Statements. In 2008’s Annual Report the term “smart grid” appears right up front in the letter from the President and CEO, Laura Formusa:

The Province of Ontario’s smart meter initiative – to have a smart meter in every home and business by 2010 – sparked Hydro One to undertake the largest smart meter deployment initiative in North America. The installation of the meters is just a fraction of the job. The supporting communications network that Hydro One is establishing is an important step in realizing the vision of a smart grid. A smart grid will transform our relationship with our customers, allow our customers to make the smartest use of electricity and enable the connection of renewable sources of power generation like solar, wind and biomass – key to the Province’s goal of increasing the amount of renewables in our system and decreasing our reliance on carbon-based fuels.The grid of the past century was incredibly reliable at delivering power and it has served us well but it wasn’t designed to allow power to flow in a diversity of directions. And in order for Hydro One to connect small, renewable sources of generation, we need the two-way flow capabilities that a smart grid will bring. Hydro One is collaborating with industry peers, universities and research organizations to transform our system.

That sounds like folks are getting around to planning after the first 1.4 million meters were committed to – so it was possible for them to get a lot, maybe 1.4 million times, smarter.

The lack of a plan is even more apparent in the Outlook section of the Management’s Discussion and Analysis Section, which has a paragraph including all 3 phrases: Smart Meters, Smart Grid, and Business Plan.

In its rate decision on the distribution application of our subsidiary Hydro One Networks issued on December 18, 2008, the OEB approved substantially all of our work program expenditures and our Smart Meter Program to the end of 2007. This firmly provides a base funding level to build upon and subsequently reduces the uncertainty of recovery of the Smart Meter Program.  The increasing focus on renewable distributed generation, such as wind, solar, hydroelectric and biofuels will require development of the Smart Grid concept, which would leverage the smart meter technology to support continued reliable and safe operation of the distribution system. This technology will allow the same kind of visibility and control to distribution-connected generators that transmission-connected power producers now enjoy.
We are committed to the protection and sustainment of the environment for future generations. We can achieve this goal through distribution of clean and renewable energy by upgrading our transmission grid to support flow reversal of small, clean energy generators connected to the distribution system to the overall load. Investments in distribution and transmission infrastructure to enable major additions of distributed generation and to improve response times to these new connections at all stages will be required. However, transmission upgrades for distributed generation have been excluded from our business plan in the short term due to the uncertainty associated with cost responsibility.

They haven’t a clue if any of this is true.

Who do we blame for this boondoggle.

For starters, and in the end, the process started April 19th, 2004 with Mr. McGuinty’s speech in the legislature, and the phase of thoughtless spending on wistful platitudes must end by October of this year. But the co-conspirators shouldn’t be let off here.

The commentary on the Maryland case concluded:

“There’s a form of regulation known as “If you do that again we’ll clobber you—but go ahead this time.” (Thanks to regulatory legend Peter Bradford.) The Maryland Commission did the opposite: “The answer is ‘no,’ until you get it right.” Bradford has a boxing-based metaphor for three levels of regulatory willpower: “Rocky,” “Rope-a-Hope,” and “Canvasback.” Maryland chose Rocky.”

If anybody takes the time to review OEB rulings, I think they’ll see the first case many times. From the recent ruling on Hydro One’s Rate Application, the decision on Page 6 regarding the quirky CDM issues quite specifically notes “the Board is prepared to accept Hydro One's CDM estimates for the purposes of its load forecast” while noting CDM is an imprecise, and quite possible false, science. And in fact, the OEB then suggests spending more money studying it, elsewhere.

In the same OEB document we find the smoking gun on the business plan behind all the smart spending. Page 32:

GREEN ENERGY PLAN

In a letter dated September 21, 2009, the Minister of Energy and Infrastructure instructed Hydro One to “immediately proceed with the planning, development and implementation” of certain transmission projects. The twenty major transmission projects in Schedule A of that letter and five enabling projects in Schedule B were developed by the Ontario Power Authority (“OPA”) and Hydro One to facilitate the connection of “renewable generation likely to be forthcoming through the feed-in tariff program.”Hydro One’s Green Energy Plan (the “GE Plan”) is based entirely on the Minister’s September 2009 letter. That is, all projects and associated timelines identified inSchedule A and B of that letter are included in the GE Plan.  The GE plan covers a ten year period from 2010 to 2020. The total gross cost of the GE Plan is $7.7 billion, of which the cost of the Schedule A projects is $6.9 billion and the cost of Schedule B projects is $840 million.

The section concludes, on Page 35:

…While the Minister’s letter of September 2009 urged Hydro One to embark on an extremely challenging development process, the letter of May 7, 2010 to the OPA required an updated transmission plan that could significantly change the original instructions to Hydro One.In this case, the development of and approval of a plan that reaches much beyond the test period would seem to be inadvisable.  It is clear that the pace at which significant system expansions and enhancements are to be undertaken is a matter of concern to all participants in the Ontario market at this time.  This factor was also highlighted in the Board's letter of October 2010. In the Board's view, in the circumstances of this case, it is most appropriate for it to approve what comes before it genuinely connected to the test period, and not much more.  Accordingly, in the circumstances of this case, the Board will not approve the overallGreen Energy Plan on a conceptual, or any other basis.

I must note this issue is simply appearing in the light of examination of electricity policy. It is not really a different issue than we’ve encountered with diverse items such as the gun registry, and eHealth.

Smart technology refers to components that can communicate, the communication protocols and networks, the servers, the software, the security protocols, the network architecture controlling access. Our governments seem to lack the technical expertise in information technology and the bureaucratic backbone to face down poor direction.

In Germany Chancellor Merkel declared an “e-energy” project at a National IT Summit, which the German Energy Blog describes; “E-Energy – ICT-based Energy Systems of the Future” is a joint support program sponsored by the Federal Ministry of Economics and Technology (BMWi) and the Federal Ministry for the Environment, Nature Protection and Nuclear Safety (BMU). Under the program, pilot projects in six test region all over Germany develop and test key technologies and business models for an “energy internet” (“Internet der Energie”). It is complex, and worth the effort of treating it as such.

I’ve noted before there was an office in the Ontario government, the Conservation Bureau, that documented Ontario’s performance with energy. Shortly before their files were buried in the incorporation into the OPA, they showed Ontario’s per capita consumption declining far quicker, since 1990, than a number of jurisdictions, including California.

Let’s revisit that day in the legislature, nearly 7 years ago, shortly after Mr. McGuinty scribbled a strategy that would cost Ontario billions without ever having a coherent plan attached to it, and give the last words to a man who deserved better than the citizens of Ontario gave him.

Mr Howard Hampton (Kenora-Rainy River):  I listened intently to what I believe was an attempt to announce an energy efficiency and energy conservation strategy, and I want to make the following response.First of all, I want to remind the Premier that in 1992, the government of the day brought forward an aggressive energy efficiency strategy, and the then Liberal energy critic from Ottawa South, Mr McGuinty, said he was opposed to it because he said Ontario couldn't afford an energy efficiency strategy.  I wonder where we would be today if the Liberals had supported the government of the day and we had implemented all of those energy-efficient fridges and all of those energy efficiency measures.  The Premier should remember that.  The Premier should also remember that when the Conservatives brought forward their strategy to privatize Ontario's hydroelectricity system, part and parcel of that was to do away with all of the energy efficiency strategies that were then in place.  Why? We know why: because private sector companies that are more interested in selling than conserving wanted all of those energy efficiency strategies done away with.  The Premier should remember that he and every Liberal in the House voted with the Conservatives, not only on the privatization, but to get rid of the energy efficiency strategies which today he wants to promote.  I see a lot of public relations here, I see a lot of spin, but I looked very carefully for the substance. The reality is this: For most of us in our homes, we can't turn off our refrigerator.  If you turn off the refrigerator, you can't eat the food.  Similarly, if you have an electric water heater, you can't turn it off.  If you turn it off, you don't have hot water, and similarly with a number of other appliances.  So I was looking for something from the government which indicated that they are prepared to put forward money, incentives, so that people who have an old refrigerator, one that uses too much electricity, can afford to buy a new energy-efficient refrigerator, can save electricity, can save on their hydro bill, and perhaps over three or four years can pay back the loan.  Did I see such an incentive strategy?  No, Speaker; none.  In his remarks, the Premier talks about how people should have an energy audit of their home. Well, part of what he was opposed to in 1992 and 1993 was the green community strategy, which provided funding so that people could actually get an audit of their home; they could have experts come in and look at how much electricity they were using and provide them with some ideas and some incentives on how they could reduce their electricity consumption and save money.  The Premier then was opposed to that.  The government wants to place a lot of emphasis on so-called smart meters. They say that by using smart meters, you can in effect lower the on-peak consumption, and he cites California. I just want him to know the results from California. California thought that by bringing in so-called smart meters, they could reduce electricity consumption by 500 megawatts. In fact, they were only able to reduce electricity consumption by 31 megawatts. The reason is that people can't turn off the fridge; they can't turn off many of these electrical appliances that they have to have every day to keep their food safe.  This is a PR announcement, but it's terribly lacking in substance that will lead to real electricity efficiency in the province.

The $60 Million Symptom

A release from Ontario’s PC party began; “Following media reports that confirmed Ontario families were forced to pay $60 million for our excess energy…”

That release, dated January 12, ^th didn’t note what media reports, but I wrote on January 3^rd:

“December 2010 saw Ontario export 1.6 TWh more electricity than it imported, which was a third more than the previous high from August 2008. This would be a much greater accomplishment if the IESO HOEP price wasn't approximately $35/MWh in December, and we didn't contract supply at around $70/MWh. This net export accomplishment cost us about $60 million.”

The other media report I’ll note is a Kitchener talk show hosted by Jeff Allan, where he interviewed Tom Adams, Peter Tabuns (NDP Energy Critic), and Energy Minister Brad Duguid , separately, on the topic of surplus generation.  There is some interesting discussion with Mr. Adams and Mr. Tabuns.  I do not believe Mr. Tabuns proposes solutions that could maintain pricing, or be able to keep emissions as low as they’ve been for several years now, but he does summarize the issue of overproduction very well.

Minister Duguid, by contrast, struck me as silly.
It would be impossible for all jurisdictions to produce too much output (as he implies) – output needs to match demand at some point – and he also blows off the figure as due to New Year’s Day (which was also a record, but separate from the figure being discussed), and states this is how it works – sometimes we overproduce and export, and sometimes we import.

So one more time, I'll argue a method to quantify what supply policies cost us  - and this time I’ll try to make the estimates easier for all to comprehend – especially Progressive Conservative leaders and the current government on the off-chance they, foolishly, believe anything they say.

The $60 million figure I gave was an estimate of the cost of the ‘net’ exports in December 2010.   I think Mr. Adams pointed out somewhere we needed to get rid of that surplus and thankfully there were export markets to take it.  The terminology is very tricky here – whether this amounts to a subsidy, or could become considered dumping by generation companies in adjacent jurisdictions, are questions that might become pertinent.

What is pertinent, in estimating the cost of our current electricity supply environment, is defining the cost of electricity, then defining how that cost is recovered, and then estimating what a policy of over-production does.    The cost recovery method includes the global adjustment, and the global adjustment can’t be applied to exports.  The cost definition should be the average weighted wholesale market price [HOEP], plus the average Global Adjustment charge (from the 2^nd last paragraph here).  This is exactly the cost to wholesale market customers, but it is also, approximately, the price paid by consumers on the Regulated Price Plan (RPP), or on the Time-Of-Use (TOU) plan.   So the figure we can easily estimate, which is how much less importers of Ontario’s output pay compared to Ontario’s internal consumers, is simply the export amount multiplied by the Global Adjustment.

For instance, from the IESO 2010 summary exports are shown as 15.2TWh, and the preliminary average Global Adjustment figure is 2.73 cents/kWh.  That math shows the other market participants paid around $414.5 million less than Ontario market participants paid for the same amount of electricity.

Which is an improvement over the 2009 figures, which are 15.1TWh of exports, and a Global Adjustment of 3.06 cents/kWh – or $462 million dollars.

I appreciate that politicians need to be better at communicating things briefly, and more coherently, than I.  But if Mr. Hudak’s PC party is really concerned about the $60 million dollar figure for what I’ll, incorrectly, refer to as an export subsidy, in December 2010, they should also be concerned with, not only the other $815 million dollars in 2009 and 2010, but the root cause of it.

The root cause, which I’ve been braying about since starting this blog, is the inability to match supply and demand, coupled with too much contracted supply.  This graph shows a 12 month moving average for supply and local, Ontario, demand, on the left axis, and for the ‘subsidy’ – which are exports multiplied by the global adjustment rate – on the right axis.  2005 was our record year for consumption, and the contracted supply actually did bring Ontario rebates that year via the global adjustment, and then we see our system unable to adjust to the declining demand (which we are expanding government to encourage).

The figures Mr. Duguid fails to address are caused by his government, and the bureaucracy he oversees.  During the radio interview I noted earlier, Mr. Duguid implied sometimes we export, and sometimes we import, as he deflected the question.

During the final 3 months of 2010, we were net importers in the 18^th hour of November 25^th.

The rest of the time we were net exporters.

The records punctuate the problems, but don’t let Minister Duguid deceive you into thinking they were the problems – especially if you lead the opposition party.

Much To Do About Nothing: Electricity Policy In Ontario

Something is bad.

Nothing is not.

This was a revelation for me. Nothing is what we all work towards. In the Ontario electricity industry of 2011, nothing drives everything. There are a number of laggards who fail to see the importance of nothing so, politically, the industry has adapted. There are ways to boast of doing nothing – generally by a flurry of feigned activity supported by measuring nought.

3 or 4 years ago I saw the long-term trend in Ontario Electricity consumption, from the Conservation Bureau. That was another revelation for me.

All of the Conservation Bureau documents are now buried after it's website was swallowed up by the OPA (a shame) – but I've since seen the same graph elsewhere, in some cases for other jurisdictions. Figure 2 of an early 2006 critique of the OPA by the Ontario Clean Air Alliance document (on page 2), crudely showed the trend specifically for Ontario, but it's not much different than the more professional trend line I took from the Energy Information Administration's recent Annual Energy Outlook:

An obvious downward trend leading to either a period of more constant usage, or maybe a decline. No big changes in the future. That's all I could see from these graphs of the past 6 decades in North America.

Well, I have been shown to be superficially observant, and completely ignorant of the growth potential of a declining trend. It took a couple of years for me to figure out that nothing was being sold – and being sold very successfully.

One document that made an impact on me, a couple of years ago, was another OCAA production, “Tax Shift: Eliminating Subsidies and Moving to Full Cost Electricity Pricing.” That document claimed subsidies on water royalties, a subsidy of the lack of a sales tax , return on equities, and corporate taxation, being set too low on crown corporations ... this group with the title about clean air seemed far more interested in ensuring all public assets where monetized to fund private organizations (businesses doesn't really describe the paradigm we've developed in Ontario's electricity sector).

I understood the allure of privatization necessitated vilifying public power. What I failed to comprehend was not why private companies might support an attack on the very concept of a public good, but why public utilities would join in a deliberate attempt to artificially inflate the price of electricity.  The document was claiming the falsely identified subsidy dollars be collected by the government, from electricity consumers, to be given out in ways far more wonderful than the electricity consumer would spend them. 

From each according to his consumption, to each according to his political correctness, and/or connections.

A bureaucratic buffet.

Finally the OPA's elevation of the absurd during the ongoing farce of working towards an Integrated Power System Plan, coupled with Minister Duguid's recent propensity for the misleading statement, brought me to my senses. For bureaucracies to do what they do – expand - they needed to grow despite the decades old trend now resulting in declining consumption. The educational bureaucrats in Toronto had already had some success in convincing the Ontario populace – one of the most educated groups on earth – that smaller class sizes were needed to counter a shrinking student population (and later that 4 year-olds require full-day schooling).

But the energy bureaucracies have been awesome in taking it to a whole other level. Price escalations became the course of the day, as Hydro One undertook smart meter/grid programs to better be able to control the escalating usage – which is at the same level it was at 20 years ago (just before we last encountered expensive supply mix problems). In 2003 Hydro One transmitted the 151.7TWh consumed in Ontario – in 2010 that number had dropped to 142TWh. In the recent Ontario Energy Board ruling on Hydro One's rate increase applications for 2011 and 2012, the OEB seemed very concerned that forecasting the outcome of Conservation and Demand Management (CDM) programs was something like forecasting with tea leaves. From that document, this paragraph really sums up a silly Ministry of Energy and a bureaucracy drunk with power:

“Over the last number of years utilities across the province, including Hydro One Distribution, have spent very considerable sums of ratepayer or taxpayer money in pursuit of the Government's conservation and demand management goals. Recently, the government has intensified this activity through the establishment of specific CDM targets on a distributor by distributor basis. While each distributor has its own specific target for CDM reductions, these specific goals are derived by allocating a global target to the individual distributors. While the budgeting process for distributors to pursue these CDM goals is not finalized, it is clear that very substantial amounts of money will be required to achieve the targets established by the Government. The Board is concerned that in this environment of increased pressure to pursue CDM, attended as it is with corresponding costs, that there does not appear to be a broadly accepted methodology in place to identify the reasonably anticipated effects of any CDM program on the throughput of the respective distribution or transmission systems.”

I suspect there isn't a methodology to measure the throughput as there isn't a methodology to determine if they are reducing usage at all. If the OEB is concerned about the issue on the distribution system they might look a little harder at whether the programs are impacting the already declining usage. On the Hydro One decision it turned out the OEB weren't that concerned – they agreed to go with the figures anyway, with a serious notation that there is clearly a need for more study, and more money to study, how to grow nothing.

The Ontario Power Authority was formed, in large part, to put together Integrated Power System Plans, to be updated every three years. They still haven't got one through the OEB to the approval stage. The OPA Business Plan for 2011-2013 makes the typical bureaucratic claims of accomplishment for measurements that have little to do with them, or their departments, but more significantly, the very first bullet point on the priorities list, on page 1, is “implementing province-wide conservation and energy-efficiency programs in partnership with local distribution companies and achieving forecasted conservation savings in an efficient manner.”

That sounds familiar.

Strategic Directive 2 has a section of the business plan that starts on page 15 and goes to page 24. They are very serious about this stuff. Page 45 notes 'efficiency metrics' with forecasting of 11 GWh/FTE in 2011, 39 GWh/$M, and a peak reduction of 2390MW -for 2011. 

They are investing heavily in unmeasurable things, or things that the causation is generally the overall economy and the weather, and the expansion in the size of the OPA since 2005 shows they are being very successful at finding unmeasurable things to invest in. As the OEB Hydro One decision noted, much needs to be spent on studying CDM due to all the money we are spending on CDM - only to have bureaucrats take credit for existing trends.

The Long Term Energy Plan recently proposed that 7100MW, of 11000MW, added over the next 20 years, be nothing (demand reduction).

That seems pessimistic to me.

If we added a lot more nothing we’d have way more supply not to consume, allowing our bureaucrats to achieve far greater theoretical reductions.  

The Mainstream Press Addresses Electricity Records Noted Here - 7 days ealier.

On January 3^rd I posted to this blog that there were a number of statistical records to end 2010 and begin 2011. Today some of the mainstream press did to: Don Butler, at the Ottawa Citizen, and the Toronto Star's John Spears. Choose Bulter's – or read this to counter the Star's Silly Spin

Friday, January 7^th John Spears dutifully reported on the IESO press release summarizing 2010's generation totals. He parroted the increase in coal and gas, as well as the official government spin.
Mr. Spears explained the use of gas and coal rose 7900GWh because hydro dropped 7400GWh while Ontario consumption rose about 3000GWh. Which is quite lovely except it ignores that we had to export 15000 GWh yet again, at enormous loss – yet again. My view of the IESO release is here.

Coal and gas replaced hydro because they were the only sources that could, when demand required it.

Minister Duguid said, in his most dudly way, that we only used coal because it was hot and dry. So we're on track not to use it, unless the climate changes as anticipated - which is the reason we want to stop using it.

Mr. Speers did note the coal use has been trending down, but either stupidly or dishonestly goes to 2003 to note the start of the trend.

The trend actually started in 2001, following the peak in 2000. 1998's reorganization had seen coal assets stranded with OPG and an all party committee unanimously agreed on 2015 for a phase out in the following years. 2003 is the year the first McGuinty government wrote off $500 million on the value of the coal units, and cancelled the scrubbers to be installed until the 2015 date, because the plants would close in 2007. Furthermore, the reductions following 2003 had much to do with Bruce 3 and 4, and Pickering 1 and 4, all of which were brought back by the preceding Conservative governments – the same that announced Lakeview's closure. Spears notes coal at 36.6TWh in 2003, but doesn't note nuclear at 62TWh. In 2010 nuclear was at 82.9 and coal at 12.6. They balance out. Hydro (water) was down 5.3TWh in the same period, but use was down 14TWh. The big difference is in 2003 we imported net 4.1TWh, and in 2010 we exported, net, 8.8TWh.

Which has everything to do with the supply mix.

The article also says consumption rose in 2010, bucking a five-year trend. Well, it also rose in 2007, which doesn't mean down isn't the trend.  But the trend can also be seen as one the decline in annual change in demand that goes back 60 years across North America - 5 years ago we crossed a milestone where demand switched from under the 0.75% a year increase it had been averaging for a decade and a half, to a decline.

--

And the big new driver in exports is ...

natural gas!

Which makes Jack Gibbons the most biased choice of quotable manipulator possible. Did the reporter think the bureaucracy is so stupid they exported all this power for fun? Gibbons opined all those exports were from coal.

Total nonsense. I recall quite clearly coal coming to the rescue when an early heat wave hit in may as the vacuum outage had all Pickering reactors offline. All 4 of the units closed later in the year were at full production – a situation repeated with at least 3 of the 4 units at each peak spell, coinciding with short heat spurts, right through the first days of September.

The reason we export so much is the mix, and the reason it is becoming unmanageable is, more than anything else, the natural gas that has come online – and perhaps the need to run significant amounts of it constantly to peak the needless wind turbines infecting the countryside.

Mr. Spears was back with his spin on the 11^th focussing on the nuclear plants. That's somewhat true, but what is new is not the nuclear plants. It's wind and gas.

Here's an astonishing figure. Prior to 2009, the record natural gas production I have seen was 12,959 GWh, in 2002 (that figure is likely from the National Inventory Report for 2004, page 364, although I can no longer locate the document). Divide by 365, and divide by 24, and you get an average hourly production of 1479MW). On January 1^st, the low point gas hit was 1169MW at 9 am.

Let's be clear. Basically the minimum amount of gas the grid needs now is more than the average it need as little as 2 years ago. And it is 1200MW, and that is how much wind is on the grid. It is one helluva coincidence – or a necessity.

And that 2400MW (we got 1200 of wind and still maintained the 1200 of gas) was a huge contribution in the production of too much output for the Ontario market on January 1^st.

I've been observing Mr. Gibbons' game for years – how to replace public nuclear with privately rewarded natural gas under the guise of wind. Mr. Spears serves Gibbons very well.

I should also say the the quotes from Mr. Murphy were offensive – and I'm a fan of the IESO's openness with all things. It is that openness which allowed myself, and others, to observe statistically the abandonment of any attempt to meet Ontario demand with wind output in 2010. That led to the bizarre situation with the Hourly Ontario Energy Price being more aligned with the wind speed than Ontario demand.

Damn right he prefers to have too much power. What bureaucrat doesn't?

He's institutionalized it – Ontario's exported over 15TWh of electricity each of the past 3 years, and over 10TWh each of the past 6.

There are thoughts on the appropriate mix, and meeting demand, on this site, and many of the links to the right on each page. You are likely using far less electricity than you did 15 years ago – your actual cost/kWh has probably doubled in the past 7 years if you include all delivery charges, allocations for line losses, and taxes – the 30% figure Mr. Murphy states must be the nonsensical cost/kWh that is now almost a minor portion of the current Ontario electricity bill. He's likely got more cable channels, is in a very high rent district, and of course has infinitely better cell phone service than 15 years ago.

His comparisons, like the scheme he's become a part of, seem designed to give us gas.

Comments on Release of IESO Annual Statistics for 2010

The IESO issued a release with the annual statistics for 2010. These events are a little anti-climatic for the data folks who check up regularly, with the exception of the totals by generation type. The big news was always going to be the increase in GHG emissions, over 2009, due primarily to the reduction in hydro output (simply from a lack of water), and also a minor growth in Ontario consumption.

We knew that from monthly reporting, but the IESO release has the annual figures, and adding the statistics for annual generation by fuel type to what I've got for the past 20 years, the trends continue.

I'll return to that.

One small surprise to me is the evolution of the vernacular at the IESO. This release states:

"The cost of power in 2010 was 6.52 cents per kilowatt hour (kWh), as compared to 6.22 cents/kWh in 2009. This cost includes the average weighted wholesale market price of 3.79 cents/kWh and the average Global Adjustment of 2.73 cents/kWh (preliminary)."

The Hourly Ontario Energy Price (HOEP) is no longer cited as a market price, but has now become a mechanism for signaling suppliers to turn up, or drop down, supply levels (when the Energy Minister says our exports are at market prices, I still believe this is the best guess at what he means). The IESO now cites the 'cost' of power as the HOEP plus the Global Adjustment (GAM) – which is what this blog has been treating it as. So, once more with feeling, here's a graph of my estimate of the running 12-month total for the level of subsidy of exports - the difference between the cost of producing exports (GAM plus HOEP), and the HOEP only:

Most people who will have seen an article on the 2010 figures probably received it from either the Canadian Press article, or the Toronto Star article. Both, unfortunately, talk to the Ontario Clean Air Alliance's Jack Gibbons. In another blog entry today I've explained why the argument that exports can be related to a single type of generation is facile, and wrong.

I am very much opposed to wind capacity being gifted a prime place in our electricity supply. I've therefore, in the past, jumped to a conclusion all wind is exported. When I noted record exports, and a record low for the daily HOEP average, I also noted a wind high (as a spin), and when Tom Adams, who has frequently noted huge, and unpredictable costs with nuclear energy, as well as other issues related to nuclear generation, discussed the record exports he noted "the average rate of exports was greater than the output of three of Ontario's largest reactors at full power." Which is also true. When Jack Gibbons implies coal is responsible for export levels, it is not true.

The only replacement for coal, in Ontario's mix, is natural gas. It meets demand. This is not particularly complicated stuff, and comparing 2010 to 2008, ignoring 2009, the IESO figures show a decline of 6.5TWh in Ontario Consumption, a decline of 8.5 TWh in production, but only a small decline in the combined output of coal and gas, of 1.1 TWh; and an increase of over 400% in the Global Adjustment due to a policy wishing peaking production can be replaced by anything other than peaking sources.

And for that I will return to my existing data, now updated for 2010 – keeping in mind we export at an enormous loss now, and we did so in the early 1990's as well.

The more supply in the system that can match demand, the closer production matches supply. This graph shows natural gas and coal production at the bottom (hydro being about 40% always on baseload and the remainder peaking, it's third), with net imports as the line graph (right axis). The lower our use of peaking sources, the higher our exports.

The second graph shows the inverse – with the baseload sources on the bottom, and the line as net exports. As nuclear and hydro and wind shrink, so too does our need to export.

“Sharper arguments are more fun than dull ones”

It's been an interesting week for me. Monday started with fresh data feeds, at the IESO, that allowed me to get some data for 2010, and January 1^st, 2011, that I noted contained some record figures. Friday morning, Tom Adams noted the post on his site – which I appreciate. Wind Concerns Ontario put the entry up on their site – which I also appreciate.

Initially I thought this was a great thing.

Then I went to my post on the records – and noticed the second sentence begins, "Here's a pair of records" and goes on to list 3 records (following a period instead of a colon).
If I were commenting on this story, I'd be critical of me! Months ago I had a comment on the Globe and Mail site responded to. I had noted KWH – and the comment was that if I really wanted to be taken seriously I should use correct notation (kWh). My response was not nice – it was also wrong. I do wish to be taken seriously, and I should know, and use, the correct notation. So a long overdue thank you to the poster I sent the nasty comment to, which I now apologize for.

I also don't want to get paralyzed in an attempt to get everything perfect. That too has been on my mind as my desire to respond, seriously, to the draft Supply Mix Directive was delayed by a desire to communicate my argument in a way that would bear scrutiny. Finally, I opted for simplicity of quality and simply opened the directive, opened up a text editor, and starting commenting in order of the directive's structure – when the time came I pulled up a spreadsheet too. I did post my response, but I don't want to revisit it as I might be embarrassed at communicating incoherently.

But that is only one purpose of writing. As I wrote "To replace coal generating capacity, you need a source with the same attributes as coal", I had arrived at the other reason to write. It took a lot of work for me to get to a simple conclusion.

Tom Adam also posted a response to the Supply Mix Directive, co-authored by Parker Gallant, which included: "Although the LTEP fails to provide sufficient information to assess the capacity and energy outlook assumed, using assumptions we believe reasonable it appears that the government is forecasting a supply mix for 2030 where about 83% of Ontario's generation will come from inflexible baseload and intermittent supplies. There is no precedent for such a power system anywhere in the developed world to our knowledge."

Yeah – that's what I was getting at!

Working through things is my usual method of learning. But it isn't my ideal way of learning.

For me, that involves some of the old Socratic method, mixed with a bit of humility in meeting criticism.

I posted a pro-nuclear comment, regarding the economics of the Point Lepreau refurbishment, on Tom Adams site in August. I received an e-mail shortly after. For those who have struggled with my blog thus far, the content might not be surprising. Could I make the points coherently?

I could, and did, edit the post.

Some time later I ran a set of numbers and began distributing claims all wind output is, essentially, exported. The numbers I ran were simply the hourly wind production in the province subtracted from the hourly exports in the province. The percentage of hours where wind generation exceeds exports is very small – low single digits.

I received this comment. "Applying the methodology described above to any small power source one could "prove" that almost all of its output is exported." I didn't really want to hear that … but he had a point. I'd since found out these same discussions/arguments have been occurring in Denmark, and elsewhere.

So I ran another set of queries to see if export levels went up, as wind production went up. They didn't in past years (but they did in 2010).

 This is the data I came up with (updated to be current):

	2009					2010
Wind (MW)	# of Hours	Hours of Wind  > Exports	Net Hourly Export	Sum of Avg Ontario Demand	Average HOEP	# of Hours	Hours of Wind  > Exports	Net Hourly Export	Sum of Avg Ontario Demand	Average HOEP
<100	2389	2	1,152	15,933	$31.43	1871	24	887	16,734	$42.69
100:199	1941	3	1,220	15,627	$30.95	1893	48	919	16,290	$39.53
200:299	1330	8	1,154	15,847	$32.80	1277	42	904	15,999	$38.86
300:399	930	8	1,181	15,997	$36.21	983	45	910	15,867	$36.21
400:499	751	7	1,240	15,936	$30.36	770	18	1,108	15,892	$33.58
500:599	585	24	1,125	16,138	$30.12	594	29	1,159	16,038	$34.97
600:699	393	30	1,134	16,150	$29.49	435	23	1,139	15,868	$33.71
700:799	268	32	988	15,888	$27.21	361	19	1,349	16,425	$33.72
>800	173	27	1,203	16,196	$29.72	576	31	1,443	16,365	$30.95

 
The data did show my point was incorrect - but becoming less incorrect – and it did point to some more troubling aspects. I've highlighted the one I've picked out for more review – In 2010, the production of the wind turbine fleet impacted the HOEP more than Ontario's demand did. The problem for me is this is far muddier, the work far harder, the conclusions far more complex, and difficult to communicate, than my original "all wind is exported" premise.

Which is a good thing. As Mr. Adams once wrote me, "Sharper arguments are more fun than dull ones."